Thursday, September 15, 2011

A Quick Guide to Banking Titles

With the news that the police have arrested Kweku Adoboli on suspicion of engaging in rogue trading, I've seen some confusion on Twitter as to what it means that he was a Director at UBS. Some people have implied that this is a very senior role and he was head of Delta 1 trading. Nothing could be farther from the truth.

The core issue is that Director and Managing Director have meanings here in the UK outside of financial services (someone on the board, and the managing board member), and financial services companies have redefined them here to mean different things.

In general, banking titles go as follows:

No Title
Most junior people won't have any honorific title whatsoever, they'll just have a job function ("Trader", "Software Engineer", "Operations").
Associate Director (UK), Associate Vice President (US)
The first honorific title. Usually a strong individual contributor without management duties, or a few years into the job as a Trader.
Director (UK), Vice President (US)
Someone with supervisory duties or a more senior member of a trading team. In IT, a line-level manager will usually have the title Director.
Senior Director (UK), Senior Vice President (US)
Not every bank has this step, it's just an interim step between Director and Executive Director.
Executive Director (UK), Executive Vice President (US)
Typically a manager-of-managers. This would be common for someone who's one of the most senior traders on a desk, or a divisional head in IT.
Managing Director (both UK and US)
The highest honorific you can go. Typically MDs run a desk or a division, and usually have some form of signatory authority. They almost always have budgetary authority over some aspect of their business. There are many of them.
Exactly what you'd expect. There's one of these per area (though the Group CEO may not be the same as the Divisional CEO for example).

Also, one last tidbit. CIO can mean one of two things: either Chief Information Officer, which means what it would in any other firm; or Chief Investment Officer, which is completely different. Make sure you know which one you're meeting with.

Caveats: Yes, there are firms that do things differently. No, this may not apply at your firm. This might be very heavily biased to Investment Banks. But I meet a lot of people who work in the financial services industry, and have worked there myself, and these appear to be the most generic bands and equivalency.

Monday, September 05, 2011

Good VCs Don't Charge Their Companies For Flying First

Recently I was alerted to a post by Dan Shapiro titled "How to handle a VC who flies First" through a post on Hacker News. Good article, and you should go read it.

We faced a similar situation when OpenGamma expanded in its Series B to have a multi-national presence, and multi-national board of directors. Prior to the Series B, we had three board members, all based primarily in the London area. Adding an investment from FirstMark Capital, and taking Lawrence Lenihan onto the board meant that we now had three board members in London, and one in New York City.

That meant two things:

  1. We were going to start having board meetings in both London and New York City; and as a result
  2. Board members were going to start to travel for these board meetings.

To make matters worse, we had two different travel policies for our two venture capital investors:

  • Accel Partners, as a policy, doesn't charge travel expenses back to their portfolio companies.
  • FirstMark Capital does.

The Interesting FirstMark Approach

Accel has actually been thinking about starting to charge, as many of their peer firms already do. And that's a reasonable position to take. But if and when they do, I expect that they'll follow the lead that FirstMark does in the way that they do it.

Essentially, it's in the interest of a venture capital firm to ensure that any travel that they do is necessary and in the best interests of the company. You don't want to have your partners flying all over the world all the time, or else they'll never get anything done. But at the same time, you don't want to penalize the firm for the travel that is essential to the firm.

The FirstMark approach is simple:

  • Their partners don't like to fly economy (and as someone who's done 10 transatlantic round-trips this year thus far in coach, I can't blame them);
  • Their partners have preferred hotels that tend to be on the pricey side;
  • This is not the concern of the portfolio company.
  • The partner will make his or her own travel arrangements at times and in standards of travel that are suitable for the partner;
  • The firm will reimburse them an amount based on the partner travelling just for the board meeting, and in the standard flight fares (in our case, full-discount economy) and accomodation (in our case, nice, but not luxurious) for the portfolio company.

The VC wants to fly first class London to New York and stay at the Mandarin Oriental? Great, and I'm happy that he's doing well enough to afford it. But that's not what employees fly, and not where employees stay, so anything beyond what we'd consider a reasonable expense report is on him.

If the firm is doing well enough to expand their standard of travel for employees? Then they should expect to compensate their board member VC partners more as well and consider that when they decide what the standard travel policy should be.

I think this policy is fair to all concerned: business travel can be a significant cost in a business and a drain on those travelling, so it's worthy of minimization in general; but the needs of the firm have to come first over and above the luxury of the traveller.

To me, if a VC wants to charge you more than what you'd pay to fly an employee, their incentives aren't aligned with yours.