It’s the time of year when the lives of people at a certain level in investment banks are consumed by an obsession about making managing director. (MD)
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When you’re in banking, making MD seems all important, but once you’re out you can see it for what it is. – Arbitrary and meaningless.
MD is above all a political title. Yes, it might reflect that you’re a high revenue producer or senior manager, but getting it really indicates that you are a master of playing banking politics.
Making MD depends upon having a lot of people to lobby for you, which means having a lot of friends who will speak up for you in appointment committees.
MD is also a title that means many different things. Some banks are perceived as more liberal with it than others, and you will often hear people say things like, “MD doesn’t mean as much over there.” Periodically, banks will also decide they’ve got too many MDs and will then make fewer promotions, which also defies the notion that MD is a merit-based achievement.
People want to become MDs because the role is associated with higher pay. It is also associated with a ratchet effect. Once you’ve made MD at one bank, you’ll rarely be demoted to a lower ranking title at another.
The whole thing is crazy. Really, the MD title should be reserved for people running businesses, who have budgetary responsibility. MDs should genuinely be managing teams and should be focused on expanding revenues at the business level.
Instead, banks increasingly use the title to reward individual producers who might have good years and bad years. An individual producer with several bad years behind them is then stuck as an underperforming MD.
From this perspective, being an MD can be a risky seat: some teams end up with more MDs than they can carry, and there’s always the risk that one of them will be let go. The position is more stressful than it’s worth.
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