Thought Leader In­ter­view: Ed Clark

The for­mer CEO of TD Bank — who led its U.S. ex­pan­sion and the tripling of its mar­ket cap­i­tal­iza­tion — talks about his track record of ‘do­ing the right thing’.

Rotman Management Magazine - - CONTENTS - by Karen Chris­tensen

In your time as CEO of TD Bank [2002-2014], you be­came known for em­brac­ing LGBTQ+ is­sues. De­scribe how and why you be­came in­volved.

First, I’ll segue a bit and go back to my el­dest son’s wed­ding a few years ago. As is the cus­tom, he stood up to give a toast, to thank every­one for be­ing there. He pro­ceeded to go on and on about his mother, and all the things he had learned from her; then, he turned to me said, “My dad? Not so much.” Once the laugh­ter sub­sided, he paused and said: “I ac­tu­ally did get one re­ally im­por­tant les­son from my fa­ther: Do the right thing.”

That sim­ple con­cept has been a core be­lief and mo­ti­va­tor for me through­out my ca­reer. And let’s face it, work­ing in fi­nan­cial ser­vices, this ap­proach stood out a bit. Back in 1994, when I was run­ning Canada Trust, we were the first fi­nan­cial in­sti­tu­tion to pro­vide same-sex ben­e­fits to em­ploy­ees. To be per­fectly hon­est, we didn’t even think much about it; it just seemed like, why wouldn’t you pro­vide same-sex ben­e­fits? We didn’t see it as part of any big­ger agenda at the time; it was sim­ply the right thing to do — so we did it.

Fast for­ward to 2002, when I be­came CEO at TD. At the time, we had about 55,000 em­ploy­ees, and I asked my HR ex­ec­u­tive, How many peo­ple have signed up for our same-sex ben­e­fits pro­gram? The an­swer shocked me: 50. I im­me­di­ately viewed this as a per­sonal fail­ure of lead­er­ship on my part. It re­ally brought home to me that just ‘do­ing the right’ thing is not enough: You ac­tu­ally have to build a cul­ture where peo­ple un­der­stand what is right and do the right thing.

Cul­ture can be de­fined in so many ways, but at TD, we de­fined it as, ‘what peo­ple do when no one else is look­ing’. When I found out that so few em­ploy­ees had signed up for same-sex ben­e­fits, it showed me that, when no one was look­ing, we were ba­si­cally run­ning a ho­mo­pho­bic or­ga­ni­za­tion, where peo­ple felt un­com­fort­able ask­ing for some ba­sic em­ployee rights. That was a huge learn­ing mo­ment for me.

An­other key les­son I learned is this: A leader’s good be­hav­iour is not enough to in­still good be­hav­iour through­out an or­ga­ni­za­tion. I used to think that if I be­haved in a cer­tain way, nat­u­rally, peo­ple would fol­low suit. But that is not how it works. I have

been in sit­u­a­tions where a new leader takes over and they are ar­ro­gant, and they yell at their peo­ple; and the cul­ture grad­u­ally shifts to re­flect that be­hav­iour. But where the op­po­site is true — when there are huge cul­tural is­sues and his­toric prej­u­dice — the sim­ple fact that the new leader doesn’t buy into those prej­u­dices is not enough. It re­quires a proac­tive, con­stant ef­fort to change the cul­ture.

Tell us more about your role in chang­ing TD’S cul­ture.

As I found out, you re­ally have to ‘cam­paign’. I used to say that I was run­ning for of­fice, ev­ery sin­gle day. When I left TD in 2014, we had 85,000 em­ploy­ees scat­tered across North Amer­ica. Obviously, you can’t just or­der that many peo­ple to be­lieve in what you be­lieve in, so you have to be very ex­plicit about your ex­pec­ta­tions. There is no room for sub­tlety. I used to go into meet­ings and say, “At this bank, you can’t yell at your em­ploy­ees. If you do it ac­ci­den­tally one time, fine; but the sec­ond time, you will be gone.” And we ac­tu­ally fired peo­ple on those grounds.

That’s an­other key les­son re­gard­ing cul­ture change: You have to be pre­pared to fol­low through on your val­ues, and act on them. Sim­ply put, you have to be in­tol­er­ant of in­tol­er­ance, and rec­og­nize that change will only hap­pen if you put your whole per­sonal brand be­hind that change. Of course, the first re­ac­tion when you take a stand on some­thing will be, ‘This too, shall pass’. Peo­ple will think you just want to make head­lines, or look good in the busi­ness com­mu­nity. That’s why you have to let them know that you are go­ing to be re­lent­less — to the point that you will say to your Board, ‘If I don’t win this bat­tle, I will be a com­plete fail­ure as CEO’.

You also have to be pre­pared to be tested, from time to time. At TD, we be­come ma­jor spon­sors of an­nual pride pa­rades in the cities we op­er­ated in, and one of our com­pet­ing banks ac­tu­ally put out mes­sag­ing that said, ‘Do you re­ally want to be as­so­ci­ated with a bank that would spon­sor this type of pa­rade? Have you seen what peo­ple wear in this pa­rade?’ Some­times, I would sit down at a meet­ing, and a col­league would say to me, ‘Your ac­tions have cost me my bonus! I just lost Client X to the bank across the street’. In these mo­ments you have to be pre­pared to say, ‘Sorry, but that’s the way it is. If you don’t want to work for a bank that be­lieves in these things, please walk across the street and ap­ply for a job.’

At one point, we bought a bank in South Carolina, and the night be­fore I was to meet with its man­age­ment team, there was a big event spon­sored by the lo­cal busi­ness com­mu­nity. I was up at a podium, talk­ing about TD’S vi­sion and our val­ues. At one point, an el­derly gen­tle­man worked his way through the crowd, wav­ing his cane, and went up to the mi­cro­phone, and said, “Well, the least that I can say about you is, you are not a Yan­kee.” I thought to my­self, ‘Oh boy, we re­ally are in the Deep South here.’

When I sat down with the man­age­ment team the next day, I said to them, ‘I strongly be­lieve that most busi­ness choices are 55/45. Peo­ple who think it’s all deadly ob­vi­ous are miss­ing half of the re­al­ity.’ But, I continued, ‘Val­ues are not con­testable: You are ei­ther in or you are out. This is not a deli. You can’t say, ‘I like this one, but I don’t like that one. There is a very good sev­er­ance pack­age for any­one who doesn’t buy into our val­ues, and if you are one of them, you should de­clare your­self now, be­cause you will not last’. That was an ex­tremely dif­fi­cult con­ver­sa­tion to have, be­cause obviously, I didn’t want to lose the en­tire man­age­ment team. But that is the sort of stance that you have to take.

You also have to be pre­pared to talk about what you’re do­ing in pub­lic. Many times, I would say to my man­age­ment team, ‘Here’s what we are go­ing to do…’, and I could see their eyes glaze over: They were think­ing, ‘He’ll never ac­tu­ally do that!’ So, at our next big in­vestor con­fer­ence, I would an­nounce it to the en­tire crowd. It was amaz­ing: Once I said some­thing in pub­lic, peo­ple re­al­ized that I was dead se­ri­ous.

What is your take on in­creas­ing in­come in­equal­ity?

For­mer Pres­i­dent Barack Obama called in­come in­equal­ity “the defin­ing chal­lenge of our time”. The re­al­ity is that the glob­al­iza­tion of tech­nol­ogy has made a few peo­ple very, very rich, while the av­er­age per­son has seen few, if any, gains. This has been a com­plete dis­rup­tion of what we used to think of as

Sim­ply put, we have to be in­tol­er­ant of in­tol­er­ance.

‘nor­mal growth’ — whereby every­one across a so­ci­ety grows to­gether. Un­for­tu­nately, when this hap­pens, peo­ple ac­tu­ally move back­wards in their think­ing. Whether it’s prej­u­dice of race, gen­der or sex­ual-ori­en­ta­tion, we are see­ing more of it, be­cause peo­ple are afraid, — and they are des­per­ate to get their ‘old world’ back.

When this hap­pens, we need lead­ers to stand up and say, ‘We are not go­ing to let this be­come the norm; we are go­ing to fight it.’ Lead­ers also have to talk to their peers and say, ‘Let’s be hon­est: The dis­tri­bu­tion of in­come in the world right now is ridicu­lous: It is not sus­tain­able for the top 1% to be en­joy­ing all the gains, while the real in­come of the av­er­age worker barely budges’.

By the way, we’re kid­ding our­selves if we think Canada is an ex­cep­tion to all of this. There is a part of ev­ery Canadian that smugly thinks to her­self, ‘We are pretty spe­cial here’. The fact is, we are just as vul­ner­a­ble to the rise of in­tol­er­ance as any­one else. And in my ex­pe­ri­ence, no prej­u­dice is more deeply in­grained in so­ci­ety than ho­mo­pho­bia. All of us have to fight it — and not just once, but ev­ery day.

Each year in Canada, the big banks’ prof­its con­tinue to in­crease, while other parts of the econ­omy strug­gle. Why is this hap­pen­ing?

Gen­er­ally speak­ing, bank earnings grow in line with the econ­omy, and the only thing that might cause them to grow faster is de­mo­graphic changes. The fact that the Baby Boom gen­er­a­tion is near­ing re­tire­ment def­i­nitely means that wealth man­age­ment earnings are grow­ing faster; and, if we con­tinue to see a hous­ing boom, that will also con­trib­ute to earnings growth. But gen­er­ally, as an in­vestor, I would not ex­pect bank prof­its to grow any faster than the econ­omy it­self is grow­ing.

Should bank com­pen­sa­tion pack­ages for ex­ec­u­tives con­tinue to go up? In my view, the an­swer is No. Fi­nan­cial sec­tor ex­ec­u­tives are more than ad­e­quately paid. In fact, if you con­trast Canada to the U.S., there has been more mod­er­a­tion hap­pen­ing here, be­cause our Boards have pushed back, and our bank lead­ers have been more mod­er­ate in terms of what they are ask­ing for. The bot­tom line is, if they want to be seen as lead­ers in so­ci­ety, they have to ac­knowl­edge that we have a se­vere prob­lem right now, where lots of peo­ple are not ben­e­fit­ing from eco­nomic growth. And that means look­ing at their own com­pen­sa­tion.

You be­lieve the grow­ing in­come gap is not just un­fair, but cor­ro­sive to so­ci­ety as a whole. How so?

We are see­ing a prime demon­stra­tion of that in the U.S. to­day, where large parts of the pop­u­la­tion had been hurt­ing for quite a while, and the re­ac­tion was to turn to a more pop­ulist leader and in­tro­duce even more racism, sex­ism, ho­mo­pho­bia and pro­tec­tion­ism into so­ci­ety. These things are the di­rect re­sult of the av­er­age per­son be­liev­ing that the lead­ers of so­ci­ety are reap­ing all the ben­e­fits, and that they don’t care what hap­pens to ‘the lit­tle guy’. We are see­ing the same phe­nom­e­non in Europe.

Just look at the pro­posal that Pres­i­dent Trump made [in Fe­bru­ary 2017] around health­care. He ba­si­cally pro­posed to pay for a mas­sive tax cut for the rich by re­duc­ing health ben­e­fits to the poor — de­spite the fact that he ran his cam­paign on ‘Look­ing af­ter the lit­tle guy’. That type of thing is highly cor­ro­sive to a so­ci­ety.

Do you fear that the pop­ulist ap­proach will cross the bor­der into Canada?

I’m hope­ful that it will not. We did see in­creased in­equal­ity in Canada in the 1990s, but since 2000, that has not hap­pened, be­cause we run much more gen­er­ous pro­grams than those in the U.S. As a re­sult, the very poor in Canada have not lost po­si­tion in terms of their in­come. That is not to say that they shouldn’t be paid more — but they have not lost their rel­a­tive share. The thing to worry about is this: As tech­nol­ogy con­tin­ues to evolve, it is the work­ing mid­dle class that will fail to see the ben­e­fits of eco­nomic growth. We must take steps to mit­i­gate that.

On that note, you are now work­ing (pro-bono) for On­tario Pre­mier Kath­leen Wynne, as her busi­ness ad­vi­sor. De­scribe the work you are do­ing.

We are de­vel­op­ing a frame­work for long-term, sus­tain­able eco­nomic growth, mea­sured against a pretty straight­for­ward goal:

Mak­ing the av­er­age cit­i­zen bet­ter off. This fo­cus on the ‘av­er­age cit­i­zen’ is im­por­tant: We need to show that growth can, and will, ben­e­fit work­ing and mid­dle-class On­tar­i­ans — not just those at the top of the in­come pyra­mid.

On­tar­i­ans get that we are all bet­ter off if we can avoid widen­ing in­come dis­par­i­ties, and hope­fully re­duce them. We have built an open, tol­er­ant so­ci­ety that is able to at­tract and har­mo­niously ab­sorb thou­sands of im­mi­grants each year — a unique as­set in North Amer­ica. But when we step back and look at what is hap­pen­ing in the rest of the world, I worry that we are not chang­ing fast enough to adapt.

Do­ing so will re­quire some par­a­digm shifts and tweaks in pol­icy. These in­clude shift­ing our fo­cus in man­u­fac­tur­ing to be­come a world leader in ‘smart man­u­fac­tur­ing’; rec­og­niz­ing the im­por­tance of the ser­vice econ­omy and fo­cus­ing on how we can be lead­ers in ser­vice ex­ports; re­duc­ing reg­u­la­tory bur­dens on the econ­omy by fo­cus­ing on the low­est cost way of achiev­ing de­sired reg­u­la­tory out­comes; turn­ing more of our small busi­nesses into mid-sized busi­nesses and ex­porters; and avoiding a race to the bot­tom, fo­cus­ing in­stead on the parts of the econ­omy where we are com­pet­i­tive — so that we can af­ford to pay more to those at the lower end of the wage scale.

You have said that there is a ‘huge para­dox’ fac­ing to­day’s pub­lic sec­tor. Please de­scribe it.

De­mand for gov­ern­ment ser­vices is grow­ing rapidly — driven in part by our ag­ing pop­u­la­tion. But its ca­pac­ity to act is con­strained by a shrink­ing labour pool and, in turn, a slow­ing do­mes­tic econ­omy, which are putting down­ward pres­sure on its rev­enue streams.

Back in the 1960s and 70s, re­cov­ery in Europe, pro­duc­tiv­ity gains, the baby boom and grow­ing fe­male par­tic­i­pa­tion rates all fed a pe­riod of ex­tra­or­di­nary growth. All politi­cians pretty much em­braced the same mis­sion state­ment: Find a prob­lem to fix and make the world bet­ter — and they seemed to have the re­sources to do it. A lot of good came from this pe­riod: Medi­care. Old Age Se­cu­rity. To­day, politi­cians face harder choices. Not just man­ag­ing in a world of scarcity — but also deal­ing with forces that can make a so­ci­ety less fair.

We need a civil ser­vice that can do more with less; that can think of in­no­va­tive so­lu­tions; that can re-en­gi­neer the de­liv­ery of gov­ern­ment ser­vices; and that knows how to man­age change. This re­quires not just bold thinkers — but peo­ple with an ac­tive fo­cus on the doable. The onus isn’t all on the civil ser­vice, of course: The busi­ness com­mu­nity must also step up and sup­port the dis­cus­sions re­quired for our so­ci­ety to keep pace with a com­plex world. And it must lend a hand — shar­ing its ex­per­tise to make in­no­va­tive ideas a re­al­ity.

Go­ing for­ward, how will you ap­ply your ‘do the right thing’ credo?

In ad­di­tion to my work with the prov­ince on a range of projects — from elec­tronic health records to is­sues of pri­va­ti­za­tion — I’m still very in­volved with char­i­ties, in par­tic­u­lar, or­ga­ni­za­tions de­voted to home­less­ness and the LGBTQ+ com­mu­nity. Years ago, when I found out the high per­cent­age of street youth that was LGBTQ, I was shocked. To­day, I feel truly blessed to be in a fi­nan­cial po­si­tion where I can spend so much of my time giv­ing back.

Let’s be hon­est: The dis­tri­bu­tion of in­come in the world right now is ridicu­lous.

Ed Clark (Uoft BA ’69) is the for­mer Pres­i­dent and CEO of TD Bank Group. He re­tired in 2014 af­ter 12 years in the role. He is now a se­nior ad­vi­sor to On­tario Pre­mier Kath­leen Wynne and chairs the Ad­vi­sory Coun­cil on Gov­ern­ment As­sets and the re­cently-launched Vec­tor In­sti­tute. He also serves on the Board of Trus­tees of The Brook­ings In­sti­tu­tion and has been chair of the ad­vi­sory board for the School of Pub­lic Pol­icy and Gov­er­nance at the Univer­sity of Toronto since 2011.

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