Jonathan Slone. (Photographer: Kiyoshi Ota/Bloomberg)

CLSA’s CEO Slone Resigns After Bonus Cuts, Citic Changes

(Bloomberg) -- Jonathan Slone has resigned as chief executive officer of CLSA Ltd. after the securities firm’s state-owned Chinese parent moved to tighten its grip on the business, according to people familiar with the matter. 

Slone, who was CLSA’s CEO for a decade and oversaw its acquisition by Citic Securities Co. in 2013, tendered his resignation late last month, the people said, asking not to be identified because the matter is private. The move followed a drop of about 60 percent in CLSA’s 2018 bonus pool and a number of other recent changes instigated by Citic, including staff adjustments and an overhaul of CLSA’s compensation structure, the people said. 

The 57-year-old’s resignation is the latest sign of tension between CLSA’s old guard and its Chinese owner, which pledged at the time of the acquisition to preserve the Hong Kong-based firm’s culture and independence. The management agreement that enabled CLSA to operate more or less independently expired in mid-2018, one of the people said. Representatives for CLSA and Citic declined to comment. 

CLSA’s Chief Operating Officer Nigel Beattie is in discussions about taking over as CEO, two people with knowledge of the matter said. No final decision has been made, they added.

Citic’s takeover of CLSA has been viewed by some in the industry as a test case for whether a Chinese brokerage can successfully expand overseas and compete with the likes of Goldman Sachs Group Inc. and Morgan Stanley. While CLSA has maintained its strong brokerage and research franchises in Asia since the acquisition, it has yet to come anywhere close to matching the global reach of Wall Street’s giants.

CLSA Chairman Tang Zhenyi, who was seen internally as a strong advocate for Slone and his team, left last month amid rising tensions between CLSA and Citic Securities. Laurie Young, CLSA’s head of human resources, also departed recently, the people said.

The Financial Times reported Slone’s planned departure on Tuesday, citing anonymous sources.

Long Relationship

Slone’s exit would bring an end to a relationship with the firm that dates back to 1988, when he joined as a Hong Kong-based regional research director. He moved to New York three years later to establish CLSA’s U.S. operations, before shifting to Bank of New York from 2002 until May 2005.

Slone rejoined CLSA in September 2005 to run its global brokerage operations, and was named CEO in 2008. While in charge of the firm, he led the negotiations with Citic Securities for the deal that saw Citic become the first Chinese bank to acquire an international brokerage.

CLSA, whose no-holds-barred research and star-studded investment conferences lured generations of money managers to Asia’s markets, jumpstarted its transformation in 2017 after the merger. The changes picked up pace last month when Zhang Youjun, chairman of Citic Securities, took over the same role at CLSA and moved to introduce a new compensation structure he said would “ensure objective and fair” rewards for staff.

“With these measures, we’ll be able to incentivize the growth and development of our people while balancing their authority, responsibility and compensation,” Zhang said according to a March 6 internal memo.

Some members of CLSA’s executive committee, including Slone, didn’t receive a bonus for 2018 and were asked to take a pay cut for this year, two people said. CLSA’s overall bonus pool was slashed by 60 percent after it booked $27 million in costs to integrate the firm with Citic Securities’ Hong Kong unit, and a $31 million writedown on a Chinese bond investment that was part of the Citic division’s legacy book, according to one of the people.

Partly as a result of those additional costs, CLSA had to reduce operational expenses to be able to boost profit for the year, the people said. CLSA’s top management argued that the integration cost should have been absorbed by Citic Securities rather than by CLSA, they said. CLSA’s executive committee was also restructured in a way that reduced the influence of its old-guard management team, the people said.

CLSA, established in 1986, has about 2,000 staff in 20 offices across Asia, Australia, the Americas and Europe. The brokerage became well known for its high-profile annual forums, with guests including former U.S. President Bill Clinton and a former heavy-weight boxing champion Mike Tyson. Singers Sheryl Crow and Tom Jones are among those who have also performed at the event.

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