Andy Kessler, a columnist for the Wall Street Journal, has blamed the spectacular collapse of Silicon Valley Bank (SVB) — the bank of choice for startups and tech firms — not on its poor financial management and unfortunate economic circumstances, but on the composition of its board.
“Was there regulatory failure? Perhaps. SVB was regulated like a bank but looked more like a money-market fund,” wrote Kessler in his ‘Inside View‘ column.
“Then there’s this: In its proxy statement, SVB notes that besides 91 per cent of their board being independent and 45 per cent women, they also have ‘1 Black,’ ‘1 LGBTQ+’ and ‘2 Veterans.’
“I’m not saying 12 white men would have avoided this mess, but the company may have been distracted by diversity demands.”
It’s a helluva spicy take. SVB was America’s 16th-largest bank and while it exploded with venture capital money, IPO proceeds, and SPAC deals over the last three years, it did make some regrettable financial decisions.
It lent out some money, took out government bonds, and put money into mortgage-backed securities. The bank sought big yields on its investments but with relatively little put into loans, when interest rates went up, its bonds and mortgage securities suddenly lost value. This led to a run on the bank’s deposits, with customers queuing up to withdraw their money before their cash went down the drain.
But, Kessler reckons “diversity” was the real culprit.
“Was management hubristic, delusional or incompetent? Sometimes there’s no difference,” he adds.
Of course, Greg Becker — a 55- or 56-year-old white man — was the bank’s CEO. He also sat on the risk committee with the bank lacking a chief risk officer, “risk management seemed to be an afterthought,” wrote Kessler.
Becker also sold US$3.6 million (AU$5.5 million) of company shares in a trading plan less than two weeks before the bank’s collapse. Considering Kessler seems to believe that no one at the bank had the foresight to realise interest rates were going to climb, it is a remarkable coincidence that Becker was able to offload his shares just before the bank defaulted.
That this column made its way through WSJ‘s team of sub-editors and editors with the ludicrous suggestion that SVB was more focused on diversity than its own financial security is remarkable. Just last week we had International Women’s Day.
On 8 March, it ran an article penned by Kevin Ali, chief executive officer of Organon telling business leaders to prioritise women’s health. It ran another piece by Sarah Chaney Cambon
and Lauren Weber explaining that women’s return to the workforce following the pandemic is “helping propel the economy in the face of high inflation and rising interest rates.”
Kessler is probably relieved that more women don’t sit on boards — otherwise who knows what sort of a mess we’d be in!
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