Head of Structured Finance Industry Group steps down amid discord over strategy and compensation

02 July 2018
Richard Johns, formerly executive director of the Structured Finance Industry Group, has left the organization, according to a letter sent to members last Friday. His departure follows months of wrangling among board members concerned about his leadership style and compensation package, according to four people close to the situation.
 
Johns's departure marks the second time in five years that a group serving as the public face of the securitization industry – which has taken pains to present itself as reformed after its role in the global 2008 financial crisis – has parted ways with a senior executive over concerns around compensation and corporate governance.
 
It also comes against a backdrop of a booming US economy but divergent fortunes for structured finance products. Despite increased issuance of products such as collateralized loan obligations and auto ABS in recent years, other structured finance instruments, such as private mortgage securitizations, have struggled to recover since the crisis.
 
According to the letter, which was sent on behalf of SFIG’s board of directors to its roughly 340 member organizations, Johns left the group voluntarily to pursue other endeavors. While the board searches for a replacement, SFIG will be led by an operating committee of SFIG’s current senior leadership, including Covell Adams, Sairah Burki, Dan Goodwin, Kristi Leo and Leslie Sack, said the letter, which was seen by Debtwire.
 
The board, and Johns himself, wished each other the best in the note sent to members. However, several people close to the situation said Johns's decision to step down was driven by board members who were increasingly dissatisfied with his leadership style and what they saw as a tendency to make big strategy decisions without the full support of SFIG’s board.
 
SFIG, which is a registered non-profit organization, was formed in 2013, when many of the banks and other institutions backing the now-defunct American Securitization Forum (ASF) defected amid a dispute over its executive director Tom Deutsch’s compensation and management of the group. Before joining SFIG around the time of its formation, Johns was global head of funding for Ally Financial, a regular issuer of securitized products. Prior to that, he worked in capital markets for several years at Capital One.
 
In the years preceding the rift in 2013, the ASF organized the securitization industry’s annual gathering in Las Vegas, which was immortalized in the 2015 movie adaptation of The Big Short, author Michael Lewis’s tale of the boom and bust of the US housing market that led to the global financial crisis.
 
In 2014, SFIG launched a competing Vegas event, co-organized with conference company Information Management Network, which came to effectively replace the ASF’s conference as the go-to industry event of the year for networking and deal-making. Since then, SFIG has become securitization’s pre-eminent industry body, and the SFIG Vegas event has grown to be one of the largest capital markets conferences in the world, with around 7,000 people attending this year, according to SFIG and IMN.
 
But while the Vegas event has been a success, concerns have percolated for some time among SFIG board members around Johns's focus on the non-profit’s conference business, and the group’s perceived lack of influence among DC lawmakers, according to several people familiar with the organization.
 
“One underlying problem is that SFIG has never really been a policy-focused group,” said one of those people. “You can write as many comment letters as you want, but you’ll struggle unless you have a real presence on the Hill.”
 
SFIG has published white papers and formed working committees on topics from the adoption of transparency regulations to the revival of the market for private-label mortgage backed securities. However, some industry members have grown weary of a lack of concrete lobbying victories, compared to, for example, the Loans Syndications and Trading Association, which successfully fought to overturn risk retention rules for CLOs earlier this year.
 
In a development that several observers said was indicative of the group's lack of progress in advocacy, two key members of the SFIG's government relations team departed earlier this year – former head of advocacy Tom McCrocklin, who joined Morgan Stanley’s government relations team, and Kristin Eagan, who moved to a similar position at Ally Financial.
While SFIG's core leadership has remained relatively stable since its inception, several other more junior staff members in other divisions have also left the organization in recent months, which currently lists 19 employees on its website.
 
Johns's compensation has also been a sore point among board members, sources said. At the most recent meeting of the SFIG board, on 26 June, two unusual items were added to the agenda alongside the more regularly discussed aspects of the organization, according to a person with knowledge of the gathering – Johns's compensation package and potential succession plans.
 
According to SFIG’s most recent non-profit filings, Johns's total compensation increased more than five-fold between 2013 and 2016. He received around USD 1.26m in compensation from SFIG in 2016, up from roughly USD 996,000 in 2015, USD 433,000 in 2014 and USD 235,000 in 2013. The group’s total revenue over those years, meanwhile, grew by about three times, at roughly USD 7m in 2016, from USD 5.8m in 2015, USD 4.9m in 2014 and USD 2.3m in 2013, filings show.
 
A decision has yet to be made around Johns's replacement, sources said. Meanwhile, SFIG’s next big event is a new standalone conference in Washington DC this September, at which former Federal Reserve chair Janet Yellen is scheduled to deliver a keynote address.
 
SFIG declined to comment. Richard Johns did not respond to calls and messages requesting comment, nor did SFIG chairman of the board Howard Kaplan, and the five listed members of the interim operating committee.