Eliot Spitzer's "Canarygate" investigation will damage the reputation of, and employee morale within, the institutional units of many investment management firms, consultants and executive recruiters predict.
"The financial services industry depends on trust," said Christopher McNickle, a consultant at Greenwich Associates LLC, Greenwich, Conn. "If even a reasonable handful of money management companies are called into question, it pulls them all into question."
So far, the impact has been the loss of top executives at some investment management firms, even before the New York Attorney General's office and the U.S. Securities and Exchange Commission filed criminal and civil charges. And observers are expecting more departures, although they won't name names.
As a result, the job of finding suitable candidates for money management openings just got a lot harder, recruiters say.
"From an investment company's perspective, they don't want to hire someone else's problem. We are asking a lot more questions; ‘How close were you to these gray areas of activity?' There are a lot of concerns about people from the distribution side, in particular. Candidates have to be literally squeaky clean," said recruiter David Barrett, partner, Higdon Barrett LLC, New York.
Whether executives from tainted companies will find new jobs in money management is a loaded question, said recruiter Peter D. Crist, president of Crist Associates LLC, Hinsdale, Ill.
"It's going to be very difficult, given the environment, for these guys to ever work again (in money management), even if they were just named in these investigations, not indicted. All the antennae are up. What board will forgive and forget? Not in this environment, they won't," said Mr. Crist.