I was introduced to Roy Swan through a mutual friend, Margot Brandenburg of the Ford Foundation. Roy is the Director of Mission Investments and Margot reports to him in her role of Senior Program Officer. I have known Margot for years and we’ve worked together on a number of sustainability-related topics. Over the past year I have had the pleasure of working with Roy on KKR’s Sustainability Expert Advisory Council (SEAC) which I chair. Roy brings great expertise to the SEAC on a broad range of social issues. In addition to working together on the SEAC, Roy and I have had a number of conversations about race and social justice. I wanted to share what I’ve learned from Roy and asked him if he’d agree to do an interview. He kindly agreed. But we soon realized that there was more to be said than could be covered in a single interview and it will be a three part series. Part 1 is about Roy’s personal background. In Part 2 we discuss his work at the Ford Foundation. Part 3 is devoted to Roy’s idea of “Patriotic Capitalism.”

Eccles: Roy, thanks again for taking the time to talk to me. Just to get started, can you talk a little about your background and childhood?

Swan: Like so many of us, my life has been filled with a series of fortunate and unfortunate events topped off with divine intervention. I grew up in small but mighty Penns Grove, NJ, a town of 4,000 people; blue collar, low-income, Title I school district. My parents landed there by following two of my dad’s older brothers escaping the rural Georgia sharecropping life. Neither of my parents graduated from high school but both were wise and sharp. Both re-started their education later in life and my dad became an ordained minister.

Eccles: The story of how you went from your childhood to where you are today must be a remarkable one. Let’s start with high school.

Swan: The summer of 1978 was big for me. I was the first Freshman in five years to be invited to the Varsity football team during summer tryouts and I also had to pick my high school educational course track. My older sister, Scheralle, advised me to pick College Prep because she knew I wanted to become a doctor after my hoped-for career as an NFL player. I wanted to be a doctor because I wanted a job where I was paid to help people.

I was told that college was required for both careers, knew my parents couldn’t pay for it, and was relieved to learn about academic and athletic scholarships. I decided I’d be the best football player and scholar I could be to double my odds of success.

Eccles: Makes sense but I have to admit I’m jealous of that kind of athletic prowess.

Swan: It’s more complicated than you think. My football scholarship and NFL dreams came crashing down when I broke my neck in a game late in my junior year. The good news is, it was my best game ever! I had over 100 yards rushing and eight tackles in the first half. I broke my neck in the third quarter.

The pain was excruciating, I felt numbness and later paralysis. One vertebra was crushed, two were dislocated and lodged against my spinal cord but, in a case of divine intervention, the angle of impact protected my spinal cord from being severed. Miraculous experimental surgery brought me from paralysis to relative normalcy.

Eccles: Wow, that’s quite the story! But sounds like the athletic part of your strategy was gone so what did that mean for college?

Swan: While my football career was over, I was good enough in Track & Field that I won the attention of elite academic colleges. I settled on Princeton, where I was pre-med.

Eccles: My son went to Princeton. It’s a great school, but a very expensive one. Did you get a full ride as an athlete?

Swan: No athletic scholarships at Princeton, just financial aid, which was great, but I still struggled financially and needed to work 20 – 30 hours a week; minimum wage back then was $2.75 an hour. I knew there was no way I could do that in med school, so I decided to work a few years before applying. Since high school my summer job was in an organic chemistry lab, so I was clueless about how to make real money. I asked my rich friends (all white, of course) where I should go to make as much money as possible as quickly as possible. They told me to go to Wall Street. I applied for the Two Year Financial Analyst position designed for college grads.

Sticking with my “clueless” theme, when investment bank interviewers asked me “why investment banking,” I said, “I hear if I work hard I can make a lot of money, which I need to go to med school in a couple years.” In another case of divine interventions, I got several job offers. I chose First Boston, a hot place back then because of its M&A department led by Joe Perella and Bruce Wasserstein.

Eccles: Fun story! And brings back some memories. I knew both of those guys from writing a book on investment banks when I was a professor at HBS. So then you were off to med school?

Swan: I guess our lives kind of crossed way back then without knowing it because you know I know about your book! But, no, I didn’t apply to med school. I started studying for the med school exam but it was too hard to re-learn everything from Princeton while working 100 hours per week so I decided to go to law school since I figured I could hang out my own shingle if I couldn’t get a job. I went to Stanford.

Eccles: Why Stanford?

Swan: Imagine an underexposed New Jersey kid in California for the first time, driving along the palm tree lined University Avenue leading up to Stanford’s vast sweeping great lawn under the bright sun of a cloudless sky. It was impossible to say “no” to that even though I had to take out a lot of loans and could have gotten a full in the JDA/MBA program at the University of Chicago.

Eccles: Hmmm. Don’t get me wrong but I wonder how much you really learned in investment banking if you let weather trump cash! But what’s done is done. How did you like Stanford?

Swan: I didn’t like law school as much as I thought I would, but the weather was unimaginably nice for an east coaster! I made great forever friends, and one of my most important was not a classmate but a professor, Joseph Grundfest. He gave me some crucial advice that has stuck with me throughout my career.

Eccles: What was it?

Swan: Professor Grundfest invited a number of Black students to a meeting. He recognized our desire make a difference in the world and appreciated that many of us would want to use our education and legal pedigrees as weapons to fight for fairness. He encouraged us to think outside the box about careers. Instead of following the well-worn path into academia and nonprofit organizations like the ACLU, NAACP Legal Defense Fund, and the Urban League, he encouraged us to think about business. I think his exact words were: “One of you in this room needs to become a billionaire.” His point was that financial currency is a great enabling device to advance positive social impact. He also suggested we pursue specialized expertise in a specific area as soon as possible as a tried and true way to achieve distinction and influence.

Eccles: Sounds like great advice but you clearly didn’t follow the billionaire part.

Swan: Sorry, Bob, but you’re jumping to conclusions! I plan to pursue that goal when I retire from the Ford Foundation on my 80th birthday.

Eccles: Good luck and I’m sure you’ll pull this off, but you’ve got decades to go before you get started on that! But back to your career. Where did you go after law school?

Swan: I worked in the M&A department of corporate law firm Skadden Arps briefly before going to Salomon Brothers. While at Salomon Brothers I got a call about helping start up Harlem’s Empowerment Zone, a great new bipartisan federal government economic development initiative that also involved NYC and NY State government funding. I joined as the inaugural Chief Investment Officer. Together with the CEO, Debbie Wright, who was also my mentor, we designed a strategy whereby our $250 million in capital would not just be given away as grants but also invested with hopes for a return on investment. Our dream was that, rather than shut down upon the program’s 2004 expiration day, Harlem’s Empowerment Zone would live on. Our strategy worked. I think Harlem’s Empowerment Zone is the last surviving of the initial six Empowerment Zones created in the 1993 legislation.

It was when I went to work in Harlem in the mid-‘90s that I first heard of a guy named Darren Walker, who was doing great work at Abyssinian Development Corporation.

 

Eccles: Impressive work and I didn’t realize that angle on Darren, but we’ll get back to that later. What did you do next?

Swan: I left the Empowerment Zone when my brilliant wife, Taran, gave birth to of our first daughter, Dara. We moved from NYC to my wife’s hometown of Berkeley, CA in late 1998. I worked at the technology-focused merchant bank, Hambrecht & Quist, my first exposure to Silicon Valley during the height of the first Internet bubble.

Chase bought H&Q, then JPMorgan merged with Chase, and the Swan family moved back to NYC in 2001. In 2005, after the birth of our second daughter, Nicole, and brief stint at Time Warner, I joined Carver Bank, a tiny historically Black run publicly traded bank founded in Harlem in the late 1940s when Black people were less welcome at traditional banks than they are today. It was there that I began to master federal banking and SEC regulations as CFO.

Eccles: How long were you at Carver Bank and what did you do next?

Swan: I was at Carver for three years and then joined Morgan Stanley as the president of one of their bank subsidiaries. My first day on the job, Sept 22, 2008, was the day the world changed. It was one week after Lehman failed and less than 12 hours after the Fed held an emergency Sunday evening meeting to convert Goldman Sachs and Morgan Stanley, unilaterally and without the usual application and review process, into Bank Holding Companies to avoid a complete collapse of the global financial system.

As a result, in addition to my job as President of a bank subsidiary, I became part of the “SWAT” team that developed the policies, procedures, risk management infrastructure, and compliance frameworks required for Bank Holding Companies at the parent company level.

Eccles: This also brings back memories, but I was a mere observer of this financial crisis while you were in the thick of it. What was that like?

Swan: It was a roller coaster ride. My 10 years at Morgan Stanley felt like 50!  I was hired to create an operating bank that originated mortgages, packaged them, securitized them, and sold them as a business model.  The Global Financial Crisis taught us that that business model, as designed at that time, was flawed and non-viable.

Thus, instead of leading the growth of a bank, I was ordered to dissolve it, help get a new bank charter with a different business model approved by the Office of the Comptroller of the Currency (OCC), transition that bank to new management, and step aside.

I assumed I would be let go after that but Morgan Stanley had mercy and gave me a series of what I’ll refer to as rag-tag risk management jobs. The jobs weren’t my cup of tea, but they exposed me to the inner workings of a complex, global financial institution.

Divine intervention entered the scene again. I happened to make a “check in” call with a wonderful colleague, Audrey Choi, who was then Head of Morgan Stanley’s Global Sustainable Finance department. Turned out that I called Audrey exactly when was considering a new hire, and she rescued me from a job I didn’t like and wasn’t particularly good at. Audrey is a force of nature, for a time was the only person at Morgan Stanley who knew what “ESG” and “impact investment” were, and later became Morgan Stanley’s Chief Marketing Office AND its first ever Chief Sustainability Officer.

Eccles: Ah, I didn’t know that about you and Audrey. I met her when she was on the Sustainability Accounting Standards Board. She’s great! What was your role with Audrey?

Swan: My job was initially very narrow—Community Reinvestment Act (“CRA”) compliance; when you’re a lawyer by training everyone thinks you’re also an expert in compliance and other tedious matters.

Because I had intensely studied the Bank Holding Company Act (“BHC”) as part of my role on the BHC conversion SWAT team, I could use what I learned to develop innovative ideas for impact investing within the strict federal banking regulations. Eventually, I became Co-Head of Global Sustainable Finance and led a CRA department that was profitable and earned a reputation as a great community partner.

CRA finance is the equivalent of “impact investing” in the banking world. My team committed over $13 billion in impact investments. Our strategy became a case study in innovation for bank examiners.

Eccles: That’s uncharted territory. What was is like getting there?

Swan: We created a plan that was solutions-based and designed to address community needs rather than traditional CRA “check the box” requirements that did not necessarily address community needs. Our strategy was unusually sophisticated for the sector given Morgan Stanley’s roots as an investment bank rather than a traditional commercial bank.

Getting that plan approved was my biggest career risk because the required public comment period would expose Morgan Stanley to broadly broadcast criticism. It was so unusual that Morgan Stanley’s outside legal counsel advised against submitting it to the regulators.

Eccles: So what did you do then?

Swan: I fired the law firm. I told management they could fire me if I couldn’t get the plan approved.

When we submitted the plan to the federal banking regulators, let’s just say it was not embraced. I was told multiple times “no, no, no you can’t do this.”

After many weeks of discussion, the regulators became satisfied that our plan, while extremely unusual, fit their expectations of serving low- and moderate-income communities and people in a commercially viable way. I can’t give you any numbers but just let me say that the community, Morgan Stanley, and the banking regulators all won.

Eccles: This is interesting. There was a market failure and due to your deep understanding of regulations and thinking outside of the box, you were able to see a path forward no one else saw. That’s fascinating. You’re there at MS for 9 ½ years and how did Ford Foundation happen?

Swan: When the Ford Foundation’s Board of Trustees made the groundbreaking decision to create the nation’s largest impact investing endowment in the foundation world, the story was covered on the front page of the NYT business section with a great photo of Darren Walker and Investment Committee Chair Peter Nadosy standing on the roof of our stunning headquarters building, staring off presciently into the middle distance.

I remember being super excited, and I walked around my floor at Morgan Stanley’s headquarters building giving copies of the announcement to my colleagues, saying “Darren Walker has moved the earth again.” I was euphoric about the Ford Foundation’s bold move.

Eccles: Did you apply for the job?

Swan: The thought never crossed my mind. The firm running the search called me three times and each time I suggested other candidates. Two close mentors heard about the job and told me I was perfect for it. The fourth time the search firm called I agreed to throw my hat into the ring.

The next day, a Saturday morning, I was in my Morgan Stanley office and received an email from Darren Walker. Never in my life had I received an email from him.  It said something like this: “Roy, I’ve been following your career since the empowerment zone.  I’m so glad you’ve agreed to explore a role at the Ford Foundation.”

Eccles: How did that feel?

Swan: I felt so honored by Darren’s personal touch, especially given his singular reputation as a world leader. The importance of the role as the inaugural Head of the Ford Foundation’s new impact investing program crystallized to me in that moment.

I went from being an interested observer of Ford’s new program and wanting to help them find the right leader for it to, “Oh my God, if I don’t get that job, I don’t know what I’m going to do!”

Eccles: And then?

Swan: My last day at Morgan Stanley was January 2, 2018 and I started at the Ford Foundation two days later.