Monday, October 29, 2007

The Wall Street CEO Graveyard

From the WSJ:

Stan O’Neal is leaving as chief executive officer and chairman of Merrill Lynch in the wake of a record $7.9 billion write-down in fixed income, but he is by no means the first top banker to suffer that fate. Our friends over at sister publication Financial News took a trip down memory lane to look at some senior executives who were forced out after problems at the banks they led.

Peter Wuffli - UBS - ousted: 2007;
Wuffli was ousted as CEO July 6 after estimated losses of $3.5 billion from hedge fund Dillon Read Capital Management. The bank’s share price rose at half the rate of rivals Credit Suisse Group and Deutsche Bank in the 18 months before he left. UBS Chairman Marcel Ospel backed Wuffli as his successor, but instead the bank’s board showed him the door. Ospel agreed to extend his contract for another three years and former wealth management head Marcel Rohner stepped in to become CEO.

Philip Purcell - Morgan Stanley - ousted: 2005;
Purcell, formerly chairman and CEO of Morgan Stanley, was forced to step down in June 2005 after a period of discontent among shareholders and employees over the direction of the investment bank and performance since its $10.2 billion combination with Dean Witter. While integration of the brokerage businesses proved problematic, the main charge was that Purcell showed little interest in investment banking and blocked proposals to use Morgan Stanley’s money to make financial bets or to invest in private equity deals. The U.S. bank’s market valuation slipped to about $57 billion in June 2005 from about $94 billion in January 2001, a bigger drop than its main competitors.

Douglas “Sandy” Warner – J.P. Morgan Chase – retired: 2001;
Variously J.P. Morgan’s chairman, president and CEO, Sandy Warner retired as chairman in September 2001 on the one-year anniversary of its merger with Chase Manhattan. In the month before his retirement JP Morgan Chase announced 3,000 job cuts in its investment-banking business, which had already suffered a major cull in the immediate aftermath of the merger. He recently became an adviser at Carlyle Group.

Jon Corzine - Goldman Sachs - ousted: 1999;
Corzine, former chief executive and co-chairman of Goldman Sachs, left in January 1999 after 24 years at the investment bank. Goldman insiders claimed Corzine’s ouster was connected to bitter politicking after the bank racked up losses from the Russian debt crisis of 1998, but the official line was that his departure was part of an orderly transition ahead of the bank’s initial public offering. Corzine was later elected to the U.S. senate and now is governor of New Jersey.

John Gutfreund – Salomon Brothers – resigned: 1991;
Dubbed the “King of Wall Street” in the 1980s, John Gutfreund’s 38 years at Salomon Brothers, where he had been chairman and chief executive for more than 10 years, ended in ignominy after the bank was implicated in illegal trading in the US Treasury bond market. Salomon Brothers under Gutfreund had been the top investment bank in the 1980s. It eventually was bought by Warren Buffet, before being sold to Citigroup.

I worked under Gutfreund and Warner--neither one was visionary or intellectually competitive--but both had strong personal skills. I think Gutfreund was a better manager of talent, but Salomon had more talent at its peak than JPMorgan (in my 2 decades of working).

UPDATE: Felix Salmon has some penetrating organizational insight.

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