CEO Watch CEO Ken Thompson disembarked by Wachovia Bank
Ken Thompson, CEO of United States’ fourth largest bank, Wachovia, has been asked to quit by the board of directors of the company. He is temporarily replaced by Lanty Smith, present chairman of the board. This decision came to sanction the turbulences that the bank encountered since the beginning of the sub-prime crisis.
Ken Thompson, CEO of United States’ fourth largest bank, Wachovia, has been asked to quit by the board of directors of the company. He is temporarily replaced by Lanty Smith, present chairman of the board. This decision came to sanction the turbulences that the bank encountered since the beginning of the sub-prime crisis.
In his first five years as chief executive of First Union, later to become Wachovia Bank, Ken Thompson was the antithesis of a big-bank CEO. While his predecessor, Ed Crutchfield Jr., was a famous daredevil during merger, Thompson was a master at carefully protecting his every bet.
Just a year after his nomination at First Union, Thompson deftly talked fellow North Carolina bank Wachovia into a "merger of equals." Thompson also took over Wachovia's name for the combined bank, allowing him to bury the First Union brand, which had become tarnished by Crutchfield's disastrous direction of the company.
Under Thompson, Wachovia improved its customer service so much that it was the perennial top performer among banks in national surveys. This attention to detail, coupled with his clever deal-making, won Thompson many fans among Wall Street investors, who bid Wachovia shares up 40% by the time of the Prudential deal.
A Series of Setbacks
But Thompson's reign ended abruptly on June 2, when Wachovia's board announced Thompson "had retired at the request of the board." It was just the first of two big blows for bank chiefs beset by mortgage woes: The same day, Washington Mutual said it was replacing Kerry Killinger as chairman. He remains CEO of the nation's largest savings and loan. During the first quarter, Washington Mutual lost more than $1.1 billion and set aside $3.5 billion to cover defaulted loans.
While the Wachovia board prudently said Thompson's dismissal wasn't due to any single event but rather to "a series of previous disappointments and setbacks," it was painfully clear Thompson's ouster stemmed from his one and only major deal: his $25 billion acquisition two years ago of Golden West Financial, a large mortgage lender that has been crushed by the housing bubble bust in California and Florida.
In retrospection, it would be easy to assign Thompson's decision to buy a mortgage lender at the height of the housing bubble to executive hubris. But it may have been more that Thompson was battling the same problem that bedevils the rest of today's mega-banks: The law of large numbers.
