History is written by the victors, and so are organizational charts. So it was no surprise that Bank of America's (BAC) new CEO, Brian Moynihan, demoted Greg Curl, the bank's chief risk officer and former rival for Moynihan's job. The financial press has reported that Moynihan, 50, wants to "bring in his own people." For shareholders, these are not encouraging words. Because history has also shown that it's usually a mistake to get rid of the couple of guys"”the architects or consiglieres"”who know how things work. These veterans tend to be micromanagers who build power by having everyone report to them and keep a lid on crucial information to stay on top. Curl was the only man allowed close enough to Ken Lewis to know how BofA was assembled.
The biggest error a new CEO in such a system can make is to overestimate his political leverage. Look at Citigroup's (C) rocky history after the exit of micromanaging architect Sandy Weill. Weill was so detail-oriented that he acted as the de facto chief financial officer of the firm. After he left, the place went through five new CFOs in rapid succession"”including Sallie Krawcheck"”who all flamed out of the job because they couldn't break down (or accept) the institution's bewildering walls on financial information. Recently, Weill blamed his successors, Chuck Prince and Vikram Pandit, for mismanaging his vision.
Or look at what happened after Vikram Pandit became CEO of Citigroup. He lost no time in installing his own people at the top, ranging from trading genius Guru Ramakrishnan to advisor Don Callahan to banker John Havens. Almost immediately, Pandit lost points among existing Citi staff for locking himself into an ivory tower of former Morgan Stanley (MS) colleagues. He could have used some friends inside HQ: Unsurprisingly, New York magazine dubbed Pandit "The Most Powerless Powerful Man on Wall Street."
There are plenty of other examples of men who held the map to a firm's financial workings and whose departures may have harmed their banks significantly. Warren Spector was the architect and chief leader of Bear Stearns' debt businesses; when his boss Jimmy Cayne fired him out of pique, it was if the keys to the castle were lost and everyone else had to work twice as hard to figure things out. Hank Greenberg, for all his flaws, managed to keep the guys at AIG Financial Products in line. After Spitzer pushed Greenberg out, Michael Lewis quoted an AIG trader as saying, "The new guys running AIG had no idea." That made it easy for Joe Cassano, who was running financial products, to take advantage of the vacuum and bully his team into riskier trades.
There are also CEOs who did it right. JPMorgan Chase's (JPM) Jamie Dimon has always kept a cadre of ex-Citigroup executives as trusted lieutenants, including Heidi Miller and Mike Cavanagh. But the profiles of Dimon also teem with anecdotes of how he courted sitting executives at Bank One and JP Morgan and won their favor, too. Give the home team a chance.
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