First they stripped G. Kennedy Thompson of his role as Chairman of Wachovia Corp. Now, they’re forcing the CEO of the nation’s fourth largest bank to retire.
Sounds like another tale of C-Suite woe for major banks. Indeed, financial institutions have been taking hit after hit in the aftermath of the sub-prime crunch and tightening credit including Citigroup and Bank of America, not to mention investment house Bear Stearns.
Some of Wachovia’s woes are generic but some aren’t. Like other banks, its stock has plunged, in Wachovia’s case by 56 percent over the past year, and its market cap has consequently shrunk. Wachovia bore the ill effects of mortgage-related losses and some questionable buys, such as its $6.7 billion purchase of A.G. Edwards and $25.5 purchase of Golden West Financial.
Thompson was noted for helping engineer Wachovia’s sale to First Union back in 2001. He had worked for years at Atlanta-based First Union. The merger was wrought with problems For one, First Union had a lousy customer service reputation. Wachovia, then based in Winston-Salem, N.C., had an excellent one. The idea was to bury the brand name of First Union and embellish it with Wachovia’s good image. To some extent it worked — the new entity improved its quality scores.
But the merger was plagued with funny deals, such as proposed million dollar giveaways to top executives. The new Wachovia had other ills, such as a $37 million fine from the Securities & Exchange Commission, alleged complicity in a telemarketing scheme that ripped off the elderly and, more recently, a Justice Department probe of alleged drug money laundering.
Thompson was stripped of his chairmanship just last month. CEOs should take warning that this brings more attention to issues of splitting the chairman and CEO roles. When you lose one, it’s easier to lose the other.
On a personal note, I have been a Wachvoia banking customer off and on for 35 years. I remember the good, ol’ conservative Wachovia, the bank that was begun by quaint Moravian immigrants in Piedmont, North Carolina many years ago. It’s a shame to see what’s happened to it.
