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Financial Times - Comeback Chiefs Return to Stage a Second Act:
March 26th 2008
Financial Times
26-Mar-2008
By Justin Baer
For all of Wall Street's unexpected twists during the past year, the markets' upheaval did produce at least one predictable effect: a string of abrupt divorces between high-ranking executives and the firms they helped lead.
Many top bankers and traders have seen their careers stall amid mounting losses and accusations of managerial failure. The casualty list includes Merrill Lynch's Stanley O'Neal, Bear Stearns' Warren Spector, Zoe Cruz of Morgan Stanley (AMEX: MWD - News) and Citigroup (NYSE: C - News) 's Tom Maheras.
Wall Street exiles should take heart, however. Compared with managers in other industries, their chances of landing on their feet, either at another bank or with a venture of their own design, are high. Moreover, a look at today's financial incumbents suggests that some of the recently departed may achieve even greater heights during the next phase of their career.
Fired a decade ago from his perch as president of Citigroup, Jamie Dimon today sits atop New York's financial services industry as chief executive of JPMorgan Chase. In avoiding many of the setbacks of the credit crisis, Mr Dimon's bank vaulted past Citigroup in market capitalisation, and this month won the downturn's biggest prize, the hobbled Bear Stearns, with an all-share offer valuing Bear at $1.2bn (£602m, €773m).
Frank Quattrone, the technology-sector banker derailed by obstruction of justice charges in 2004, has announced plans to open his own advisory firm. His overturned conviction paved the way for the former Credit Suisse star's return to an industry dotted with notable comebacks.
Sandy Weill, retired Citigroup chairman, Pete Peterson, Blackstone Group co-founder, and John Mack, two-time Morgan Stanley chieftain, also suffered defeat at the hands of colleagues during bitter power struggles earlier in their careers.
Michael Bloomberg, New York's mayor, and Jon Corzine, New Jersey governor, won the support of millions of voters in their quests for political office. Years earlier, each had lost the confidence of their partners at Salomon Brothers and Goldman Sachs, respectively.
Of course, executives in any industry can set a derailed career back on track. But vindication appears to come sooner and more easily in financial services.
"The financial sector is transaction-driven," says Andrew Ward, an assistant professor of business at the University of Georgia and the co-author of Firing Back: How Great Leaders Rebound After Career Disasters. "Some deals work out well, some don't work out well. Failure is accepted."
Wall Street's volatile nature often helps strengthen the deposed executive's case that they were not alone in making the mistakes that led to their departure.
"It's a lot easier to find the sunlight in the careers of financial players than it is for a guy who's working his way up the food or razor-blade industry," says Jim Drury, an executive recruiter who has sought candidates for companies such as United Airlines, Sara Lee and Quaker Oats. "Decisions don't happen as quickly, and the movements are slower in the broader industrial sectors. In financial services, reputations can be made or lost overnight, and then made again."
There is a relatively small pool of people with the experience and skill to run complex securities and banking businesses. Take Citigroup: its search for the ideal successor to chief executive Charles Prince, who resigned under pressure in November, proved fruitless. The bank eventually tapped Vikram Pandit, an investment banker who had joined Citi just five months earlier.
Most Wall Street executives retain their fame - and certainly their vast web of contacts - long after they have lost their jobs. And for those looking to open a hedge fund, private equity firm or advisory boutique, the barriers to entry and capital investment are lower than those required for an industrial concern of equivalent size.
Nevertheless, those who seek another opportunity to run a publicly traded company may struggle to persuade board members to overlook the abrupt end to their previous job. Some reasons, such as disagreements over company strategy, are easy to forgive, says Mr Drury. Others, such as a history of making poor or ethically questionable decisions, are impossible to ignore.
"You usually only get one chance to be a public company chief executive," Mr Drury says. "If you make the most of it, you may get another chance at a bigger or more complex company. Clients who want to recruit CEOs don't want to explain to shareholders why they're hiring someone who got fired from somewhere else."
A third of the chief executives ousted from top US companies came back to hold active management jobs, according to a study Mr Ward conducted in the 1990s. About 22 per cent slid into advisory or investment roles, a figure he says probably has increased with the growth of private equity.
Some executives who failed to fit in at one company may thrive in another. Robert Nardelli, the tough former General Electric executive known for his skill at operating industrial businesses, foundered as chief executive of hardware retailer Home Depot.
"I learned a lot," Mr Nardelli says of his stint at Home Depot. "We doubled the size of the business in five years, we almost tripled the earnings. Would you do some things different? If you had to do it over again, yeah. You're smarter, you've learned. So, yeah, you might approach it differently." He now runs Chrysler, the privately held US carmaker.
"Nardelli saw lots of ways he could improve Home Depot from an efficiency standpoint," Mr Ward says. "Yes, there was some backlash. But going somewhere like Chrysler, that's what they need."
When the markets rebound from their current malaise, banks and brokers will be eager to capitalise on the return of the world's appetite for risk. A recovery will also open doors for many of those held responsible for the downturn.
"Not all of one's decisions are going to be the right decisions," said Sandy Weill, the former American Express executive whose transformation of a moribund Baltimore-based consumer lender into Citigroup, the world's largest financial-services company, was arguably Wall Street's most remarkable second act.
"Learn from it and do even better," he added. "It happens a lot in this business."
How to come up smelling of roses
Executives who fall from the high echelons can make it back by reminding recruiters of their previous attainments, say careers experts.
The skills that made their early achievements possible may be enough to persuade a cautious board to overlook any abrupt end to their employment, according to Andrew Ward, co-author of Firing Back: How Great Leaders Rebound After Career Disasters.
Those looking for a second chance should argue that internal politics and philosophical differences over company strategy - not poor leadership or lapses in judgment - were the real culprits in their downfall, says Jim Drury, whose JamesDruryPartners helps recruit chief executives and board members.
That is not always easy, Mr Ward says. Severance agreements may limit what some deposed executives can say about their former colleagues, forcing them to strike a difficult balance between giving their side of the story and pointing the finger of blame elsewhere.
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