The battle for Ken Lewis's job begins
Filed under: People, Bank of America
Ken Lewis, who will retire as CEO of Bank of America (BAC) at the end of the year, oversaw the creation of one of the country's biggest banks over the last eight years. In hindsight, it looks like Bank of America's corporate strategy is deeply flawed, and in order to make the bank viable again, a CEO will need to come in who can make big changes.
During his tenure, Lewis, whose legal problems are likely to continue, oversaw the continued construction of a bad idea, the financial services one-stop shop. This is a bad idea because people do not want to do all their financial services business with a single supplier. If consumers get into trouble, they don't want to give the bank so much control over their financial lives. And if the bank gets into trouble, consumers don't want to go down with the bank.
Lewis ran into another problem with the one-stop shop: he could not get the different parts of the bank to cooperate with each other to sell different products like loans, credit cards, and mortgages to individual customers.
With the failure of this so-called cross-selling strategy, Lewis resorted to growth by acquisition. In 2004, he overpaid for FleetBoston Financial, then in 2005 he acquired the country's largest credit card lender, MBNA Corp., and in 2008 he bought mortgage lender Countrywide Financial. Lewis also acquired U.S. Trust Co., an upscale bank, and LaSalle Bank in Chicago in 2007.
But his January 2009 deal to acquire Merrill Lynch for $29 a share proved to be too much -- particularly considering all the trouble it got Lewis from shareholders, Congress, the SEC, and a few state attorneys general. The biggest issue is that Lewis paid way too much for the deeply loss-ridden pile of mortgage-backed securities that was Merrill Lynch thanks to the work of its former CEO, Stan O'Neal.
So who should succeed Lewis? Internal candidates include the head of its retail bank, Brian Moynihan; Thomas Montag, a Merrill Lynch executive appointed to lead the combined investment bank; and Sallie L. Krawcheck, a former Citigroup (C) executive hired to lead the wealth management division.
Two external candidates come to mind. One possibility is Al de Molina, a former Bank of America CFO who now runs Ally Bank -- formerly GMAC Financial Services. Wall Street like him because he had financial skill and was open about Bank of America's financial prospects. While Molina has strong financial skills, I would like to see an executive with broader experience in strategy and organization.
My choice would be Larry Fish -- a less well-known executive who has a reputation as an independent thinker with broad bank management experience. Fish started off at Bank of Boston where he ran operations in Brazil and Japan, headed the Asia Pacific Region, ran Trust chairman of Rhode Island's Citizens Financial Group, a Royal Bank of Scotland (RBS) subsidiary.
I think Fish has the independence to rethink Bank of America's corporate strategy and cut it back to a profitable core. And I question whether any of the internal candidates can do what is needed.
Meanwhile, Lewis can enjoy his $50 million pension while he's hounded by Andrew Cuomo.
Peter Cohan is a management consultant, Babson professor and author of eight books including, You Can't Order Change. Follow him on Twitter. He owns Citi shares has no financial interest in the other securities mentioned.
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Reader Comments (Page 1 of 5)
10-01-2009 @ 9:51AM
Tony Stone said...
Interesting opinion piece, but you lost me with the second sentence. Your assertion that "Bank of America's corporate strategy is deeply flawed" is a fallacious claim. There are no indications that BAC will come out of this recession in any state other than profitable. The Country Wide acquisition came packaged with some headaches, but is already beginning to pay off. Merrill will once again thrive once the recession is behind us and has already started showing signs of improvement.
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10-01-2009 @ 5:09PM
JP said...
I say it's going to be a clown from Ringling Bros. (He'll fit Right in)
10-01-2009 @ 10:25AM
Brian said...
It seems quite clear, the new B of A head is who ever Obama wants!
Thats the new wave towards socialism.
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10-01-2009 @ 2:20PM
Mike McKibben said...
At last check Brian, it wasn't Socialism that got us in this economic mess, it was unbridled Capitalism, fraud and greed. Further, I doubt President Obama will have much say in who heads up BoA, and I don't see why you even had to make it "an Obama" issue. BoA is their own worst enemy.
10-02-2009 @ 12:38AM
Tony said...
I don't think it was Capitalism that got us in this economic mess. It was unbridled Government interference with Capitalism. As far as fraud and greed go, I'm sure you can find plenty of that in Socialism.
10-01-2009 @ 10:32AM
RAY said...
Obama might appoint Van Jones
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10-01-2009 @ 10:33AM
algonquin j. calhoun said...
...i think i should replace Lewis because i don't know anything about banking, either...having another overpaid goofball running the show would be good for continuity and fits right in with the obama administration...
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10-01-2009 @ 11:05PM
A said...
I think before u decided to run a bank, u should learn how to correct your grammer, i.e. ( i ). Sad!
10-01-2009 @ 10:34AM
gm said...
Rumor is Obama will appoint Barney (sweet boy) Frank
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10-01-2009 @ 10:52AM
bagsamoney said...
Obama, of course, should replace the CEO of Bofa. He is looking to control everything. What a no brainer!!!!
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10-01-2009 @ 5:48PM
Lita said...
Well, you came up with the brilliant premise, so that indicates you have no brain. You'll get no argument from me on that.
10-01-2009 @ 10:54AM
eeyyyy said...
well,,as far i am concerned,,if its gonna make another azzzzhole 60 million dollars a yr,,then,,dont fill the job,,cant wait to see barfa..go belly up,,with a dagger in its gut,,
although glenn beck comes to mind,,lol,,,lol,,,,pttthhhhlllt,,,i love to fart up a room when i when i walk into bofa,,lol,,i did it 2x last week,,,wow,was that funny!!!!!!!!!!!!!!!!!!!!! i had an account but not anymore,,do a secu,,its better for the community,.
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10-01-2009 @ 5:57PM
Bruce said...
Bring in Michael Moore or Osama Bin Laden. Who could possibly be worse?
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10-01-2009 @ 11:01AM
mike said...
i'm gonna have to go with carrot top ...:]
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10-01-2009 @ 11:05AM
BigJerry said...
Maybe Bernanke will give BOA a trillion or two, resign and take the job himself?
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10-01-2009 @ 11:08AM
Praise the Lord said...
He doesn't need to be replaced because Geitner and President Obama are the psuedo-CEO's of Bank of America since the bailouts. Who's kidding who here?
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10-01-2009 @ 11:17AM
Meg said...
Everytime a CEO retires....he takes all the money with him. Hmmmmmm!
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10-01-2009 @ 11:29AM
Randy said...
Who will replace Ken Lewis at BofA? I'm sure there is at least one more of the sycnchophant hangers on who fetched coffee for the socialist in chief and soros puppet to appoint... maybe another 31 year old ivy league student who has yet to earn a degree like he appointed to run GM during bankruptsy.... maybe another communist like he appointed to head up the joke of green jobs.... or how about another homosexual pervert like Kevin Jennings who instead of reporting a case of homosexual statutory rape of a 15 year old, telling the kid to where a condom and enjoy himself.... surely there are additional septic tank scum for the soros puppet to demand be put in the role!
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10-01-2009 @ 11:49AM
stan sirgutz said...
iff you can learn on the job ill take it i know how to live within my means is this a quality ??ill start at 75k/ year im available immediately can i give myself a 10 million bonus at xmas family to feed etc etc
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10-01-2009 @ 12:14PM
wowyouranid10t said...
i really wish some of these people commenting were educated... thats the internet for you! staying in line within bofam im thining Doeser will replace lewis.
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