Time For Bank CEOs Like Wachovia's Ken Thompson To Step Down

Henry Blodget | April 15, 2008 8:46 AM

As the financial services train-wreck continues, CEOs are getting better at saying they feel shareholders' pain. But actions speak louder than words, and it's time some of these folks acknowledged where the buck really stops--in actions, not words.

CEOs are happy to accept responsibility--and fortunes in annual compensation--when times are good. Thus far, however, unless forcefully shown the doors, they seem to show no willingness to accept real responsibility when things go bad.

If CEOs get rewarded when companies like Washington Mutual, Citigroup (C), Wachovia, UBS, Merrill Lynch (MER), Morgan Stanley, GE (GE), Bear Stearns (BSC), et al, gamble and win--and, boy, do they get rewarded--then they should get punished when the same gambles lose. And don't think for a second that "unprecedented market disruption" these folks blame for recent losses is actually the cause of the tens of billions they have vaporized. The cause is and was risky bets that went bad.

Instead of saying he was "deeply disappointed" with Wachovia's disastrous first quarter, in other words, Wachovia CEO Ken Thompson should have said he was deeply disappointed, accepted full responsibility, and tendered his resignation. Why? Not because Ken actually made the bets that blew Wachovia's capital to smithereens, forcing it to raise $7 billion in emergency capital. Because Ken is responsible for those bets, and because accepting that responsibility with actions, not words, is the right thing to do.

The world won't change if today's bank CEOs resign--the new senior executives will still take credit in good times and blame "market forces" in the bad time. But at least some high-profile people will lead by example and do what too many Americans don't: accept full responsibility for their decisions.

Yes, we know you're disappointed. Now quit.

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25 Comments

Craig Goldenberger said:

Apr. 15, 9:45 AM

Yeah sure, fall on the sword and all that. Then what Henry? Who is then left to run the show, and clean up the mess? Should they be compensated as if they'd won the game? Hell no! But their contracts assure them of very good compensation, no matter if they resign.

Wachovia's Ken Thompson and WaMu's Kerry Killinger effectively made the mess, and they should clean it up. Kerry Killinger took a small regional S&L, guided it through the S&L witch hunt, and created the country's largest and most profitable S&L. Did he suddenly get stupid? No. Did he allow the sway of the industry and the arguments of his subordinates to move his better judgement aside to keep up with revenues? Yeah, he did. But what makes you think the next guy wouldn't? Fifteen years of cheap money and the need to put it to work will wear down a man's reticence.

No, I say they made the mess, they should clean it up. It isn't a fun job and not one you can recruit top talent to do. Once things are tidied up a bit, find the next generation.

Henry Blodget said:

Apr. 15, 9:52 AM

Fair enough. Resign--effective the moment they've finally cleaned it all up.

Brian said:

Apr. 15, 10:19 AM

Also, you'd have to at least give John Mack credit for not taking a bonus this year due to the write-downs. I don't think I've heard of any other CEO doing that.

FM said:

Apr. 15, 10:21 AM

Too many CEO's mimic congressmen; no shame, no fault, all ether and gain. The BOD's should cashier the Killingers but the bet the system activity that was the norm w/ the financials clearly show they remain MIA.

Henry Blodget said:

Apr. 15, 10:23 AM

Agree with Brian re Mack. A nice gesture.

Mike Gittins said:

Apr. 15, 10:37 AM

"Killinger took a small regional S&L, guided it through the S&L witch".....

Culminating in the purchase of Golden West at the top of the market?

2 words: Bad Management

crawford (URL) said:

Apr. 15, 10:44 AM

Keep the light shining on this one Henry. Accountability can't be shrugged off. Not if we have any hope of teaching our kids.

Mel said:

Apr. 15, 11:15 AM

Wachovia Corp.'s controversial Pick-a-Payment mortgage program lets borrowers choose between four monthly payment amounts. Unfortunately for Wachovia, these "Pick-a-Pay" borrowers are increasingly inventing a fifth choice: Not making mortgage payments at all.

S said:

Apr. 15, 11:44 AM

The CEO who should go is Fuld. This guiy had the audacity to come out and say he was showing leadership going to the Fed window after it was opened to keep his firm on life support. Then they structure a vehicle for the prupsoe of skirting the spirit of the window and call it Freedom. Finally he comes out and gives us the all clear today. A collective bow should ensue. As for leadership and cleaning up the mess, there are long lines of the not so creative tyope people who are more than capable of stepping up and running these organizations and they will have an easier task as regul;ation works its way down to the operating level. All the obfuscations that made them the smartest in the room will / should perish. ROEs revert to market means and the business model once again becomes a partner to the productive economy, not the other way around.T he problem with the leadership hasn;t much to do with this crisis, rather it is the mindset that their actions are accretive to the real economy.

Brian said:

Apr. 15, 4:42 PM

Mike Gittins said:

"Killinger took a small regional S&L, guided it through the S&L witch".....

Culminating in the purchase of Golden West at the top of the market?

2 words: Bad Management

Sorry Mike, that was Wachovia, not WaMu. Killinger jumped in with both feet, though, and deserves to go for writing billions in California HELOC's and 2nd mortgages. Fool!

billy bragg said:

Apr. 15, 6:16 PM

Henry - did you resign from MS when your risky "bets" went bad, i dont even think you accepted responsibility for your actions.
People in glasshouses.....

Rohit said:

Apr. 15, 6:24 PM

I really don't undrestand how resigning is a better way of accepting responsibility. The resignation package would probably compensate these CEOs very well. I'll echo the other comments in saying they need to clean up the mess and NOT take bonuses in the interim.

BA said:

May. 12, 5:26 PM

What kind of message does it send when you punish Ken Thompson of Wachovia by just taking away the Chairman of the Board title, but let him stay as CEO? So Mr. Thompson needs new business cards and letterhead, so what? A punishment is something that hurts on a monetary basis, which is what will alter behavior. This is the way I treat my 2 year old when I put him in time-out for bad behavior, he sits there and cries for the 2 minutes he is in, then 30 minutes later he is off doing the same thing that got him in there in the first place. What about the billions Mr. Thompson and his team have lost for shareholders and the stock is -60%? His public statement not to cut the dividend then turn around and cut it 41%, then Wachovia had to raise $8 billion in capital to stay afloat? Wachovia is in the press for bad behavior more than Britney Spears with telemarketing, money-laundering accusations, earning restatements, etc. The $24 billion acquisition of Golden West by Mr. Thompson almost to the day of the housing bubble peak. What about the nearly 20% of the Wachovia workforce which has loss their jobs because of all the losses over the last year? Look at their punishment in comparison, they are life changing! Mr. Thompson talks about the cost-cutting effort Wachovia is going through. In order to ‘practice what he preaches”, Mr. Thompson should not get to order new business cards and letterhead but have him have to put a big X through “Chairman of the Board” on his business cards and letterhead. This would show a real commitment to his cost cutting initiative and a constant reminder of his “slap on the wrist”. Better yet, ground the Wachovia jet fleet and have Mr. Thompson and his team fly commercial, the more time they spend in airports and in the air, the less damage they can do to Wachovia.

Mary said:

May. 14, 10:05 AM

Too bad that First Union bought out the original Wachovia Bank, a much more conservative consumer oriented bank. First Union purchased Wachovia to get the "good name" Wachovia had in the marketplace and proceeded to ruin it just like they did their own name. All upper management remained FU and retail policies as well became the old FU policies. No where were Wachovia's policies and procedures that led to it's good name in the banking industry adapted in the "new" bank. Its longtime customers and employees have fled in droves, ashamed and disillusioned with the poor decisions made by the old First Union management. Ken Thompson's fault, yes. Let's check his stock position over the past couple years. Leave him in to fix it? I'm not sure he knows how.

William (URL) said:

Jun. 04, 1:07 PM

At Wachovia why not also initally let Thompson fire the persons really responsible for the "gamble" to be initiated..the head of the Risk Management Department, the Executive Committee that also aproved the deal, but most certainly the Board of Directors that gave final approval to the deal...and asked very few questions about the deal when presenterd to them. Is Thompson the only one expected to have he crystal ball seeing good results?

I think not. It is time for the Boards of Directors of all companies to do their juob and lead the Company....not be sheep dogs.

P G said:

Jul. 28, 12:25 PM

Wow - such harsh remarks for Ken Thompson. I disagree completely with the person above stating that First Union Procedures were adopted. In fact, they weren't adopted in most cases and most upper mgmt of First Union were replaced by Wachovians. I worked for First Union during this merger and saw the change and it was indeed a better company for changing to Wachovia's strict standards. Our customer service record proves that. The problem lies with unforseen circumstances in the mortgage industry and we made two bad purchases at the wrong time. That is where Wachovia and its shareholders are being hit. The AG Edwards merger and the Golden West Merger were two very large mistakes. Yes, Ken should have left because it is the right thing to do but what you fail to mention is that he took no pay increase or bonus last year either. I agree with the person above too.