Staying on top

An excellent leader in The Economist analyses the calibre of chief executives of banks in America.

Only three of the chief executives from the ten largest banks in America during the unfolding of the financial crisis remain. The rest have been asked to leave over the past year.

Some are claiming conspiracy, in that chief executives have manipulated for personal gain. This may appear true considering the lavish perquisites that they showered on themselves - expenses claim on a $87,000 rug, playing a game of bridge as their firms collapsed, almost like Nero. The article compares this to actions of Kenneth Lay of Enron and concludes that most of the current breed were useless.

It says "Far from expertly manipulating their firms' books, many could not even understand them" and "....even when they had decent numbers, executives struggled to manage their mutinuous staff". One ex-boss said "... his job was less of management, more crowd control".

Did acquisition make a difference? No. Acquisitive firms such as BoA, Fortis and RBS floundered. Those who were not acquisitive, such as JP Morgan Chase and Barclays prospered.

Did long-term perspective make a difference? No. Managers at Bear Stearns and Lehman Brothers did have a lot of their personal holdings, but did not focus on the long-term.

Did risk committees make a difference? Hardly. Santander had 98 meetings in 2007 while Credit Suisse's had just six, yet both did much the same.

So, what is generally prescribed by the know-it-alls as required and essential is not necessarily the right thing to do. Its better to be a historian than a politician; an economist rather than an executive. The former have the advantage of hindsight.

The summary "On any measure of banks' boards - experience, gender, age, independence - there were successes as well as failures". "What firms need is a culture of excellence, but that is like saying all football teams should be like Manchester United".

My line "It is remarkable that these executives stayed on the top without staying on top of their jobs."