Raleigh News & Observer, June 10, 2009, Wednesday

Raleigh News & Observer

June 10, 2009, Wednesday

Raleigh News & Observer

Turnover in BofA's top ranks raises questions
Exodus of dozens of top execs since 2005 raises concerns about bank's ability to navigate crisis.

BY RICK ROTHACKER - THE CHARLOTTE OBSERVER

CHARLOTTE -- In the past four years, Bank of America has lost key banking talent from the companies it has s acquired, adding to turnover in the bank.

Former Merrill Lynch executives who have departed include former chief executive John Thain, president Greg Fleming, wealth management head Bob McCann and a host of top investment bankers.

When Bank of America agreed to buy wealth manager U.S. Trust, CEO Peter Scaturro was originally supposed to stay, but he changed his mind and decided to leave before the deal closed in July of 2007. He didn't get along with Bank of America's Brian Moynihan, then leading wealth management, and chafed at the bank's instructions to stick to scripts at town hall meetings, people familiar with the matter said.

Most of Scaturro's top management team has left Bank of America, including his successor, Frances Aldrich Sevilla-Sacasa. A ranking of brand prestige this year by the Luxury Institute found U.S. Trust had fallen to No. 22 out of 35, down from No. 3 in 2006.

Bank of America has experienced significant turnover in its top ranks in recent years, raising questions about the Charlotte bank's leadership stability amid a government review of its management and board.

The latest departure came last week when the bank said chief risk officer Amy Brinkley was giving up her post as chief executive Ken Lewis looks for a "different approach" to risk management.

Brinkley, when she leaves this summer, will be among 52 of the 100 top executives at the bank in 2005 who are no longer with the company, a document reviewed by the Observer shows.

The exodus raises concerns about management's ability to lead the nation's biggest bank through the current crisis and into a more traditional banking model under tighter government scrutiny. The bank has also failed to keep a number of high-profile executives from companies it has acquired.

The executives left for multiple reasons, including jobs at other financial institutions, Merrill Lynch-related layoffs, retirements and ousters under CEO Lewis. Regulators may also be directing changes in leadership. Like other big banks, regulators have asked Bank of America to evaluate whether its board and managers have "sufficient expertise and ability" to handle current economic conditions.

Perhaps the biggest concern about the bank's talent development process is the lack of a clear-cut successor for Lewis, who at 62 isn't expected to stay more than three years. Many observers doubt the bank has a viable internal candidate.

Federal Reserve officials have reportedly told the bank to work on CEO succession and its management bench. The bank says the board is assessing its succession plan as part of Chairman Walter Massey's review of the bank's corporate governance.

Many companies begin to worry if they lose 5 percent of their top executives per year, said Bradford Bell, an associate professor at Cornell University specializing in human resources issues. Other experts said annual turnover around 10 percent would be considered at the high end. Bank of America's turnover of top executives equates to 13 percent per year.

"For top talent, that is quite large," Bell said. "Companies devote a lot of resources to keeping these people happy and keeping them in the company."

Others, however, said the bank's turnover is likely in line with other banks that are losing executives in the financial crisis, especially as the government reins in compensation and the banking industry loses prestige.

"The level of leadership turnover we've experienced is consistent with the history of the organization and a consolidating industry," said Bank of America spokesman Scott Silvestri.

Any leadership changes over the four years included "retirements, career changes, relocations and voluntary and involuntary departures," but he declined to comment on the specific numbers.

Silvestri noted that during the four years, the bank's size, types of businesses and markets where it operates have changed. The bank has nearly doubled its assets with five major acquisitions in that time.

To be sure, losing executives can be a sign that the bank has talent that other institutions covet or that it's shedding leaders who aren't up to the task. The bank's board has expressed strong support for Lewis and his team, Silvestri said.

But a half dozen former Bank of America executives said the turnover was a sign of the low morale inside the bank under Lewis. They said the bank's ability to bring in new talent and develop current executives is a major concern. "You can't keep draining a bank of that size and complexity without replacing it," said a former bank executive, who did not want his name used so he could speak more frankly.

The list of the top 100 viewed by the Observer was part of a presentation made to the bank's board in 2005. Some key positions that have seen high turnover are chief financial officer and treasurer. Since June 2005, the bank has had three CFOs and three treasurers.

The exit of Brinkley, the risk chief, wasn't a surprise because the bank has suffered rising problem loans in the past year and stunned shareholders with bigger-than-expected fourth-quarter losses at Merrill Lynch, which the bank acquired Jan. 1.

The bank's decision to replace Brinkley with strategy executive Greg Curl, however, raised questions about why the bank didn't have a more experienced risk executive to put in her place. Sam Ramsey, a Bank of America veteran who joined GMAC Financial Services in 2007, had once been deemed a potential successor for Brinkley, a source familiar with the matter said.

Perhaps the most notable departure is that of former CFO Al de Molina, who was seen as a possible CEO successor before his surprise resignation in December 2006. De Molina is now chief executive at GMAC, where 8 of his top 17 lieutenants previously worked at Bank of America. De Molina was known for his willingness to share contrary views and push back against Lewis, people familiar with the matter said.

Another potentially key departure was general counsel Tim Mayopoulos, who was replaced Dec. 10 by Bank of America executive Brian Moynihan amid Merrill-related layoffs. Mayopoulos, now general counsel at mortgage giant Fannie Mae, was not on hand to advise the bank as it attempted to back out of the Merrill deal later that month.

In the end, the bank proceeded with the merger under government pressure. But it has faced regulatory and congressional probes, including a hearing set for Thursday, for its failure to disclose problems with the Merrill deal until mid-January. Moynihan now runs Bank of America's global banking and wealth management unit, replacing former Merrill CEO John Thain.

"It's been very apparent there's been incredible drain there from primarily the finance and strategy areas of the company," said a financial services industry recruiter, noting the departure of de Molina and the retirement of a previous CFO, Jim Hance. "It certainly plays a factor in the challenges they're facing. There's been no internal counterweight (to Lewis)."

Another departure noticed in the bank this year was James Jackson, one of the higher-ranking African American executives at the company, who joined Bank of America alumnus Lynn Pike at Capital One Financial Corp. on May 1. Pike now runs Capital One's banking unit and Jackson is in charge of its branches. Both were among the bank's top 100 executives in 2005.

Ultimately, the responsibility of keeping top talent falls on the CEO, top managers and the board, said Bell, the Cornell professor. Companies such as General Electric, American Express and Shell are known for rigorous talent management programs in which top executives, including the CEO, play a role, he said. At Bank of America, "maybe they're not getting the care and feeding they need," he said.

Lewis, whose longtime personnel chief is Steele Alphin, made the infusion of new talent a major focus when he started as CEO in 2001, hiring executives from General Electric and Honeywell International to help the company improve customer service and internal processes. But many of those executives, including at least three in the 2005 top 100, have departed.