Management Turnover as Change Agent

Monday, September 8, 2008

CEO Watch - Kerry Killnger, Washington Mutual, Update 1

Another financial CEO bites the dust. Kerry Killinger, the CEO of troubled Washington Mutual WM (NYSE) was finally forced out of his job. After failing to stem continuing losses from home mortgages the bank's board had to act. According to a story by Dan Fitzgerald and Peter Lattman of the Wall Street Journal,
For months, Mr. Killinger had fought off a growing chorus of calls for his removal. Even after Citigroup Inc., Merrill Lynch & Co. and Wachovia Corp. pushed out their chiefs over mortgage-related write-downs, and Mr. Killinger disclosed losses at WaMu of as much as $19 billion, the company's board, dominated by associates and longtime allies, continued to back him. The board recently got new blood in key posts and concluded WaMu needed an outsider to signal a fresh start, according to people familiar with the matter. Board leaders conducted a discreet search for Mr. Killinger's replacement and told the CEO Thursday that they wanted him to retire, these people said.
The bank selected Alan Fishman as Killinger's replacement. Prior to the appointment Fishman
was the chairman of commercial mortgage broker of Meridian Capital Group. In the past he was the president and chief operating officer of Sovereign Bank and earlier had been a top executive with Chase Manhattan Bank and earlier on Chemical Bank. While the market initially cheered the change, the bank is far from out the woods. WAMU also announced in its press release it had,
entered into a Memorandum of Understanding (MOU) with the Office of Thrift Supervision (OTS) concerning aspects of the bank's operations, principally in several areas of its risk management and compliance functions, including its Bank Secrecy Act compliance program. In addition, WaMu has committed to provide the OTS an updated, multi-year business plan and forecast for its earnings, asset quality, capital and business segment performance. The business plan will not require the company to raise capital, increase liquidity or make changes to the products and services it provides to customers.
Fishman has a difficult job ahead of him. Keep a close eye on his appointments and his plans. Will he move for a takeover or what?

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