Why Bank of New York Mellon Gave CEO Robert Kelly the Hook
Deposed Bank of New York Mellon (BK) CEO Robert Kelly seems to have violated the golden rule of CEO-dom: be liked. Reports the WSJ:
People familiar with the matter said the board believed the CEO alienated some board members and top executives by blaming some company problems on other members of senior management. He also was viewed by some as having become difficult to work with, and the board feared losing highly valued employees, these people said.When the board of directors is more afraid of losing your subordinates than losing you, it's time to freshen up that resume. In announcing Wednesday that Kelly was stepping down, Bank of New York attributed the move to "differences in approach to managing the company." That's corporatese for "buzz off."
Other people familiar with the matter told the NYT that Bank of New York boardmembers had issues with Kelly's "management style." More code. Certainly it couldn't have helped that the company's stock price has fallen by nearly a third in nine months and recently was scraping near its 52-week low. For their part, investors don't seem to be sweating Kelly's departure. The stock jumped this morning -- don't let the door hit you in the ass on the way out, Bob! As one bank analyst succinctly put it:
"Bob Kelly failed to generate adequate returns from the company's balance sheet," said Dick Bove bank analyst at Rochdale Securities.Of course, that could be said about lots of bank CEOs still decamped in the corner office. The abruptness of Kelly's exit smells more personal. His replacement, Bank of New York president Gerald Hassell, is a 38-year veteran of the company. Drafting a long-time insider to replace the outgoing CEO suggests the company was in a hurry to dump Kelly, supporting the notion that his relations with the board were irreparably frayed.
Lawsuit, schmawsuit
By some measures, Kelly had done a decent job at Bank of New York. The company is profitable. Recent revenue growth has topped analyst expectations, rising 4 percent sequentially in the latest quarter. It is well-funded by bank capitalization standards. The company, which makes most of its money on fees for managing assets for other financial firms and investors, is at risk for losses through its holdings in troubled European banks. But it has mostly steered clear of the eurozone debacle and faces no exposure to Greece or Portugal, according to a recent Jefferies report.
One stain on Kelly's record is the bank's involvement in messy litigation related to a proposed $8.5 billion settlement between Bank of America (BAC) and owners of mortgage-backed securities. New York attorney general Eric Schneiderman recently accused Bank of New York, which served as trustee for the investors, of deceiving them. That's a serious charge, but in an age when big banks are constantly in legal trouble, it's usually not the kind of offense that results in CEOs getting the boot -- just ask B of A chief Brian Moynihan.
Not all successful CEOs are liked, of course (Larry Ellison, come on down!). Many seem mostly to be feared. That's why chief execs typically surround themselves with allies and other assorted toadies. And when financial results are down and the love or fear disappear, so do they.
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