Risk & Compliance

Shareholders Speak, Banks Listen

Wachovia CEO "retiring at the request of the board," while Washington Mutual splits CEO and chairman job and shakes up the board's finance committee.
Stephen TaubJune 2, 2008

The subprime crisis and credit crunch led to shake-ups at two major banks that recently faced irate shareholders: Wachovia and Washington Mutual.

Wachovia announced that chief executive officer Ken Thompson “is retiring at the request of the board.” His interim replacement as CEO was current chairman Lanty Smith, with directors forming a special committee to find a permanent CEO. Ben Jenkins, currently vice chairman and president of the bank, will serve as interim COO.

Thompson is being ousted after spending 32 years with the bank.

“Wachovia is a strong institution and well positioned even in the face of the unprecedented conditions in the financial services industry,” said Smith, adding that no other senior management changes are currently contemplated. He added that no single precipitating event caused the board to reach this decision, although he said that “a series of previously disclosed disappointments and setbacks cumulatively have negatively impacted the company and its performance.”

When a shareholder called for his resignation at the company’s April 22 annual meeting, Thompson reportedly responded: “I’m not here to sugar-coat things. I’m not here to make excuses and I’m not here to tell you we were a victim of circumstance.” Despite the shareholder objections, each director was re-elected with more than 90 percent of the vote, and two popular measures championed by shareholder activists — a say-on-pay measure and another on proxy access — were defeated handily.

Washington Mutual, whose annual meeting was more raucous that Wachovia’s, said that it would separate the chairman and chief executive positions, effective July 1, with independent director Stephen E. Frank becoming chairman and current CEO Kerry Killinger giving up the title, but staying in the CEO’s role and continuing as a director.

At the April 15 shareholder meeting, more than half the thrift’s shareholders had voted to separate the chairman and CEO roles, although the vote was only advisory.

Today, the board also adopted a majority-voting standard and made several changes to the composition and leadership of certain of its board committees.

“The actions taken today by the board are the result of a deliberate review of how best to enhance WaMu’s corporate governance policies and practices,” said Frank, who has served on WaMu’s Board since 1997. “They also reflect the board’s commitment to listening to feedback from our shareholders.”

Among other moves, the WaMu board also appointed retired Starbucks CEO Orin C. Smith to serve as finance committee chair. He will continue to serve on the audit and governance committees. Recently elected director David Bonderman will serve as vice chair of the finance committee, in addition to being a member of the corporate development committee. Bonderman is managing director of the global private investment firm TPG.

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