Ken Lewis leaves Bank of America with one last present – a CEO succession mess. But like Ken Lewis himself, it won’t last for long.
In notifying the board of his “plan” to retire by year-end, Lewis ensures a succession process that will not be smooth. Each of the top candidates – Moynihan, Montag, and Krawcheck – is now thrust into a quick sprint to the CEO job. This horse race ensures that the person who doesn’t get the big job will be seen as a “loser,” meaning they will certainly leave the bank.
More well-thought-out horse races give the leading candidates plenty of time to prove they have the right stuff, to interact with the board on numerous occasions, and to reinforce their positions at the top. Three months just doesn’t allow any of this to happen at a measured pace, creating a free-for-all in the corner offices. Complicating matters is a board made up talented people who just started their own jobs as directors, and cannot possibly have the insight they need to select among these leading candidates in this short time window.
What to do? First, there is little reason to keep Lewis in the CEO slot for three more months. He is as lame a duck as there ever has been, and the three months he might stay on hardly makes for a textbook transition.
Second, the board of directors needs to quickly take charge of the succession process. It’s time for experienced board members like William Boardman (Banc One; Visa International) and Robert Scully (Morgan Stanley), among others, to show the world that the new Bank of America board is active, attuned to the marketplace, and talented enough to work this out.
Third, and this is less certain, but I can imagine the board deciding to elect one of their own as the Interim CEO, with a clearly defined tenure that will be more than 3 months but less that 15 months. During this transition stage, the board can do what effective boards always do when it comes to CEO succession – spend time with the top candidates, gauge their capabilities and weaknesses, and come to a determination on the best person to be the next CEO of Bank of America. This is not a job that can, or should, be rushed into the timetable that Ken Lewis has thrust onto the board. At the same time that this evaluation of internal candidates is going on, the board should look outside as well to make sure that full due diligence is done. The board may well decide that there is more than enough talent among the leading inside contenders, but to not look outside, at least at first, is to unnecessarily cut down on viable options.
All considered, Bank of America may yet be better off with Ken Lewis leaving, than staying on for an orderly transition. He’s had his nine lives already, and it looks like Judge Jed (Rakoff)’s decision to question a settlement (on Merrill Lynch bonuses) that punishes the innocent (shareholders) while protecting the guilty (executives, and perhaps the board) is finally the straw that broke the camel’s back.
Note: A version of this post can be found today in the WSJ Online