Hutton President Adds to Power in Shake-Up

E. F. Hutton Group said Tuesday that it will split the company into divisions serving its consumer and institutional customers in a reorganization that will give important additional responsibilities to its president, Robert P. Rittereiser.

Hutton, which has recently struggled to lower costs, characterized the reorganization as an efficiency move. But some analysts interpreted it also as an effort to increase accountability and burnish the image of the nation’s second-largest stock brokerage, which last year pleaded guilty to 2,000 counts of mail and wire fraud.

“Hutton stumbled into its legal problems as a company with 10 divisions all reporting to (Chairman Robert) Fomon and not much real accountability,” said Brenda Davis McCoy, an analyst with the regional brokerage Mabon, Nugent in New York. “Accountability is a key word in this.”

Rittereiser, who joined Hutton from Merrill Lynch last June, will also become president of E. F. Hutton & Co., the retail brokerage subsidiary, which has 6,700 brokers in a worldwide network of 413 offices. The retail, or consumer, business accounts for more than 80% of Hutton’s revenue.

Scott Pierce, who was president of the subsidiary when the check-kiting scandal broke, has been named vice chairman and moved from day-to-day operations into what are largely planning functions. Pierce will take charge of strategic planning and personnel and will chair a committee that oversees the raising and allocation of capital.

There has been speculation that the 61-year-old Fomon, who is also the company’s chief executive, will soon retire. Some analysts speculated that the latest reshuffle puts Pierce in position to move into Fomon’s job after the chairman’s retirement.

Currently, the 10 divisions handle separately such functions as corporate and municipal finance, investment banking, management and trading.

With the changes, Hutton will be organized much like Merrill Lynch, where Rittereiser was executive vice president, chief administrative officer and chief financial officer. Still another investment house, Paine Webber, underwent a similar reorganization two years ago, analysts noted.

Hutton’s new consumer division, called the Individual Investment Services Group, will be headed by Jerome H. Miller, who will become a senior executive vice president. He was executive vice president of Hutton’s equity division.

The senior executive in Hutton’s new institutional division, called the Institutional & Capital Markets Group, will be Richard S. Locke, who has been executive vice president overseeing corporate and public finance and fixed-income trading. Locke will become a senior executive vice president and retains responsibility for the units that he has overseen.

The heads of both new divisions will report directly to Rittereiser.

Senior executives declined to be interviewed, but, in a prepared statement, Fomon said the company’s functional organization had become “outmoded . . . as our businesses have become more complex and the competitive environment has intensified.”

Analysts, who have partly blamed weak management control for a recent slump in Hutton earnings, said the realignment might help in the cost-cutting drive.

“This might help them define their purpose a little bit better,” said Lawrence Eckenfelder, an analyst with the brokerage firm Dean Witter Reynolds. “They tend to get a little bit management heavy without that differentiation.”

But he said far more effort is needed to hold down expenses, which have “really ballooned over the last two quarters.” In the quarter that ended last Sept. 30, for example, Hutton’s revenue declined $9 million to $750.7 million, while expenses rose $25 million.

Hutton, which has not reported 1985 earnings, earned $52.7 million on revenue of $2.79 billion in 1984.