BankAmerica Head Faces a Financial House Divided
The senior management team that A. W. Clausen inherited over the weekend when he returned to the helm of crisis-ridden BankAmerica Corp. is divided almost evenly between executives who worked at the bank the last time Clausen ran it and newcomers brought in over the last 5 1/2 years by the giant company’s deposed president, Samuel H. Armacost.
Analysts, bank insiders and former bank officers interviewed Sunday and Monday questioned whether that team will be able to work together effectively in BankAmerica’s highly politicized atmosphere--one in which Clausen-bashing became almost fashionable during the Armacost era, when some Clausen loyalists were shunted aside.
The challenge is heightened, of course, by First Interstate Bancorp’s unsolicited bid to acquire BankAmerica and the still-bleeding loan portfolio held by its major subsidiary, Bank of America, which includes $4.4 billion in problem loans. BankAmerica is expected to report a further operating loss later this week when third-quarter results are announced. The bank has posted net losses of $577 million so far this year, following a $337-million loss for 1985.
“A lot of people view Clausen’s return as something akin to ‘The Empire Strikes Back,’ ” said one dismayed middle-level manager. He was referring to Clausen’s reputation as an aloof and autocratic leader who was more feared than liked by his subordinates. That image contrasts markedly with Armacost’s shirt-sleeves informality. At 63, Clausen is nearly a generation older than the 47-year-old Armacost, his former protege.
Indeed, it is said that during Clausen’s previous reign as head of BankAmerica, from 1970 to 1981, his stern personality and tendency to centralize authority led to the defection of several talented executives who went on to distinguish themselves as heads of their own banks. They include G. Robert Truex Jr., chairman and chief executive of Rainier Bancorp in Seattle, and Joseph J. Pinola, whose Los Angeles-based First Interstate now seeks to acquire BankAmerica.
‘Out of Touch’
“The directors who picked Clausen are out of touch with the Bank of America of today,” one Armacost loyalist contended.
“They seem to think they can turn back the clock,” he added, to the era before deregulation, when Bank of America’s steady record of growing earnings was the envy of the banking industry. “They can’t.”
BankAmerica may be in for another bout of high-level turnover if Clausen--who is known to resent criticism from within the bank that he left it ill-prepared to meet the rigors of deregulation and saddled with loans that soon soured--takes the opportunity to settle old scores.
Clausen, who has scheduled his first management meeting for today and is expected to hold a press conference later this week, was unavailable for comment Monday. However, in accepting the board of director’s call Sunday to return to BankAmerica, he said: “I don’t intend to waste time looking back.”
‘Rank Speculation’
Meanwhile, bank spokesman Peter Magnani sought to play down the idea of high-level contention, saying: “It is rank speculation at this point to talk about conflict in this highly competent, very well-experienced group of managers.”
In any case, few expect immediate changes. “I assume there will be a period during which Clausen gets used to the people he inherited, and vice versa,” said Donald Crowley, an analyst who follows BankAmerica for Keefe, Bruyette & Woods in San Francisco. “I would hope the management situation will stabilize.”
Of the 20 BankAmerica officers ranked executive vice president or higher, 11 were at the bank under Clausen and nine joined after Clausen left to head the World Bank in Washington.
“It’s not yet clear which of them will be reporting to him,” Magnani said. “Clausen himself will be making that decision, in time.”
Clausen seems well aware of the need to forge an effective management team. One indication: He dined Saturday night with Thomas A. Cooper, the former Methodist minister who was named president of Bank of America in March and on Sunday was given the additional title of president of the holding company.
Although the two men hardly know each other, Clausen and Cooper are both “very tough, hard-working individuals with very high standards,” analyst Crowley said. Still, Cooper is thought to have harbored ambitions for Clausen’s job, and he has many supporters within the bank.
Top Officers
Other top officers with whom Clausen has never worked before include a large contingent from rival Wells Fargo Bank, including Frank Newman, BankAmerica’s newly named vice chairman and chief financial officer; Glenhall Taylor, vice chairman for credit policy, and Lewis Coleman, executive vice president for credit in the world banking division.
Clausen will also have to get to know Robert Beck, a former IBM executive who heads BankAmerica’s personnel department, and Daniel Costello, an American Express veteran in charge of corporate real estate. Both have been critical of the bank’s past practices in their respective areas under Clausen.
Top executives who worked at BankAmerica during Clausen’s prior reign include Robert W. Frick, vice chairman of world banking; James P. Miscoll, executive vice president and head of Southern California operations, and Stephen T. McLin, executive vice president for strategic planning. But almost all owe their current positions to Armacost. And some have been harshly critical of the condition in which Clausen left the bank, pointing to deficiencies in BankAmerica’s computer and credit-monitoring systems.
“It’s unfair to rap someone who’s been gone five years,” one Bank of America executive said Sunday. “For now, I’ll give him the benefit of the doubt.”
