Cloistered Clausen Plots Comeback of Embattled B of A
Shortly after rejoining BankAmerica as chairman and chief executive last month, Alden Winship (Tom) Clausen told the ailing company’s communications chief that one of his goals was “to make this company boring.”
So far, he has not had much success.
Since Clausen took over, the woes of BankAmerica--parent of Bank of America, the nation’s second-largest bank--have been splashed all over the world’s business press as the company tries to thwart unwanted takeover bids, stem massive losses and raise cash by lopping off one unit after another.
The relentless media scrutiny has come despite Clausen’s hard line against unauthorized contacts between bank officials and journalists.
“It’s like Nixon’s White House around here,” grumbled one bank official, who contended that he would be fired if he were caught cooperating with reporters.
Clausen--who headed BankAmerica during its glory years in the 1970s and whose father, ironically, published a small newspaper in Hamilton, Ill.--declined to be interviewed for this article.
“Top management is not entertaining interview requests, period,” a spokesman said. Clausen has held just one news conference since becoming chairman on Oct. 12.
In some respects, the 63-year-old banker’s bunker mentality is understandable. During Clausen’s five-year absence from BankAmerica from 1981 to 1986, when he ran the international development agency known as the World Bank, BankAmerica went from being the envy of the banking industry to its most prominent basket case.
Its portfolio includes $5 billion in problem loans and foreclosed real estate; its management information systems are so woefully inadequate that they allowed a $640-million second-quarter loss to go undetected this year until the quarter’s final days, and its travails are driving away some of its best and brightest employees.
The new stone wall that has been erected around top management is just one of the changes that has occurred at BankAmerica since Clausen retook the top job from his one-time protege, Samuel H. Armacost.
Other developments include a new willingness to shed subsidiaries and other assets considered sacrosanct by Armacost, a relentless campaign to slash expenditures by $450 million annually and renewed efforts to retain and expand market share in the company’s “core” businesses.
Friday, Clausen announced a restructuring program designed to shed $10 billion in BankAmerica assets and boost the company’s net worth and capital ratios by the end of 1987.
Clausen himself is said to rarely venture from his 40th-floor office in the granite and glass headquarters tower here that BankAmerica had to sell last year to raise needed capital.
He prefers, instead, to hold one-on-one sessions with his financial and legal advisers and with key deputies, who relay his orders to the troops.
“It is a very tight circle,” one BankAmerica official said. “If Clausen is in the bunker, it is because he believes that the company is at war,” the official added.
Clausen may be right. From without, BankAmerica faces an unwanted takeover proposal from a company less than half its size, Los Angeles-based First Interstate Bancorp, and informal overtures from industry leader Citicorp in New York.
Citicorp is thought to be pressing regulators for permission to acquire all or part of BankAmerica, perhaps through its Citicorp Savings unit in California.
At the same time, B of A must contend with the sometimes hostile and always skeptical news media and fierce competition from such opportunistic rivals as Wells Fargo, Security Pacific and a host of savings and loans, credit unions and financial services concerns.
Entrenched Bureaucracy
From within, it faces a restive--many say demoralized--work force and an entrenched bureaucracy that defied five years of genteel cost-cutting efforts by Armacost.
The loyalty of the employees is also suspect. Many blame Clausen for laying the groundwork for problems that surfaced under Armacost, and a group of middle managers even attempted to contact members of the board of directors in an effort to block Clausen’s return when word of his impending appointment leaked out last month.
From its long-suffering shareholders, whose dividends on common stock were eliminated earlier this year, BankAmerica’s officers and directors face no fewer than 21 lawsuits charging them with mismanaging the company’s affairs.
Looming on the horizon may be a proxy fight instigated by First Interstate, whose board of directors is meeting Monday to consider its next step in the takeover drama.
As Clausen marshals BankAmerica’s defenses against First Interstate and other would-be suitors, BankAmerica’s newly named president, Thomas A. Cooper, is sharpening his cost-cutting ax and dreaming up new ways to win business for the bank.
Within the past month, Cooper has offered cash bonuses to any B of A employee--janitor, teller or executive--who can persuade friends or relatives to open time deposits or trust accounts at the beleaguered institution.
One such bonus: $10 for every $10,000 deposit the employee brings in. Some workers have already brought in nearly $1 million in new deposits and are close to pocketing $1,000 in bonuses.
Cooper, who previously headed Philadelphia’s Girard Bank, recently wowed 1,100 Bank of America employees at meetings in Orange County with the story of the Girard teller who earned $114,000 one year by aggressively pushing the bank’s products and services.
A Marketing Man
“Though he’s been painted in the press as a cost cutter, Tom (Cooper) sees himself as more of a marketing man,” one associate said. “He feels strongly that the bank can’t just save itself into prosperity.”
Still, Cooper’s top priority, by necessity, has been chopping away at BankAmerica’s stubbornly high cost structure with the assistance of Frank Newman, the vice chairman and chief financial officer who jumped to BankAmerica last month from tightly run Wells Fargo.
Newman and fellow Wells Fargo alumni Glenhall Taylor and Lewis Coleman--both credit officers trying to straighten out BankAmerica’s problem-plagued loan portfolio--are part of a contingent that some in BankAmerica are calling “the stagecoach crowd.”
Backed by BankAmerica’s board of directors, the new management team is trying to bring Wells Fargo’s no-nonsense, by-the-numbers management style to an organization still steeped in the paternalism of founder A. P. Giannini.
“There comes a time in everyone’s career when they have to choose between being a fool and a son of a bitch,” Clausen is said to have told 200 top managers at a pep rally the day after he took over the company.
Clearly, the man some of his subordinates call “the dictator” intends to be nobody’s fool. About 2,300 jobs will be eliminated during the fourth quarter, compared to 2,700 positions cut during the first nine months under Armacost. Another 5,000 employees will be dropped next year, Cooper has vowed.
More Workers Will Go
These projections do not include the thousands of BankAmerica workers who will leave the payroll as a result of the sale of assets. About 2,000 employees will leave when the company, as expected, sells its Charles Schwab & Co. discount brokerage, and hundreds more will go as the bank eliminates retail banking operations overseas.
All told, BankAmerica may employ fewer than 65,000 people by the end of 1987, compared to 78,000 at the beginning of this year.
So far this year, two-thirds of the job cuts have resulted from a hiring freeze and attrition. But that is scant consolation to employees targeted by BankAmerica’s “redeployment” program; many simply leave the company after being offered unpalatable transfers.
The company’s new toughness is especially noticeable in such sensitive areas as data processing. There, sources say, employees slated for layoff are given the bad news, then immediately escorted from the bank’s premises while mechanics change the locks on office doors.
“It is not fun to watch,” said one middle manager, who is sprucing up his resume, even though he has been assured that his job is safe. “In times like these, a lot of the best people just want to get out.”
Some areas have been particularly hard hit. The marketing staff of Bank of America’s personal trust department was slashed to three from 15, leading some employees to believe that the bank is planning to get out of the personal trust business.
A rumored possible buyer: Northern Trust Co. of Chicago, which is looking for a California beachhead after forays into Arizona and Florida.
Irked by ‘Golden Handshake’
Many employees were shocked and embittered by the lucrative severance package awarded by the company’s board to Armacost, who walked away with $1.7 million in cash and stock worth hundreds of thousands of dollars more.
“We’re being ordered to pinch every penny and the bank is losing hundreds of millions of dollars,” groused one bank employee who holds an MBA degree. “Meanwhile, one of the guys who got us into this position gets a golden handshake and the other one gets his job back.”
Clausen is very sensitive about such criticism--though one source said he has privately acknowledged that he under-invested in computer technology during his previous tenure at BankAmerica. He has also tried to humanize his stern and autocratic image by appearing on a videotape shown to BankAmerica’s employees.
Publicly, Clausen says he will not look back. And some securities analysts who look to the future say they are encouraged by the steps “Tom-Tom”--Clausen and Cooper--are taking to rescue the company, belated though they may be.
“Clausen has made it very clear that he’ll be looking over BankAmerica’s operations with an eye toward possibly selling them,” said Donald Crowley, an analyst in San Francisco for the New York financial firm of Keefe, Bruyette & Woods.
“BankAmerica is finally getting serious about cutting its costs,” added Stephen Berman, a banking industry analyst with Nomura Securities in New York. “Severance expenses are going to be very high in the fourth quarter,” he said, “though the challenges remain formidable.”
Still, it is a challenge that Clausen relishes. Little more than a month ago, at the annual meeting of the International Monetary Fund and World Bank in Washington, Clausen, by then in retirement, “seemed like a lonely and forgotten man,” a former World Bank colleague said.
But now, he added, Clausen is “back in the thick of things, and he’s determined to salvage both BankAmerica and his reputation.” Though his prospects are uncertain, one thing is clear: Things are bound to get more interesting at BankAmerica before they get boring.
