Ex-L.A. Lawyer Takes Buffett’s Salomon Posts
Salomon Inc. on Wednesday named former Los Angeles attorney Robert E. Denham chairman and chief executive, replacing Warren E. Buffett, who stepped in to lead the firm last summer after a scandal threatened its survival.
Denham, 46, was managing partner of the Los Angeles law firm of Munger, Tolles & Olson last August when Buffett recruited him to be general counsel of Salomon, whose Salomon Bros. investment-banking subsidiary had admitted fraud in its government-securities trading unit.
In his 10 months as chief legal officer at the crisis-ridden firm, Denham directed the overhaul of Salomon’s compliance systems. He also led the negotiations that settled all charges with various government agencies, including the Treasury Department, Federal Reserve Bank, Justice Department and Securities and Exchange Commission.
The settlement, announced two weeks ago, was widely viewed as a victory for Buffett and Denham because no criminal charges were lodged, and Salomon was allowed to retain its prized status as a “primary dealer” of government securities. Salomon agreed to pay $290 million in fines and penalties for cheating during auctions of Treasury securities in order to capture an undue share of the lucrative business.
Denham has long been a legal adviser to Buffett on matters concerning Berkshire Hathaway, the Omaha holding company of which Buffett is chairman and chief executive.
Los Angeles businessman and lawyer Charles Munger, a founder of the firm that bears his name, is vice chairman of Berkshire and a director of Salomon.
In Wednesday’s announcement, Buffett said: “Bob was my sole recommendation for the job. He fits perfectly the criteria of ‘owner-oriented and business-wise’ that I set forth earlier. Additionally, he comes to the post with extensive knowledge of our two major businesses but with no ties to either.”
Salomon is also parent of Phibro Energy, an oil-refining and trading subsidiary.
The choice of Denham, which came after a Salomon board meeting, is effective immediately. By late afternoon, Buffett had left in his private jet for Omaha, leaving Denham in charge.
Buffett retains the title of chairman of the Executive Committee. He has been a director since 1987, when Berkshire invested $700 million in Salomon.
Last week, Buffett named Deryck C. Maughan as his successor as chairman and chief executive of Salomon Bros. Maughan was tapped to run the firm as chief operating officer the day after Buffett took over.
While Denham’s duties are expected to require his full-time attention in the beginning, the announcement said that over the longer term the position of chairman is expected to be part-time. Denham plans to rejoin Munger, Tolles at some future date.
Denham’s duties at Salomon will be to evaluate the performance of its subsidiaries, set compensation of key managers and oversee compensation policies. He will also establish controls to ensure that the businesses operate legally and without “undue risk, and allocate the capital generated by the two subsidiaries,” Salomon said.
With Denham’s appointment, it is clear that Deryck Maughan will bear full responsibility for Salomon’s operations.
Salomon’s stock rose after Denham’s appointment was announced, ending the day up 75 cents at $33 a share on the New York Stock Exchange.
Separately, Treasury Secretary Nicholas F. Brady said Wednesday that despite the Salomon Bros. scandal, the system for selling the bonds that finance the government and $3.5 trillion in national debt needs little improvement.
He said a joint study by regulators found that “the Treasury market does work--and works well--but that changes can be made to improve it.”
Bio: Robert E. Denham
Named chairman and chief executive of Salomon Inc., replacing Warren E. Buffett, interim chairman and chief executive.
Age: 46
Born: Dallas. Raised in Abilene, Tex.
Education: Received BA in government from the University of Texas in 1966, where he graduated Phi Beta Kappa and magna cum laude; received master’s in government from Harvard University in 1968. Graduated from Harvard Law School in 1971 magna cum laude.
Family: Wife Carolyn is associate vice president for academic programs at California State Polytechnic University, Pomona, where she is also professor of educational research and statistics. For the past 10 months, she has commuted to New York to see her husband. With this appointment, she will move there. His two children are Jeffrey Hunter, 21, and Laura Maria, 15.
Resume: Immediately after graduation from Harvard, Denham joined the L.A. law firm of Munger, Tolles & Olson, where he was managing partner from 1985 to August, 1991. He joined Salomon Inc. as general counsel August, 1991.
Business philosophy: “Long term, our challenge is to institutionalize in Salomon an enhanced commitment that the firm exists to serve society and customers instead of the other way around.”
Quote: “We wanted to understand what the violations (at Salomon Bros.) were, give information to investigative authorities to help them understand what happened, and obtain a resolution that was appropriate. That is the right way to deal with regulation and the public. We wanted to leave people in a position to carry on a firm that we think can be a valuable resource to the economy and to clients.”
