The Wells Fargo-First Interstate Merger : DEJA VU : Ex-Security Pacific Executives Predict an Exodus
When Bank of America acquired Security Pacific Bank in 1992, the deal was billed as a merger of equals. But the top executives at Security Pacific soon found out that they were less equal than their counterparts at B of A.
Today, in fact, not one of the eight top executives from Security Pacific still works for the merged company. And, by insiders’ estimates, only about 10 of the roughly 80 senior executives who were in the next rungs of management at Security Pacific remain.
Now that Wells Fargo & Co. has tentatively worked out an $11.6-billion deal to buy First Interstate Bancorp, former Security Pacific executives foresee a virtual rerun--except this time, it’s First Interstate’s top brass who will be heading out the door.
“I don’t believe in blending cultures. You kill one of them, and I think that’s what is going to happen here,” said Nicholas B. Binkley, a former vice chairman at Security Pacific, who survived the merger but left B of A in May 1993, to set up a Newport Beach venture capital firm.
“Remember, this whole situation originated from a hostile advance by Wells,” Binkley added. “I don’t think it’s any less hostile in terms of culture or intent than when it was started.”
“First Interstate is earning about half as much money with twice as many people, so guess what” is going to happen, Binkley said.
Robert H. Smith, who was chairman and chief executive of Security Pacific and who stayed with the combined organization for six months, said two key factors drove away former executives. For one thing, as the California economy crumbled, Security Pacific’s real estate portfolio worsened and its financial problems grew, while B of A held relatively steady.
That, in turn, had a psychological impact. “Their people in general became critical of Security Pacific people in general. [The attitude was] your people don’t know how to do it, we know how to do it,” said Smith, now a partner in a banking consulting firm.
Or, as Binkley put it: “It was like noticing a wart on the face of your beloved. Once you see it, it’s hard to notice all of the other beautiful features. You keep coming back to the wart.”
Along with the divisiveness stirred by Security Pacific’s financial woes, Smith cited the companies’ conflicting cultures. While B of A was tightly controlled and centralized, Security Pacific prided itself as an entrepreneurial organization. Soon after the merger, he said, a verity of business life became crystal clear: “Entrepreneurial people can’t function in a control environment.”
As it turned out, several of the former top eight executives at Security Pacific, unlike Smith and Binkley, have gone to work at new banks. And they generally have thrived despite the glutted market for bank executives. Two leading examples: George Benter, now the president of City National Bank in Beverly Hills, and Jerry A. Grundhofer, chairman of Star Bank Corp., a $10-billion institution based in Cincinnati.
The former Security Pacific executive who has fared the best at B of A is Kathleen Burke, who moved up from executive vice president at Security Pacific to become a vice chairman in charge of human resources at B of A.
Departing top executives--many of whom are receiving so-called golden parachutes or other generous severance packages--figure to do far better financially than the majority of the 7,000 to 8,000 employees expected to lose their jobs because of the Wells-First Interstate deal. Top executives “walk away with a chunk of money, which allows them a lot of avenues,” Smith said.