Wachovia’s CEO, G. Kennedy “Ken” Thompson, has his bags packed and is all set to join his brethren on the list of former CEOs ousted by their companies.
It was a brewing storm for Thompson ever since he made a costly gamble and error back in 2006.
The reason for Thompson’s ousting by the Wachovia Board of Directors stems from “The Thomp’s” decision to acquire Golden West Financial in 2006.
You see, Thompson wanted to grow Wachovia across the country and saw a shortage in market representation over on the ‘Left Coast’. He went after Golden West hard and, some argue, purchased it for much more than he should have. Of course the expensive purchase of that bank would have been justified if it actually helped Wachovia grow… and not just added to colossal liquidity problems and large write-downs.
Instead, a little thing called the subprime mortgage crisis hit the world hard and (surprise, surprise) the California real estate market was one of the hardest areas hit with home foreclosures and mortgages in default. Good thing Golden West had nothing to do with that, right? Actually, as it turns out, they were heavily invested in those mortgages and suffered major losses because of it.
Therefore, Wachovia which could have avoided a huge chunk of that subprime crisis, would be taking some big hits because of it. According to an article in today’s CNN Money:
In early May, Wachovia revealed that its first quarter loss was in fact nearly twice as big as the total originally announced due to previously unrecognized losses on a life insurance portfolio. Shortly after that announcement, the board stripped Thompson of his chairman’s title, naming Lanty Smith to replace him.
And so begins Thompson’s Trail of Tears. For the first few months of this year, with all those losses announced, Wachovia’s Board was defending Thompson well. Saying they had all their faith in him and these were just tough times they needed to push through.
Lanty Smith will be the acting interim CEO and is also in charge of finding Thompson’s long-term replacement. But be on the lookout for him to appoint himself the permanent CEO. The current Pope did it, Dick Cheney did it during the Vice Prez search, and more recently the Wall Street Journal editor-in-chief searcher did it while looking for a replacement.
That’s a fun trend, right? Pretend you’re looking to hire someone new and then just pick yourself. Do you think those guys submitted and then reviewed their own resumes objectively like any other candidate?
CNN Money: Wachovia Ousts CEO Thompson, sites series of setbacks, June 2, 2008