CHARLOTTE -- Less than a month after losing his chairman post, Ken Thompson is out as Wachovia's chief executive officer as the Charlotte bank wrestles with mounting losses from its troubled Golden West Financial acquisition and ongoing investor unrest.
Wachovia said Monday morning that Thompson had retired at the board's request, ending more than a three-decade career at the nation's No. 4 bank by assets. The board appointed Chairman Lanty Smith as interim CEO; vice chairman and general bank president Ben Jenkins will serve as interim chief operating officer.
The board has formed a special committee to search for a permanent CEO. In a conference call with reporters, Smith said the board would consider internal and external candidates for the job. He gave no time frame for hiring a new CEO but said the search would be done with "alacrity."
Analysts, surprised by the timing of the announcement, said the news raised questions about the possibility of more bad news coming out of the company or a potential takeover. Smith, however, said there were no negative announcements forthcoming and that the company would move ahead as a "strong, independent company."
Analyst Nancy Bush of NAB Research said she hoped the move signaled the company's willingness to make major changes in its mortgage business, which has struggled in the aftermath of the Golden West deal. "I'm hoping this means they're going to take a major whack at the mortgage company," she said.
New York-based JPMorgan Chase has widely been seen as a possible suitor for Wachovia, given its desire to expand in the Southeast and relative strength during tough times for the financial services industry. But Bush said JPMorgan CEO Jamie Dimon has his hands full with his purchase of investment bank Bear Stearns and is likely wary of expanding in turbulent economic times.
"I don't think he'll do it right now," Bush said.
Thompson joined the CEOs of Citigroup and Merrill Lynch as the latest high-profile casualty of the fallout from the nation's mortgage meltdown and the ensuing downturn for the financial services industry. Also on Monday morning, Washington Mutual stripped chief executive Kerry Killinger of his chairman title.
Smith gave little detail about how Thompson's hold on the post he had held since 2000 unraveled. The board asked him to resign a few days ago and acted Sunday to put interim leaders in place, he said.
"There is no single precipitating event here," he said. "It's simply a series of previously disclosed disappointments and setbacks."
Not a 'crisis situation'
Smith said the company has a succession plan but had expected Thompson, 57, to serve much longer. He said the company is not in a "crisis situation" and can take the time to find the best replacement. He said he expects strong outside interest in the job.
Thompson had faced calls to resign at the bank's annual shareholder meeting in April, following a first-quarter loss and a prolonged plunge in the company's stock price. Thompson had argued he was the right person to turn the company around, but lasted only a little more than a month longer in the job. He had been beset in recent weeks by a series of additional missteps, including new losses from an insurance portfolio and a $144 million settlement over the bank's ties to telemarketers.
Thompson joined predecessor First Union in 1976 after business school and quickly moved up the company's ranks under the eye of mentor Ed Crutchfield. When Crutchfield ran into his own troubles, including a number of bungled acquisitions, Thompson became CEO and led a restructuring that rescued the company.
He won praise for a successful merger with then Winston-Salem, N.C.-based Wachovia in 2001 and for making the bank a leader in customer service. He also became a major player on the Charlotte civic scene, participating in numerous charitable causes and leading efforts to bring a new arena and arts projects to the city.
"I think a lot of Ken Thompson," Hugh McColl Jr., retired chief executive of rival Bank of America, said, declining to comment further.
But Thompson's biggest merger -- the $24 billion acquisition of mortgage specialist Golden West in 2006 -- proved his biggest mistake. The high-priced deal gave the company exposure to troubled housing markets in California and led to billions in loan losses that continue to build.
Smith would not provide an outlook for second-quarter earnings, but he said Wachovia would continue to be impacted by loan losses, like its competitors.
Thompson handled his departure "professionally," but Smith didn't provide any details. He praised Thompson's integrity, loyalty and dedication.
In a statement, Thompson said it had been an honor to lead the company. "Together we achieved great successes and overcame tough challenges," he said. "I have complete confidence in the ability of 120,000 Wachovia employees to continue to take this company forward, and I want to thank them for their dedication and commitment to Wachovia."
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Smith sent an e-mail to Wachovia employees Monday morning that acknowledged the news would be difficult for many employees who had worked with Thompson over the years. Wachovia is one of Charlotte's largest employers, with more than 20,000 workers in the area.
"The board took this action only after careful and thorough deliberation and in accordance with our responsibility for the strategic direction of the company," Smith wrote in the e-mail. "Over the past few weeks, as we continued to look at all the facts, cumulatively, we determined that in order to move forward Wachovia required new leadership at the top. A change in chairman was not enough."
Smith said he expected a somber mood Monday among the bank's employees because Thompson was well liked and because of the hard work ahead in restoring the company's performance and reputation. He said the strong loyalty of employees and customers, however, was a major asset in the company's favor.
Smith will lead the search committee, along with directors Robert Ingram, Mackey McDonald and Joseph Neubauer. During the interim period, all of the company's staff functions will report to Smith, while the company's lines of businesses will report to Jenkins.
Thompson will get $1.45 million, or 16 months' base salary, in severance, according to a securities filing Monday. He'll get another $7.25 million in stock awards that were scheduled to vest with his retirement.
Thompson's retirement agreement also spells out a two-year noncompete agreement and a three-year moratorium on soliciting Wachovia workers for jobs elsewhere.
Wachovia also announced that it will grant Smith a quarterly restricted stock award retainer worth $560,000, as well as use of the company aircraft and a leased apartment. Last year, as lead independent director of Wachovia's board, Smith earned $125,000, plus stock awards worth $157,500. The board held eight meetings in 2007.