Where Leaders Don’t Grow

In Monday’s Wall Street Journal, a page-one meditation on how the financial industry’s emphasis on quick profits in every unit, or else, has crushed a generation of top leaders, leaving both Citigroup, Inc. and Merrill Lynch & Co. without obvious successors to their two newly-cashiered CEOs.

So many worthy candidates carry the taint of having been fired for a bad quarter. Meanwhile, the combination of skills needed to run these institutions don’t all fit inside one Dolce & Gabbanna. Neither of the ex-CEOs had the “technical expertise to figure out the mess involving mortgage-backed securities whose value is uncertain,” but their possible successors either lack that kind of knowledge or the leadership qualities needed to run immense public companies.

Mergers and expansion have made the job of leading a Wall Street giant tougher. It may no longer be enough for the leader of Merrill Lynch to be a longtime brokerage executive like David Komansky, who headed the firm from 1997 to 2002, or for the head of Citigroup to be a top investment or commercial banker.

Roy Smith, a professor of finance at New York University and former partner at Goldman Sachs Group Inc., said Wall Street chiefs, obsessed by their stock price, are quick to let go anyone whose unit has a bad quarter. That may show their boards that they are aggressively managing their subordinates, but it means talented executives who make mistakes can be quickly shown the door.

During Mr. (Charles) Prince’s tenure at Citigroup, more than a dozen top bankers have departed, been forced out, or been given different responsibilities. They include Marjorie Magner, who ran global consumer banking, and Michael Dunn, a 30-year Citi veteran who served as finance and operating chief for Citigroup’s global consumer unit.

Similarly, Merrill’s Mr. (Stan) O’Neal acquired a reputation for purging top executives — prompting some of those executives to agitate behind the scenes for his departure. Wall Street has become a more “volatile place to grow managers,” Mr. Smith says.

(The article is behind the WSJ’s pay wall.)

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