When John Gutfreund left Salomon in the hands of his close friend and investor, Warren Buffett, he brought about the rescue of the company by realizing that at moments of crisis, short-term confidence can restore long-term survival.
The main constituents for Salomon then, as they are now for Bank of America as it ponders its own urgent succession, were regulators, politicians, the media, investors, and employees, including management.
As the story goes, Gutfreund called Buffett the morning after more damaging news broke regarding the illegal trading practices of Paul Mozer, and asked Buffett to step in. Buffett agreed to take on the role of CEO at $1 per year, perhaps out of concern for his investment as well as his friendship at the time with Gutfreund, and some angst about the American economy.
Buffett sent a clear message–to employees: “We want people to get rich through the firm and not off the firm. If you damage the reputation of the firm, I will be ruthless.” And to regulators: Before Buffett had a chance to formally accept the offer to the board, he received a call from Treasury that Salomon was going to be dropped from bidding at auction. Buffett placed a call to the Treasury Secretary and said if so, then he was out, and the domino effect on the bond trading industry would be palpable and disastrous. Treasury called off the witch-hunt.
The Bank of America board is dealing with a succession scenario that has some remarkable similarities. The selection of a new chief will either enhance the company’s stature in the minds of regulators, investors, and employees or may undermine it. The problem is that few of the constituencies will agree on the same choice. Team players argue for someone who knows the culture and can lead the firm but carry out the tradition. Others argue for an outsider with stature and political pedigree, someone who can calm the regulatory waters. No one wants Bank of America to fail. But everyone wants to win their way and with their “guy.” Who is right?
There really is only one choice. As Buffett proved, what is needed is the right character, experience, otherwise known as …Leadership. We rally around a leader who makes it clear that his or her selection is in the company’s and the nation’s best interests. Warren, are you interested?