(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
By Jeffrey Goldfarb
NEW YORK (Reuters Breakingviews) - Surprise changes at the top of a company don't typically go down well in the market. Even worse are ones accompanied by mealy-mouthed excuses. Yet following the unexpected ouster of Bank of New York Mellon boss Robert Kelly, the bank became about $1 billion more valuable. So much for the cult of the chief executive.
For a mostly sleepy trust and custody institution, BNY Mellon has a knack for rude wake-up calls. In early 2006, the board pushed out Chairman and Chief Executive Marty McGuinn ahead of his planned retirement date and brought in Kelly from Wachovia. Less than a year after his arrival and just weeks after presenting a strategic vision, Kelly dropped the bombshell merger with Bank of New York. So in a way, shareholders have been conditioned for shocks.
There was certainly no clear reason to expect Kelly's abrupt departure. A controversial surcharge on large deposits and state lawsuits alleging overcharging on foreign exchange trades hardly seem enough to get a CEO pushed out. The company's shares have lagged the sector of late, but only modestly. Since the merger, they have declined by almost half, nearly the same as those of rival State Street.
On the other hand, this performance hardly warranted Kelly commanding one of the top pay packages in the financial industry, or of any public U.S. company. Last year, he collected over $19 million. Perhaps that helped the board accept that Kelly was entirely dispensable. The company used only corporate-speak mumbo-jumbo to explain his departure, claiming "differences in approach to managing the company."
In his place, BNY Mellon tapped a familiar face, longtime President and Director Gerald Hassell, to be the new chairman and CEO. Analysts expect more aggressive cost cutting but no big shift in strategy. Having a steady successor at the ready probably helped overcome any concerns about what was behind the sudden change in the corner suite.
More may yet emerge about this saga. But BNY Mellon's experience reinforces two simple ideas often forgotten in corporate boardrooms. A credible succession plan goes a long way to smoothing any upheaval, expected or not. And with a few exceptions, the CEO is almost always less essential than some bosses -- and many around them -- tend to think.
-- Bank of New York Mellon said on Aug. 31 that Robert Kelly had stepped down as chairman, chief executive and director by mutual agreement because of differences in approach to managing the company. Gerald Hassell, the bank's president and long-serving board member, took over the roles, effective immediately.
-- BNY Mellon shares were up about 4 percent in late morning trade on Sept. 1, adding around $1 billion to the company's market value.
-- BNY Mellon statement link.reuters.com/jup53s
-- Reuters story: BNY Mellon CEO Kelly steps down
(Editing by Richard Beales and Martin Langfield)