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If the directors of Bank of America Corp. were caught flat-footed last week by the news that their chief executive officer wanted out, they would have been in good company.
October 2
The surprise departure of American Express Co.'s highly regarded president could be a knock-on effect of succession planning elsewhere.
The credit card issuer and network said Monday that Alfred Kelly, a 22-year company veteran, will leave early next year to seek the top spot at another company. Kenneth Chenault, Amex's 58-year-old chairman and chief executive, plans to remain in his post for the foreseeable future, the company said, so Kelly would have to go elsewhere to fulfill his ambition of becoming a CEO.
The announcement was part of a rapid string of executive changes across the financial services industry as firms maneuver to cement succession plans and adjust to a rapidly shifting business environment.
Barry Bregman, a vice chairman of the financial services practice with the executive search firm CTPartners, said Hartford Financial Services Group Inc.'s hiring of Liam McGee last week as its chairman and CEO — shortly after he left his post as the head of consumer banking at Bank of America Corp. — and the absence of an obvious successor to Kenneth Lewis at B of A, "has opened a number of No. 2 folks' eyes to the potential to get the No. 1 slot." (B of A said last week that Lewis would step down as CEO at yearend.)
Chenault said in a press release that Kelly, 51, "made it clear to me that he wanted the opportunity to run a company as chief executive," but "that was not likely to happen at American Express in the short term."
Amex announced other organizational changes Monday, most notably that it is now searching for an outsider to lead an effort to build new payments businesses as the company increasingly casts about for new avenues for growth after a period of painful credit losses and amid a retrenchment in consumer spending.
This recruit would lead a newly formed "enterprise growth" unit, which is to be tasked with improving returns on existing operations, boosting fee revenue and driving the company's entry into new payments businesses.
Observers called this surprising since Amex has a history of promoting from within.
"Chenault has a senior management that consists of executives who have longevity in the business," said Philip J. Philliou, a former Amex executive and a partner in the Philliou Selwanes Partners LLC consulting firm. "Perhaps bringing in an outsider is a different perspective that he needs."
Edward Gilligan, Amex's 50-year-old vice chairman, who formerly led the company's global business-to-business unit, has been put in charge of its global consumer, small-business and network businesses.
Amex has also created a new unit that encompasses customer service, technology and processing functions across the company, led by Stephen Squeri, 50, who was formerly in charge of technologies and corporate development.
Joanna Lambert, a spokeswoman for Amex, said the organizational changes Amex announced were to take place even if Kelly were to stay at the company, and were not driven by succession planning.
She said the company considers succession "on an ongoing basis" and "the board has several strong internal candidates," though the outsider who is to lead the new unit could also be up for consideration.
Amex did not make executives available for comment.
Kelly will stay with Amex until early next year and continue to lead its transition to a bank holding company. Amex became a bank holding company in November of last year after the credit crunch disrupted its sources of capital markets funding. It cited access to emergency federal rescue programs as one reason for the move. Amex repurchased about $3.4 billion of preferred stock that it issued to the government under the Troubled Asset Relief Program in June, and associated warrants in July.
Philliou called Kelly's departure a "disappointing" loss for the company.
"Kelly was seen as a real driving force for the company — young, fresh ideas, a real leader," he said.
Michael Taiano, an analyst at Sandler O'Neill & Partners LP, agreed that Kelly's departure is "certainly a loss."
The shuffle could be a reflection of the company's move to de-emphasize the businesses in the global consumer group that Kelly had overseen, Taiano said.
Amex is trying to "be less levered to consumer spending" in the United States, he said.
In a memo to employees, Chenault stressed the importance of lifting returns and building new businesses in a "slower growth environment." Several trends are forcing Amex to reshape itself, he said, including the prospect that "a 'new normal' of slower billings growth" will take hold as wary consumers and businesses emerge from the recession.
Bregman, at CTPartners, said Kelly is "clearly a prospect to run a company. He's been running a very, very large portfolio at American Express."
Robert Voth, a partner at CTPartners, said McGee's move from B of A to Hartford "may embolden other C-suite executives to seek instant confirmation on their internal succession track. And if they're not told they're the chosen one, they may take this time to be aggressive in seeking a top role elsewhere."
