News: Analysis & Commentary: EXECUTIVE SUITE
MR. CLEAN, YES. MR. DYNAMO, NOT YET
In many ways, it was an astute move. During the past 18 months, Bankers Trust Co. has been investigated and censured by regulators, accused by clients of misrepresenting the complex derivatives it sold them, and faced with a wave of staff defections. This was a bank badly in need of a credibility boost.
It has one now in the person of Frank N. Newman, named president of Bankers on Oct. 19 after joining the bank as senior vice-chairman in charge of administration and finance just a month before. He will take on the duties of CEO on Jan. 1 and become chairman and CEO next April, after Charles S. Sanford Jr. retires. Newman brings impeccable credentials, having served as chief financial officer for Bank of America and most recently as Deputy Treasury Secretary in the Clinton administration. Add to the resume a pristine reputation for integrity and intelligence, and Bankers has a solid "Mr. Clean" in its corner office.
Newman, 53, vows to help Bankers, a longtime leader in derivatives and risk management, realize its potential. "This company is extraordinarily good at financial risk management in every direction, and that's going to be a continually growing need, especially internationally," he says. "Its approach...is really on the leading edge of the direction I think financial services is going."
RESERVED. Skeptics question whether Newman is really the best person to run Bankers for the long haul. He has spent most of his career as a staff executive and financial expert, not a banker with line functions. Indeed, Hamish Maxwell, former chairman of Philip Morris Cos. and a director of Bankers, says Newman, who was recruited by Sanford, was originally hired with no promise of anything beyond his original role.
And although he inspires remarkable loyalty among subordinates, former colleagues--even some of the many who admire him--describe Newman as reserved and guarded. Some analysts question whether he has the dynamism to galvanize the troops at Bankers. "I'm not 100% convinced he has the skill set to run a wholesale bank," one says.
On the other hand, Newman has successfully confronted broad strategic issues. At BofA, he was known chiefly as an adroit manager of the bank's capital and as part of the team that turned the bank around. Newman says that as CFO "I was actively involved in the setting of direction for a range of businesses--very good training for a CEO."
Newman is known as a consensus builder who solicits opinions from everyone around him on decisions. "I do like to get multiple views," Newman says. "But I'm not reluctant to make decisions and hold people accountable." He also listens to criticism. A Treasury aide recalls a heated Capitol Hill meeting on Washington's fiscal crisis, when Democratic District of Columbia delegate Eleanor Holmes Norton erupted at Newman: "You are tight-assed and unhelpful!" Newman thought for a moment and replied: "Tight-assed I accept--unhelpful, I don't."
NO SALE. Newman will head a bank whose derivatives business has lost $170 million so far in 1995. Procter & Gamble Co. is alleging that the bank violated anti-racketeering laws. And many clients are still shying away from doing business with the bank. Says one Asian derivatives expert: "If you're a corporate treasurer and say your bank is Bankers Trust, you'll be laughed out of the room."
Such problems may have greased the skids for Sanford's retirement. "I think regulators had a big hand in Sanford's departure," announced in May, says Thomas H. Hanley, an analyst at CS First Boston. Bankers says regulators were not involved. But what helped drive Newman's elevation, sources say, was the disclosure of taped conversations among Bankers employees regarding misrepresentations to clients. Those conversations, cited in P&G's litigation with Bankers, were made public on Oct. 3, less than three weeks before Newman was named president. Maxwell says naming Newman took place when "we felt we knew enough" and knew Newman better.
Some say Newman's mandate may be to clean up Bankers, settle with P&G, and sell the bank. Newman will not comment on the P&G case and says he has no plan to sell Bankers. If so, he's facing a major rebuilding. And integrity alone won't win the battle.
FRANK N. NEWMAN
President, CEO-elect, Bankers Trust
-Deputy Treasury Secretary under President Clinton
-Chief financial officer, Bank of America
-Chief financial officer, Wells Fargo
Harvard University, BA in economics, 1963
Helped enact bills allowing interstate banking, promoting community development, and reforming bankruptcy laws. During the late 1980s, helped turn around Bank of AmericaBy Kelley Holland in New York, with bureau reports