Chief executive officer and president, Wachovia Corporation
Nationality: American.
Born: November 25, 1950, in Clarksville, Virginia.
Education: University of North Carolina at Chapel Hill, BA, 1973; Wake Forest University, MBA, 1975.
Family: Son of Maynard (manager, textile factory) and Stacy Kennedy Thompson (teacher and homemaker); married Kathylee; children: three.
Career: First Union Corporation, 1976–?, manager New York loans office; 1980s, senior vice president, human resources; 1980s, president of First Union Georgia; 1990–1996, vice chairman of First Union Florida; 1996–1998, executive vice president and codirector of First Union Capital Markets Group; 1998–1999, vice chairman and head of global capital markets; 1999–2000, president; Wachovia Corporation, 2001–, chairman and president; 2003–, chief executive officer.
Awards: One of the Best Managers of 2003, BusinessWeek, 2003.
Address: 301 South College Street, Charlotte, North Carolina 28288; http://www.wachovia.com.
After assuming the leadership of Wachovia Corporation, G. Kennedy "Ken" Thompson rewrote the rule book on bank mergers. In his short time as head of First Union Bank, Thompson took an ailing bank and overhauled it through cost-cutting, retuning strategies, shutting down underperforming institutions, and acquiring profitable enterprises. When First Union merged with Wachovia, another underperforming bank, Thompson boosted its fortunes, making Wachovia the fourth largest bank in the United States, the fifth largest broker-dealer institution, and the largest bank on the East Coast. A strong believer in the importance of giving back to the community, Thompson was active in many charitable organizations and encouraged employees to volunteer in their communities.
Education and Early Career
Born in Clarksville, Virginia, and reared in Rocky Mount, North Carolina, where his father managed a textile mill, G. Kennedy (Ken) Thompson attended the University of North Carolina at Chapel Hill as a Morehead Scholar majoring in American studies. He graduated in 1973 and went on to study at Wake Forest University, from which he earned a master of business administration degree in 1975. Thompson joined First Union Bank in May 1976 and over the next 23 years held various positions with the company, becoming president in 1999 and CEO in 2000. When First Union merged with Wachovia Bank in 2001, Thompson stayed on as president and chairman of the board of the new Wachovia Corporation. In 2003 he became CEO of Wachovia.
An Ailing Bank
Thompson assumed control of First Union at a time when the bank was in serious financial jeopardy. In 1997 a merger with CoreStates Financial Corporation, for which First Union paid $20 billion, a sum that was six times book value, deflated First Union stock prices more than 50 percent and twice diminished earnings estimates. To compound the problem, later that year First Union purchased the Money Store, a subprime lender, for $2.1 billion. As head of global capital markets, the position he held prior to becoming president and CEO, Thompson had generated enough revenue to keep First Union's profits at a respectable level, mitigating a crisis that otherwise would have been much worse.
As president Thompson set about boosting company morale, improving customer relations and service, and raising income and profits. When Thompson replaced Edward E. Crutchfield Jr., who was retiring because of ill health, as CEO in April 2000, First Union stock values increased 5.63 percent at the news. Investors and analysts alike warmed to Thompson's diversified strategy, which included investment banking, capital and asset management, and commercial banking. They had long been disenchanted with Crutchfield's acquisitions strategy, which critics characterized as recklessly expensive without yielding an adequate return.
Questions of Style and Substance
Thompson made deliberate efforts to distinguish his management style from that of his predecessor. At his first presentation to Wall Street analysts, in June 2000, Thompson made it clear that he would not pursue the aggressive acquisitions policies that had become the hallmark of Crutchfield's tenure as CEO. Thompson did not eschew acquisitions but indicated that he planned to pursue a more conservative strategy. With a management style that emphasized teamwork, cooperation, and flexibility, Thompson promised that under his leadership First Union would grow more slowly and commit more intently to customer service and retention. He revealed plans to divest First Union of its mortgage operation and credit card business; to close 90 branch banks and the Money Store, taking a $3.8 billion tax write-off on the capital loss; to dispose of $900 million of nonperforming corporate loans; to jettison $13 billion in low-yielding securities; and to sell other holdings that were performing poorly. Thompson insisted that First Union would concentrate on capital markets, asset and capital management, and general banking, all of which promised to be safe and lucrative.
Carrying Out Reform
Impressed at Thompson's initial restructuring but not convinced it would work or that Thompson or First Union would survive, Wall Street analysts reserved judgment. Thompson still had to prove his mettle. He knew from the start that he faced daunting challenges in restoring the credibility of First Union and that he was in a race against time. The patience of disgruntled shareholders, especially large institutional investors, was not infinite. "There is nothing I can say that is going to make our stock price a lot higher next week," Thompson acknowledged in 2000 to Irwin Speizer of Business North Carolina. "But if we perform, if we execute the plan we've got in place, I think our stock price can be a lot higher 24 or 36 months from now."
Prospects looked bleak. First Union stock values declined 4 percent in the nine months after Thompson took over as CEO, and by the end of 2000 First Union stock was trading at 10 times less than estimated earnings. Investors remained understandably wary, more so since the economy itself had turned sluggish. To cushion the bank against worsening economic conditions, Thompson slashed in half, to $0.96, the annual dividend per share of $1.92. This action saved $1 billion. The focus, Thompson declared, was on creating shareholder value, and a stronger balance sheet and lower dividend payments were attractive. By February 2001 the price of First Union stock had risen to $33 per share, the first indication that shareholders approved the reduction and that the fortunes of the company were at last beginning to turn around.
The Payoff
Thompson's campaign to restore confidence in First Union took an unexpected direction in 2001, when First Union acquired its North Carolina rival Wachovia for $13.4 billion, a mere 6 percent premium over the value of Wachovia stock. The deal created a banking corporation that with 19 million customers and $330 billion in assets was the fourth largest in the United States. Although a surprise given Thompson's announced strategy, the acquisition of Wachovia made good business sense for First Union, especially given the low price. Thompson's careful planning and conservative approach enabled the integration of the two companies to proceed smoothly.
The merger was a resounding success. In 2002 the new Wachovia Corporation recorded an increase in profits of 121 percent, to $3.6 billion. Operating income doubled to $4.9 billion, and the value of stock shares rose to $43.82, a return of 40 percent to investors. The deal also gave Thompson considerable influence. In February 2002 he announced another bold, unorthodox move: the acquisition of Prudential Financial. The deal, completed in July 2002 for only $400 million in upfront integration costs, made Wachovia Securities the fourth largest brokerage firm on Wall Street, trailing only Merrill Lynch, Salomon Smith Barney, and Morgan Stanley Dean Witter. Wachovia's earnings rose approximately 30 percent in 2003, to $6.09 billion. The merger with Prudential Financial was Thompson's foremost coup to date. For his accomplishments Thompson earned recognition from BusinessWeek as one of the best managers of the year for 2003. In lauding Thompson, BusinessWeek noted that even in the competitive world of banking, finance, and corporate acquisitions, nice guys sometimes do finish first.
Sources for Further Information "Alumni Profiles," Wake Forest University Babcock Graduate School of Management Alumni Magazine, Fall/Winter, 1999.
Atlas, Riva D., "First Union's Work in Progress," New York Times, December 29, 2000.
Boraks, David, "At Wachovia, Talk Shifts to Revenues," American Banker, September 10, 2002.
——, "Price Makes Sense for 1st Union," American Banker, April 17, 2001.
Foust, Dean, Brian Grow, and Emily Thompson, "Wachovia's $400 Million Hunch," BusinessWeek, September 1, 2003.
Herubin, Danielle, "New First Union President Seen as Brilliant, Team-Oriented Leader," Charlotte News & Observer, August 2, 1999.
Milligan, Jack, "Thompson on a Short Rope," US Banker, March 2001.
Minton, Mark, and Chris Serres, "Charlotte, N. C.–Based Wachovia May Need to Catch Bank-Merger Fever," Charlotte News & Observer, January 16, 2004.
Moyer, Liz, "New Chief Exec Struggles to Show He's Not a Clone," American Banker, June 27, 2000.
Padgett, Tania, and Louis Whiteman, "Numbers Man to Bring a New Style to 1st Union," American Banker, March 13, 2000.
"Q & A with Wachovia's G. Kennedy Thompson," BusinessWeek Online, March 24, 2003, http://www.businessweek.com/bw50/content/mar2003/a3826033.htm.
Rehm, Barbara A., "The Corporate Community," American Banker, January 10, 2003.
Speizer, Irwin, "Reluctant Rebel," Business North Carolina, November 2000.
—Meg Greene
