Wachovia separates chairman, CEO positions

Wachovia Corp. on Thursday stripped Chief Executive Ken Thompson of his chairman role in a move that separates the top management position from the top oversight role.

The Charlotte-based bank named its lead independent director, Lanty Smith, to the position of nonexecutive chairman.

Smith has been a director since 1987, a lead independent director since 2000, and serves as chairman of Wachovia's executive committee. He is chairman and CEO of Tippet Capital, a merchant banking firm in Raleigh, N.C.

"I think this is a distinction without a difference," said Tony Plath, an associate professor of finance at the University of North Carolina at Charlotte. He said outside shareholders will wonder how the separation will boost accountability within the company.

The move comes a little more than two weeks after Thompson faced disgruntled shareholders calling for his resignation at the bank's annual meeting. He had been under fire for the company's recent earnings problems and stock slide. At the time, Smith said Thompson had the board's backing.

Thompson said in a statement Thursday that the change frees him "to focus 100 percent of my time and attention on guiding the company through the current environment and building and delivering enhanced value."

Like many of the nation's other leading banks, Wachovia has been hammered by the collapse of the nation's housing market.

The nation's fourth-largest bank's troubles with the housing slump have been compounded by its 2006 acquisition of California-based Golden West Financial Corp., a $25 billion deal whose timing, Thompson has acknowledged, "was not the best."

In April, Wachovia reported a first-quarter loss of $393 million and announced a 41 percent cut to its dividend.

Earlier this week, the bank nearly doubled that number to $708 million, or 36 cents per share, during the January-March period, after reviewing its portfolio of bank-owned life insurance.

And that's only the beginning.

Last week, the bank said it may take an after-tax charge of between $800 million and $1 billion in the second quarter tied to past leasing transactions.

Last month, Wachovia said it would pay $144 million to settle federal allegations that it failed to stop telemarketers who took advantage of thousands of elderly consumers.

Reports have also circulated that federal prosecutors are investigating Wachovia in a probe into alleged laundering of drug proceeds by Colombian and Mexican money-transfer companies.

"They are trying to get things in order, we can see that," Plath said.

The bank recently raised $8.05 billion in a share offering to bolster its balance sheet.

Wachovia said Thursday that Thompson, who has been chief executive since April 2000 and had been chairman since February 2003, will remain a board member in addition to his role as chief executive. He will also continue to be fully responsible for the management of the company.

Wachovia says the separation "strengthens independent leadership" at the company.

Corporate governance watchdogs repeatedly call for companies to separate the CEO and chairman roles in the interest of shareholder value.

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