WaMu replaces Killinger as chairman

SEATTLE — Washington Mutual Corp., hard-hit by the mortgage and credit crises, said Monday it will replace chief executive Kerry Killinger as chairman of the board and take other steps to improve corporate governance.

Killinger, 58, will remain on the board. He has served as chairman of the country's largest savings and loan since 1991.

So far, Killinger has managed to hang on to the top executive spot at WaMu even as other CEOs have been canned as a result of turmoil in the U.S. housing market.

On Monday, Wachovia Corp.'s CEO Ken Thompson was forced out of a job, joining Merrill Lynch & Co.'s Stanley O'Neal and Citigroup Inc.'s Charles Prince on a growing list of casualties.

At WaMu's April shareholders meeting, a nonbinding resolution urging the thrift to require a non-employee to serve as chairman of the board passed with 51.5 percent of the votes.

WaMu said Stephen E. Frank, the lead director on its board, will assume the role of chairman starting July 1. Frank, 66, was CEO of Southern California Edison, the largest subsidiary of the Edison International power company, from 1995 until he retired in 2002.

In addition to taking the chairman's seat from Killinger, WaMu said its board made has made it harder for directors in uncontested elections who don't get a majority of votes cast to remain on the board.

WaMu's board also shuffled the leadership for committees that activist shareholder groups blamed for leading the thrift deep into the subprime mortgage crisis, despite signs the housing market was poised to collapse.

The thrift has responded that it took appropriate steps early on to mitigate that risk, but in April the chair of its finance committee, Mary Pugh, resigned.

On Monday, WaMu said Orin C. Smith will serve as chair of the finance committee, replacing Pugh. David Bonderman, managing director of TPG, a private equity group that led a $7 billion investment in WaMu this spring, will serve as vice chair of the committee.

The company also swapped out the chairs of its governance committee and its corporate relations committee, and said it is searching for additional directors.

"These actions underscore the board's long-standing commitment to good corporate governance and my personal commitment to improving the company's financial performance and delivering value to our shareholders," Killinger said in a statement.

Washington Mutual has been badly hurt by the cost of rising mortgage delinquencies and defaults and by the sinking value of its mortgage portfolio. During the first quarter, WaMu lost more than $1.1 billion and set aside $3.5 billion to cover defaulted loans.

Shares of WaMu slipped 7 cents to $8.95 in midday trading.