"There's been a complete recognition at the board level that Golden West was a mistake and that we have to deal with the consequences of it," Wachovia (WB) Chairman Lanty Smith said in the company’s conference call Thursday morning.
Say, thanks Lanty! Where were you back in May of 2006?
The unremarked-upon fact surrounding the management changes at Wachovia Thursday is that, through all the tumult, the company’s board has been an absolute disaster for shareholders.
Oh, it’s fine for Lanty Smith to say now that the Golden West deal was “a mistake.” But why couldn’t he have done his job and been more skeptical about the deal two years ago when the board was considering it? It’s not as if there wasn’t an enormous amount of skepticism at the time: the stock dropped by 7% the day the acquisition was announced, and kept on falling after that. The housing market was clearly slowing—particularly in California.
Yet if Smith or anyone else on the board had a bad word to say about the Golden West buy, we’ve yet to hear of it.
Then the board compounded its negligence by failing in what is perhaps directors’ most important duty: ensuring that a CEO succession plan was in place. So when the mortgage crackup finally happened and Ken Thompson thrown over the side, the board was pathetically unready to find a replacement. The market seems pleased with the choice it came up with, and maybe Bob Steel will do a great job. But the fact is that at the moment of the greatest credit stress in Wachovia’s history, the company is now going to be run by an individual with absolutely zero lending or credit experience. Great. The shareholders can thank their board.
Lanty Smith says Wachovia has “come to grips” with its problems. That’s not true. If it were, and the board really were serious about getting rid of the causes of its recent problems, it would resign. Starting with its chairman—Lanty Smith.
Tom Brown is head of BankStocks.com.