Memo to Bankers: Woo the Board

That's a lesson Credit Suisse First Boston's John Mack just didn't learn. Why do so many top financiers make the same mistake?

Emily Thornton

Today is goodbye time for John J. Mack, one of Wall Street's fiercest gladiators. His contract as chief of Credit Suisse First Boston officially ends on July 12. And his ouster serves as a valuable lesson for all his fellow Masters of the Universe: These days, you ignore your board of directors at your own peril. Even if you're a Wall Street icon so tough your nickname is "Mack the Knife," unless your board is on your side, you won't be around for long.

Sounds obvious. But it seems to be the No. 1 blind spot for star bankers like Mack. In fact, for all the paeans to methodical succession planning on Wall Street, it has almost become the norm that these guys are unceremoniously shown the door. Never mind the loyalty and admiration they engender in some quarters. In 1998, charismatic Jamie Dimon fell out with his mentor Sanford "Sandy" Weill at Citigroup (C ) -- just like that. And in 1999, Jon Corzine, now a New Jersey senator, was the target of a corporate ambush at Goldman Sachs (GS ).

Before knifing Mack, Credit Suisse Group removed his predecessor, Allen D. Wheat, in 2001 in a similarly sudden fashion. Lukas Muhlemann, then chairman and CEO of Credit Suisse Group, summoned Wheat to London for a brief meeting. Muhlemann himself became a corporate casualty shortly after.

"HE'S NOT SWISS."

  What's striking about Mack's fate is that the same thing happened to him at Morgan Stanley (MWD ) three short years ago. In both cases, he suffered acute public embarrassment because he didn't have the board's backing. At Morgan Stanley, he concentrated on running the bank and didn't cultivate the board as much as Chairman and CEO Phillip J. Purcell did. Nor, say insiders, did Mack fight when Purcell replaced Mack's boardroom allies.

He seemed at first to have learned his lesson at CSFB. As co-CEO, he traveled often to Zurich to schmooze with the board. The 12-member board added three Americans after Mack took his job at CSFB in 2001. But he pressed his luck when he pushed for a merger. Despite Mack's co-CEO title, "he's not Swiss," notes Wall Street historian Charles Geisst. "Over the last 20 years, decisions about CSFB have been made by the Swiss bank."

Such shootouts are becoming more common in Europe, where top executives traditionally were rarely ousted. In the U.S., the rules of the Street have been, and remain, far more cutthroat. As fictional financier Gordon Gekko declared in the 1987 blockbuster movie Wall Street: "It's a zero sum game. Somebody wins. Somebody loses." Bankers, take note: Whoever has the backing of the board usually emerges the victor.

Thornton is Finance & Banking editor for BusinessWeek in New York

Edited by Douglas Harbrecht