A Second Act for David Pottruck

Schwab's ex-CEO has launched an investment firm and will teach at Wharton, but he hasn't taken his eye off a corner office

By Justin Hibbard

Three months after being ousted as CEO of Charles Schwab (SCH ), David Pottruck is ready to teach B-school -- and get into the private-equity business. He has formed The Pottruck Group to invest his own money, BusinessWeek Online has learned.

So far the "group" is just Pottruck and an assistant, who share an office in San Francisco with private-equity firm Francisco Partners. Drawing on his background in financial services, Pottruck is eyeing investments in service industries that combine people and technology. On his radar: outsourcing services, pay-for-performance Internet advertising, and health care for baby boomers. "I want to invest in companies where I can personally add value as an adviser," he says.


  Pottruck plans to invest side by side with other private equity firms. He and his co-investors will take majority stakes in established companies or spin-offs from public companies. Though he hasn't made any investments yet, he is actively evaluating prospects.

In addition to investing, Pottruck is trying his hand at academia. On Oct. 12 he'll start teaching a five-week course for senior managers at the University of Pennsylvania's Wharton School. A Wharton alumnus, Pottruck joined as a senior fellow in the management department before the fall semester began. His course will be "The Role of the CEO," covering "lessons learned."

The 56-year-old Pottruck is upbeat about his 20 years at Schwab, although his final 14 months were tough -- especially working in the shadow of founder and Chairman Chuck Schwab. "I never considered Chuck Schwab and myself to be equal," he says. Even after Schwab handed off the CEO job in May, 2003, there was always a lingering possibility that he might want it back. Indeed, Schwab returned to the post after Pottruck left.


  Pottruck says he accepts responsibility for Schwab's poor performance on his watch. He concedes that opportunities were missed, including the boom in mortgage refinancing, 401(k) plans, and bank consolidation. But he hopes his career at the company will be judged over its entire 20-year span. During his tenure as president and co-CEO, Schwab's market capitalization rose from $1.5 billion in 1994 to a peak of $45 billion in 1999 before dropping to $12 billion at the time of his departure.

Pottruck expects to return to the executive suite at some point, although no offers have come in yet. "Maybe in the process of looking at companies, I could find one where I could actually end up as the CEO," he says.

Luckily for him, second acts in business are not uncommon. After all, Chuck Schwab was once a failed mutual-fund manager.

Hibbard is a correspondent in BusinessWeek's Silicon Valley bureau