Co-CEOs Are a Bad Omen On Wall Street: The Ticker

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By William D. Cohan

The idea of co-CEOs hasn't worked well on Wall Street. When Citigroup tried it with John Reed and Sandy Weill, disaster was the swift and predictable result.

And yet now Deutsche Bank is planning to take that mystifying plunge, too,  naming Anshu Jain, 48,  and Juergen Fitschen, 62, head of the bank's German unit, to run the banking powerhouse together when Josef Ackermann, 63, resigns as Deutsche Bank's leader next year. Although the bank had telegraphed the idea that it would name the two men to share the top job at the bank -- the rap on Jain, a former Merrill Lynch banker who has successfully led the firm's investment banking business to respectable heights, was that he doesn't speak German and thus would be of little use around the water cooler in Frankfurt -- it still defies nearly every rule of corporate management to think that two heads are better than one at the top of financial institutions.

Whose vision will prevail? How will the two men reach agreements or resolve differences, given that they don't know each other all that well and barely speak the same languages? In the case of Weill and Reed, ongoing clashes led to the inevitable split in 2000, when Weill forced the Citi board to choose between the two of them. Weill won, and the rest of his legacy is well known. To wit, the bank would have gone down the tubes during the financial crisis but for the billions in largesse from American taxpayers.

Defenders of the idea of co-CEOs point to how well Goldman Sachs thrived under its co-senior partners John Whitehead and John Weinberg -- the Two Johns -- during the years following the unexpected death of Gus Levy, in 1976. True, Goldman reached new heights of respectability and profitability under the Two Johns. But the men had known each other and worked together for nearly three decades, and Goldman was still then a relatively small private partnership. The two men also were both bankers, pretty much agreed on everything and had a simple mechanism to resolve disagreements: whoever felt most strongly won the day.

The co-senior partner gig seemed to work so well at Goldman that the firm tried it again after Weinberg retired, in 1990, by naming Bob Rubin and Steve Friedman to take the helm. These men worked well together, too, for a brief period until Rubin left to go to Washington in January 1993. They succeeded for many of the same reasons that the Two Johns worked well together: They knew each other very well, and deferred to one another on important decisions when there was disagreement. But again, Goldman was still a partnership and relatively small.

When the firm tried it a third time -- with Jon Corzine and Hank Paulson -- the result was nearly an unmitigated disaster. After some five years of internal feuding, Paulson forced Corzine out on the eve of the firm's much anticipated May 1999 IPO. Now, as a public company, Goldman no longer considers the idea of co-CEOs a good one.

So good luck, Anshu and Juergen, but the odds are definitely against this working out. I predict Jain will be in full control sooner rather than later. And you can take that prediction to the water cooler in Frankfurt.

-0- Jul/28/2011 22:57 GMT