The financial crisis of 2008 exposed the frailties of bank chiefs. Boards and shareholders wanted scapegoats. There was nowhere to hide for those who had been running investment banks that ran aground on the pernicious rocks of leverage and greed.
Two years on, the waves have closed over. It is very much business as usual at the big financial institutions. Was it perhaps all a bad dream? Then you look at the share prices of some of these firms and you realize: "Houston, we have a problem!" Barclays’ shares, for example, trade for less than half of what they were worth at the peak (spring 2007). This is also true of Credit Suisse and Deutsche Bank shares. Neither of these banks took taxpayers’ money during the crisis so this underperformance is odd. Shareholders of HSBC and JPMorgan have fared better but those who invested in the banks that were bailed out are in big trouble: Citi shares fell from $55 in May 2007 to about $5 today.
So, what is life like for a deposed mogul or former bank chief who has been ejected from the corner office? Is it full of despair and regret: a dark period of brooding over past mistakes? Or is it a wonderful interlude filled with new challenges and less stress? I suspect exile is rarely a walk in the park, which is why most former bank chiefs maintain a low profile. Think Dick Fuld, Jimmy Cayne, Chuck Prince, Daniel Bouton, Fred Goodwin and many others.
I was pondering this subject when a headline flashed across my Bloomberg screen that Naguib Kheraj, the recently appointed chief executive of Lazard International, had left the firm after 32 days to "concentrate on philanthropic activities". This is a remarkably short tenure at the top, even in the fast-moving world of investment banking.
Parting is such sweet sorrow, and the official statement regarding this departure does indeed read like a love letter. Kheraj is quoted: "I am very sad to be leaving Lazard, and have not taken this decision lightly. I underestimated the difficulty of managing my external activities in a way that would enable me to be properly engaged in an executive role." Lazard responded: "We understand and respect Naguib’s reasons for stepping down. He was a friend of the firm before he joined and will continue to be a friend. We wish him well."
I am perplexed. Kheraj, a former finance director at Barclays and chief operating officer at Barclays Capital, is a demon for detail and extremely hard-working. Isn’t it odd that a man with such a fine brain could make such a simple miscalculation? Effectively we are being told that Kheraj couldn’t juggle his commitments.
When Kheraj’s appointment was announced, the press release stated that he would "take a leadership role in advising large corporates, financial institutions and sovereign funds in Europe, the Middle East and Africa". Surely, if you agree to take on such a job, you would realize that it was a broad and time-consuming role?
It is not only Kheraj who has stumbled here. One obviously has to question the efficacy of the Lazard recruitment process. But might there be a back-story that we are not being told? In my December column (Abigail with attitude: Over-indulgence and overdrafts), I was dubious that Kheraj and Lazard would have a fairy-tale ending. "Ken Jacobs, Lazard’s chief executive, hopes Kheraj will sprinkle magic dust in the air and all will end well," I wrote. "I am not convinced... Might we be about to witness a plethora of body bags?"
I know my instincts are normally correct but it is rare that I am proved right so quickly. The market has a raised eyebrow about this revolving door. "It reflects badly on whoever sponsored him at the firm," a senior banker told me.
"Kheraj is more of a manager than a client guy," a well-connected source mused. "At Lazard, did anyone, apart from his assistant, report to him? Maybe he had difficulty carving out a client-facing role for himself?"
Rumours circulate that King Kheraj might have clashed with Mighty Mandelson. Lord Mandelson, the former British politician, was hired by Lazard on January 21 as a senior adviser. Kheraj exited less than a month later.
Sources hint that Mandelson has already become a key component in pitching for business in the UK and Europe. Was this perhaps the role that Kheraj expected for himself, only to find the ‘Dark lord’ – and new-found best friend to Bob Diamond – dominating the room? And did Kheraj’s need to shine lead him, as one observer noted, to "aggressively assert himself", an effort that went "disastrously wrong"?
A source close to Lazard insists: "Kheraj did not clash with anybody. Given his considerable commitments to the Aga Khan and other charities, he simply realized he could not fulfil both roles properly." It sounds unlikely. As one former colleague says: "Naguib’s been doing lots of stuff for the Aga Khan since he was in nappies." Or, you might surmise, at least while he held down full-time jobs at Barclays and Cazenove. Kheraj declined our requests for comment.
One is left confused about his future. If his philanthropic activities are so demanding, does this mean that at the relatively tender age of 46 he is dismissing the possibility of any future executive roles? Noble Naguib has had three employers in the past four years: he left Barclays in April 2007 (after a decade), joined JPMorgan Cazenove in the autumn of 2008 and then darted briefly over the Lazard threshold in January 2011. I am all for variety but perhaps this is too much of a good thing. What do you think?
I was stunned when a source whispered to me that James Gorman, chief executive of Morgan Stanley, might face exile if the firm can’t produce consistent results in the next few quarters. Is this damning judgement fair? "Come on Abigail," a source said. "The honeymoon may be over but surely they will give Gorman three years? You must remember the mess that he inherited." I tend to agree with my source but Morgan Stanley’s shares are trading below their stated book value of $31.49 (as of December 31 2010). This is not a vote of confidence.
