Memoirs

by David Rockefeller

  I had felt this way for some time. Indeed, in the fall of 1968, a few days before the public announcement of my promotion to chairman, I addressed a meeting of the Financial Executives Institute on the subject of the “urban crisis” and told them that what we faced as businessmen was not a single problem: “Rather it is a kind of witches’ brew blended from all the major ills of our country—inadequate educational systems, hard-core unemployment, hazardous pollution of natural resources, antiquated transportation, shameful housing, insufficient and ineffective public facilities, lack of equal opportunity for all, and a highly dangerous failure of communication between old and young, black and white. All of these are problems that cry out for immediate action.”

  I believed then and I believe now that the private sector has an obligation to understand and help solve such societal problems.

  Chase had a strong tradition of civic involvement, but I wanted to broaden and deepen the bank’s involvement with its community. The manner in which an institution gives expression to its relationship with the community has an important bearing on its public image. I was eager to have Chase perceived as a modern, progressive, and open institution. To forge a new “image,” I targeted three areas:

  First, I wanted to transform our uncoordinated corporate charitable giving into a broad-based and carefully conceived program that focused on the complex urban issues of the day. I believed that personal participation and leadership by Chase officers should be part of this effort and was as important as the contribution of corporate philanthropic funds.

  Second, I planned to use the distinguished modern architecture of One Chase Manhattan Plaza as a model for the design and construction of new branches and facilities around the world.

  Third, I believed that our art program, which had started out as a way to make One Chase Plaza less austere, could be expanded into a powerful expression of the bank’s enlightened role in the culture of the modern world.

  During our joint tenure George had taken little interest in any of these programs; at best he considered them peripheral to the bank’s principal activities. But with his departure I would have a freer hand to pursue these and other initiatives more aggressively.

  CHARTING A NEW COURSE

  At the beginning of my tenure as chairman I was fortunate in finding an extremely able executive assistant, Joseph Verner Reed, Jr., who was recommended to me by Eugene Black, a Chase director and former chairman of the World Bank. Joseph had been Gene’s assistant at the World Bank and had stayed with him when he returned to New York. A few weeks before I took over as chairman, Gene told me that my success would depend to a considerable degree on finding a capable personal aide who could supervise the wide-ranging responsibilities of my office. Reed, he said, had all the qualities that were needed, and he urged me to take him on.

  Joseph—a man of uncommon spirit and joie de vivre—proved to be all Gene Black claimed he would be. During the twelve years I served as chairman, Joseph’s friendship, loyalty, and managerial capability were critical in enabling me to handle the broad range of tasks I had to cope with and to survive many difficult moments.

  In addition to Joseph I had strong support and wise counsel from Dick Dilworth, who in addition to being a Chase director was also the chief financial advisor to the Rockefeller family and a close personal friend. Dick helped me steer through several perilous moments during my tenure as chairman. Joseph and Dick were especially helpful during the early years when I was struggling to build a senior management team at the bank. As it turned out, I needed all the friends I could find.

  A RELUCTANT DEPARTURE

  At the outset of my tenure I lacked the full authority and independence that I needed to do my job and accomplish my goals. This situation resulted from George Champion’s refusal to let go of the reins of power and my own reluctance to fully assert my authority.

  While no longer an officer of the bank, George remained a director and at the monthly board meetings continued to second-guess my decisions, make pronouncements that sounded like orders, and act much as he had when he was chairman. I have no doubt George thought he was acting in the bank’s best interest, making a last-ditch effort “to save the bank” from my quixotic schemes, but even his supporters on the board recognized that this situation was intolerable. After two years of his constant sniping, I convinced the board to amend the bylaws and lower the board retirement age to sixty-eight, which was, not coincidentally, George’s age at the time. For some years after that I would occasionally run into George, who stayed active in the New York business community, and after a few drinks he would pour out his feelings in scathing terms about how I was ruining the bank.

  In one sense I can’t blame George for his bitterness. Our shared leadership had been deeply frustrating for him. He had devoted his career to the Chase, an institution I’m sure he loved as deeply as I did, yet he was never allowed to run the bank entirely on his own. He was honestly convinced that my “radical” ideas were dangerous, just as I was convinced they were essential to the bank’s survival and growth. Our visions were so diametrically opposed that no real compromise was possible, only accommodation. Certainly, Chase had lost valuable ground, especially to City Bank, that we would never entirely make up. On the other hand, had I simply resigned in 1960—my only real alternative—and left the bank in George’s hands, Chase would never have developed into the great international bank that it became.

  CHAMPION’S REVENGE

  George had also limited my authority through more direct means. In the fall of 1968, six months before he retired, George pushed through a reorganization of the upper level of the bank’s management via the creation of the “executive office of the chairman” that would commence operations on the day I took over. He pointed out, in defending his move, that other leading New York banks, including J. P. Morgan, had recently done the same. The executive office would be composed of me as chairman; Herbert Patterson, the new president and chief administrative officer; and John Place and George Roeder, newly appointed as vice chairmen. Efficiency was the ostensible reason for the change. Although I had serious reservations about the reorganization, I defended it at the press conference where I was introduced as the next chairman. I said in response to a reporter’s question, “It’s obvious that not one or even two people can deal effectively with the complex problems of a bank as large and diverse as Chase.”

  While there was some truth to my statement, it certainly was not the whole story. The reorganization should have been called “Champion’s Revenge,” because it effectively prevented me from becoming the chief executive officer. The procedures instituted by George required a unanimous vote of all four of us before any major decision could be made. And since Patterson, Place, and Roeder had all risen through the ranks under George’s tutelage and subscribed to most of his views of banking, this was clearly a technical device to keep me under control. It was as if George, embittered by our years as co-CEOs, could not accept the idea of my attaining the position that had been denied to him.

  The executive office would guarantee even more delay and stagnation, which the bank could ill afford. I realize now that I should have objected immediately to this rigged system, but I had never been a CEO before and lacked the confidence to move promptly and decisively to rectify it. In truth, the arrangement was so intrinsically unmanageable that it could not last long. In early 1971 I persuaded the board to disband the committee as an operating entity and make it purely advisory to me.

  FISTFIGHT AT A UNITY MEETING

  Ironically, the biggest problem the bank faced in the first few years of my chairmanship was the result of the one decision both George and I had agreed on: appointing Herb Patterson president and chief operating officer. Herb was a good credit officer and was well liked in the bank. A graduate of Yale, he had successfully run both the United States Department—where he worked for George Champion—and the International Department, where he had truly grown into the position, developing a keen interest
in promoting our foreign activities, something that obviously appealed to me.

  The first indication that we might have made a serious error in promoting Herb came at a retreat I had arranged for the bank’s senior management in Princeton, New Jersey, in late January 1969, just before I took over as chairman. I had convened the meeting “to build unity” among my most senior managers. The decade-long rift between George and me had created a massive fault line within the bank, and the Princeton retreat was my effort to mend fences and promote a sense of teamwork and camaraderie.

  It was no secret that Herb Patterson enjoyed a cocktail, but I was certainly not prepared for his performance that first evening at Princeton. After downing a few too many, Herb started a shouting match with Charlie Agemian, the bank’s feisty comptroller. A man of considerable girth, Charlie had a quick temper and was not the easiest person to get along with, but he was also extremely knowledgeable and a very competent officer who would need to be a fully participating member of Herb’s and my core management team. The shouting soon turned to shoving, and before we knew it, Herb and Charlie were throwing punches at each other and the rest of us were trying to separate them. At the height of the debacle, as he was being escorted from the room, Herb shouted that Charlie should be fired. My unity meeting had degenerated into a total fiasco.

  I was angry and disheartened by this incident. Instead of forging a closer working relationship among my top officers, I had only succeeded in exposing the deep fissures that existed within the bank. The next morning as I rode back in the car to New York, I realized something had to be done; I simply could not afford to tolerate this kind of behavior.

  I was in an impossible position, however. Firing Herb a month before he was to take office as president would undermine the fragile consensus in the bank and also create a furor in the financial community that might have a strongly negative impact on Chase’s business relationships and operations. My options were severely limited. The following Monday morning I called Herb to my office and told him that another such incident would force me to fire him. Herb was contrite and assured me nothing like that would ever happen again. There were no more fistfights, but personal tensions continued. More important, I began my tenure as chairman of the bank with grave doubts about whether I could rely on the man who would be my chief operating officer.

  THE FIRING

  Herb and I assumed our new responsibilities on March 3, 1969, and for the first two years Herb’s performance was respectable. He had, after all, done an exemplary job managing two of the bank’s most important departments. However, in the early 1970s I began to notice that many of the routine managerial and administrative functions I expected Herb to deal with were being neglected or mishandled. As time went on he seemed to freeze under the pressure. He retreated into his office, which was next door to mine, and rarely emerged during the day. From my perspective Herb appeared unwilling or almost incapable of making a decision, but he also refused to allow important issues to be brought to me, even for my advice or comment. “Mr. Rockefeller can’t be bothered,” he would say, and I would only find out about it later, sometimes when it was much too late. Herb was supposed to run the day-to-day operations of the bank, allowing me to focus on broader issues of policy and planning, but even routine decisions were not being made.

  Herb’s lifestyle was taking a visible toll on him. His first wife was a lovely woman who had kept him on the straight and narrow path, controlling his drinking and keeping him focused on his work. She had died, and Herb soon married an attractive socialite who enjoyed her status with the New York “jet set.” However, it was impossible to run a major commercial bank after staying out all night; the pressure and fatigue only compounded Herb’s drinking problem. I learned of several incidents at important banking functions when Herb had become conspicuously drunk and had to be led, staggering, from the room. His associates and friends tried to conceal or rationalize his behavior, but word about these bouts spread rapidly around Wall Street.

  I spoke with Herb a number of times, voicing my growing concern about his performance and style. Herb always listened patiently and contritely to my admonitions and complaints, but nothing changed. As a result, morale at the bank suffered, and the upper echelon of management started to grumble.

  By early 1971 a number of Chase directors had spoken with me about Herb’s work. A few demanded that I take immediate action. Therefore, in order to strengthen the senior level of management and to ease the burden on Herb, I recommended to the board in late 1971 that we appoint two new vice chairmen to become part of the executive office and absorb some of Herb’s responsibilities. While the performance of the bank improved modestly, Herb’s passivity remained a problem. I grew more and more frustrated, and by the late summer of 1972 I decided that Herb had to go. During the annual meeting of the American Bankers Association in Dallas in early October of that year, I asked him to come to my room. I told him I was disappointed with his performance and that I was planning to replace him. Herb agreed that things were not going well, and he seemed relieved by my decision. There was some press criticism over the apparent abruptness of Herb’s departure, but people who understood the circumstances felt I should have fired him much earlier.

  FINDING A NEW PRESIDENT

  One of the reasons I had given Herb a number of second chances was that there was no obvious replacement for him. Bringing in someone from outside the bank would have been hard on morale, and, indeed, I saw no outside candidates who fitted our needs. There was a limited field within the bank as well.

  In the end only one person stood head and shoulders above the rest: Willard Butcher. Bill had served ably as vice chairman for the previous nine months and had an easygoing personality and an exceptional knowledge of modern banking. Ten years my junior, Bill was a Phi Beta Kappa graduate of Brown University and had joined the bank as a management trainee in 1947. He had spent most of his career in the Commercial Banking Department, mainly in the highly competitive New York City branches, and had risen rapidly. I was impressed with Bill’s knowledge and personal touch, and in 1969 appointed him head of the International Department, where he was an aggressive exponent of foreign expansion.

  Bill Butcher was a pleasure to work with. A hands-on administrator, he went about his job aggressively and enthusiastically. We worked well together, conferring often and talking easily. There were no walls or awkwardness, just a plain, straightforward give-and-take. Bill understood my plans for Chase and ably administered its day-to-day implementation. Almost immediately the bank gathered momentum.

  MY OWN TEAM

  It had taken me four years to secure full authority as CEO of the Chase Manhattan Bank. Admittedly, I should have moved more quickly to consolidate my power and to end the Champion era. I didn’t, and that was a mistake. But once I became comfortable with my role and position as CEO, I moved swiftly and correctly in making the difficult and painful decision to fire my chief operating officer, a man I liked personally but who was not performing acceptably.

  These were difficult and frustrating years for me. Despite my many years at the bank, I felt isolated, with few close friends or supporters. As a result I acted with considerable caution, even timidity, insofar as the bank’s internal structure and management was concerned, and I regret my hesitation in this area. Fortunately, my timidity was balanced by a boldness in leading the bank in a number of other areas.

  I helped lay the groundwork for our future growth and expansion by convincing the board to organize as a one-bank holding corporation and by beginning to improve our management process.

  We moved quickly and effectively to establish a direct presence in many parts of the world—in the expanding industrial and financial centers of Europe, the rapidly modernizing countries of Latin America and the Pacific Rim, throughout the critical petroleum-producing countries of the Middle East, and later in the bastions of the Communist world, the Soviet Union and China.

  Finally, in the realm of external relations—in o
ur philanthropic support for the local community and the larger society, and our willingness to speak out in defense of the system we represented—Chase was viewed by many as a model company.

  I was extremely proud of these accomplishments and took it as my special mandate to strengthen Chase’s position as a leader in global banking by continuing to expand our presence in new markets around the world.

  *I had outlined my ideas on the importance of good management practices in banking and the need for banks to play a greater role in economic development at home and abroad in the McKinsey lectures at Columbia University in 1964. These lectures were later published as Creative Management in Banking.

  CHAPTER 17

  ENGAGING THE SOVIETS

  To become a global banking leader Chase would have to confront the reality that much of the world was dominated by governments fundamentally opposed to democratic principles and to the operation of the free market. As a practical necessity, then, if Chase was to expand internationally, we would have to learn how to deal with regimes that were autocratic, totalitarian, and anticapitalist in their orientation and policies.

  Even though I was totally unsympathetic to these regimes, I believed the bank should work with them. Throughout my Chase career I never hesitated to meet with the leaders of my country’s most militant and obdurate ideological adversaries, and with rulers whose despotic and dictatorial style I personally despised, from Houari Boumedienne of Algeria to Mobutu Sese Seko of Zaire, from General Augusto Pinochet of Chile to Saddam Hussein of Iraq. I met them all.