On the personal level, despite the insistence of journalists and revisionist historians, there was never a “Rockefeller-Kissinger behind-the-scenes campaign” that placed “relentless pressure” on the Carter administration to have the Shah admitted to the United States regardless of the consequences. In fact, it would be more accurate to say that for many months we were the unwilling surrogates for a government that had failed to accept its full responsibilities.
The Iranian crisis had little impact on Chase, but it would take years for my personal association with the Shah to be placed in proper perspective.
One of the more dubious rewards of being a public figure is that The New York Times periodically sends a reporter to update your—as they benignly put it—“biography.” Literal translation: “obituary.” In 1981, shortly before I retired as chairman of the bank, a reporter came by for one such biographical update. We talked for a full hour, and 90 percent of his questions involved the Shah. As far as the Times was concerned, my experience with him was the most important, perhaps the only important, issue in my life. In 1986 another Times reporter stopped by, and this time only about half the questions were about the Shah. In 1996 yet another reporter conducted yet another update, and this time only 20 percent or so of the questions were Shah related. If I live another couple of decades, I may be able to outlast my bad press.
*Chase officer Archibald Roosevelt, cousin of Kermit Roosevelt, the CIA officer who had engineered the 1953 coup that restored the Shah to the throne, was with me on the trip. Archie, who had also worked for the CIA, had an astonishing political and historical knowledge of central Asia and the Persian Gulf region. Archie said he thought the “game was up” for the Shah in Iran.
CHAPTER 25
REDEMPTION
The public furor over my involvement with the Shah of Iran did not divert me from my primary task: presiding over the recovery of the Chase Manhattan Bank.
Two decades later I hope it is not immodest to conclude that “we did it.” I say “we” because Chase’s turnaround and recovery was the result of a team of people pulling together to reach a common goal.
“It’s a Stronger Bank That David Rockefeller Is Passing to His Successor” was the way Fortune magazine headlined Carol Loomis’s follow-up account of the Chase comeback. Few articles have made me prouder.
CREATING A MANAGEMENT PARTNERSHIP
Sailors know that it takes time before you can bring a ship onto a new course; the larger the ship, the longer it takes. After the difficult meetings with the Chase board over our burgeoning real estate problems in the summer of 1975, I took my vacation in Maine and spent some delightful days sailing the waters off the coast of Mount Desert Island with Peggy and other members of my family. I remember thinking about the difficult task we faced at the bank, not unlike threading my way through the narrow passages and treacherous shoals between islands, constantly correcting course for the wind and tide. We had shown the board how we planned to manage our severe real estate exposure, but we needed a comprehensive approach to deal with the full range of our challenges—from back office operations problems to front office management development.
That was what I set out to achieve in early September 1975. By my side as chief operating officer was Bill Butcher. Together we would confront and ultimately conquer our considerable challenges. Bill and I had quickly established an excellent working relationship. We understood each other’s roles and responsibilities. I was the CEO, the final arbiter of policy and strategy; Bill was the COO, responsible for seeing that all the bank’s day-to-day operations were consistent with our strategies and our profitability objectives.
Unlike George Champion and me, who butted heads constantly when we were co-CEOs, Bill and I never got in each other’s way. He had grown up in the bank, knew our business intimately, and handled the day-to-day business flawlessly.
Our offices adjoined on the seventeenth floor of One Chase Manhattan Plaza, and the two of us talked daily during 1975 and 1976 about policy and personnel issues. It was this latter area that we both felt needed bolstering, particularly the critical nonbanking functions of marketing, planning, systems, and human resources, which in the Chase tradition had usually been headed by credit officers who were untrained for these specialized jobs.
BUILDING THE TEAM
I often think one of the best decisions we ever made at the bank was bringing in Alan Lafley to run our human resources department; Alan was key to helping change the bank’s culture. Bill and I first met Alan in 1974, on the same inauspicious day we had announced news of the bond trading account scandal. Alan had been in charge of human resources for a large segment of General Electric and came to work for us in 1975. He developed a strategic organization plan and helped us determine what our staffing needs would be in the next several years. This, in turn, led to an in-depth analysis of the qualifications of our senior staff and to a system of rotating talented officers through different departments in order to broaden their experience and test their skills. Some moved up and some moved to different positions within the bank; others who did not measure up were encouraged to move out of the bank altogether.
At the same time we drastically altered the system of executive evaluation and compensation, becoming much more attentive to performance in relation to clearly defined jobs. For the first time in the bank’s history we tied an individual’s compensation directly to results, offering bonuses and more rapid pay increases to those producing the most outstanding results. Most important, we instituted annual executive reviews throughout the bank to identify the most talented people and to decide how they could be used to best advantage. Today, of course, such management systems are routine. But in the “comfortable” Chase culture of those days, the steps we instituted were considered positively radical.
The board’s compensation committee periodically reviewed with management the performance of our most senior officers. Several directors headed industrial corporations noted for excellent management policies, and they were particularly helpful in honing our program.
By the late 1970s, for the first time in Chase history, we considered an orderly management succession plan, identifying a handful of candidates best qualified to assume top leadership positions. One of these was Thomas Labrecque, who had worked as secretary of the executive office and had played a key role in dealing with the New York City fiscal crisis in the mid-1970s. Tom later became president and then succeeded Bill Butcher as chairman and CEO. Beyond identifying these new senior leaders we also stocked the bank with a cadre of high achievers, and we began to provide the training they would need to lead Chase in the future.
TRANSFORMING THE CULTURE
We also took actions to reorganize the bank on a more efficient basis and to create a culture built on the cornerstones of competence, character, and accountability.
The Chase “culture” had often been criticized for allowing semiautonomous fiefdoms ruled by powerful department heads who concentrated on guarding their turf rather than creating synergy with other parts of the institution. Early in my tenure as chairman, we had sought to address this problem of internecine warfare by restructuring into three new line units: corporate banking, institutional banking, and personal banking. This change went a long way toward integrating the bank but did not completely solve the problem. Restructuring to streamline our organization became commonplace. But creating a new culture based on cooperation and shared responsibility involved much more than a simple structural reorganization.
One program that played a central role in our cultural evolution was the Corporate Social Responsibility Program. Few companies in the 1970s made charitable contributions, and still fewer had programs whereby a planned percentage of annual earnings were contributed to charity. Even these formal giving programs tended to be an extension of the chairman’s office, with the CEO arbitrarily directing funds to his favorite nonprofit organizations or acting in response to customer requests. This was not acceptable to me.
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sp; Instead, we established clear guidelines and objectives—contributing 2 percent of our annual net income before taxes to a diverse array of carefully identified nonprofit organizations. The program was managed by a Corporate Responsibility Committee, which met quarterly and included the entire executive management team. Subcommittees proposed grants in such areas as the arts, social service, community development, public policy, and a host of others. The twenty-five-member committee convened to consider the merits of each organization proposed by the subcommittees. We debated the level of support we would provide to civic organizations such as hospitals, symphony orchestras, and universities, as well as to more controversial groups such as Planned Parenthood and Covenant House. These discussions were among the most worthwhile we had within the bank. We learned from one another and about one another, and we began to understand how Chase fitted into the broader society around us.
My rationale for an active corporate responsibility program was simple: Businesses could not afford to become isolated from the larger society of which they were an integral part. I said as much at a meeting of the American Bar Association in October 1972: “Any business that does not respond creatively to this world and its growing insistence on an improved quality of life is cutting off its future nourishment. For, however you interpret its role, the corporation depends on the health of its society. Just as society’s perception of us molds the laws that govern us, society’s health determines whether we will have a vigorous or slack marketplace.”
The broadening of executive sensitivity to the important underlying societal issues of our time became one of the most powerful components of the evolving Chase culture and helped our institution become qualitatively different from the vast majority of major American companies.
FRAMING THE STRATEGY
By early 1976, Bill Butcher and I had brought our real estate and back office problems under control and began to focus on developing longer-term growth strategies. We worked intensively on a three-year strategic plan to establish earnings targets for each year. We presented it to the board at an all-day session at my family estate in Pocantico in November 1976.
Our plan positioned Chase to cope with the profound changes that had overtaken the financial services industry worldwide. In essence, we radically redefined the bank and the products on which we would place our principal emphasis. We had to do this because the domestic and international marketplaces within which we operated had now altered irrevocably.
Through most of its existence Chase had been a major supplier of credit, first to the largest U.S. corporations and later to companies around the world. Chase also played a leading role both domestically and internationally in providing services to other banks. Thanks to the 1955 merger with the Bank of Manhattan, we had become strong in retail branch banking in New York City as well.
By the early 1970s, however, it had become apparent that the profitability of our most important product, lending to major corporations, was eroding. This resulted from the growing competition we faced from European and Japanese banks and, even more important, from the appearance of new financial instruments, particularly the growing use of commercial paper issued by corporations themselves.
Moreover, the proliferation of investment and merchant banks introduced another area of bank competition in the international capital markets, even in the provision of short-term banking needs.
Faced with increased competition in our traditional core businesses, Chase had to diversify; we had to identify other profitable fee-generating products and markets to meet our earning targets. We told the board that we wanted to accelerate our movement in three areas in particular:
The first was our declining corporate lending business. We sought to expand our capital markets and investment banking business. After two attempts to form consortium banks in Europe in the late 1960s, we now proposed to develop a capital markets capability of our own, first in London with what became Chase Manhattan, Ltd., and then in Asia through the purchase of the charter (for the bargain basement price of $6!) of a Hong Kong merchant bank that had not yet begun operations. From this modest beginning grew Chase Manhattan Asia, Ltd., which by 1979 was co-managing syndicated loans of $10 billion a year and was playing a leading role in the Eurocurrency markets that had spread to Asia.
The second was the marketing of retail products, such as credit cards and home mortgages, on a nationwide basis. Even though Federal Reserve regulations prevented us from directly accepting deposits outside New York, it was permissible to have out-of-state offices that marketed other products. A retail expansion of the kind we proposed represented a major departure for Chase, and some of our directors resisted it at first. However, over the years this business became a reliable and rapidly growing source of revenue for the bank.
The third was a renewed concentration on private banking, which provided trust and custody services and investment advice to wealthy individuals, along with the creation and development of other institutional investment services. Our earlier efforts to enter the private banking business had failed. By the mid-1970s, having learned from these earlier false starts, we formed the Chase Investors Management Corporation and brought in experienced people from outside the bank to manage it. CIMC attracted upscale investment clients from all over the world. Today the businesses of private banking, investment management, and custody have become great global strengths for Chase.
BEATING THE DEADLINE
At a special board meeting in November 1976, Bill and I projected a three-year plan of earnings of approximately $310 million by the end of calendar year 1979—nearly triple the expected earnings in 1976. It was an ambitious goal, and many of the directors may have thought it wishful thinking. But Bill and I were confident that we were on the right track and that the programs we had launched were taking hold and would produce the results we projected.
By the end of 1979 we posted earnings of $311 million—even better than our ambitious forecasts. Fortune, which had earlier given me “three years to turn the bank around,” summarized our progress this way: “Chase made it back, and Rockefeller beat his deadline.” For a change the story was rather pleasant reading. I was gratified—actually, considerably relieved—that our plan had worked and the bank had made it all the way back.
When I stepped aside as CEO on January 1, 1980, I felt a great sense of accomplishment that our efforts to reassert Chase’s leadership in the world had succeeded.
Between 1969 and 1980 we opened sixty-three new foreign branches and seventeen new representative offices. By the early 1980s we operated in more than seventy countries, and our foreign activities accounted for the majority of the bank’s income. Income from international operations grew from just over $29 million in 1970 to $247 million in 1981. Our aggregate earnings during my decade of Chase leadership had nearly tripled, from $133 million in 1970 to almost $365 million in 1980.
Most important, the “culture” of the bank, which had seemed so intractable through much of my career, had clearly changed. Chase had become a modern corporation. Equally important, the bank’s idea of social responsibility—once a revolutionary concept—had become an integral part of the Chase philosophy. Our commitment to social responsibility extended beyond our annual charitable contributions to include programs of minority hiring, “lending” executives to schools and not-for-profits, making loans and extending credits in low-income areas, and many other social initiatives. It was indeed a “stronger” bank that I was passing on to my successor.
REDEMPTION AND RETIREMENT
On June 12, 1980, I reached the ripe old age of sixty-five, and in accordance with Chase bylaws, it was my time to retire. The same board that six years earlier had seriously contemplated asking for my early retirement now requested that I stay on for an extra nine months as chairman, until the next annual meeting in 1981.
I was proud that my thirty-five years in the service of The Chase Manhattan Bank ended on a high note. I was even more delighted that our plans and strateg
ies resulted in a bank that was vindicated on all counts. The Chase was back. The team had triumphed.
Looking back, there is no other career I would have preferred. Banking gave me a chance to meet the leaders of the world in government, finance, and business—and to keep in touch with many of them over four decades in a way no other job I can think of in any field would have made possible.
But when I completed my tenure on April 20, 1981, by presiding over my final board of directors and stockholders meetings, I felt no pang of regret at leaving. Bill Butcher provided me with an office and secretary at the bank, and I would continue to serve as chairman of the International Advisory Committee and a member of the Art Committee. Bill also asked me to continue to travel abroad with senior bank officers, and I am pleased that subsequent Chase CEOs have continued to request my support from time to time. While my management responsibilities had ended, my links to the Chase would remain strong.
CHAPTER 26
NEW YORK, NEW YORK
Although my retirement from Chase in 1981 brought to an end a distinct phase of my life, there would be important continuities with the past. One of these was my involvement with the affairs of my hometown, New York City.
INHERITING AN URBAN INTEREST
I began to learn about New York as a schoolboy. Father was my principal mentor. Soon after he graduated from Brown University in 1897 and entered Grandfather’s office, he immersed himself in many of the Progressive reform movements of the time: education, health, housing, regional planning, and parks. All had a strong urban focus, and my brothers and I were motivated by his example.
Memoirs Page 49