Award recipients might not be most deserving of title

By DAVID MOON, Moon Capital Management, LLC
January 30, 2011

In the late 1970s, my uncle was mentioned in an issue of American Banker magazine. He was my hero, so seeing him memorialized in a magazine that began publication in 1835 merely added to his mystique.

Children are easily impressed. And apparently so are bankers.

When the magazine recently named Richard K. Davis of U.S. Bancorp as its 2010 Banker of the Year, it reminded me that this particular award has, too often, been the precursor of some not-so-award-winning performances by previous honorees.

Bank of America’s Ken Lewis won the Banker of the Year award twice: in 2002 and 2008. Lewis received the 2008 award only months before being replaced as the company’s CEO. Buying subprime lender Countrywide Financial and troubled brokerage firm Merrill Lynch were certainly sexy acquisitions, but too often the sexy decisions are the ones that come back to haunt you.

One of my favorites was Angelo Mozilo’s 2006 Lifetime Achievement award. Mozilo is best known as the CEO at subprime lender Countrywide Financial who waived mortgage fees and documentation requirements for his buddies in Washington, including (surprise) the Chairman of the Senate Banking Committee.

The 2007 American Banker Innovator of the Year award went to Elizabeth “Lee Lee” James for her cutting edge technology moves, beginning with Synovus Financial’s work with credit cards. Now that the stock is 90 percent below its 2007 peak, one wonders if those credit card innovations were so award worthy.

In 2005, Wachovia’s Ken Thompson was Banker of the Year. Three years later, the company was merged into Wells Fargo in a fire sale.

The largest bank failure in US history was Washington Mutual, in 2008. Its CEO, Kerry Killinger, is a former Banker of the Year (2001.)

This phenomenon isn’t simply a function of being in the wrong industry at the wrong time. There are thousands of bankers who didn’t feast on non-collateralized leverage, inverse floaters or drive their companies into the ground. It’s interesting that some of the most heralded bankers of the past ten years were folks who spent eight years buying yachts and two years bailing water.

Too often we equate risk-taking and grandiosity with success, even before giving the risky, grandiose plans a chance to pan out or flame out.

Six years ago Fortune magazine called Rupert Murdoch’s purchase of MySpace a “grand-slam.”

Facebook was barely a year old at the time.

Murdoch had previously been declared a genius for buying TV Guide.

Does TV Guide exist any more?

So who might be future Darling-to-Dustpan award winners? Potential candidates will always include CEOs who make huge, bold, out-of-industry acquisitions.

I’m keeping my eye on Comcast CEO Brian Roberts. Industry observers are calling him a genius for buying NBC Universal. Through its E!, Golf Channel and a couple of other channels, Comcast has already been in the programming business, but its cash cow is clearly the sale of data services: television, internet and telephone.

Let’s see how Roberts handles a business that eats cash, as opposed to one that generates it.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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