Markets can be fickle and heartless. In June last year, Fortis’ now-former CEO Jean-Paul Votron won overwhelming shareholder approval for the bank’s role in the landmark three-bank bid for ABN AMRO and the plan to raise €13bn ($20.6bn) to finance its part of the deal.
By May 26 this year, that goodwill had evaporated. Shareholders revolted over a further round of capital raising, and the decision to cancel the interim cash dividend and to pay the full year dividend in shares. By this time, shareholders argued that too high a price had been paid – in every sense – for the ABN deal.
When Mr Votron resigned on June 11 – forced to do so by the vitriol heaped upon him by shareholders in the Belgium and Dutch press – Fortis shares immediately rose by more than 2%.
At best, the shareholders’ response seems shortsighted. Mr Votron has played a key role in the transformation of Fortis, begun by his predecessor, from a little-known parochial bank into a global player.
The shareholders want to have their cake and eat it too. They have been only too happy with the growth and profitability that Fortis had yielded up until the credit crisis hit – yet are unwilling to offer him any leeway when the bank’s current performance is at least partly determined by a transatlantic banking crisis. Would another CEO have led the bank any differently or any better?
Yes, senior managers must take responsibility for their mistakes – but they should not be pilloried for problems that are not of their making.
The challenges being faced by banks go beyond the losses and write-downs related to subprime (Fortis’ total losses, at $6.6bn, are trifling compared to the majority of its competitors) and they are not the result of acquisitions – good or ill-advised. Barclays, which lost the battle for ABN, and which has also seen relatively few write-downs, has seen its shares pummelled to much the same degree as Fortis.
Bad timing
Moreover, now is not the time to oust a CEO who has – even in shareholders’ short memories – been a very successful manager. The bank has yet to finish its complex integration and the industry must navigate very difficult waters for the foreseeable future.
Can shareholders be sure that they haven’t thrown the baby out with the bath water?
