In the two months since he ascended to the chief executives office at FleetBoston Financial Corp., Charles K. Gifford has had to deal with turmoil in Latin America, a battered customer service image at home, and a loss of credibility on Wall Street.
Increasingly, Mr. Gifford has been leaning heavily on Eugene McQuade, the chief financial officer, and H. Jay Sarles, the head of corporate banking, to help him navigate those problems. Company insiders said those two executives appear to be the most likely candidates to become his second-in-command.
Indeed, some observers said the designation of one or the other could come before yearend, when Mr. Gifford, 59, is to assume the chairmans title.
The issue of succession is one that Fleet did not have to deal with in recent years, because Terrence Murray had agreed to hand over the reins to Mr. Gifford this year as part of the merger of Fleet Financial Group and BankBoston Corp.
Establishing a top management team that can win back credibility on Wall Street may be one of Mr. Giffords most important tasks, analysts said. Mr. Gifford took over just as Fleet was announcing a loss for the fourth quarter and dismal yearend results, the result of the companys exposure to Argentina, lingering credit quality problems, venture capital losses, and the drought in capital markets activities.
Adding to the pressure was the embarrassment of having to postpone the earnings report from the middle of January to the end as Fleet scrambled to assess its losses from the Argentine currency devaluation.
Though he does not necessarily need to appoint a president and chief operating officer, Mr. Gifford may choose to name someone to that post to make the succession clearer to investors. Some have complained that his laid-back personal style makes him seem detached from day-to-day business concerns.
A spokesman declined to comment.
In any event, investors seem impatient for signs of change at the Boston banking company. Fleet has been accused of having done too many mergers too quickly and overconcentrating its business mix in volatile market-related activities, and analysts say it is now time to retrench. They need to develop a culture of execution, said Richard Bove, an analyst at Hoefer & Arnett. Investors want managers who have a new vision.
Mr. McQuade and Mr. Sarles are part of a small coterie of top executives Mr. Gifford put in place last fall before taking over as CEO. His moves then included the removal of Mr. Giffords former No 2. at BankBoston, Henrique de Campos Meirelles, as head of corporate banking in favor of Mr. Sarles, a long-time merger-and-acquisition strategist for Fleet who had a hand in much of the companys expansion over the last decade.
Two other executives are seen as up-and-comers in the new management structure: Brad Warner, the head of Fleets retail operations, and Brian Moynihan, the head of investment services. And Anne Finucane, the head of marketing and communications, is seen as having a prominent role in improving customer relations, a pet project of Mr. Giffords.
Still, observers inside and outside the bank agree that power has been concentrated at the top among Mr. Gifford, Mr. McQuade, and Mr. Sarles.
Mr. McQuade, analysts said, is well-liked on Wall Street and has managed to maintain that good will even amid criticism of the company. Last fall he was given additional responsibility when foreign exchange and private equity units were told to report to him. Still, Mr. McQuade is primarily seen as a numbers person lacking the experience of running a major operating unit.
Mr. Sarles has been more behind-the-scenes but has been given the important task of identifying which businesses will stay, be fixed, or go. He is a long-time associate of Mr. Murrays and was involved in a previous horse race for the presidents title in 1997, at the old Fleet, losing out to Robert J. Higgins. Last fall, Mr. Gifford put Mr. Sarles, who had been overseeing Robertson Stephens, in charge of all U.S. corporate banking. Analysts said Mr. Sarles strength is in turning around unprofitable businesses.
Both executives are viewed favorably. They have a depth of knowledge and understanding, said Gerard Cassidy, an analyst at RBC Capital Markets.
Other executives who might once have been considered contenders have faded in power inside the company or left altogether. Mr. Meirelles, the former president of BankBoston, has been dispatched to Latin America to help stabilize the banks business there before a final decision is made about whether to keep that business or sell it. Mr. Meirelles star had been fading since the Fleet merger. Observers said his more patrician style clashed with the roll-up-the-shirtsleeves mentality of Fleet executives, many of whom grabbed the top spots at the combined company.
Mr. Higgins announced in October that he was going to quit the company to pursue other interests. Shortly after, he was diagnosed with cancer. A spokesman said Mr. Higgins is well following surgery.
