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David Rockefeller’s Fight to Save Chase Bank

Mar 20, 2017

Editor's Note: David Rockefeller, a billionaire philanthropist, died on Monday. He was 101. Rockefeller was from one of America's most famous gilded age families. But he was also a very successful businessman, running Chase Manhattan bank for more than a decade. It was near the end of that tenure, at a time when Chase was struggling, that legendary Fortune writer Carol Loomis caught up with Rockefeller. What follows is a tough, but fair, profile of a hard charging banker that not only gets to the heart of the problems at Chase, and large banks in general the late 1970s, but also to the heart of who Rockefeller was. The story, which is republished below, is from the July 1977 issue of Fortune, and was originally titled "The Three Year Deadline at 'David's Bank.'"

Here's what Loomis later had to say about the article in a piece she wrote about her time at Fortune, which was republished recently by Longform.org:

Another 1970s article, "The Three-Year Deadline at 'David's Bank' " (July 1977), gave me a tale to tell about Chase's then-CEO, David Rockefeller, who was struggling to improve the company's rotten record before his scheduled retirement in 1980. Interviewing him at Chase's downtown Manhattan offices was a bit overwhelming: Here was John D.'s grandson sitting across from me and a virtual wing of the Museum of Modern Art hanging on the wall. During my interviews, some of Chase's executives allowed that their boss, though always courteous, was indeed intimidating--just enough to keep them from speaking up about needed changes. Omitting names, I repeated those observations to Rockefeller, who found them mystifying. "Do I scare you?" he asked. And I replied, "Yes, a little." I wrote this exchange into my first draft. My longtime favorite editor, Dan Seligman, immediately told me he'd found an error in my manuscript. I may have paled. Said Dan: "I don't think you were scared at all." The story we published includes Rockefeller's "Do I scare you?" but not my answer.

David Rockefeller, more keenly perhaps than any other of John D.'s five grandsons, has always felt an obligation to perform in a way that he would describe as "appropriate"—that will bring credit to the Rockefeller name and support the proposition that the family's power is being usefully channeled. In one sense, Rockefeller has succeeded splendidly; he is a world-renowned figure, clearly this nation's leading business statesman.

Yet in another sense, Rockefeller must be judged at this point to have flunked. Chase Manhattan Corp., of which Rockefeller is chairman, and whose principal unit is so closely identified with him that it is sometimes called "David's bank," has in recent years had a totally "inappropriate" record. Its operating problems have at times been terrible, the quality of its loan portfolio exceptionally weak, and its financial performance, by just about any measurement, inferior. Chase's earnings, to take one piece of evidence, fell by 36 percent between 1974 and 1976; meanwhile, the earnings of the four other biggest bank holding companies rose, by proportions ranging between 12 percent and 31 percent. (Chase is the third largest, behind BankAmerica and Citicorp, and ahead of Manufacturers Hanover and J.P. Morgan.)

The blame for Chase's performance, moreover, has often been squarely laid on Rockefeller. He has been called an ineffectual manager and vigorously criticized for being too often on the go instead of home minding the store. The waves of bad publicity that have swept in his direction have even included the thought that he should "fire himself."

So how, if you are David Rockefeller, do you feel about this messy state of affairs? "I can't say I've enjoyed the criticism," he says wryly. "And I think that some of it has been unfair. On the other hand, I am chairman and chief executive officer of the bank, and the bank has had problems, and therefore I have to accept the responsibility for what happened. The only thing I can do is correct the problems and get the bank where it should be."

That statement, which leaves us knowing, among other things, that Rockefeller does not intend to fire himself, is delivered in the slow-paced, unflappable manner in which he always talks. But the manner in this case hides a sense of urgency. Rockefeller is sixty-two years of age and must retire as chairman in three years. If it is to be David Rockefeller who gets the bank where it should be, the job is going to have to be accomplished in pretty short order.

Well, they are talking today at Chase as if it can be accomplished—or, at the very least, as if the bank can be moved a long way in the right direction by 1980. The talk in this case is backed up by a rather extraordinary amount of change. Some is of the locking-the-barn-door variety; e.g., credit standards have been stiffened and new operating controls installed. Other changes—mainly new marketing plans—are aimed at booting the bank ahead. Indeed, you can hardly move a foot at Chase today without bumping into some new plan or other, quite possibly being nursed along by someone relatively new in his job, who may even have been hired from the outside.

There's something growing in "the culture"

The newcomers are, in themselves, the surest sign of change. Until a couple of years ago, Chase almost always drew its top three or four layers of management, line and staff alike, from the inside. The firmness of this policy tended to create an ingrown society—often described as "the Chase culture." The introduction of foreign matter into the "culture" suggests the degree to which things are being shaken up.

The point is also made by certain changes in the boss's schedule, though these do not reach to his extensive travels, which Rockefeller regards as deserving applause rather than boos. As the critics view the situation, Rockefeller is forever traipsing around seeing heads of state instead of running the bank. As Rockefeller views it, neither do these visits consume all that much time, nor are they by any means extraneous to Chase's interests. The bank has for many years been scrambling to build up its international business, and by all evidence, Rockefeller has been an extraordinary marketing force.

The heads-of-state routines—played out, for instance, with the Shah of Iran, King Faisal, Sadat—have specifically helped in getting Chase permission to extend its operations into new territory. Michael Esposito, Chase's controller, says there is one sure byproduct of Rockefeller's road shows: "He gets back and we immediately start having to fill out all sorts of forms necessary to go into a new country. It's absolutely predictable."

What shall we do this year?

It is also predictable that Rockefeller will be perpetually busy; he is a "public man" to an incredible extent, the prime mover in all sorts of major organizations. He could easily use a forty-eight-hour day to handle all the demands on his time, except that if he had a forty-eight-hour day, he probably would need a seventy-two-hour day. The facts of life about Rockefeller's time have, since his elevation to chairman in 1969, called for a division of duties not unknown to—but somewhat more exaggerated than at—other corporations: "D.R.," as he is sometimes called, is the policymaker (and watchdog over the process by which executive talent is moved along); somebody else—today Willard C. Butcher, Chase's fifty-year-old president—is the operating head. The split fits Rockefeller's interests, which are much more entrepreneurial than managerial. He is not cut out to be a "detail man," even if he had the time.

He could plainly, however, use a lot more time for such homely pursuits as thinking—and he has been thinking about that, whenever he can find the time. There are some constructive signs, most visibly in the decisions coming out of a unique yearly meeting—who else but David Rockefeller could possibly need this kind of meeting?—at which the subject and his wife gather with the guardian of his schedule, a Chase vice president named Joseph Reed, and another adviser to plot the allocation of Rockefeller's energies over the coming year. The group has been chopping away at Rockefeller's outside activities; at one memorable meeting, seven got the ax. (That still leaves him prominently involved with fifteen outside organizations.) Meanwhile, Rockefeller says, he has been focusing more sharply on how he can most efficiently use his time for the benefit of Chase. "I think it's a question of recognizing that I do have a finite remaining time at the bank."

A case of "better late than never" perhaps, though maybe not soon enough. As things come down to the wire, Rockefeller does have one rather strong—and startling—asset: the emotions among the people who work for him. "You know," says one senior Chase executive, "the guys in this bank love David Rockefeller. He's got three years. The integrity of that guy is a plus that I don't think anyone could ever quantify as we look ahead."

Some of the problems against which such sentiments are to be tested can be quantified, and they are not small. Chase has a $3.9-billion share of those loans in less-developed countries that many regard as potential trouble (see "The IMF Lays Down the Law," page 98) . And in its own hometown, it has an outsize share of the trouble already arrived (see "New York City Is Still on the Brink," page 122). At the end of 1976, though it has since been a seller, Chase owned more New York City--related securities than any other bank. Its total was $400 million, besides which (in a point relating to the domino theory) it had $300 million in obligations issued by New York State and its agencies.

A wallop from real estate

That $700-million dragon is dwarfed by another at Chase: the corporation's huge portfolio of "nonperforming" real-estate loans—obligations on which Chase is receiving no interest, or reduced rates of interest, or in satisfaction of which it is holding foreclosed property. This unlovely bundle, the product of a real-estate market that collapsed a few years back, amounted to $1.7 billion at the end of 1976. Every major bank in the country has its own personal bundle to brood over, but Chase's is the biggest of all.

Last year, counting loan-loss provisions, expenses on foreclosed property, and lost interest, the nonperforming real-estate loans dealt about a $330-million wallop to Chase's income statement—and plainly had a lot to do with the fact that pretax operating profits were only $148 million (and after-tax net income, including securities gains, only $116 million). The question now is how rapidly loan charge-offs can be reduced and how quickly Chase can recover its money and put it to work at a full rate. Given a strong economy that provides a lift to real estate, the recovery operation might be pretty well cleaned up by the time of David Rockefeller's retirement party. Given a return to the same high interest-rate levels that originally wrecked the real-estate market, the problem will clearly outlast him.

The surmounting of the real-estate problem, in any case, would be rather like the winning of a qualifying heat in a race—a necessary accomplishment, but no guarantee that the main race can be won. The main event for Chase—its overriding problem—is its return on assets, which was sliding rapidly well before real estate hit the fan. In the 1971-74 period, for example, Chase's return on its earning assets fell from .73 percent to .55 percent, and has since fallen to .33 percent; the returns of its chief competitor, Citicorp, have meanwhile held quite steadily at around .80 percent. Naturally, there is a large financial penalty attached to earning .33 percent rather than .80 percent; at Chase's 1976 level of earning assets, $35 billion, the penalty amounts to $164 million.

At one time Chase's problems could have been said to include structural flaws—most notably, a limp international operation. But Chase's overseas base has for several years now been in good, and constantly improving, shape, and in other respects the bank possesses all the essential equipment needed to make it a very profitable money-center operation (including historically strong relationships both with U.S. corporations and with banks here and overseas) . Indeed, Chase, as its executives are fond of mentioning, is fundamentally a powerful institution. President Butcher puts the case in musical terms: "The Chase is the New York Philharmonic; it is not Johnny One-Note."

The problem is that the bank has too often played as if the conductor were out to lunch. And to hear the reports of people who have left Chase, there has also been discord among the musicians. Chase is remembered by one alumnus as a very "political" place inhabited by executives singularly uninterested in teamwork. There is widespread comment also about the rigidity of that Chase "culture"—an atmosphere in which, so it is said, creativity and initiative go unnurtured.

The point would seem supported by a 1974 survey of several hundred corporate financial officers conducted by Fortune's market-research department. Asked what banks they associated with certain positive qualities, the respondents very often found reason to name Chase (though never as often as Citibank); many, for example, thought Chase displayed "expertise in its customers' industries" and "above-average international capabilities." But Chase dropped way down when it came to "imagination and innovation in banking services."

"Do I scare you?"

The Chase "culture" is also said by former employees to produce an unholy number of meetings at which executives known to hold strong opinions suppress them ("Whew ! One more day gone and I'm not in trouble"), and at which absolutely nothing gets decided. The lack of forthrightness is reported to grow more pronounced when David Rockefeller is in the crowd. That is not because of his temper; at the most, he displays a certain chilliness when displeased. But he is nevertheless an imposing figure to many in the bank, and almost certainly a man who, more than most chief executives, generates a certain amount of "fear."

That is not the way Rockefeller wants it. Asked recently about reports that he tends to terrify his subordinates and cool their ardor for speaking out, Rockefeller said he found the reports hard to understand. ("Do I scare you?" he asked.) That same day, at a management meeting for sixty people, and later in the week, at a smaller meeting, he raised the subject, making the point that the bottling up of opinions was simply not tolerable behavior in the bank.

The history of the bank suggests that there was a time not too long ago when Rockefeller himself did not have too much success in getting certain of his own opinions across. That was the period, from 1961 to 1969, in which Rockefeller and George Champion ran the bank together. Their posture to the outside world then was that they were truly coequals. On the relatively few occasions when they had a disagreement, they said, they simply got together and talked the matter out, arriving at a common viewpoint.

Today the story spins out differently. Champion, now in retirement, says he was making the decisions those days, and Rockefeller tells a tale that seems to confirm that claim. The tale involves Rockefeller's persistent efforts to get the bank to speed up and redirect its overseas expansion efforts. The redirection he wanted was more emphasis on branch banking and less on correspondent relationships with banks abroad, which had always been Chase's main thrust.

The strategy, in fact, was inherited from Equitable Trust, the Rockefeller-controlled bank that in 1930 merged with Chase National Bank, bringing with it profitable international correspondent relationships that meshed well with Chase National's domestic "wholesale" strengths and added a little panache to its small, undistinguished "foreign department." The emphasis thereafter was on not setting up branches that would compete with the correspondents. David Rockefeller, who joined Chase in 1946, always thought the emphasis was misguided. So did the First National City Bank, Citicorp's ancestor, which started in the early 1900's to build up an international branch system that eventually became extraordinarily effective. And lucrative, too; last year Citicorp's international business produced $293 million in operating profits.

"It never became a confrontation"

Upon becoming president and co-chief executive officer of Chase in 1961, Rockefeller pushed hard for branch expansion overseas—and with considerable success. Following the completion of a major study on the international market, the bank began about 1963 to move quite aggressively in Europe and South America, in some cases setting up branches, in others buying partial ownership of existing banks.

But the drive was never up to Rockefeller's ambitions, and the reason was George Champion. Says Rockefeller: "I don't want to put this in the form of confrontation, because it never became a confrontation. But basically George had been brought up in the tradition of the Chase National Bank—a tradition of a whole series of very great bankers, of which he was one himself. But his whole image was domestic." Rockefeller's image is enormously international. He appears to have endured this period with some frustration.

Relief came after 1969, when Champion retired and Rockefeller became chairman and uncontested chief executive officer. The bank embarked then on an all-out campaign of international expansion, moving into some new areas, such as Southeast Asia, and adding heft just about everywhere. Meanwhile, gratifyingly, most of its correspondent relationships with foreign banks survived very nicely; the needs of the correspondents for services seem to have overpowered any resentments they might have felt at seeing Chase invade their turf.

Chase's international business has had its setbacks in recent years. A huge part of the bank's real-estate problem is located in Puerto Rico, which is classed as "international." Chase also has major problems in Germany today with a retail operation called Familienbank, into which it plunged with rather non-Teutonic abandon. But basically, the international operations, though not up to Citicorp's speed, are a nice thing to have around: last year, despite the losses in Puerto Rico (perhaps $25 million), the international arm contributed $82 million of Chase's $105 million in operating profits.

Two is one too many floaters

As those figures suggest, the uphill march of the international operations was accompanied by a tumble here at home. A case can be made that the two trends were related, since a sizable number of highly regarded executives—Bill Butcher was one—were lifted from domestic jobs and committed to the international front. Accepting that proposition, one would have to think of the disagreements between Rockefeller and Champion as having effects that transcended the international business. The case is tenuous, however, and probably not worth arguing. What is important are the problems contributing to the slide and what they show about the workings of Chase.

One problem involved Herbert Patterson, whose three-year stint as president, from 1969 to 1972, did relatively little to advance the ball at Chase. Tall, good-looking, and conservative, Patterson, forty-three when he got the job, was everybody's choice for president—Rockefeller's, Champion's, the board's. He was looked upon as a man who could install management systems and operating controls—paraphernalia largely missing at Chase (and at many other banks as well) . But his wife died not long before he took office, and perhaps because of that, says one man familiar with the situation, he seemed in time to suffer a kind of personality change. "He was sort of floating. Eventually, it became clear he was just going through the motions."

When you have a geographic floater as chairman, you do not need a floater of any kind as president. Around the beginning of 1972, a few members of Chase's board of directors pressed views of that nature on Rockefeller. He equivocated, for reasons amplified today by one of the directors then pressing him: Richardson Dilworth, who manages the investments of the Rockefeller family, but whose candor suggests he really means it when he describes himself as an "outside" director at Chase. "David tends to think the best of people. The whole family is optimistic, which is good generally, but it can get you into trouble." Does that mean David delayed overly long in shoving Patterson out of his job (which he did in October, 1972)? "I think undoubtedly he did," says Dilworth. "But we all learn from such things and he has gotten tougher."

"We pushed too far"

There was another point at which the directors again leaned on Rockefeller, mainly because of a crisis that developed in Chase's operations department, the area in which such items as checks, letters of credit, and money transfers are processed. The crisis may be thought of as having its core in a cost-cutting drive that began in 1970, at a point when the number of people in operations had climbed to about 11,000, with too many of these bodies still doing manual work. The goal, Herb Patterson told Barry F. Sullivan, then running operations, was to get the fat out of the head count and, meanwhile, to get cracking on automation.

Sullivan, today forty-seven and a member of Chase's eight-man management committee, followed orders: by early 1973, he had cut the head count to about 8,000. Remarkably, considering that inflation was constantly jacking up wages and benefits, and that the bank's volume of business was rising very fast, Sullivan even managed in one year to achieve an absolute reduction in expenses.

The only problem, says Sullivan, was that "in some cases, we pushed too far." The repercussions were to a small extent felt in 1973: domestic corporate customers began to complain that their inquiries about the status of money transfers (in which Chase does more business than any other bank) were not being promptly handled. People were added to allay the problem. But the "glitches," as Sullivan calls them, showed up again in 1974, this time in the international area. By that time, there were also bookkeeping difficulties in the letter-of-credit area and reconciliation questions, some very aged, overhanging the accounts Chase keeps at foreign banks, and vice versa. To put that last matter in familiar terms, Chase did not have its checkbook balanced—at a time when the foreign banking system was afflicted with such disorders as the failure of the Herstatt Bank in Germany, an event that shook the banking world.

Meanwhile, in August, 1973, a four-year automation plan had been approved. The first stage was to be new I.B.M. equipment that would maintain the records on securities held for safekeeping. The work had up to then been done part manually and part on ancient Univac equipment—so ancient that repair parts were no longer being made. In a fine example of planning ahead, Sullivan's people scoured the country for parts, storing these away so that the Univac equipment could be kept running in parallel with the new equipment as the switchover was made. But in February, 1974, a zealous handyman went into the locked room where the Univac parts were kept, and seeing all that "junk" lying around, threw it away.

Minus old equipment to parallel the new, Sullivan went ahead with the switchover, in July, 1974. There was an input problem with the new system. Says Sullivan: "We had garbage in, garbage out, and a backlog of garbage." They also had visitors from the Comptroller of the Currency's office, who chose this exquisite moment to walk in and begin a regular bank examination. Every closet the examiners opened, something fell out.

Furthermore, in early October, before the examination was completed, Chase itself was forced to open a closet—to disclose the bank's discovery that its bond-trading account had been overvalued by $34 million. The bizarre details of that matter, laid out in the accompanying article on page 78, proved starkly that Chase's "controls" in this key area of its business were woefully inadequate. Folding that additional fact into their thinking, the examiners ultimately filed a report that said, among many other supercritical things about Chase, that the bank's operating problems were "horrendous."

Prior to the Comptroller's examination, the directors had begun to see internal and external auditing reports that suggested to them that top management should be giving less attention to marketing and more to operations. From that point on, with both Rockefeller and Butcher readily accepting the need to shift gears, little expense was spared in trying to bring the operating problems under control. The initial action was to "throw people" at the trouble spots, and by now the automation program is well along. The result, says William Hinchman, who succeeded Sullivan, is that there were no adverse comments on operations by any examining body last year.

Real estate used to be the "good guys"

A main conclusion to be drawn about Chase's most immediate problem—that real-estate debacle—is that it had, up to a point, a certain inevitability. Chase has traditionally been very strong in real-estate lending, and Raymond O'Keefe, who headed the department until his retirement in 1973, was the dean of the lenders. He hardly knew what it was like to have loan losses. Rockefeller remembers that for many years, when the bank's examining committee met to discuss problem loans, the real-estate department was put first on the agenda because its act was a sure bet to take the shortest time—"it had no problems and no losses."

The department began practicing to be last on the agenda in the late 1960's, when a sort of general euphoria about housing growth gripped the industry. In 1969, when the Chase set up its holding company, one of its first acquisitions was a mortgage-banking subsidiary in Puerto Rico. It was expanded to become a developer, and so was a Chicago mortgage-banking company bought a bit later. In a third major move, the bank set up a big housing-loan operation in Florida.

Meanwhile, the real-estate investment-trust industry had begun to boom, with the effect that large amounts of public money—supplemented by large amounts of bank and commercial-paper money—became available for real-estate ventures. The Chase sponsored its own REIT-Chase Manhattan Mortgage & Realty Trust, an independent company, of course, but one to which the bank was the investment adviser. Because Chase was sort of the real-estate bank, CMART—the REIT—was unusually successful in attracting capital from investors and became the biggest trust going.

With all the REIT money around and bullishness in the air, lenders—REIT's and the banks—began to compete aggressively and to loosen up on the terms of their loans. This trend accelerated in 1972, when business loan volume weakened and the banks began to think of themselves as really needing the real-estate business. Chase entertained that thought more than most, because its domestic corporate business was suffering an unusually severe sinking spell. There can be no doubt also that Chase was feeling unrelenting pressure from Citicorp, which in 1971 had told the world it meant to increase earnings by 15 percent a year (on average, it has done just that).

Chase's 1972 annual report made its strategy clear: "To help compensate for decreased [corporate] loan demand, we increased our emphasis on [other] opportunities. Domestic real estate lending provided one such opportunity." The die was cast in that year and 1973—just as the nation was about to be hit by the Arab oil embargo, soaring interest rates, and a recession.

Early in this action—near the beginning of 1974—Chase all but stopped making new real-estate loans. But commitments continued to force its real-estate loan portfolio up. In 1970, real-estate loans were about 14 percent of the domestic loan portfolio. By 1975, they were 24 percent. And on the side there was Puerto Rico—its tourist industry riddled by the recession, its unemployment rate then and now close to 20 percent.

Lombardi-style banking

The experience in real estate—the drive for growth colliding with the need to maintain credit standards—frames a main problem that Chase is facing right now. Though an argument can be made that size in banking matters very little, it matters to Chase. "We intend to be a very large, very major international bank," says Butcher. But simultaneously the bank is also aiming, in the wake of its embarrassments, to keep its credit standards very high. Butcher, who has an analogy handy for just about every purpose, says: "We are not going for Namath passes; we are going to play Vince Lombardi ball."

The difficulty of attaining both goals at once is suggested by the bank's loans to those less-developed countries, whose nature is that they typically have balance-of-payments troubles. In this area, Lombardi-style banking has meant proceeding with what Butcher describes as "caution." Chase certainly seems cautious when compared with Citicorp; at the end of 1976, it had $3.9 billion in loans outstanding in these countries (12 percent of the bank's total loans), while Citicorp had $9.2 billion (or 22 percent) . But, still, Butcher himself admits: "I've told the board this is a heads-you-win, tails-I-lose situation. Because if we're wrong and there's no problem in world balance-of-payments deficits, we'll have lost market share. And if we're right, we've still got enough of [these loans] to have a few problems."

A second obstacle to growth is the bank's capital situation, which is not at the present in shape to support a whole lot of asset expansion; that is, leverage is high (each $1 of equity is supporting about $21 in earning assets) and cannot, so the bank feels, be pushed a whole lot higher. One solution, obviously, is for Chase to raise equity capital in the public market. Right now, selling common does not look like much fun; Chase stock was recently about 40 percent below book value. But the bank has just announced a $130-million issue of preferred (to be sold to institutional investors), and that will pump up equity for a while. The only enduring solution to the capital problem, however, is faster growth in retained earnings—and that can come about only if Chase manages to raise that miserable .33 percent return on earning assets.

Planning in a "polite world"

Understanding that problem very well, Chase is attacking it today with a new emphasis on planning. The idea is to identify the markets where growth looks possible and profitable, and to get out of losers.

The chief planner today is one of those guys brought in from outside, Gerald Weiss, who came from General Electric in 1975. Weiss is a fast-talking dynamo of a man whose ideas seem to present some danger to the Chase "culture." The bank, he says, is a very "polite world" where "people sometimes talk by each other." His job, as he sees it—and he says he would feel the same way at any company—is to be an "activist" (and a devil's advocate and a lightning rod) and to force decisions, on the theory that delay will not make these any easier to come by. "There's a fine line to doing this right. If I don't get a call once a month or so telling me that someone is really upset with one of my staff, then I know we haven't come close to the line."

So far nobody has murdered Weiss, and a few hard decisions have been made. One of these, in the trust department, was to largely slide out of the "shareholder services" business—stock transfers, dividend payments, and the like—by contracting with an outside specialist, Bradford National, to take over the work. The thought was to get rid of a losing operation, while keeping the relationship with the corporate customer. Attention has now moved to the personal trust business, another corner of the trust department that is a loser (it dropped about $20 million last year before taxes) . The hope is to come up with a plan for making money. If no plan materializes, the business might just get lopped off.

In similar strenuous exercises throughout the bank, the work is being helped along by cost-accounting systems that are relatively new. In the Patterson era, effort was focused on "responsibility accounting," a system holding managers accountable only for those expenses they directly control. But a couple of years ago, a shift was begun to "profitability accounting." ("I've told Butcher," says one executive, "that this will be written on his headstone.") The system provides managers with "fully loaded" profit and loss statements—i.e., loaded in the sense, say, of including operations-department expenses that once would have been omitted. The change appears to have been a shock to many executives in the bank, who for the first time began to get a clear idea of just how well they were not doing.

Other shocks have been administered in the area called "human resources," which is headed by another ex-G.E. man, Alan Lafley, who has a large reputation in the personnel field. Commenting on the state of the art in his department when he arrived in 1974, Lafley says that all the necessary knowledge was there—it just wasn't being implemented too well. Lafley has been implementing furiously: he has revised compensation schedules to place more stress on performance, forced executives to begin really evaluating their subordinates, and started to overhaul the trainee program, which is sometimes accused of turning out robot-like bankers.

Lafley has directed the searches that have brought in the outsiders. But he says that on the whole he found the executive talent at Chase to be first-rate. The observation is supported by several outside directors who say they believe management to be in good shape these days. The great majority of Chase's executives do seem impressive. But, then, it could well be that they would have seemed impressive five years ago also—and look what happened subsequently.

Henry is in the wings

The major question in the lineup is obviously Butcher. Despite a pontificating style that has been known to drive people up the wall, he seems to be liked by the directors, appears to work exceptionally well with Rockefeller, and is given high marks by Chase executives for his accessibility and unquestioned devotion to getting Chase straightened out. On the other hand, whether he is a man who can walk the fine line between caution and growth that Chase's situation seems to call for is a tough judgment to make. As one former Chase man says, "The book has not yet been written on Butcher."

Unless what is writ begins to read very badly, Butcher looks like the heir apparent at Chase, with the successor to his job likely to be one of several executive vice presidents now on the management committee. Still, one has to remember that Henry Kissinger has recently been named a consultant to Chase and vice chairman of its international advisory committee. Could that mean Kissinger is a possibility to succeed Rockefeller as chairman?

Rockefeller finds the thought pretty amusing. "I admire Kissinger enormously—he is one of the great people of our time. But running a bank is not his cup of tea. You know, it's just, just ..." Impossible? "Well, yes. It's inconceivable to me that he would think about it for one minute."

Some people have questioned whether running a bank is David Rockefeller's cup of tea. He has his own "final days" to settle that matter once and for all.

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