Investor Focus Induces Management Restructuring In Credit Suisse

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Mar 12, 2015

Credit Suisse (CS, Financial) has announced its plans to replace the current CEO, Brady Dougan with Tidjane Thiam, the current chief executive of U.K. insurer Prudential Financial Inc. (PRU, Financial). Brady Dougan has been loyal to the global financial service company for a period of 25 years, eight of those as a CEO. Tidjane Thiam will take over the reigns of the post of CEO mid-2015, IE June 2015. Both the companies confirmed the announcements earlier this week. The main reason for the replacement is to steer the company away from U.S. penalties and the ever-increasing regulatory scrutiny. Though Dougan did a fabulous job by leading the company through the crisis, a series of legal and regulatory issues did crop up.

Restructuring drive

Dougan has been facing tremendous pressure to step down from his role as a CEO ever since the company reached a $2.5 billion negotiation with U.S. authorities. It was said that Credit Suisse helped the locals evade taxes through the means of secret bank accounts. Not only this, but the issue of the lender’s objectives and capital still surfaced. Dougan said it is in the company's and his best interest that he is leaving the company for good. He said that he had high respect for Tidjane Thiam, his replacement. Urs Rohner, chairman of Credit Suisse, was confident that, with the help of the new strong and distinguished leader, Tidjane Thiam, Credit Suisse will have a better holding in the global financial services industry. The main basis for appointing the former Ivory Coast government minister was his experience in wealth and asset management. Thiam also has the skill of developing new markets and that proved to be an added advantage for his appointment, Rohner said.

During Dougan's tenure, he was criticized for not speaking German at the annual shareholders meeting. His fat paychecks also garnered criticism. The bank has missed many targets under his leadership and continued to provide a 15% return on equity. Competitors said that such high returns were not possible given the financial condition post the great crisis. The financial company made an income of CHF 901 M before taxes in the fourth quarter 2014. Net revenue was reported to be CHF 6,376 M. The net income attributable to shareholders for 2014 was CHF 1,875 M.

Advantage Tidjane

The chairman of Prudential, Paul Manduca, was also all praise for Tidjane. He said that Tidjane was an "exceptional" leader. His main focus was on the markets of Asia that ultimately led the company to high growth. Manduca said the company is coming to terms with his departure, but it would have to respect the decision that Thiam has taken. He will take on the challenge as a CEO of Credit Suisse, and Prudential wishes him success, he said. He also added that Mr. Thiam was “one of the most exceptional leaders in Prudential’s long and illustrious history.” Mike Wells, head of the company's U.S. business will now step into Mr. Thiam's shoes. Though the company did not make any official statement about its new CEO, it said that it has a candidate in mind.

What’s in it for Investors?

Now that the management has changed, Credit Suisse's income is expected to rise. The change in CEO affects stock prices to a great extent. When Tidjane joined Prudential, the share value increased around 150%. Investors surely have a reason to celebrate the coming of Thiam Tidjane into Credit Suisse. The experience, tenure and philosophy can of Tidjane can boost investors confidence and create a productive and well-functioning company. Mr. Thiam will now be Credit Suisse's second African-American CEO after Stanley O’Neal. This role as a CEO will bring about a cultural revolution for the bank.