Character still counts in the financial services industry.
Don’t believe me? Just compare the way Wall Street treated the recent travails of Knight Capital Group Inc. and its well-respected CEO Thomas Joyce to the way it watched, abetted, and even enjoyed the slow, brutal demise of Bear Stearns and its CEO, Jimmy Cayne, and Lehman Brothers and its CEO, Dick Fuld.
Knight, only a few days after incurring a self-inflicted $440 million technology-induced loss, not only was able to arrange an interim financing lifeline but a permanent equity infusion from six firms: Blackstone Group LP, TD Ameritrade, Jefferies Group, Stifel Financial Corp., Stephens and Getco LLC (a direct competitor). In what was in some ways an embarrassment of riches, Knight was reported to have received more than 90 offers of assistance and its Board of Directors turned down what might have been an even more attractive last minute offer from Citadel LLC.
“Wall Street came to the aid of one of its own,” wrote the Wall Street Journal, quoting one industry participant as saying, “A world without Knight is a worse world.”
Now contrast the Knight Capital narrative with the sagas of Bear Stearns and Lehman Brothers at the onset of the 2008 financial crisis. That’s when JP Morgan initially offered a mere $2 per share for Bear Stearns stock that had been trading at over $70 earlier in the year. The entire financial services industry, its regulators and the US government let Lehman Brothers go bankrupt. Ask yourself, did the outcomes have anything to do with the character and the reputation of the CEOs involved: the trustworthy Joyce vs. the infamous Cayne and Fuld?
Most certainly they did.
I have served on the Board of the Securities Industry and Financial Markets Association (SIFMA) for several years with Tom Joyce and I can tell you that he is a standup guy who is admired, respected, and trusted by his peers. I didn’t talk to Joyce during his week of crisis, but I respected the refreshing forthrightness with which he accepted responsibility and accountability for the trading glitch that brought Knight to its knees. “We made an error and we paid the price,” Joyce said in an August 6th interview with CNBC. I was impressed with his ability to leverage his industry relationships to quickly arrange temporary and permanent financing for his wounded firm and the decisiveness he showed in choosing dilutive terms for the sake of survival.
And most of all, I admired the way Joyce talked throughout the crisis about moving forward, rather than about what had happened. “The actions we have taken and will take in the future will determine whether people will have a high or low opinion of me,” Joyce said.
Tom Joyce is a man of character. That’s why the financial services industry went out of its way to save Knight Capital.
Contrast Joyce with Bear Stearns CEO Jimmy Cayne…the guy who played in golf and bridge tournaments while his firm was imploding and who, a decade earlier wouldn’t back the Fed when it called on the big securities firms to bail out Long-Term Capital Management to preserve the safety and stability of the financial markets.
Or consider Dick Fuld, who was described as “belligerent and unrepentant” by Portfolio Magazine in an article that ranked him number one on their Worst American CEOs of All Time list. And a well-documented company video reveals his loathing for competitors, snarling that he wanted to “rip out their heart and eat it before they die.”
Any wonder why no one reached out to save Bear Stearns or Lehman the way they did to save Knight Capital?
Knight Capital’s story shows character still matters on Wall Street. That is a good sign; a healthy sign; a starting point from which we can begin to repair the financial services industry.
Originally published at Forbes.