BankAmerica on Sunday named former President and Chief Executive A. W. (Tom) Clausen to head the banking firm in a drastic bid to restore stability and profitability to the floundering company.
Clausen, 63, replaces Samuel H. Armacost, 47, the man Clausen chose to succeed him 5 1/2 years ago when Clausen left the San Francisco bank to become president of the World Bank in Washington.
Also leaving is BankAmerica Chairman Leland S. Prussia, 57, who has not played a central role in bank management over the past several years. His retirement was voluntary, bank sources said. The board asked Armacost to step down.
Thomas A. Cooper, 50, president of the company's Bank of America unit, who has grown increasingly powerful in recent months as Armacost lost the support of the board of directors, was named to the additional post of president of the bank holding company, BankAmerica.
Clausen immediately confronts a $2.8-billion takeover bid from First Interstate Bancorp of Los Angeles and a crisis of confidence among the bank's shareholders, customers and employees. Knowledgeable bank officials said the appointment of Clausen almost certainly means BankAmerica will turn down the First Interstate bid.
BankAmerica, the nation's second-largest banking firm, has been in turmoil for more than a year. It has posted huge losses, lost numerous key executives and board members, eliminated its dividend, seen its stock price collapse and been the subject of persistent rumors that it was about to be rescued by federal authorities.
'Extremely Volatile' Atmosphere
Former Transamerica Chairman John R. Beckett, chairman of the BankAmerica board's executive committee, was instrumental in Armacost's departure and Clausen's return. He said in a statement issued Sunday afternoon that "given the extremely volatile external atmosphere currently surrounding the bank, and the uncertainties and concerns present in a number of the bank's principal constituencies, the board concluded a change in top management was necessary."
The Sunday special meeting of the board lasted an hour. It was opened by Armacost, who tendered his resignation and then turned the meeting over to Beckett. Clausen was present and the management change was the only matter discussed, sources said.
Clausen, Beckett said, "will bring the authoritative and calming management direction that is necessary to the bank's success." And in a signal that the board intends to take a more active role in overseeing the company, Beckett added that Clausen "with the active advice and consent of the board" is charged with returning the company to profitability and restoring the common stock dividend, which was suspended in January after the bank announced a $337-million loss for 1985.
The bank has posted net losses of $577 million so far this year and appears likely to announce next week that it lost money in the quarter ended Sept. 30.
Ran Bank in Glory Days
It is not clear how long the board expects Clausen, who will be 65 in less than 18 months, to stay in the job. The bank has no mandatory retirement age, but it is traditional for employees to leave at age 65.
Clausen ran BankAmerica from 1970 to 1981, its glory days when the bank was the nation's largest and most profitable. He left in 1981 to take the World Bank post, turning over the top job to his protege, Armacost.
As head of BankAmerica, Armacost proved unable to cope with the changing environment in the banking industry, which demanded massive cost reductions and modernization steps that the bank took too timidly and too late. He was also saddled with a loan portfolio heavily exposed in agriculture, commercial real estate and the Third World, all of which went sour at the same time.
In announcing his departure to employees, Armacost said: "The atmosphere of speculation and concern that has been so prevalent over the past several months was building to such a point that we agreed only a change at the top could dispel it. . . . I want you to know I am very proud of what we achieved together. I only regret that time ran out before we had a chance to finish the job."
Until word of his likely return leaked out late last week, the appointment of Clausen was a surprise to nearly everyone inside and outside the bank. But it is said that the board of directors did not seriously consider any other candidates. Clausen is a longtime friend and ally of Beckett and several other board members.
Many of the bank's current top managers blame Clausen for leaving them with bloated overhead costs and billions of dollars worth of bad loans, written in the bank's headlong rush to expand into every aspect of finance and every corner of the globe in the 1970s. Clausen, who is aware of and deeply resents the criticism, said he would not dwell on the past.