Dual CEOs in Focus in California, Ohio Mergers
This week’s credit union merger news may have been on the delay of a Los Angeles megamerger and a three-way deal in Ohio but both had something special in common to draw industry attention: a dual CEO.
Update, March 1, 2012: Kinecta, NuVision Cancel Merger Plans
The idea of the CEO wearing two hats managing simultaneously two separately chartered CUs---with two sets of boards – figures in the now-delayed $5.1 billion merger of Kinecta FCU of Manhattan Beach and NuVision CU of Huntington Beach, both in California.
It also plays a part in the planned consolidation of three mid-size Columbus credit unions led by Powerco CU to form a $170 million CU to be rebranded later in 2012.
“I’d say Roger Ballard is one talented guy,” is how Diana Dykstra, the president/CEO of the California/Nevada Credit Union League, described the skills of the president/CEO of both Kinecta and NuVision.
Ballard was given the Kinecta job nearly two years ago to engineer one of the nation’s largest CU mergers. That consolidation is on a back burner until mid-2013 while Ballard and the Kinecta team devote their energies to clearing up the CU’s mortgage portfolio after Kinecta endured a $30.6 million loss in 2011.
And in Ohio, Michael Shafer, president/CEO of Powerco, took over management at year-end of the $60 million Western CU prior to an unusual three-CU merger with the $52 million Members First CU.
The buzz among CU managers and consultants was the prospect of more such dual CEO deals in the future with a caveat: these kinds of contracts deserve careful scrutiny.
“I suppose the question is whether this arrangement adds risk of a diminished CEO focus and/or led to the Kinecta losses,” observed Tom Glatt Jr., a credit union consultant in Wilmington, N.C.
But he added, “if the loss was an outcome of a of a defined strategy, such as working to reduce concentration risk or mitigate interest rate risk, then you can say that the CEO arrangement itself did not contribute to the loss “
Nonetheless “if that was the strategy you could certainly question decision-making and execution,” said Glatt, noting that late Apple founder Steve Jobs once ran Pixar and Apple at the same time and said in his biography that he found it very difficult.
“I imagine the same can be said for this situation, which to me suggests the boards should push a little harder to wrap up the merger sooner than later,” suggested Glatt.
Another consultant, Michael Bell, a Niles, Mich. Attorney, said the dual CEO “certainly brings a series of risks to the forefront.”
Good analysis and advance planning “can eliminate a great majority of the risks including continuity of leadership,” said Bell.
For his part, Ballard, with 18 years of CEO experience, has said he takes dual management in stride despite the complications and the job stresses. Yet, he told Credit Union Times he could not succeed without a “the advantage of seasoned, senior executive teams at both organizations.”
In fact, said Ballard, during 2011, “we increased the leadership capacity at Kinecta with the addition of a chief operating officer and a chief information officer” and so “given the expertise, strength and depth of the senior teams as well as the synergies between the two organizations, it has proved to be a very effective management structure as we go through the merger process.”