MBA's in crisis- who makes the grade?

At many top business schools, students toil under heavy expectations of success. They are constantly reminded of distinguished alums who head companies and government organizations. They are told that upon graduation they are expected to become "leaders" that others will look to for direction. This aspiration is admirable, if maybe a little self-important. It is certainly an improvement on the commonly held perception that people only go to business school so they can make obscene amounts of money.

So do business schools produce good leaders? Should one follow an MBA graduate to anywhere other than an expensive bar? True leadership usually emerges in a crisis. In today's economic crisis, how are MBAs performing?

To answer that question, The editorial staff of the Review did a survey of the companies and organizations that are involved or have been heavily affected by the credit crisis. It turns out there are a lot of MBAs running around. We have collected a sample of MBA leaders and evaluated their performance, assigning them a grade on an A-F scale. Staff members had differing views on how people had performed, so the scores were averaged to provide a composite grade. The only criteria for selection were that they held an MBA and were in a leadership position of a company/organization directly involved in the financial crisis.

Please note that these grades are not intended as a critique of specific business schools, nor are they meant to pass judgement on the motives or character of the individuals evaluated. Rather, they are intended to provide a sample analysis of how MBA graduates have performed as leaders during this crisis. As any shrewd investor knows, past performance is not necessarily indicative of future results, and these grades should be treated accordingly.

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A
John Paulson, President, Paulson & Co.
MBA- Harvard Business School

Image: Reuters

This NY-based hedge fund manager shares a surname but no familial relationship with Treasury Secretary Henry Paulson. The Paulson in question predicted the subprime collapse back in 2006 and bet his money accordingly. This year he has posted 20% returns while the hedge fund industry as a whole slipped by the same amount, earning him the moniker the "King of Subprime."

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A
John Stumpf, CEO Wells Fargo
MBA- University of Minnesota
Image: Reuters

While other banks foundered in the subprime waters, Stumpf steered his bank clear of mortgage backed securities. In October, he used Wells Fargo's strong balance sheet to snatch Wachovia from right under Citibank's nose

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A

Robert Diamond, CEO Barclays Plc

MBA- University of Connecticut
Image: Getty

In September, Diamond completed a stunning $1.35B raid of the bankrupt Lehman Brothers, grabbing most of its core assets including its Manhattan headquarters. In an effort to be humane to former Lehman employees he has delayed rounds of expected layoffs until 2009. While the U.K-based Barclays hasn't been immune to losses from subprime exposure, they have been able to survive thus far without taking government capital.
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A
Jamie Dimon, CEO JP Morgan Chase & Co.
MBA- Harvard Business School

Image: Reuters

Jamie Dimon could be aptly described as the Charles Darwin of the financial sector. A serial acquirer, Dimon has used the crisis to snap up both Bear Stearns and Washington Mutual. If and when crisis finally subsides, JP Morgan will have scampered its way to the top of the financial sector food chain.

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B+

John Thain, CEO Merril Lynch
MBA- Harvard Business School
Image: Getty

It is perhaps a sign of the times that a CEO who presides over a 75% drop in a company's stock should receive a passing grade. But Thain's singleminded determination to avoid bankruptcy helped save a storied Wall St. firm. Meanwhile Lehman Brothers and Bear Stearns burned to the ground with their CEOs at the fiddle. Thain would have received an "A", were it not for his recent tone-deaf decision to pursue his management bonus.

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B
Henry Paulson, Treasury Secretary

MBA- Harvard Business School

Image: AFP/Getty

By the time Paulson was installed as head of the Treasury in mid-2006, the stage was already set for the crisis that has unfolded. Paulson's failure to act quickly and consistently allowed things to snowball. Yet throughout the crisis he has been the one individual in the federal government who has shown anything resembling leadership: dutifully marching to capitol hill to take abuse from a hysterical congress, pulling all-nighters then rushing over to do the Sunday morning new circuit. When January 20th rolls around, Paulson will have earned his retirement.

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C+
Jeffrey Immelt, CEO General Electric
MBA- Harvard Business School

Image: AP

Under Immelt's leadership, GE has increasingly turned to its GE Capital unit to fund the company's growth. A reliance on wholesale funding subject to consumer confidence has put GE at risk; rumblings are already being heard of a potential downgrade of GE's coveted AAA-credit rating.

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C-
Neel Kashkari, Office of Financial Stability

MBA- Wharton
Image: Ghetty

Despite his important role as manager of the largest bailout effort in American History (the $700B Troubled Assets Relief Program, or TARP), Kashkari has been virtually invisible to the public. Under his leadership the program has come under constant criticism for its lack of oversight and transparency. His office still refuses to release the names of financial services firms who have received funds from TARP. Public mistrust of how the program is being managed has poisoned the waters for the ongoing auto bailout effort.

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C-

George W. Bush, President
MBA- Harvard Business School

Image: ABC News

Presidential legacies are often defined by the economic conditions of their tenure, and MBA-in-chief George W. Bush will probably carry much of the historical blame for this recession. Already a lame duck when this crisis hit, Bush immediately outsourced leadership to Henry Paulson and Ben Bernanke- a wise decision given that his prior exhaustion of the public's trust rendered him unable to personally lead the effort. Bush's inability to lead now should not completely overshadow the efforts his administration took to prevent this crisis. In 2003 he proposed comprehensive regulations for Fannie Mae and Freddie Mac, only to see them shot down by members of Congress.

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D+
Rick Wagoner, CEO General Motors

MBA- Harvard Business School
Image: ABC News

Rick Wagoner will forever be remembered for his decision to fly to Washington D.C. in a private jet in order to ask for taxpayer bailout funds. Under his leadership, GM missed numerous opportunities to avoid its current fate, clinging to white elephants like SUV's and fuel-cell cars while the Japanese grabbed market share with desirable, fuel-efficient cars. Congress is unlikely to care that during his tenure, Wagoner implemented major changes at GM, without which the company would likely have gone bankrupt several years ago. As it stands today, any bailout package is sure to include a required exit for Mr. Wagoner.

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D+

James Lockhart, Director Federal Finance Housing Agency

MBA- Harvard Business School

Image: Getty

As head of the organization that assumed conservatorship of Fannie Mae and Freddy Mac earlier this year, Lockhart has acted decisively, offering innovative solutions like protecting tenants living in foreclosed properties. But where was that leadership over the last six years? As head of the now-defunct Office of Federal Housing Enterprise Oversight (OFHEO), Lockhart should have been sounding the alarm about the coming crisis. While special interests in Congress carry some of the blame for holding Fannie and Freddie hostage, it is the job of a regulator to call attention to abuse, and if ignored, publicly resign to bring attention to the issue.

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D-
Stan O'Neal, former CEO Merril Lynch
MBA- Harvard Business School
Image: Merril Lynch

After leading Merril Lynch into $2.24B in subprime-related losses, Stan O'Neal secured his own ouster by approaching Wachovia for a deal...without the board's approval. He walked away from the "thundering herd" with a $161M severance package. Merril Lynch proceeded to write down an additional $16.7B of subprime assets in Q4 2008. Quite a bargain, indeed.

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D-

Chris Cox, SEC Chairman

MBA- Harvard Business School

Image: The New York Times

Chairman Cox and his predecessor, fellow HBS alum William Donaldson, have done an effective job of demonstrating the complete ineffectiveness of the SEC as a regulatory agency. His belated ban on naked shortselling did not come until mid-September- the same month that he suspended the "voluntary regulation" that had clearly worked so well for the investment banks. In the last few days it has come to light that the SEC could have shut down the Bernard Madoff scheme years ago, but somehow managed to drop the ball....
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F

Kerry Killinger, former CEO Washington Mutual
MBA- University of Iowa

Image: Flickr

Few companies made bigger bets on the sub-prime mortgage market than Washington Mutual, and few leaders have failed so spectacularly as Kerry Killinger. Under his leadership, WAMU built up $16B in subprime loans on its way to becoming the 6th-largest bank in the country. A bank run in September forced the company into receivership, the largest to ever occur in the FDIC's history. JP Morgan acquired the holding company in a transaction that completely wiped out WAMU's equity holders.

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F-

Richard Fuld, former CEO of Lehman Brothers
MBA- NYU Stern
Image: Reuters

The former CEO of failed investment bank Lehman Brothers rounds out the bottom of our MBA grading chart. His utter mismanagement of one of the nation's historic firms led to a bankruptcy that could have easily been avoided. It proved to be the spark that set off the fire that soon engulfed the entire financial sector. While other bank CEOs also made bad bets in subprime, their leaders had the good sense to either sell the company, ask the government for help or that failing, get out of the way and let somebone else try. Fuld stubbornly refused to accept the reality that his firm was sinking, eventually going down with the ship and taking thousands of employees with him.