Looking for a Few Good C.E.O.'s

Are C.E.O.'s, an endangered species?

Citigroup and Merrill Lynch should be relieved to know that they are not the only ones that have been dogged by leadership issues. A new study contends that when it comes to high-level executives' concerns about the future, finding their own replacements tops the list of challenges.

According to the Society for Human Resource Management Foundation, a professional association for the human resources field, three out of four c-suite executives cited "succession planning" as their most significant challenge for the future.

Seven out of 10 respondents said the next most pressing problems were "providing leaders with the skills they need to be successful" and "recruiting and selecting talented employees."

Succession issues were in the spotlight this fall after the departures of Stan O'Neal from Merrill Lynch and Charles Prince from Citigroup just days apart prompted frenzied hunts for their replacements.

A major part of the problem for the two banks was that neither had a deputy that had been groomed for the position, nor other obvious, qualified replacements.

Merrill ultimately found its solution outside the organization in John Thain, the former Goldman Sachs executive and president of the New York Stock Exchange. Citigroup promoted Vikram Pandit, who although a Citi insider, had been at the bank only half a year. He was considered by some to be a risky choice in part because of his relatively short tenure at the bank.

So how can it be that two such large, prominent companies ended up in such a scramble for new leadership? Where are all the top executives going?

Most likely, the would-be chiefs are wheeling and dealing on Wall Street rather than climbing the ranks in corporate America.

There's been a lot of talk recently about the "brain drain" from bulge bracket banks to private equity and hedge funds, but the real shift began long before that. Ever since the 1980s, the promise of big money on Wall Street has siphoned off a good chunk of the young business school graduates who might otherwise start down the management path within companies.

Twenty years later, those men and women are poised to join the senior ranks, but it's not as easy as just yanking private equity principals, managing directors, or hedge fund managers into c-suit positions.

While Wall Street's leading lights may have built valuable expertise in deal making, valuation, sales, and trading, many have had almost no opportunity to develop management skills required of a corporate leader.

So those managers who are at the top of Wall Street are very valuable indeed.

How valuable? Consider Lloyd Blankfein, the chief executive of Goldman Sachs, who is expected to get a 30 percent increase in compensation, to $70 million, according to the Financial Times. Of course, Goldman has done very well at a time when other firms have been hammered by the credit crisis.

Lehman Brothers has largely weathered the subprime storm. The firm is awarding its chief executive, Richard Fuld, more than 550,000 restricted stock units, or more than $30 million worth, and more than 97,000 performance-based restricted stock units.

Not bad for a survivor.

Liz Gunnision