Morningstar has named Warren Buffett CEO of the Year for the long run performance of Berkshire Hathaway. A runner up to the award was John Allison, CEO of BB&T Bank [HT: Division of Labour]. Allison was inspired by novelist and ardent advocate of laissez-faire capitalism, Ayn Rand, and runs his bank according to Rand’s philosophy of Objectivism. The culture that Allison fostered led BB&T to reject much of the high-risk behaviour that other banks were lured into that is responsible for the current financial mess. Here is what Morningstar had to say about Allison:
It may seem odd to nominate a bank CEO after all the trouble that imprudent lending has caused to our financial system, but John Allison, BB&T’s retiring CEO, is a worthy candidate. During his tenure, he has used the combination of conservative underwriting with timely expansion to create a Southeast banking giant. With an intense focus on culture, Allison’s personality and ethics are ingrained throughout the organization.
Allison’s conservatism shined strongly in the past year’s dismal banking environment. While BB&T has not been immune to the problems, its strong capital position and underwriting standards have helped tremendously. In the first nine months of 2008, earnings declined only 9% from the same period in 2007, and in a landscape of dividend cuts, Allison actually increased BB&T’s dividend slightly.
BB&T could post these kind of results because losses at its peers were 50% higher than BB&T’s. The bank’s resilience has largely come from Allison’s ability to portray BB&T as a safe haven for its customers, helping the bank to soak up deposits and profitable small and mid-sized business clients from its troubled peers at a rapid rate, as well as Allison’s long-term efforts to enter the insurance brokerage business, which now accounts for 14.5% of total revenues. Most important of all, Allison’s focus on the company’s culture and his close relationship with his fellow managers have assured us that even though he will retire at the end of the year, BB&T’s conservatism will remain its backbone and, we believe, will help reward shareholders for years to come.
Allison shared his thoughts on strategy, profits, and self-interest in a 2007 EconTalk interview with Russ Roberts.
