John Allison joined BB&T Corp. in 1971, when he was fresh out of UNC Chapel Hill and the company was just a small farm bank in eastern North Carolina.
Now, after 19 years as chief executive, Allison has helped transform the bank into one of the country's largest, buying up 60 competitors and expanding its footprint to 11 states. He's part of the coterie that made North Carolina a banking destination.
Wednesday, he announced it's time to retire, though he'll remain as board chairman through the end of 2009. He plans to spend more time on another love: philosophy.
His retirement, effective Dec. 31, is part of a succession plan in place for years. Even so, Allison said it “comes with a lot of mixed emotions.”
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“However,” he added, “for BB&T and for me personally, this is the right time to move forward. Nearly 20 years is certainly a long time for anyone to serve as CEO.”
Allison, who turned 60 two weeks ago, will be replaced by his right-hand man, chief operating officer Kelly King. Both are company lifers with deep ties to North Carolina.
Allison, a Charlotte native, is fond of philosophy – he quotes Aristotle and gives senior managers a copy of Ayn Rand's free-market manifesto, “Atlas Shrugged.”
He's skeptical of big government: In 2006, his bank made headlines when it said it would not lend money for commercial projects on private land seized by eminent domain. The government, Allison said, shouldn't have such vast control over individuals' property rights.
His bank is faring better than most peers. Though earnings are down slightly over the year, Allison has steered clear of subprime mortgages and the complicated financial instruments that supported them. “Esoteric” and “illogical” are how he describes CDOs, SIVs, and other investment tools now haunting many competitors.
But one potential vulnerability, the bank and analysts have said, is its exposure to residential real estate.
BB&T just increased its dividend by a penny and earned $428 million in the second quarter. Though that's down about 6 percent over the year, rival Bank of America saw earnings slide 41 percent in that same period. Wachovia lost $9.1 billion.
“In the annals of North Carolina banking, there are a few legends that stand out, like Hugh McColl and John Forlines,” said Tony Plath, a finance professor at UNC Charlotte, referring to the well-known retired CEOs, respectively, of Bank of America and Bank of Granite Corp. “You can put John Allison on that very short list. It's hard to overestimate what they did and what they built.”
A teacher of realistic philosophy
Throughout his tenure, Allison has emphasized a commitment to developing and keeping employees: Most executive managers have been with the bank since they graduated from college.
A philosophy buff, he likes to share his line of thinking with his workers: New employees are supposed to get a copy of his 30-page handbook, “The BB&T Philosophy,” on their first day of work.
In it, Allison covers standard corporate fare such as teamwork and integrity, as well as reason, justice and reality. “The existence of the law of gravity does not mean men can not create an airplane,” Allison writes, to explain reality. “However, an airplane must be created within the context of the law of gravity. At BB&T, we believe in being ‘reality grounded.'”
Under Allison's guidance, BB&T's charitable arm has funded classes at a number of schools on the moral foundations of capitalism, usually with a heavy influence on Ayn Rand. Though that's drawn some criticism on the grounds of academic integrity, Allison has said he welcomes opposing ideas in the classroom and is merely trying to promote an author who is largely ignored on most campuses.
Claude Lilly, dean of Clemson's business school and the former dean of UNCC's business school, worked with Allison to bring those classes to both of his schools. Wednesday, Lilly recalled how he cold-called the bank CEO when he became dean of UNCC's business school.
“He didn't know who I was, but I introduced myself and said I'd like to get together and discuss the banking industry and what your vision is. A lot of people would have said, ‘I don't have time,' but John was very gracious and said, ‘I'd love to meet with you.'”
Allison, who says he's a self-taught philosopher, took one philosophy class at Chapel Hill and hated it. The professor – a “true modern skeptic,” he said – attacked Aristotle.
“I said, ‘Boy, Aristotle's brighter than you are, buddy,'” Allison recalled. And that's when he got hooked on the Greek philosopher.
Allison, a married father of three, earned $4.8 million in total compensation last year, not including stock options awarded.
When he retires, he said, he plans to work with the college programs he's helped start and maybe write a few books on the real-world consequences of different financial philosophies. And he thinks he might finally have time for his model railroad now.
Allison's replacement, the 59-year-old King, said BB&T will continue in the same “strategic direction” after he takes the reins. “There is no reason to change course,” said King, a native of Raleigh and graduate of East Carolina University. “Our mission, service culture, operating strategy and values have only been reaffirmed during the current down cycle in the economy.”
Though BB&T gobbled up banks at lightning speed in the past, company officials say that pace has slowed, but might pick up next year.
Allison said he didn't have much counsel to offer his successor.
“Kelly and I have worked together 36 years,” he said, “so I guess I've given him all my advice.”