Krongard to try to maintain Alex. Brown Inc.'s even keel

On on one

November 04, 1991

One on One is a weekly feature offering excerpts of interviews conducted by The Evening Sunwith newsworthy business leaders. A.B. "Buzzy" Krongard is chief executive officer and vice chairman of Alex. Brown Inc., an investment banking company based in Baltimore.

Q. As the chief operating officer of Alex. Brown, you were involved in the formulation of the business strategy that resulted in a 252 percent increase in earnings during the first six months of 1991. As the new CEO, do you see any changes in that strategy, and could you briefly describe the strategy?

A.I see no immediate changes in the strategy. As far as what the strategy is, I would expect an overview would best be stated that, in light of the kind of business we're in, our thought is to do very, very well when the opportunity presents itself as the current market is doing and to run the business so that when there is less euphoria in the market place, we are still able to do reasonably well. Rig the ship so that when the wind is behind us we can sail very rapidly, and when we're in the storm, we still don't get capsized. I think that's the secret to success in our business.

Q. Your tenure at Alex. Brown spans the time when it was a privately held company and when it converted to a stock company. How would you characterize the operations under the two different systems?

A. We originally were a partnership, a partnership not only in form but in substance. A very horizontal organization, our general partners were left to pursue and would dedicate resources as they saw fit. We now, as a publicly held corporation, have a more vertical operation. We are much more closely monitored and managed and leave less things to the discretion of individual people.

Q. Has it perhaps also reduced the paternalistic nature of the company?

A. Whenever one enters the public marketplace and has a fiduciary obligation to stockholders, you must reduce the paternalistic elements involved in running businesses.

Q. What does the future hold for smaller regional firms or special niche operations in the face of the competition from national giants?

A. First of all, we see ourselves as a national specialty firm and we compete with the giants and as long as we are able to chose when and where to compete, we are dedicating a hundred percent of our capabilities and resources in those areas. We feel that we will always do well because while we do not attempt to be all things to all people, in those areas upon which we focus we feel that we are the best.

Q. Are initial public offerings and also managing the assets of high net income individuals your specialties?

A. No, initial public offerings just happen to be the result, rather than a cause, of the strategy. Our first strategic objective is to make money for our clients. Our second is a fallout from that, which we have found the best way to do that, to identify growth companies in dynamic industries and become identified and associated with those companies. Bringing them public in their IPO happens to be one ramification of that strategy, but we also grow with them and we don't advocate a strategy of getting into one IPO and out of that and into the next and into the next. What we're saying is, these companies are good companies, buy them, stick with them and you'll do very, very well.

Q. What are the advantages and disadvantages of being in

Baltimore as opposed to being in the financial

hub of the country, which is New York?

A. This a bit of an overstatement, but not a gross overstatement, that if one wants to play at the highest level in the investment banking business, in the big league so to speak, then their choice is Alex. Brown or New York, and a lot of people don't like living in New York, don't want to raise children in New York and therefore Baltimore is the alternative, and Baltimore is an attractive place to live today. That's one of the advantages. One of the disadvantages is, there are a lot of people who think you have to go to New York to get whatever it is they're after getting. We have to compete against what we call the New York syndrome.

Q. Does the possibility of new powers being extended to banks, such as investment underwriting, threaten firms like your own?

A. For all intents and purposes, Glass-Steagall [a law limiting bank operations] is dead, and doesn't know it. It's like the elephant that's been bitten in the foot by the cobra. The message hasn't gotten to its brain yet. Personally, I can't wait for the end of Glass-Steagall. As long as they [government regulators] permit investment banks to compete with commercial banks as well as commercial banks to compete with investment banks, all we ask for is a level playing field.

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