MBNA directors failed to direct Cawley

March 17, 2004|By JAY HANCOCK

CHARLIE Cawley was schooled by Benedictine monks imbued with humility, but he did not absorb the trait.

Why would he? His achievements might have turned St. Benedict himself into a blowhard, and Cawley was no St. Benedict.

From scratch, Cawley built a financial company that earned $2.3 billion last year and is worth $34 billion on the stock market. He invented the idea of decorating credit cards with logos of universities and associations, thus getting the organizations to do much of the hard work of peddling the plastic.

He correctly pegged Maryland legislators as "some of the dumbest people I have ever known." Almost single-handedly he revived downtown Wilmington, Del., by moving MBNA Corp.'s headquarters there (it had originally been in Maryland) and expanding into building after building.

He grew his personal net worth into the nine-figure neighborhood. He spread around millions in corporate and personal charity.

He brought 10,000 MBNA jobs to Delaware, 4,000 to the hinterlands of Maine and more than 1,000 to Baltimore County.

And he did it without the usual wheedling for special tax breaks.

This is not widely known, but perhaps alone among corporate chieftains Cawley detested the government-financed "incentives" that are routinely sought when companies open new locations. He paid generally sticker price on taxes, and he believed in giving back to communities.

But he wore his accomplishments like a purple toga, which ultimately led to his premature retirement as MBNA's chief executive in December. Last week The New York Times, quoting unidentified MBNA directors and executives, reported that Cawley was pushed out after clashing with his board over executive pay and his personal use of planes and other company assets.

Among other questionable actions, the paper said, Cawley used a corporate plane last year to take friends and relatives to Europe and reimbursed MBNA for only a fraction of the cost and used MBNA funds to build a multimillion-dollar collection of paintings, which were sometimes displayed in his home.

There were also internal allegations about improper billing for work on the homes of MBNA executives, but the company said it checked out the claims and found no wrongdoing.

MBNA does not dispute the Times' account.

"The story speaks for itself," says company spokesman James Donahue. "The story makes certain points and our reaction as a company to those points was incorporated in the story."

Cawley hated journalists and generally responded to criticism the way fires respond to gasoline.

He once nearly kicked a reporter for The Sun out of his offices for asking a softball question about whether MBNA could keep up its phenomenal growth.

He banned skeptical analysts from company conferences and counted on lavish political contributions and numerous political friendships, from Republican George H.W. Bush, the current president's father, to Baltimore County Democratic Congressman C.A. Dutch Ruppersberger, to help keep MBNA right with regulators.

Ruppersberger, who got to know Cawley decades ago when MBNA was owned by the parent of Baltimore-based Maryland National Bank, is one of dozens of MBNA-Baltimore connections.

Cawley started MBNA in the early 1980s as an affiliate of Maryland National parent MNC Financial and moved it to Delaware after Maryland's legislature refused to lift credit-card interest limits at a time when the prime rate was in the high teens. MNC, later absorbed into Bank of America, spun MBNA into a separate company in the early 1990s, and Cawley and MNC boss Alfred Lerner went to run it.

Bruce L. Hammonds, who has replaced Cawley as MBNA's boss, went to the University of Baltimore and was with the company early on. So was John R. Cochran III, who replaced Hammonds as head of MBNA America Bank and went to Loyola College.

Baltimore was the scene of a critical MBNA board meeting a year ago, according to the Times, at which directors, worried about growing negative perceptions of imperial CEOs and obscene pay, first balked at Cawley's lavish plans to pay himself and his lieutenants.

Cawley made $45 million in 2003 and more than $100 million in the two years before that.

Now the post-Cawley era is here, as signaled by MBNA's recent announcement that compensation for its top-dozen executives would be 44 percent lower this year than in 2002. MBNA is selling Cawley-inspired planes, yachts and paintings.

It is the job of CEOs to display hubris, guts and moxie. But it is the job of directors to control those attributes and channel them in productive directions. MBNA's board should have stepped in long ago. They would have been doing a favor for shareholders - and Cawley, too.

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