Friction between the chairman and chief financial officer of Zurich Insurance Group AG escalated during the summer as the two argued over how to explain the company's disappointing progress toward meeting certain business targets, said officials familiar with the situation.
The sometimes-heated exchanges between Josef Ackermann and CFO Pierre Wauthier didn't strike Zurich officials as problematic at the time. Then, Wauthier committed suicide at his lakeside home outside Zurich, Switzerland on August 25.
Tim Herron, a governance consultant with Boardroom Metrics in Toronto, told InsuranceBusiness.ca that – from a human resources standpoint – there must be an understanding from the chair or lead director as to what the capabilities are in a particular boardroom.
“Both from a board standpoint and from a management standpoint, there needs to be some understanding of the capabilities in the room,” says Herron. “Today, that’s why you have diversity; diversity of thought and skillset. They sound great, but it is a little like putting together a hockey team. You need to know who works well together, and who plays to those strengths.”
(See related feature: How do you tell clients their broker committed suicide?)
He left a typed note blaming Ackermann for creating an unbearable, pressure-cooker working environment, and for treating colleagues disrespectfully – according to people familiar with the note – which still hasn't been released to the public. (continued.)
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Ackermann, a hard-nosed former investment banker who became Zurich's chairman after a long career as the chief executive of Deutsche Bank AG, resigned almost immediately following Wauthier’s death.
Clearly distraught, Ackermann told stunned board members that his position as chairman had become untenable, according to people familiar with the events. Then he insisted on releasing a public statement that said some people held him responsible for Wauthier's death — an allegation he rejected.
Despite the suicide note, Wauthier's broader state of mind is still uncertain. According to company officials, neither the directors nor other employees had detected warning signs about Wauthier.
Zurich said it was launching a review into cultural issues in the aftermath of the suicide. Among other things, that review will examine whether employees in Zurich's finance department were subjected to excessive pressure from higher-ups, according to a person familiar with the process.
Although we may never know the true cause of the suicide, says Herron, it does appear that Zurich did follow the proper steps in the aftermath of Wauthier’s death. (continued.)
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“It was the reputation that you have to uphold as a corporation, and that is why Ackermann stepped down,” he says. “There would have been damage to Zurich on a global basis on brand – his resignation was done more for the brand – and judging by how the share price was mostly unaffected by these tragic events, his and the board’s duties to the shareholder were fulfilled.”
It can be a difficult balancing act, and there is the sadness of losing a colleague, says Herron – but in the end you are operating a business, and the show must go on.
“There needs to be empathy shown, but again, there is a business that needs to continue on,” says Herron. “You need to separate it off and make sure the business will go on. We can always remember the person in whatever way – but your business is paramount and you want to make sure you are acting in your fiduciary responsibility role.”
Upon joining the board, Ackermann tried to shake up the culture at Zurich. Although a nonexecutive chairman, he took an active role, as Zurich was struggling with a tough macroeconomic environment. Just some of the issues included a sagging return on equity and competitors poaching top employees.
Prior to Ackermann, Zurich had a tradition of quiet, polite internal meetings. However, as chairman, Ackermann would drill executives with tough questions, according to former colleagues; but his conduct was generally perceived as tough but professional. (continued.)
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In board meetings, some directors were taken aback when he criticized executives, including Wauthier, the Wall Street Journal learned from a person familiar with the board.
Having joined Zurich in 1996, Wauthier was known by colleagues as mild-mannered and quiet – holding a variety of roles at the company, including a stint in Southern California where he enjoyed surfing the Pacific. After becoming CFO in 2011, Wauthier sometimes found himself on the receiving end of Ackermann's frustrations with the company's financial performance, former colleagues say.
Before Zurich reported its midyear results in August, there was an internal debate over how to update investors about the progress toward hitting three-year business targets that it had set back in 2010. Ackermann argued that the company should publicly declare its dissatisfaction with its lack of progress, according to people familiar with the debate.
Wauthier disagreed, arguing that Zurich should emphasize that it was moving in the right direction. According to a person who witnessed the debate between the two men and others, it was intense.
On August 15, the company said that while certain units were on track to hit their three-year targets, others “remain more challenging,” and Zurich's shares fell 1.6 per cent.
About 10 days later, Wauthier – alone in his home on the shores of Lake Zug, Switzerland – typed out a suicide note in English and took his own life. His wife and son were in the U.S., and his daughter was in the U.K. (continued.)
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No one can predict a suicide, says Herron, who has seen the business world try and make sense of what happened at Zurich.
“He (Wauthier) came out of a very pedigree background, he had the knowledge – but he was never a CFO,” he says. “He was more of an IR (Investor Relations) person. There are pressures that you are unable to bear, and that is possibly… well,” as even Herron struggles to understand Wauthier’s suicide. “I’m not going to surmise what happened to the gentleman.”
The day after police discovered Wauthier’s body, Ackermann convened a meeting of Zurich's board of directors to discuss the situation. A group of Switzerland-based directors gathered in a conference room, as others dialed in from around the world. Ackermann read aloud excerpts of Wauthier's suicide note.
The note repeatedly criticized Ackermann for his harsh management style and blamed him for heaping pressure on Zurich's finance department, according to people familiar with the note and the meeting.
According to one person at the meeting, Ackermann sounded deeply wounded as he read it.
Board members stressed the importance of remaining unified amid the tragedy, as some directors tried to reach Ackermann to express sympathy, urging him not to blame himself. Ackermann didn't return their calls.
On the Wednesday – the day following the meeting and only two days after learning of Wauthier’s suicide – Ackermann announced his decision to resign immediately.
