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INSIDE II - Star Quality

“I am big,” Norma Desmond insists in Sunset Boulevard. “It’s the pictures that got small.”

On Wall Street just the opposite has been taking place. The business has gotten so big that it has made the stars seem inconsequential. That’s one reason it has become fashionable of late to lament the decline in talent, as evidenced by the lack of succession planning for hastily departed chief executives at Merrill Lynch and Citigroup and the strained searches for replacements that followed. Merrill, of course, selected New York Stock Exchange CEO John Thain; Citi in early December named investment banking head Vikram Pandit as CEO, while designating acting CEO Sir Win Bischoff as chairman after a nearly six-week search. Bischoff succeeds Robert Rubin, who served as interim chairman and headed the search committee.

In reality, the talent is there; if anything, there is more talent than ever in the business, and it is not all going into the exceptionally lucrative realms of hedge funds and private equity. What has changed is the nature of finance today: Wall Street is simply more complex, more far-reaching in its needs and more demanding of its executives. At a minimum they must have a truly global perspective, a confident grasp of risk management, an understanding of client needs and a deft managerial touch that enables them to fashion a culture and motivate employees in far-flung corners of the world.

That’s for starters, and it’s a far cry from 25 years ago, when most of today’s senior managers were embarking on their careers. Then Wall Street was still largely a cottage industry, serving the needs of much bigger corporate entities, and operating often under the thumb of old-fashioned partnerships like those at Morgan Stanley and Goldman Sachs. Today these firms are globe-­straddling, publicly held giants that like to cling to old ways, with senior executives often referring to each other as “partners.” It’s a pleasant affectation that underscores, presumably, the need for managers to think of the collective good above all and confirms on users membership in an elite club.

What’s less certain, as these firms expanded into new product lines and geographies, is whether they invested enough time and money in training their best and brightest to manage across a variety of disciplines, rather than rewarding today’s profit producers. Wall Street is cyclical: Today’s securitized bonanza is tomorrow’s subprime bust. It comes as no surprise that two executives who stand out in the current mess, Jamie Dimon of JPMorgan Chase, and Thain, bring broad experience to their jobs. Dimon helped Sandy Weill engineer the series of deals that built today’s Citi but left to run Bank One Corp., a commercial bank, after a falling out. Thain began as a banker, ran Goldman’s mortgage desk, became CFO, then co-president before leaving for the NYSE. Their résumés underscore a crucial element of star quality: the ability to master changing circumstances.

After all, what really hurt Norma Desmond was the introduction of sound.