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Monday, 18 May 2009

Albert H. Gordon

I have been meaning to write a piece about a great man who died earlier this month, but which appears to have been missed by the British press who have been preoccupied with the affairs of far lesser mortals.

Albert H. Gordon, who helped rebuild Kidder Peabody after the 1929 Wall Street crash and built the firm into "a minor powerhouse on Wall Street," died on May 1 at his home in Gracie Square, Manhattan. He was 107.

Albert Gordon was born in North Scituate on July 21, 1901. His father, after working as a sheep herder in Wyoming, moved to Boston to become a successful leather merchant, supplying the British Army in World War I. He graduated cum laude from Harvard College in 1923 with distinction in economics. He ranked third in his class at Harvard Business School.

Gordon arrived on Wall Street in 1925, to take a job as a statistician with Goldman Sachs. He moved into the role of a commercial paper salesman and travelled an immense territory, on a train 12 nights out of 14, and later one of the first investment bankers to fly.

In those days, investment bankers strove for decorum. In an interview with National Public Radio in 2004 he described how the bankers of the time wore silk collars and hats. “We took ourselves seriously."

At his first job with Goldman, he won a $2 million deal from National Dairy Products, a predecessor of Kraft Foods. He was entitled to a substantial commission, but his boss took all the credit. Gordon learned an important lesson, he told Forbes in 2000, "You can't retain employees if you don't spread credit around."

In the business world, Gordon was known for his success on Wall Street. In 1931, he and a classmate took control of Kidder, Peabody & Co., an old Boston firm established in 1865 which was then on the brink of bankruptcy.

Kidder had been a respected Wall Street institution in the 1920’s. The firm had been prominent in the early financing of the American Telephone and Telegraph Co. But two years after the crash, it was broke. J.P. Morgan & Co. arranged financing that included a cash infusion from the Webster family of Stone & Webster, the engineering company. Frank Webster had led Kidder for most of the first third of the 20th century.

The reconstituted Kidder had three principals: Edward S. Webster Jr., Frank's grandson and Gordon's Harvard classmate; Chandler S. Hovey, who led a Boston investment bank, and Gordon, who, at 29, was the youngest.

They moved the firm to New York, and Gordon, who would go on to become the firm's senior partner and biggest shareholder, built up its sales and underwriting divisions. Gordon expanded across the U.S. and overseas, taking airplanes to see clients when his competitors were more comfortable on trains like the 20th Century Limited to Chicago, he says.

Gordon was the de facto head of the business, even if it was nominally run by Webster. Gordon pioneered the idea of having offices elsewhere in the U.S. and later in Europe and Japan to create a distribution network that would be both envied and emulated. He expanded the underwriting of high-grade securities and deemphasized private banking and foreign exchange. By the 1940s, Kidder rebounded as a top underwriter and prestigious investment bank.

“People wouldn't fly,'' he said. ``So there was virtually no competition.'' With the advent of jet travel, he flew to Japan with his wife ``to see if the people were friendly,'' paving the way for an expansion in Tokyo.

“We did a tremendous amount of business in Japan,'' he said. That followed expansions in Asia and Europe in the 1950s. Kidder was the first U.S investment bank to have an office in Hong Kong and in England.

Kidder bounced back. From 1960 to 1964, it ranked second among all investment banking concerns in a category of securities offering, The New York Times reported in 1965.

The firm grew from 200 employees to over 2,000 in the 1980s and became one of the world leaders in municipal financing, bond trading and public utility financing under Gordon’s chairmanship.

Gordon was chairman and a large shareholder of Kidder in 1986 when General Electric bought the business. Under G.E., Kidder floundered and ended up selling most of its assets to the competing PaineWebber Group in 1994. Hovey retired in 1952, and Webster died in 1957.

In 1960, Fortune magazine listed Gordon as one of the 10 most powerful men on Wall Street and as the financial community's most successful underwriter and salesman.

Gordon used his charm, powerful friends like Armand Hammer of Occidental Petroleum, and legendary energy to chase deals.

“He was a famous business-getter,'' said John Whitehead, former CEO of Goldman Sachs. “Work hard and never give up -- those were very valuable lessons I learned from trying to compete with him.''

Whitehead remembers vying for clients against the more experienced Gordon at St. Paul, Minnesota-based 3M Co., where Gordon's relationship was so close with CEO William McKnight that Whitehead says he focused instead on cultivating the next generation of executives. It didn't work right away, he says. When McKnight died, Whitehead says, his will stipulated that Gordon and Kidder should handle any sales of McKnight's stake in 3M.

Gordon lived to become an eminence grise of the investment community. Indeed his opinions were sought until his death because he was one of the very few living Wall Street investors who worked in the years leading up to the stock market crash of 1929.

But that is not why we remember Albert H. Gordon. Apart from his successful business career, he set a fine example as a human being.

The New York Times reported in 1989 that Mr. Gordon had imbued Kidder with "an air of positive gentility, giving employees a free hand to pursue deals." He gradually sold back ownership of the firm to its workers at discounted prices, to signal that he would not challenge the new management he had recruited. He did not want anyone to think of him as "that greedy old bastard".

When he ruled that the investment industry did not violate federal antitrust laws in 1953, Judge Harold R. Medina noted the industriousness of Kidder. He said Gordon's firm had "forged its way strictly on the merits from a minor position in 1931 to that of one of the country's leading underwriters."

Gordon was dedicated to physical fitness, which he believed explained his longevity. He took one puff of a cigarette in his life, he said, didn't salt his food, and limited his alcohol intake to a glass of champagne a year. In the 1960s and '70s, Gordon offered cash rewards to employees who quit smoking.

He began running marathons in his 80s and at his death was the oldest graduate of both Harvard College and Harvard Business School. He was twice the oldest participant in the London marathon and sometimes walked from airports to his hotel. He made cold calls to prospective clients well into his 90s. At 105, he was still working four days a week at Deltec Asset Management, a company run by his son, spun out of Kidder.

A student of health and nutrition, he correctly anticipated later neurobiological findings that mental exercise was as important as physical exercise, so he taught himself new languages, studied, and read voraciously.

Unconcerned about race, religion, gender, or even age, Gordon promoted a new meritocratic spirit in an old "blue-blood" merchant bank. "In Kidder, anybody that has an ounce of productive capacity, as measured by the bottom line, does not have to retire…. It is necessary, however, to give leadership responsibility to other people so that they can learn."

In contrast to the greed and sense of entitlement that characterize so many contemporary executives, Gordon evinced genuine frugality and concern for the bottom line. He flew exclusively in coach, and took the subway to work. Spotting a young Kidder executive in first class, he passed a note from his own coach seat: "What is the food like up there?"

He advised a traffic-delayed office visitor who complained about trouble getting a taxi in the rain, "You should have just hopped on a train—like I do—headed for Wall Street. Folks have heard of the stop!"

As a philanthropist, Gordon was generous but quiet about his donations. Gordon was a past president of the Harvard Club of New York, and his generosity to Harvard is evident in the Albert H. Gordon Track and Tennis Center there, as well as a professorship at the business school. The New York Road Runners named its library and an annual race for him. Today, one of the main roads into the Harvard Business School bears a plaque calling it “Albert H. Gordon Road'' in recognition of his advice and donations over the years.

Some said he was Harvard’s largest individual donor, and he was also a notable supporter of Winchester College in England, where he sent his sons to receive an education he no longer felt to be available in the US. Such was his generosity that the oldest school in England bestowed on him two unique honours, declaring him an honorary Old Wykehamist and later an honorary Fellow.

A bibliophile, his generosity delivered the only surviving copy of John Eliot’s 1663 “Indian Bible” to his alma mater, Roxbury Latin School, and helped to underwrite the acquisition of the manuscript of Trollope’s The Way We Live Now by the Morgan Library and Museum.

At a 2002 conference, Yale's president asked the centenarian Gordon, a long-standing Harvard donor, if he might want to give a little something to the Elis. Gordon, noting the "big to-do" made over Yale's 300th anniversary, remarked that perhaps the celebration was premature. "Now I am just one person, but I am already one-third of the way myself. Shouldn't we wait a bit to see if Yale makes it?"

He showed similar humour at the New York Stock Exchange in 2007 when he joined a CEO summit held in the august 101-year-old building, then designated a national monument. Gordon announced, "Unsure how to distinguish myself in so impressive a group, I thought I'd be the guy who didn't wear a tie."

A great man, whose likeness we rarely see.

1 comment:

albertmbankment said...

If nobody else is going to do it, I will thank you for such an eloquent obituary of a very fine man.