One Billion Customers - James McGregor [46]
The Rising Son
Elaine La Roche, a veteran Morgan Stanley executive in New York who had been a liaison between Koenen and Morgan’s New York bosses, took over Koenen’s job and quickly won the respect of CICC employees by working to mentor and empower the best among them. After so many years as an administrator at Morgan Stanley headquarters, she also focused on building the missing management systems. When setting up the joint venture, Wadsworth and the other Morgan Stanley executives had been so focused on the deal that they had given short shrift to the procedures and schedules for building the joint venture’s corporate culture and values, overall organizational structure, risk management systems, training programs, internal controls, exit strategies, and all the other details of a normal business partnership. La Roche made up for lost time, pushing a culture of performance, merit, and integrity.
Yet no matter what La Roche did, the Chinese in CICC still considered Fang Fenglei the boss. He was increasingly bitter and dismissive of La Roche’s sophisticated management systems. In turn, he became the focus of the joint venture’s problems. After Fang took the China Telecom deal to Goldman Sachs, the Morgan Stanley side of CICC began to blame anything that went wrong on him. The dilemma was that Fang was CICC’s only real rainmaker, but he had no desire to direct deals toward Morgan Stanley, not least because they were people who had treated him as an ignorant peasant. Goldman capitalized on its first success by continuing to relentlessly court Fang. For Goldman, CICC was a client to be wined and dined, mostly in the person of Fang. For Morgan Stanley, CICC was a troubled subsidiary with Fang the principal source of trouble. It seemed to some Morgan Stanley executives that Morgan Stanley was the wife with the responsibilities and headaches, while Goldman Sachs was the mistress with all the fancy jewelry. Fang continued to partner with Goldman whenever he could, including the firm’s next megadeal, PetroChina’s $2.9 billion IPO in April 2000.
In January 1998, Fang’s mentor, Wang Qishan, was named deputy governor of Guangdong province, his first job to clean up a huge financial scandal there. Wang’s successor as CICC chairman, Zhou Xiaochuan, who later became China’s central bank governor, decided that Fang Fenglei had to go. Fang rejected Morgan Stanley’s offer to send him to Harvard University to get an executive MBA because it contained a noncompete agreement. Instead, Fang joined Bank of China International in Hong Kong and set out to compete with CICC.
Even before Fang was ousted, though, there was an important new development on the personnel front. Shortly before Austin Koenen died, he had told La Roche that the Chinese side of CICC was “preparing to bring in somebody big.” A few months later that “somebody” turned out to be Levin Zhu, the son of China’s new premier, Zhu Rongji.
The Communist party in China has an informal policy that the children of top leaders are expected to live in China and work for the government or Chinese companies. Levin Zhu had obtained a PhD in meteorology from the University of Wisconsin, and a master’s degree in accounting from DePaul University in Chicago. After a stint as an accountant at Arthur Anderson in Chicago, he joined Credit Suisse First Boston in New York as a trainee. When his father became premier, Levin was called home. He was steered toward CICC as an appropriate place to build his career.
At CICC, Levin was the most junior executive in the investment banking department. At first he tried to be modest and low-key. He seemed happy putting together reports that went into excruciating detail on state company finances. But the Chinese bankers at CICC were quick