Is There Anybody Out There?

from Forbes

Whence your new chief executive? From inside? Or from outside?

This week’s change at the top of the two large U.S. mortgage agencies, Fannie Mae (nyse: FNM news people ) and Freddie Mac (nyse: FRE news people ), seems to confirm a management succession rule of thumb: Go inside for continuity, outside for change.

As part of being taken into government conservatory, Fannie Mae’s chief executive Daniel Mudd was replaced by Herbert Allison, former Merrill Lynch (nyse: MER news people ) banker who most recently has been running the pension fund TIA-CREFF (and, full disclosure, is a former director of Freddie Mac’s Richard Syron was replaced by David Moffett, who resigned as a board member at the financial insurance guarantor MBIA (nyse: MBI news people ).

In one sense, these were atypical changes at the top; the decisions weren’t being taken by the companies’ boards, but by the U.S. Treasury secretary, who had been given power by Congress to backstop the two government-sponsored enterprises.

Exercising those powers this week was an extraordinary event, and in such circumstances, the government didn’t really have a choice but to replace the chief executives, says Scott Saslow, executive director at the Institute of Executive Development, a California-based leadership consulting firm. That only the heads of each company were axed underlines the symbolic nature of the acts.

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