High Growth – 1968 to 1974
High Growth – 1968 to 1974
New Purpose and Objectives
In late 1971, the Board adopted a fresh statement of the Purpose and Objectives of A.G. Becker & Co., Incorporated. (DI#1130 and DI#1131).
The Purpose and Objectives of A.G. Becker & Co., Incorporated, are:
“to operate a profitable business by rendering professional, distinctive, and valuable investment services to a select clientele.”
Toward this Purpose we have adopted these Corporate Objectives:
- To become an acknowledged leader in providing select, diverse and professional financial services.
- To attain a leading position in each market in which we participate.
- To emphasize the development of new and improved services, particularly those which satisfy key needs of large multi-client groups.
- To attract and develop talented people and to provide a stimulating environment which fosters team effort.
- To provide our shareholders with an above average return on the investment of their funds while maintaining a sound capital structure and the widest available access to capital.
- To fulfill our responsibilities to the communities in which we operate and to foster the same sense of community responsibility among our employees.
Each of these words and phrases, and the subsidiary statements in the reference files, were argued over and chosen with care. The thinking behind them, as they were assembled, was that they would begin more closely to guide management decision making about the businesses we were in and chose to be in, both on a shorter and longer term basis.
New Planning System
With their adoption we commenced an annual process of integrated operational, personnel, financial and strategic planning, and the development of a firm-wide annual profit plan. The plan had our financial expectations broken down by month, to which actual financial results could be compared and reviewed in monthly profit center management meetings and in an annual firm wide management conference. This process involved detailed cost accounting work which had not heretofore been carried out and which results would be published monthly.
The “Orange Book” (named because of its orange cover) was a monthly publication of the firm’s revenue and expenses for the month and for year-to-date, available within a week after month-end, showing actual results vs. plan, for the firm as a whole, and for each division and department - each “profit center.” The emphasis for each revenue (marketing/product) profit center was on its “contribution” to central costs - a number over which managers and supervisors had reasonable control. For “cost centers,” the emphasis was on providing high service at low cost, and certainly at or less than the cost which was planned. In due course, bonus determinations would in part depend on Orange Book results.
Later on, we anticipated determining, in some useful form, how much capital we were devoting to each business segment and how the earnings of that segment related to capital usage.
At the annual management conference, the past year’s results were reviewed. Even more importantly, for each division and/or department, “action plans” for the coming year were developed and reviewed. These were the listed steps that were to be taken in the coming year, which along with market conditions, good management, and some good fortune, were expected to produce the projected financial results.
The above process was first initiated in early 1967 for the 10-month fiscal year ended October 31, 1967. The firm changed its fiscal year to that date so that annual financial results for the fiscal year could be known by mid-December, with bonuses and profit sharing amounts determined and booked at that time. (See later comment).
Planning for Fiscal 1968 started in the late summer of 1967 and was completed and presented at a firm wide management conference in October. This schedule began to be the standard annual operational planning cycle for the firm in future years.
Non-voting Shares and Shareholders
At the beginning of 1969, the firm began to invite (1) officers who were not voting shareholders, and (2) certain other key persons, primarily in senior staff positions, to purchase non-voting shares on the same net asset value per share (essentially book value) basis as voting shareholders. As of calendar end 1969, the first year of this program, the firm had 86 non-voting shareholders.
Through the forward years, both the number of voting and non-voting shareholder count increased, as some non-voting were invited to become voting, and new invitees were added to the non-voting group.
Profit Sharing Funds
In parallel with the inception of annual operational and financial planning in 1967, the firm established a Profit Sharing Fund, the first use of which began in 1968. This Fund was to be a supplement to an annual cash bonus system for managers and supervisors, a compensation component that had been in effect for many years, perhaps since the firm’s establishment. In recent times, for the managers and supervisors, year end annual bonuses could be in amounts of, say, 15-100% of base salaries. With the inception of this Fund, such employees were permitted to defer otherwise current compensation into the plan, up to 15% of cash compensation.
With each such employee, therefore, a calculation was made of his or her total intended compensation (salary and bonus) of which total 15/115 (13.04%) would be distributed to the employee’s account in the Profit Sharing Fund. After subtracting that distribution from total compensation, the employee would receive a cash bonus for the difference between that amount and his/her salary. For many employees, thus, an important portion of their “bonus” (if not all) was contributed into the Fund. These arrangements were highly valued by many employees in that they resulted in an important portion of their total compensation being set aside into a deferred savings status which over the years could accumulate, with good investment management, into a substantial sum. These accounts, with direct ownership and growing value of Becker shares, and along with prospective Becker pension payments, became quite hefty savings for many employees over the next 15 or so years.
Somewhat later, for employees who were not supervisors or managers, a separate profit sharing fund was established and contributions made on the employee’s behalf to his or her separate account equal to a percentage of cash salary which the Board annually determined for all such employees. The author believes that at some point, the “second” Profit Sharing Fund was permitted to purchase, and did purchase, some non-voting shares of the company.
Central Management Changes/Additions
During this period 1968-1974, there were some key changes in and additions to the firm’s top management group and in the organization’s structure. Starting in late 1968, on the recommendation of the author, who became President and CEO as of the first day of the period under review, Jack Connor was elected Executive Vice President, Roger Brown was elected Senior Vice President, and the Executive Committee was reduced to Paul Judy (Chairman), Roger Brown (Vice Chairman), and Jack Connor.
Early in 1968, the author recruited into the firm John (“Jack”) Wing who become Vice President and General Counsel and took over all regulatory compliance tasks, including oversight of the central, corporate secretarial functions. This move was in part a response to the Pogue affair and the now absence of Vince Flett. Jack had obtained his law degree from George Washington University, worked for a period in the SEC, and then in the central staff of Investors Diversified Services in Minneapolis under the mentoring of Ralph Saul.
In mid-1969, in another significant addition to the top management group, Fred Moss joined the firm. Fred was the former Chairman of the Boston Stock Exchange and was thoroughly knowledgeable as to the relations among and communications systems linking the national and regional stock exchanges, and the specialist operations on all such exchanges. Fred joined the New York office and in due course took charge of the firm’s extensive stock exchange activities and dealer services. Shortly after joining Becker, Fred was elected a Director and member of the Executive Committee.
In connection with Fred’s appointment in early 1970, Dave Heller resigned to leave with Jerry Beebe (a senior accounting employee) and Jim Kipp (a senior employee on the MSE) to become the top management team of the Ralph Davis firm in Chicago. (David later founded Advisory Research, Inc., which became a leading investment management company in Chicago.) With Jim Kipp's departure, Jordan Bloom took over as Manager of MSE Specialist activities.
Also in early 1968, Bob Vance was hired as a Vice President. He soon took over the job of Controller and began promptly to supervise the increased emphasis on financial planning and detailed cost and profit center accounting. In 1969, Phil Alexander joined Bob as Assistant Controller, and they were later buttressed by Tom Matchett and Marvin Letwat. Later, Ralph Walter became heavily involved in firm wide financial planning.
Market Conditions: Back Office Chaos
Stock and credit market conditions during this period were generally unfavorable and quite hectic. Shortly after the author’s election as President, he was elected a member of the Board of Governors of the New York Stock Exchange. From this perch he witnessed first hand the industry’s back office chaos and logjam in the 1967-1970 period, during which period a number of substantial organizations went out of business, were merged into stronger firms, and/or received stiff fines and sanctions for sloppy accounting and/or poor operations procedures. The industry's back offices were a mess.
Exchange-set Fixed Commissions Terminated
In the period from about August, 1968 until well into 1975, and in some dimensions for some years beyond, the NYSE was in the midst of pressures, especially from institutional investors, to do away with fixed commissions, and to substitute negotiated commissions, order-by-order, or in accordance with competitively responsive, firm-set schedules. Various organizations representing individual investors joined into the argument pushing for lower commission rates. Newspaper records show almost weekly arguments for and against industry fixed commissions from late 1968 through early 1975, during which period proposals, studies, possible alternative arrangements, and some experiments were considered or tried. The issue was finally resolved when, on May 1, 1975 ("May Day"), the SEC issued an edict that did away with fixed commissions.
For Becker, there were two areas of the firm’s business about which there was concern if fixed, industry wide commissions, were to be eliminated. The Funds Evaluation service depended almost entirely on payment of a set amount of commissions or commission credits, per client. For this business, it turned out that the firm was able to set competitive commissions for its own institutional trading, and was able to obtain adequate commissions or credits from other member firms, such that its revenues for the funds evaluation service were initially not too much effected by the changes.
As to the firm’s so called “reciprocal” dealer business, once again, the firm was able to maintain a larger flow of NYSE commission income even at lower, competitive rates, and to "give up" a lesser amount of commission income earned on its regional specialist trades, as permitted by the exchanges, per the arrangements made with the dealer client. As a member of all exchanges, and active in the OTC market, Becker was also still able to provide “best execution” to its clients, whether individual, institutional, or dealer, with respect to almost any trade in any equity security. Once again, the change had little initial effect on our dealer reciprocal business.
Lower rates did, of course, for a period of time, effect the profitability of the Firm's retail account business, and the wallets of brokers. These effects, however, were short lived as they could be offset by new business, and with greater volume. For firms with a competitive instinct (and Becker was one), negotiated rates were a desirable marketing tool.
Management Incentive System
As mentioned earlier, the firm put in place a fairly detailed revenue and cost accounting system in the late 1960s along with an annual profit plan that focused the attention of marketing management teams and the “contribution (to overhead)” of their group, per the profit center plan. The assumptions in each profit plan as to the market conditions were of course important. Cost center managers were challenged to keep their costs under the planned levels. Before these overall and detailed profit plans were activated, they had to be “approved and accepted” by the Executive Committee as fair and reasonable, with a modest bias to “stretch” for each group. Adjustments were negotiated in some cases before approval/acceptance. Bonus pools were established for each group with maximums (the firm did not believe in paying bonuses on “windfall” results). A central bonus pool was also established. Bonus pool allocations at the end of the year were were based primarily on general judgment and qualitative factors, as to group performance, and as to the contribution to overall profits. As described elsewhere, bonuses were paid to the maximum permissible extent in a profit sharing contribution to each particular employee’s account before calendar year end and the balance in cash after that date.
To augment the above cash bonus system, the Executive Committee each year determined those employees who performed their duties in a “senior managerial capacity.” These were persons whom in the Executive Committees’ judgment, were, as a group, the primary decision makers in the firm, and on whom the company’s longer term growth and profitability primarily depended. This program was established – also in the late 1960s -- as a way to build up share ownership among the senior management, (as a technique requiring more “stake” by the participants than a stock option plan). It was also a plan more suitable to Becker, as a private company, than would have been a stock option plan.
“Senior” managers were offered the opportunity to purchase a specified number of common shares at net asset value (the normal purchase price) by a cash investment equal to 10% of the aggregate price for the shares to be purchased, with the balance financed by a term (15 year) loan from the firm payable interest only by payroll deduction. The shares “vested’ one-third at the end of the 3rd year, an additional 1/3 at the end of the 4th year, and in full after 5 years.
Management shares were designed to provide extra motivation for firm wide gains. Their availability was indirectly linked to regular share ownership in that management share allocations were sometimes limited due to the candidate’s low regular share ownership, which, if improved, would make him or her eligible for a larger allocation. Also, when a manager had an already appreciable share holding providing quite adequate motivation, he or she was not further eligible for more management shares. The Executive Committee had a policy limit to govern the overall management share program (which the author remembers correctly, up to approximately 10% of the common shares outstanding could be management shares).
Credit Securities Group
The progress being made by this group in 1967 was carried forward into the current period.
Becker continued to develop new issuers. The firm became one of four dealers to handle the Notes of the Export-Import Bank. Ray Ryan’s concentration on developing new issuers was successful, and with the assistance of Claude Wilson, a number of utilities became Becker issuers financing receivables and inventories with open market credit. In 1970, a large number of Bell Telephone subsidiaries became Becker issuers.
Treasury and Agency Securities
In 1969, the earlier discussion idea of sometime becoming a dealer in U.S. bonds and notes became a reality. In 1970 the firm established a Government Bond Department. Shortly after that, Becker’s prowess in distributing Government Agency paper was recognized when we became one of four dealers in Farmers Home Administration notes, and a co-manager of FHA and FNMA longer term securities. In 1971, the firm’s activities in the government bonds had advanced to such a level that the firm was invited to become a “recognized reporting dealer” to the Federal Reserve Bank of New York. After this recognition, our business in Government and Agency securities grew even faster. The work of Bob Flynn as manager of Government Bond Trading, along with sales work of Joe Kelly, was central to these developments.
At the beginning of 1969, the firm opened an office in Atlanta initially to distribute commercial paper.
In December, Rob Anderson was made Commercial Paper National Sales Manager, working in the Chicago office. In 1971, Rob and an associate, John Hendrickson, tragically died in the crash of a small plane flying home to Chicago from a downstate Illinois visit with clients. Hugh Devlin was appointed National Sales Manager to succeed Rob.
In 1971, the Municipal Department, now managed by Mike Brookins, was relocated to be under Jack Connor and the new “Credit Securities Division.” Jack Donahue, moving to the New York office, succeeded Jack Connor as head of the expanded Division. Probably in connection with these moves, Ray Ryan unfortunately left the firm (however, Ray rejoined the firm about a year later, coming back to work with Fred Moss - see later).
Tom York, in New York, took charge of the national inventory. Jack Connor continued his role as Executive Vice President and member of the Board and Executive Committee. Upon Dave Heller’s departure, Jack Connor was also elected Treasurer.
In 1972, after another name change, the “Credit Securities Group” entered the bankers’ acceptance business under the guidance of Frank Bacher. Later that year, Mac Skall went to London for a period to assess and then organize a money market operation in Becker’s London office. Jack Cunningham, a veteran commercial paper salesman in the Chicago office, was transferred to London to commence the distribution of Eurodollar Commercial Paper with the support of Dave Dobell who was hired as a money market trader for the office.
Commercial Paper Program Service
In 1973, supported by the data entry, programming, and production capabilities of the Funds Evaluation Group, a Commercial Paper Program report/service was created for issuers. This service/report summarized in text and graphs various factors as to an issuance program, including cost savings versus bank loans and the cost savings of using Becker vs. competitors, based on the issuance rates of competitors. This report helped to cement relationships with existing issuers and to inform potential issuers of their money savings by using commercial paper and Becker in particular.
Very Large Money Market Dealer
Thus, by 1974, Becker had become one of the nation’s largest money market dealers. In the traditional commercial paper market, the firm handled over $25 billion of the notes of over 200 issuers. Under Manny Falzon as lead trader, Becker had become in a short period of time a major dealer in the CDs of some 95 separate banking companies, either on behalf of the bank, or its holding company, or a non-bank subsidiary, distributing over $20 billion of such securities. The FNMA Note distribution program continued on a high level. Through the work of Paul Leonard, the firm had begun to deal in a growing volume of GNMA pass-through securities. In the bankers acceptance market Becker garnered over 20% of the market in a year or so, and introduced to the US market the acceptances of the major Japanese banks or their affiliates.
Credit Review Formalization
In the mid-1960s, those of us in leadership roles in commercial paper and corporate finance areas recognized the significance of a careful credit review of new commercial paper issuers. Rather quickly, this concern extended to the need of a steady, ongoing review of all issuers. We envisioned this work being carried out in an organized way through a full time dedicated staff reporting regularly to a credit review committee.
To this end, the first staff hire was Brad Neubaur, followed by Lou Moss, Dave Simpson, and others. At first the staff reported to the commercial paper management, but the analyses involved were closer to corporate finance work, and the separation of this function from the paper department helped to insure objectivity. By the late 1960s, Bill Cockrum was assigned the oversight of this function and staff, and with them developed steady sophistication in their analyses. The work of this group gradually extended to regular credit reviews of banks and bank holding companies, to the development of the Finance Company Statistical Report later described, and to general support of the wide ranging services to a wide variety of financial services organizations.
The value of a Credit Department and a Credit Review Committee functioning separately from the commercial paper department, and reporting to a separate person in the top management, was confirmed with the bankruptcy of Penn Central Railroad in June, 1970. This was a sudden, unexpected, and for some, hard-to-believe development, and a very large challenge for Goldman Sachs as Penn Central’s dealer. Becker had not handled Penn Central notes nor, to the author’s knowledge, ever considered doing so. The commercial paper market was in temporary crisis. Becker went to each holder of its paper and offered to repurchase any notes with which the holder was uncomfortable. Few notes were repurchased. In due course, the market was back to normal.
Corporate Finance Group
From late 1967 until mid-1969, the Group continued under the temporary oversight of the President (the author). In mid-1969, Bill Cockrum was appointed the Manager of the Corporate Finance Group which he organized into four sections: New York General Barry Friedberg; Chicago General John Griner; Finance Group Howard Christeson; and Special Accounts Dan Good.
Finance Company Statistical Report
In 1968, after careful planning, the Group offered the Finance Company Statistical Report which tabulated all the credit statistics and measures about which lending institutions needed to be kept informed with respect to a substantial number of North American finance companies with capital funds of at least $4 million. This was a subscription service rather quickly taken up and regularly renewed by many banks and insurance companies lending to companies in this field, or contemplating lines of credit or the purchase of debt securities. The service further extended Becker's reputation and recognition as the leading firm funding finance companies.
Organizational Combination: A Mistake
Effective in late 1971, the Corporate Finance Group and the corporate services component of the Funds Evaluation Group were combined into one organizational unit under Dave Peterson overseeing three sub-groups: Marketing (under Dan Good); Capital Development (under Barry Friedberg) and Product Development (under Bob Brehm). This was the author’s idea, as President, to bring these separate “corporate services” under a single umbrella for better coordinated, more effective, and non-duplicative cross-marketing, more professional and creative corporate finance engineering, and more farsighted product and service planning and development.
Toward better coordination, and now useful for integrated marketing and client servicing, the firm had already developed a computer based system to track all corporate contacts and relationships, including credit securities clients and potential clients. In the consolidation of Funds Evaluation and Corporate Finance, the author also had the objective of more broadly using the experience and skills of a senior manager (Dave Peterson).
With the formation of the Corporate Services Group, Stu Gassel took over the funds evaluation support activities and the non-corporate client services, with a charter to broaden the range of corporate services. Bill Cockrum took over the newly formed Private Investment Services Group and moved to Los Angeles to become the senior West Coast officer, and oversee the development of corporate finance and other services personnel in the Los Angeles office. Dave Wicks joined Bill’s group to review private investments not suitable to BTA or BEC, and to provide corporate finance services to any company in which Becker had a direct or indirect investment.
The creation of the Corporate Services Group was rather quickly seen by the author and colleagues to be a major mistake. Very few marketing personnel from either background, even with intensive training, were able to acquire sufficient competence to open doors for Becker's experts. In some cases, the former vertical professional relationships were continued and engagements signed up despite the organizational structure. Within twelve months the change was reversed. By the end of 1972, the author took back temporary management of the Corporate Finance Group with Barry Friedberg managing in New York staff, Dan Good in Chicago and Los Angeles, and with Bill Cockrum’s assistance in Los Angeles. The Funds Evaluation Group was brought back together under the management of Stu Gassel, with Dave Peterson leaving the firm to take up very successful presidencies sequentially of two well known Chicago based companies.
New Client Development and Specialization Continues
Despite the disruption caused by the above organizational changes, and the adverse markets in most of the period, especially 1974, the Corporate Finance Group added a wide range of clients and provided repeat services to many others during the period under review. Below are those corporations to whom Becker provided investment banking services in the period 1968-1971; unfortunately similar data are not available for the period 1973-74.
New general industrial and commercial clients engaged during the 1968-1971 period included Alberts, Inc.; COMCET, Inc.; The Commodore Corp.; Data Products Corp.; Evan’s; Katz Drug; Government Employees; United Refining; Informatics; Novo Industrial; Intercraft; John Blair; Ecological Sciences; Kenton Corp.; U.S.Natural Resources; Whittaker Corp.; American Reserve; Diamond M Drilling; Bliss & Laughlin; Emporium Capwell; Jim Walter; Wolverine World Wide; Construction Aggregates; ISC Industries; and Sealed Power.
Repeat services were provided to Gamble-Skogmo; American Gas; Boise Cascade; Cook Coffee; Midas International; Mohawk Data; Younker Brothers; and Jostens.
Mergers and acquisitions in which Becker had a hand during the period included Barnett International into Novo Industries; Ready Foods into Leggett & Myers; Eldorado Tool into Litton Industries; Enterprise Paint into Insilco; and Columbus Services into SERVISCO.
Finance companies receiving repeat services - primarily private placements - included Boise Cascade Credit; General Acceptance; Government Employees Financial; Acceptance Finance; Caribbean Finance; Civic Finance; Credithrift Financial; Economy Finance; Local Loan; Liberty Loan; Southern Discount; Sun Finance; Union Investment; Capital Finance; American Standard Credit; and CPS Credit. M&A activities in the finance company area included Aetna Life’s acquisition of Civic Finance, and Signet Finance's acquisition of Time Finance.
By 1974, the Group had expanded its specialized services to include the financing of leverage leases, the placement of railroad and other equipment trust securities, and the financing of ocean-going vessels under US government Title XI procedures.
Despite market conditions and other challenges, the amount of funds raised for clients in offerings managed by Becker or privately placed during 1974 well exceeded $1 billion and was up 24% over 1973.
As 1972 neared year-end, Howard Christeson narrowly avoided death in a widely reported plane crash. The crash took place in mid-afternoon on Friday, December 9, 1972. A United Airlines plane on a flight from Washington DC to Midway approached the airport in an instrument guided landing and crashed into a residential area well short of the airport runway. Some some 46 passengers died, and 15 survived, including Howard. As Howard told his story to the Chicago Tribune three days later:
“ . .. (I) recalled that (I) glanced out the window as the plane emerged from the clouds and almost immediately felt “a great surge of the engines” . . . I knew this was not ordinary. The pilot pulled the nose up about 45 degrees. I saw those houses and I knew we were too low. I knew we were going to hit. . . I put my head down and covered my face with my hands. I felt the bottom of the plane hit something. It was just skipping along and hitting things and then, all of the sudden, it stopped. I was in complete darkness. There were people screaming and crying and yelling all around me. I crawled out a hole in the fuselage onto the right wing. . . (I) felt bodies of people under (me), both on the wing and on the ground. I was yelling for help because I knew if I stayed where I was I could be fried. I was in great pain."
Howard did receive help and was taken to a nearby hospital to treat a broken leg, multiple burns, and internal injuries. He was back to work just as soon as he fully recovered from the unfortunate event.
Funds Evaluation Group
The funds evaluations services of A.G. Becker “came of age” during the 1968-74 period. Over the period, trustor clients grew to over 1,600 and assets being measured grew to over $50 billion. The services were extended to Canada during this period, through the enterprising work of George Baxter, working out of New York, and by 1975, 40 out of 100 of the largest Canadian corporations were clients, began, expanded and now served by Harty McKeown out of a new Toronto office.
The Institutional Funds Evaluation Service (IFES) - measuring and evaluating the performance of investment managers’ portfolios toward the goal of assisting them in better understanding their own performance, risk factors, and alternatives - was started up in 1972 by Stu Porter and colleagues. IFES was quickly well established. By 1974, the service was being used across North America by 67 out of the 100 largest banking organizations; 45 out of the 50 largest investment management companies, and 23 out of the largest 25 insurance companies
The Employment Retirement Income Security Act (ERISA) was legislated in 1974. It was anticipated that with the law’s strong provisions and expectations as the roles of fiduciaries and investment managers, an independent annual investment review would be a necessity for many pension fund sponsors, benefit planners, and actuaries. ERISA would likely boost Becker’s FES services.
As noted earlier, with the reversal of the effort to combine corporate finance and corporate funds evaluation services, the Funds Evaluation Group was restored under Stu Gassel’s leadership, supported especially by Bob Brehm as National Sales Manager. Stu brought to the revised Group a fresh intensive emphasis on marketing and product development, and by the end of the period, some fourteen separate funds evaluation services were being offered in the U.S. and Canada.
Continued rapid growth of clientele, the number and uniqueness of funds, and the quality and timeliness standards of the Group, led to a regular expansion and improvements in the Systems and Production support departments of the Group.
Portfolio Services Group
In late 1968, Burt Weiss succeeded Roger Brown as the head of the General Accounts Group and, in 1970, took charge of the Portfolio Services Group, composed of all equity marketing and research activities - general accounts (individual clients), institutional sales, and research, including the new Geneva office. The new London office would be added to his coverage a year later. Each department or office had its own manager.
Succeeded by Burt, Roger continued as Vice Chairman of the Executive Committee and Senior Vice President. With his long experience, he also maintained a watch over the management of the Operations Group during this difficult period for back office activities. In addition, he kept an eye on and gave counsel to Dave Peterson and colleagues then leading the still emerging funds evaluation service. In 1968, Roger contracted for a comprehensive marketing survey which became a guide for the evaluation of prospective clients and the selection and training of sales personnel throughout what was to become the Portfolio Services (PSG). The selection of top talent for sales personnel was a continuing policy of the PSG, with Lou Holland being a prime example of such selectivity.
In late 1968, Leo Bailey, Director of Research, was assigned the additional duties as head of Institutional Sales, succeeding Jim Lewis, who indicated his intention to retire in 1969. By year end, Paul Blaney was appointed as Director of Research and Leo focused on the whole Institutional/Research marketing program. Account coverage, execution competence, and the timely and well informed delivery of research were all steadily advancing.
Institutional sales early in the period were gaining momentum; block trading in 1968 was double the level of 1966.
In August, 1969, Don Pearson moved to the New York office to more closely manage the Syndicate, Municipal and Trading Divisions’ activities. Once there, he was given the additional assignment to oversee the Institutional Sales Group, succeeding Leo Bailey. Paul Blaney continued as Director of Research; Don Hahn was appointed Associate Director of Research. Roy Moor joined the department at year’s end as Director of Economic Research. Shortly afterward, Roy recruited Elaine Garzarelli to analyze and report on industry sectors.
At this time, the thinking and output of the Research Department began to incorporate “strategic” as well as “stock analysis” advice. In both research and sales, selected personnel were regularly being hired and institutional sales teams being developed in all of the firm’s institutional sales offices.
To resolve the management leadership situation in the institutional sales and research activities, as described above, in 1971 Burt Weiss was appointed to oversee all general and institutional sales, as well as the research department. With Larry Novak's retirement in Chicago, John Rogers took over the Chicago General Accounts Department, John Webster the New York General Accounts Department, and John Levy was appointed head of National Institutional Sales, with Charles Gordon heading the New York Major Institutions team. Top associates continued to be hired in the Group and extensively trained for individual account development.
In addition, some general accounts salesmen in the Group were assigned, or given leeway to identify on their own, smaller and medium sized institutions to service.
At the same time, a number of new associates were brought into the Geneva office (from Hirsch) under the leadership of Max Bosshard, and including Pierre Bottinelli. Shortly afterward, in September, 1971, Charlie Hale joined the firm with a team of colleagues (also from Hirsch) to open the London office. The team also included Hans Mosiman in New York to assist in the U.S. side of the London and Geneva business. In the same year, a Boston institutional team under Dick Murray joined the firm and the expansion of Los Angeles institutional sales continued.
Paul Blaney unexpectedly resigned in early 1973 to join Baker, Weeks as an institutional salesman. Burt Weiss took over temporary management of the Research Department but in March, 1973, Stu Porter was selected to succeed Paul Blaney. Stu had been instrumental in the development and marketing of IFES (see Funds Evaluation Group above) and in that work had become quite well informed as to the research needs of investment managers. During the separation of the funds evaluation group into corporate (grouped with Corporate Finance) and non-corporate services, Stu Porter and colleagues who started up and moved IFES forward at a fast pace, were in fact operating under Burt Weiss’s oversight, as part of Portfolio Services, in the period. Having Stu Porter take over Research was thus a fairly natural move.
During Stu’s tenure as head of Research, he immediately formalized the “Strategy Group” consisting of himself, Hahn and Moor. The Group's thinking would in turn guide the work of analysts. The comment on the Department’s approach as printed in the Becker 1974 Annual Report captures this thinking and related actions quite well. Once again, Becker was willing to do what it thought right and innovative, and not what the herd would do. The Group’s considered opinion on the stock market in mid-1974 was bearish and, as reported in the Becker 1973 Annual Report:
“Throughout 1973, we continued to pursue the systematic and disciplined investment research program instituted some four years ago. Directed to the needs of the portfolio manager, the objective of this program has been to recommend specific security investment decisions within a comprehensive appraisal and outlook for economic and market conditions. The results of this program in 1973 were particularly gratifying. . . Starting in late 1972 and continuing until late 1974, the primary view of our investment strategy was that equity values were under pressure. Correspondingly, specific sell recommendations were developed on some 32 securities during this period. Portfolio managers were presented with a new and controversial dimension in analytical information instead of the usual optimism generated by the investment community. To our knowledge, no other major securities firm took such a definitive stance.”
As was reported in the Wall Street Journal in April, 1975, looking back to the 1972-73 period:
". . . when most stock market experts were wildly bullish about the market's prospects, A.G. Becker & Co. was telling its customers to sell most of their stock . . . (Becker) issued more than 40 “sell” recommendations, harpooning (many) market favorites . . The advice proved timely. The stock market slumped more than 40% over the next two years, with most of the stocks on Becker's sell list falling even more."
Portfolio Management Approach (PMA)
In mid-1973, the firm once again created an innovative product/service called Portfolio Management Approach (“PMA”) This service involved a well designed, proprietary, easy to operate cassette tape reader in which a subscriber placed a tape received by mail monthly from Becker. On the tape was recorded Becker’s latest thinking about the market and the economy, usually as dictated by Don Hahn and Roy Moor. The tape was accompanied by applicable, printed economic and stock market charts, and a summary of the range of securities recommendations by research department analysts. The pricing was reasonable and PMA was directed to the small and medium sized institutions, although many personal investors became subscribers. Within a month of the product launch in 1973, the service had over 400 subscribers, and by mid-1974, passed 500 subscribers. In due course, PMA subscriber conferences were held at which over 100 subscribers attended and the outlook for market, attractive industries, and specific stock implementations were presented and questions answered.
Becker in Top Ten
Despite the turnover of very good analysts, the quality of their insights and reports and strategic calls as to market movements led the firm to be recognized in a 1974 independent national poll as the seventh best investment research house on Wall Street. And as to execution services, a survey by Greenwich Associates in early 1974 found that Becker was in the top 10 out of 43 institutional brokers serving some 400 institutions.
Exchange Operations and Municipal, Trading and Syndicate Activities
1968 experienced record levels of underwriting participations and managed offerings, Art Curtis was in the New York office directly helping with the workload. In 1969, Lon Moellentine was transferred to New York to give steady assistance to Sam Yonce.
On the Municipals side, a Miami office was opened in 1968 and manned by John Osbrink, transferring from Chicago with an associate. Jack Dancey in Chicago took on the role of National Sales Manager with Mike Brookins as New York sales manager. Under John Canaday as underwriting manager, the department accelerated its efforts to bid for manager of offerings and won five out of ten deals on which it bid, and successfully placed each.
Despite 1969 - the worst municipal bond market in many years, with twenty year municipal bonds down as much as 25% - the firm stepped up its management interest and won and successfully sold 10 out of 53 bids.
In light of industry operating problems, there was no trading on Wednesdays during part of 1968. This had a particularly bad effect on the over-the-counter securities market. Inventory control was also an issue within the firm and was fairly quickly addressed by some creative systems and procedures work by John Burman. Gross trading profits were more than doubled in 1969 with the support of the new information system.
As earlier described, Fred Moss joined the firm in 1969 and in due course assumed the management of the firm's extensive stock exchange activities and dealer services. In connection with Fred's appointment, Heller resigned to become head of the Ralph Davis firm. Shortly, Ray Ryan returned to Becker as a Vice President, joining Fred Moss as assistant group manager and especially overseeing the Trading and Syndicate Departments.
With the MST group dissolved, Don Pearson temporarily took over the Institutional Sales and Research Departments in New York. Shortly, however, in 1973, the Chicago Corporation, a small and growing Chicago brokerage firm, recruited Don as President. Don retired, redeemed his shares, and returned to Chicago after long service with Becker which started under his father in the Roseland office in 1953.
In the balance of the period, activity within the Group involved many changes.
- This was a period of high growth in syndicate operations. The firm's originations were growing rapidly. In addition, this growth was being recognized by other syndicate managers and more underwriting positions were in the major or mezzanine bracket which meant larger participations and commitments. At the same time, the firm's distribution power was increasing, particularly in institutional sales placement of high quality equities and corporate bonds.
- The firm extended its specialist activities beyond the Midwest, Philadelphia, and Pacific Coast operations by acquiring Elwell & Co. on the American Exchange, with a specialist book of 45 securities. A year later, the specialist firm of F. Sacken & Co. was acquired on the NYSE, with a book of nine securities, and then the firm of David Warner, specialist on the Philadelphia Exchange, adding 50 securities to the existing specialist operation there.
- Activities in the Trading Departments in New York and Chicago were reduced, with a personnel cut, to confine principal trading to the over-the-counter securities of corporate clients. For all other stocks, investor orders would be handled on an agency basis. During this period, John Tognino became the National Manager of the Trading Departments.
- During the early part of this period, a clearance and information system was designed for the Trading Department by John Burman which provided information on operations and a better basis for inventory control. The software was sold to IBM with Becker retaining the right of use.
- Also during this period, George Morris was authorized to create a proprietary trading operation (for firm account) and the results were regularly at or exceeding plan.
- Expansion of floor broker personnel and operations took place on all floors, including the CBOE (see later) and these activities became central in the creation of a national order handling system.
- Even though the firm expanded and then cut back its stock exchange specialist operations, it had learned a great deal about the needs of specialist firms for good back office service and accounting. By the end of the period, Becker was well established in this service business with a growing number of exchange specialists and NYSE registered traders as clients.
- In 1972, Joe Sullivan, a friend of the firm and former newspaper reporter and writer, drawing on advice from various sources, including Jack Wing, began to plan the formation of the Chicago Board Options Exchange. The new CBOE would be an affiliate – or maybe “child” would be a better word - of the Chicago Board of Trade. The SEC approved the CBOE plan in early 1973; the exchange opened in late April. Under Jack Wing’s supervision, working with some carefully selected colleagues and planning in parallel with the CBOE, Becker had some 40 employees on the CBOE floor on opening day. The Exchange's activities fit very nicely into Becker’s overall exchange operations and dealer services business. Within a year, some 20% of all trades on the CBOE were being processed through Becker’s organization and facilities. Other than Jack, a key man in this planning and implementation was Bill Smith, who in 1979 became the CBOE President. Later, Russ Ruhl played a leading role in the development of Becker’s CBOE activities.
- Participation as a pioneer in the CBOE development permitted the firm to see many business opportunities. For a short period the firm was a market maker but withdrew to concentrate on alternatives. The primary opportunity the firm pursued was to extend execution and clearance services in CBOE trades to a wide range of other securities firms, large and small. This was a business about which the firm had professional knowledge and experience - and in this instance centered on an exchange which was absolutely new and unfamiliar to most of the industry. Activity on the CBOE involved dealing in a whole set of securities derivatives as opposed to the underlying securities. There was the perception of “risk” in this business, and utilizing a firm with a known professional capability and extensive exchange floor presence would be desirable.
- Toward the end of the period, after overseeing the firm's significant role in the establishment of the CBOE, Jack Wing took on the management and development of the overall Dealer Services business. By period end, under Jack's guidance and especially with the assistance of the Kipp brothers, and with the strong impact of the firm's CBOE position, Dealer Services grew at about 25% per year. During this period, the business was extended to a number of the top Japanese dealers in US securities.
- Lastly, in the final two years of the period, the firm centralized and unified all its executions in listed securities into one national unit involving the cooperation and integration of the trading desks of Institutional and Retail Sales, the floor brokerage functions of Exchange Operations on all exchanges, and the order execution traffic coming in from clients of Dealer Services. This national order handling activity was organized into the Execution Services Group and was supported by a sophisticated, cutting edge communications system linking all upstairs order desks and all exchanges. All block activity was coordinated by a New York team under Tony McLaughlin and Don McKinnon. By the end of 1973 the orders in listed securities coming from some 1,200 entities were handled in this system. In that year, some 178 million shares involving some $6.5 billion were executed in the system, 18% over 1972, and growing by another 20% in 1974. As noted earlier, Becker was recognized by some 400 institutions in a 1974 Greenwich Associates survey as one of the top institutional brokers in the country.
Private Investment Services Group
The firm's private investment activities and services during this period are described in the separate chronology (Appendix-6). As is described, the planning, organization, and funding of Becker Technological Associates (“BTA”) took place in 1968. Tank Schiavoni was appointed Manager upon the departure in 1969 of Phil Greer to join Steve Weiss in the formation of Weiss, Peck and Greer. Becker Entre-Capital (“BEC”) was also organized by Mike O’Reilly in this period. In 1972, Becker Communications Associates (“BCA”) was organized by Bill Cockrum and Jim Ackerman and began operations in 1973. See Appendix-6 for more information.
Given the growth of dealings and revenue in almost all sectors of the firm in the six year period, 1968-1972, it is not surprising that the Operations Group was regularly tested, and experienced essentially similar growth.
The first two years of the period were devoted to "clean up, recovery, and catch-up" from the industry wide congestion and indigestion of 1968-69. Dave Heller was in charge of Operations during the early part of the period, especially overseeing Chicago, with Ray Holland in New York. Between the two, Becker's processing and books during this period were in relatively good order. In 1968, Becker was 5th out of 62 members of the MSE Clearing Corp. with respect to error control. In early 1970, Ray took over leadership of National Operations with Joe Goeschl in charge of New York and Ben Witt in charge of Chicago. This threesome provided operations management all the way through 1974, and contributed to the on-going excellence of these support activities.
Line and Staff
In 1972, the Operations Group was divided into "line” and "staff," with Joe Goeschl heading up the line operations in New York and Chicago, with sub-management in each office, and Ben Witt heading up the staff functions. “Line” operations consisted of the day-to-day processing and completion of forms of transactions. “Staff” functions involved improvements in systems and procedures, planning, training, management information, record keeping and analysis, and other activities in support of “line” operations.
During this period, staff operations provided support for the new system developed for use by the Trading Department to improve trading procedures, clearance, management information, and inventory controls. Similarly, the staff group designed and began to handle the unique sub-operating system for clearance services to exchange specialists and registered traders, and then in 1973, to support the unique back office needs of the new CBOE clients.
And all through this period, the Group provided operating support to the wide-ranging and growing principal trading business of the Credit Securities Group involving billions of dollars in transactions each month.
Much like the Operations Group, the firm's expansion required steady growth and improved competence in central administrative services. These tasks included the central accounting, finance, control, and planning responsibilities along with the corporate secretarial tasks (being licensed in all domestic and some foreign states, for example); legal and compliance; internal audit; advertising and public relations; printing and supplies; underwriting and document review; among other tasks.
A number of these tasks had fallen in earlier days under the oversight of Vince Flett, but with his retirement they passed primarily to Bob Vance. As noted earlier, in April, 1968, the President (the author) recruited Bob Vance as a vice president to take over the job of Comptroller and assume a wide range of administrative responsibilities.
Bob began promptly to drive the increased emphasis on financial planning and detailed cost and profit center accounting. In 1969, Phil Alexander joined Bob as Assistant Controller, and they were later buttressed especially by Tom Matchett and Marvin Letwat. Timely financial reports were quickly accomplished including the detailed profit-center based, revenue and cost accounting. The new planning system described earlier was put into effect.
Bob also took on oversight of the Internal Communications, Advertising and Public Relations, Personnel, Printing and Supplies, Underwriting Document Review, and Office Services functions. Prior to Bob's arrival, some of these activities were in the Operations Group and others reported directly to the President.
During this period, under Bob's leadership, the Personnel Department became a more professional human resources group under Tom Camden in Chicago and Jim Toner in New York. Formal personnel policies and procedures were developed and adopted by the Executive Committee. Employee benefit programs were reviewed and updated. At this stage of the firm’s growth, over 500 people were being hired per year to fill vacancies and meet profit-center personnel plans.
Internal and External Communications
Another important support group established in this period was the Communications Department, under Dave Scholl and colleagues. A Director of Public Relations was hired. Timely, accurate, and comprehensive internal and external communications were increasingly necessary and valuable given the firm’s growing size and spread.
In 1973, the A.G. Becker Bulletin received a renovation which among other changes consisted of a new name - BeckerBriefs - along with modernizing the design; printing on regular-sized paper; separating the personnel information into a People section; separating the summary company reports into a Company section; keeping the Calendar in its own section; and creating a new separate section on Compliance, printed on distinctive blue paper.
The "Man from A.G. Becker" advertising program continued well into 1969 with copy that exhibited fresh creativity overlaying a fundamental theme.
During this period, encouraged and assisted by the Communications Department and overseen by the Legal Department, experienced Becker employees were authorized, invited and encouraged to make speeches to trade groups interested in the employee's expertise. Topics covered a wide range, but included such things as the use of commercial paper, the funding of finance companies, trends in the stock market and economy, pension fund performance measurement, and the like. Various employees wrote articles that appeared in trade publications. There began to be periods in which the Becker name appeared in the Wall Street Journal or New York Times at least once a month. The firm was increasingly becoming "notable and quotable."
Public Financial Reports
In late-1969, following the step taken in mid-1967, the firm published a "Progress Report to our Clients and Friends" which included a summary of activities and services in 1968 along with a balance sheet as of May 31, 1969. This publication carried out the President's objective of publishing and widely distributing a full annual report describing the activities of the firm over the latest fiscal year, along with full, audited financial statements. This practice was initiated in 1971. Through 1976 the firm continued to publish an annual report shortly after fiscal year end. This public annual report was usually accompanied - internally to shareholder employees - with a Personnel Review for the year. Preparation of these growing annual report requirements were expertly handled by the Communications Department. (For a listing of the firm's annual reports and related documents over the years, see Annual Publications).
As noted earlier, in January, 1968, Jack Wing was hired to take over regulatory compliance tasks. He designed a compliance training program involving a general alertness throughout the firm to laws and regulations. There were absolutely no areas of Becker’s business which were not impacted by them. Jack was particularly adept at writing policy and procedure; various memos were created which covered all aspects of firm policies as to compliance.
Jack also set up a system through which all personnel in all offices, through the daily BeckerBriefs, would be reminded of compliance matters. The system also provided this newsletter with the daily list of securities which, for various regulatory reasons, the firm, as principal or as agent, was not able to deal in.
Moving Into A Line Position
Within a period of time, Jack indicated a desire to take on a "line" job if and when there was an opening. Jack had hired Barry Haase as Assistant General Counsel in 1970. By 1972, Barry was ready to move ahead to General Counsel and related management functions. In late 1974, Barry hired his back up and successor, Randy Harris.
During this period, as part of the General Counsel office, the Corporate Secretarial functions passed from Hal Ahlberg, temporarily back to Vince Flett, and then on to Joyce Carrier (Exner) and finally to Nancy Osterberg.
Jack Wing's opportunity to "show his stuff" came in 1972 with his unofficial involvement in the establishment of the CBOE, followed by planning and implementing Becker's heavy involvement in the new exchange. Jack passed his test with flying colors and turned over the General Counsel position to Barry Haase. When the CBOE was ready for operations, Jack morphed naturally into heading the further growth and development of the Dealer Services business which story has been told earlier.
General Growth in Personnel
Starting the current period of review with October 31, 1967 (the changed fiscal year), Becker had approximately 750 employees on that date (exactly 759 on December 1). Seven very "bumpy" years later, as of October, 1974, employment had grown to 1,578, up some 115%, or a net growth rate for the seven year period of a little under 12% per annum - a step up from the 9% rate of the prior 10 years.
1970 saw the Chicago office move from the seventh floor of 120 S. LaSalle (having occupied that space for over 40 years) to the 29th and 30th floors of the newly constructed, award-winning First Chicago Plaza Building ("One First National"). In general, the firm’s central administrative functions and certain other activities remained behind, but then moved a year later to new space in the Bank’s second building, on South Clark, across the street from the main building ("Two First National").
In 1971, over a weekend in March, the New York office was moved to 55 Water Street.
By the end of the period, with the completion of the affiliation with Warburg and Paribas (see later), the firm had eleven offices: Chicago, New York, Los Angeles, San Francisco, Atlanta, Boston, Geneva, London, Milwaukee, Philadelphia, and Toronto. (The Miami office staff was moved to Atlanta during the period, and an office in Houston was opened in 1975).
Various Committees and Similar Groups
Starting in 1961, and running into the 1970s, the firm essentially had three sub-committees of the Executive Committee. The "buying committee" (per industry tradition) approved all managed underwriting commitments. The "accumulation/participation" committee approved the accumulation of stock positions for retail distribution, and underwriting participations. The "investment committee" approved proprietary investments, usually in marketable securities.
By the late 1960s and early 1970s, in addition to the Executive Committee of the Board, the following subcommittees of the Executive Committee had transitioned into or were newly formed during this period:
Committees providing approval of commitments or the taking on of clients:
- Prospective issuers in AGB managed offerings
- Prospective commercial paper issuers
- Corporate Underwriting Pricing, Fixed Income
- Corporate Underwriting, Managed Offerings, Equity Pricing
- Municipal Managed Bids and Underwritings
- Investment Dealers (including specialists) as Clients
Committees primarily administrative in character:
- Internal Audit and Compliance
- Investment Valuation
- Banking (relationships and arrangements)
Regional Management Committees
Starting in 1961, the senior management, for a period, experimented with younger directors sitting in on Executive Committee meetings. Later, for a short period, there was a Junior Executive Committee which made various suggestions, including those dealing with the employee benefit program. Commencing in 1967, the Executive Committee set up Regional Management Committees with rotating chairs and vice-chairs, in the two main offices, consisting generally of the office's department managers. The purpose was to better coordinate inter-office and -department relations, space questions, office appearance and maintenance, communications, and the like. Over time, one of the officers in the office, typically, if available, and a member of the Executive Committee or the Board was denoted the "senior officer in the office." He or she began, with the concerned department managers, to coordinate and resolve "office only" issues.
Investment Management Tasks
An important "employee group function" within Becker was to be a Trustee or an Investment Manager of the firm's pension and profit sharing plans. As noted earlier, these plans started up in 1957 (pension fund) and 1967 (first profit sharing fund). Through excellent investment performance and annual, substantial, and increasing contributions, these portfolios became important "savings and retirement" funds for many employees. Each fund was broken up into equity and fixed income segments, and the equity segment was parceled into smaller units. It was a special honor to be selected to be a Trustee, or to be on the Investment Committee of these funds, or singularly, to be invited and given authorization to provide discretionary investment management to one of the equity sub-funds.
Community service was encouraged and valued throughout the firm. Many employees were active in non-profit organizations in their communities. To further encourage such service, the firm annually sponsored in the two main offices an on-site blood donation program and active participation in the local United Way campaigns. In addition, the firm set up, rather early, the A.G. Becker Foundation for which there was a grant budget for each Becker office and a Contributions Committee within the office which made grants to local charities. These committees were usually staffed by non-officers in each office.
Death of James H. Becker
In late 1970, the firm suddenly and tragically lost its Chairman, James Becker, at age 75. Jim died at Michael Reese Hospital after a short illness. He joined his father’s firm in 1921 and was President from 1957 to 1961 when he was elected Chairman. He was survived by his widow, Hortense and two daughters, Jane Colman and Kate Morrison. Services were held at the North Short Congregation Israel in Glencoe. His memorial service was attended by many employees whom he knew and greeted personally day-in and day-out in the office. He had, however, arranged for his succession, and he oversaw the reorganization of the firm’s capital in such a way that although his death was a personal blow it did not effect the firm’s business activities and momentum. Like his father, Jim Becker became a much honored legacy for the firm.
Finally, following Jim Becker's death, the firm made a special contribution of $100,000 to set up the James H. Becker Fund within the Foundation. Through Chicago agencies, grants from this Fund went to underprivileged youth directly to support their special needs. The stories of these recipients were periodically reported to all employees through BeckerBriefs.
As noted earlier, Jim Becker converted his ownership of common shares into preferred stock in the early-mid 1960s, and in 1968, given the firm's then relative excess of equity capital, the firm retired Jim's preferred shares. Thus, Jim's death did not trigger in capital redemption, the effect of his possible death on the capital of the firm having been anticipated and dealt with some years earlier.
At this point in the Chronicle, it is interesting to note that when the author became President, on the morning of the last business day of the year, up through 1969, Jim Becker used to take him for a walk to visit the First National, Continental, Northern Trust, and Harris Banks, calling on the President in each, congratulating him on the fine year the bank must be realizing as the books were closed, and wishing him prosperity in the coming year. Jim told me that this was a practice of his father, when, back then, the President and the Cashier would take a break from adjusting the books to an intended target, and receive Abraham Becker on his annual visit. On each visit Jim and I made, Jim would tell this story and get a hearty response. The visits were quite cordial and brief. Unfortunately, the author does not remember continuing this warm and thoughtful tradition beyond 1969.
Board of Directors
With Jim Becker’s death and the retirement of all the firm’s “elders,” the firm’s Board of Directors took on a clearly younger character. A photo of the Board in late 1970 shows the members around a table and is captioned. As shown, the members at that time were Ryan, Mabie (J), Moss, Brown, Judy, Connor, Peterson, Weiss (B), Vance, Cockrum, Donahue, Skall, Wing, Levy, and Holland.
Certain Senior Officers
In late 1973, both Roger Brown and Jack Connor expressed the desire to retire, and they were feted at a joint retirement dinner in early 1974. At about the same time, Fred Moss and Jack Donahue were Senior Vice Presidents. Upon Jack Connor’s retirement, Al Kopin succeeded him as Treasurer and Al was elected a Director.
As reported earlier, the firm's net worth at the beginning of the 1968-74 period was $12.2 million. Revenues had reached a then record of $32.7 million and net profits a record of $4.3 million. By the end of 1973, net worth was a little over $32 million. In mid-1974, based on 1973 data, Becker was ranked twenty-sixth in capital, one position behind Lehman Brothers and well behind Merrill Lynch.
By the end of the period 1968-74, revenues were again up about threefold to a new record of $106 million. Income for the seven year period aggregated some $34 million, a substantial portion of which was net investment gains. Net worth (all employees) advanced over the seven year period from $12.2 million to approximately $33 million in mid-1974, before taking into account the amalgamation with the Warburg-Paribas interests (which arrangement will be shortly reviewed).
Giving effect to the amalgamation transactions, including the redemption of some employees' shares, investments by other employees, and the Warburg-Paribas purchase of shares, the successor firm's stockholders' equity ended at $27.5 million. With W-P's purchase of an $18 million subordinated note and other subordinated debt funds of $9.9 million, the successor firm's capital funds rose to in excess of $56 million.
Net asset value for the successor firm as of year end was $21.22 ($9.65 adjusted for the 2:1 stock split after 1974 fiscal year end, and a 10% stock dividend), up some 210% over the comparable value seven years earlier. See the financial data exhibit.
As already noted, employee share ownership in late 1967 totaled some 67. With the continued high rate of employment and business growth, many additional employees were becoming officers, as managers or large scale revenue producers, and eligible for shareholder invitation. The policy of seeking broad and open key employee ownership was very much still in place. Thus, the employee shareholder group expanded to some 227 employees before the 1974 Warburg-Paribas affiliation. In the course of the amalgamation, some employee shareholders cashed out completely, but most retained all, or substantially all, of their interest. As a result, the employee share owning group only declined to 221.