Wachovia CEO Thompson to shareholders: 'I'm not here to sugarcoat things'

Wachovia Corp. Chief Executive Ken Thompson was grilled at the company's annual meeting Tuesday morning as angry shareholders questioned him about the company's performance in the wake of a dismal first quarter.

The fireworks began early in the meeting -- before Thompson had begun his presentation of the company's 2007 results -- when shareholder Manuel Lopez walked to a podium in the grand ballroom of the Charlotte Marriott City Center in Charlotte, N.C., where the meeting was held, and called for the ouster of Thompson and the Wachovia board.

Lopez, who said he represented shareholders owning more than 4 million shares of Wachovia's stock, lambasted Thompson for the company's recent dividend cut and $8 billion capital raise after comments just months earlier suggested the dividend was safe.

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"Mr. Thompson failed to present a clear, accurate and timely picture of the company's financial condition, to the detriment of shareholders," Lopez said. "This is neither the board nor the CEO that we would like to see leading the company."

Shareholders in the packed ballroom applauded. A bank spokeswoman estimated attendance of around 200.

Wachovia -- Greater Baltimore's second-largest commercial lender and fourth-largest depository institution -- reported a net loss of $393 million in the first quarter and cut its dividend to 37.5 cents per share from 64 cents per share while also raising $8 billion in new common and preferred stock, which dilutes the value of existing shareholders' stock.

"I stand here in front of you in the midst of difficult times," Thompson said after Lopez had preempted his presentation. "I'm not here to sugercoat things, I'm not here to make excuses and I'm not here to tell you we were a victim of circumstance."

With the bank struggling through rising loan defaults in the "pick-a-payment" mortgage portfolio it acquired through its $24 billion purchase of Golden West Financial Corp., Thompson said, "Clearly, Golden West was an ill-timed acquisition." He added that the results are painful to him and his management team, which he said is focused on improving the company's performance and restoring shareholder value.

"We did make a bad acquisition," he said. "It has hurt us. But we can lead out of here now."

While the dividend cut was "certainly unpopular" with the company's shareholders, Thompson said it was the right thing to do as the financial-services industry works through an economic environment that he said is likely in a recession or close to one. The CEO of the nation's fourth-largest bank also conceded Charlotte-based Wachovia (NYSE:WB) needs to restore its credibility with investors after its about-face on its dividend.

For roughly an hour, Thompson faced a parade of upset shareholders who questioned him on topics that included the Golden West acquisition, his compensation and how the company will extricate itself from its current difficulties. Shareholders in the audience often applauded comments critical of Thompson or the board.

"I have no confidence in you whatsoever," one shareholder told Thompson.

"Thank you very much," the CEO responded wryly.

Lanty Smith, the lead independent director on Wachovia's board, also faced tough questions from shareholder activist John Moore about his continued support of Thompson. Smith called the company's first-quarter performance "unacceptable" but said the board is still strongly behind Thompson and his team. He also considered "insulting" any suggestion that the board is not independent enough.

"The board is not in lockstep with management," Smith said. "This is a very strong, independent board that is going to be working on behalf of shareholders."

After the meeting, Thompson told reporters the scene was exactly what he had expected, given the company's recent financial woes.

"Our shareholders have suffered," he said. "They have questions, and they deserve to have their questions answered."

Wachovia's stock has traded between $23.77 and $56.90 per share over the last year.