Lou Pepper, RIP: triumph, tragedy and example

Lou Pepper, who died Friday at age 92, represented the very best in the Seattle way of doing business. It was simple: Bosses saw the health of the community and that of their companies as inextricably connected.

His model of stewardship was once common here, and it lives on as a model, in works by Bill Gates, Paul Allen and, after his fashion, Jeff Bezos. People who have been here all their lives don’t know how rare and precious this is. So many cities saw their stewards die off, replaced by imperial CEOs, hucksters or branch managers. But it is as important to Seattle’s success as technology, location, pluck and luck. It has been a key component of Seattle’s genius for reinvention.

Pepper may be the last local CEO who carries the description of “beloved.” As my colleague Rachel Lerman wrote, it was especially on display in the years he ran Washington Mutual and after:

Mr. Pepper was an executive who took the time to check in on how his employees were doing, regardless of their position within the company. He built the local bank during its most successful days, and never lost sight of its “Friend of the Family” motto. And when the bank collapsed in 2008, Mr. Pepper, who had retired years earlier, created a fund to help the former employees who had lost everything in the crash.

Pepper saved Washington Mutual and had placed the thrift on firm footing when he retired in 1989, just as the rest of the industry was collapsing into the savings and loan scandal. Unfortunately, he had groomed a successor who turned out not to be the man Pepper thought him to be. Kerry Killinger, diligent, nerdy, joining WaMu when it acquired the Spokane broker-dealer Murphey Favre, advanced rapidly.

But Killinger changed as CEO, embarking on risky acquisitions, pushing a sales culture and becoming a high-paid CEO-prince. He became increasingly disconnected from the austere, community- and employee-focused culture of Pepper. Killinger also pulled away from the hard-nosed common sense of Pepper and from the team of skilled veterans Pepper had assembled. To be fair, the American economy was changing, “financializing,” rewarding swindles, anti-competitive mergers, redistributing money upwards and a toxic executive culture.

When earnings disappointed in 2004 and WaMu was forced to lay off 13,000 employees, Killinger was not deterred in his ambition to make the company “the Wal-Mart of consumer finance.” Pepper cautioned him about his compensation. Killinger ignored his former patron. He would do so again later, fatally, when Pepper told him to get out of subprime lending. But this had become key to WaMu’s stock price thanks to Wall Street’s appetite to turn the securities into rackets — thus to Killinger’s compensation.

When it came crashing down in the Panic of 2008, the death of WaMu was a deep wound to Seattle’s economy and our end as a banking center (a big hit to economic diversity). It was a personal wound to Pepper. “It was a great institution for 110 years or more, and to see it so mishandled that it would be the largest bank failure in the country is abominable, to put it mildly,” he told us then.

After Killinger resurfaced here, few wanted to be seen with him. Not so with Pepper, who remained admired and treasured. Rightly so.


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