The other major change in the firm's research program, also accomplished in March 1972, was to shift the primary emphasis of its product and services away from the individual client and toward institutional buyers, the largest owners and traders of equities. By improving the quality of its research to meet the sophisticated needs of institutional buyers, Kidder, Peabody maintained that the firm's individual clients also would benefit from superior reports and recommendations that had been specially prepared for the institutional buyers. The firm's research, in other words, was made to serve two markets individuals and institutions.
By the end of 1975 Kidder, Peabody's research department, headed by Johann Gouws, a thirty-six-year-old analyst formerly with H. C. Wainwright & Co., was one of the largest on Wall Street, not only among investment houses but also among commercial banks and trust companies. Nearly half of its total staff of some 110 men and women were professionals-economists and analysts. The department's annual budget which had reached almost a million dollars in 1968 continued to grow steadily; by 1975 it exceeded $4 million a year. And the group's publications, among the largest and most diverse of those of any investment firm on the Street, were distributed selectively to some 2,000 individuals and institutions.
But it was not only Kidder, Peabody's clients that benefited from the research department's findings. By providing the firm with in-depth knowledge on a wide range of economic and financial subjects, the research group's analyses also strengthened the firm's ability to recruit new clients and better serve old ones. The research department's work often proved highly useful also to the corporate finance group in its investigation of new public offerings and in arranging direct sales.
Research, with its specialists studying the present and future needs of various industries, put a premium on expert, detailed information on a wide range of complex financial topics. Kidder, Peabody and other diversified houses like it soon came to be composed of teams of specialists in every type of financial transaction and investment medium. Experts in one department cooperated closely with specialists in others, and all of them operated under the general supervision of the firm's three-man policy committee headed by Gordon. The other two members in 1975 were Erwin Stuebner, Kidder, Peabody's president who was stationed in Chicago, and Ralph D. DeNunzio, the chairman of the firm's executive committee. DeNunzio joined the policy group in 1969 at the age of thirty-eight replacing Ames, who gave up most of his responsibilities at Kidder, Peabody to become Chairman of the Board of the Lincoln Center for the Performing Arts, Inc.
A Princeton graduate with a major in classics, DeNunzio once considered a career as a sports broadcaster but chose instead to become an investment banker. In July 1953, a month after earning his bachelor's degree, he joined Kidder, Peabody's training program and has been with the firm since then, rising rapidly from institutional sales in Chicago to syndicate manager in New York. In 1962 at age thirty he was made a partner, and in 1969 when he joined Gordon and Stuebner on the policy committee, he also became the firm's chief operating officer, a post he continued to hold even after he was made president in January 1977.
Intelligent-"a razor-sharp intellect," said one Wall Street observer-knowledgeable and level-headed-"one of the coolest cats I've ever watched in action," said a New York Stock Exchange official-and possessed of a seemingly infinite capacity for hard work, DeNunzio has earned the respect and confidence of both the senior members of his own firm and the leaders of the securities industry. In 1968 he was elected a governor of the New York Stock Exchange; the next year he was elevated to vice chairman of the board of governors; and in May, 1971, he was made chairman, the youngest person to hold that post in the Big Board's entire history. DeNunzio's service on the New York Stock Exchange's board occurred at a terrible time in Wall Street's history, when the back office and capital crises shook the financial district to its roots and the Big Board itself was under attack for having failed to foresee and avert the worst problems. DeNunzio presided over the sweeping reorganization that resulted in the election of the first public members to the Exchange's board of directors, and he played a major role on its Crisis Committee, the group that helped arrange the lifesaving mergers that kept afloat some of Wall Street's largest houses. DeNunzio also headed the industry task force that helped draft the Securities Investor Protection Act, as well as serving on several committees of the Investment Bankers Association and its successor organization, the Securities Industry Association.
DeNunzio's long and difficult work on behalf of the Exchange and the securities industry was accomplished without neglecting his mounting responsibilities at Kidder, Peabody. Since 1969 when he joined the firm's policy group, DeNunzio has carried the major responsibility for supervising the worldwide operations. As its chief operating officer in the New York City headquarters, he has occupied himself with every aspect of Kidder, Peabody's business. He serves on the commitment committee which decides what the firm will underwrite and at what price; and he reviews the many weekly reports submitted to him from department heads, regional office managers, and the heads of overseas subsidiaries. The firm's present-day internal management and control system, which DeNunzio himself helped plan and establish, allows him to keep as close and effective a watch on Kidder, Peabody's underwriting commitments, trading position, and operating costs as Gordon had done in the days before incorporation.
That DeNunzio is qualified to run Kidder, Peabody is generally accepted both within and outside the firm. He has participated in all the large policy decisions of the last decade, often assuming the chief responsibility for implementing them. He took a lead in negotiating the Van Ingen, Pacific Northwest, and Clark, Dodge mergers, and he was largely responsible for restructuring the firm's back office procedures. In 1968, a year before he joined the policy group, it took some 550 operational employees to process fewer than 2,000 trades a day; by the end of December 1975, with slightly fewer than 400 workers, the firm's back office was processing an average of about 5,000 trades a day. DeNunzio's commitment to improved productivity and service and his readiness to invest heavily in expensive new computers and other sophisticated office machinery made it possible for Kidder, Peabody in 1975 to conduct more business more effectively with fewer clerical workers than ever before. Kidder, Peabody's high reputation among Wall Street leaders-that it is a well-managed, carefully balanced, profitable house-owes much to DeNunzio's constant striving for operational efficiency and conservative, steady growth.
If there is one aspect of the investment banking business in which DeNunzio has yet to distinguish himself, say some Wall Street observers, it is in recruiting large corporate clients, a talent that Gordon possessed in such abundance that The New York Times' Michael C. Jensen labeled it "legendary." Whatever the merits of that observation, DeNunzio is fully aware of Kidder, Peabody's need to win and hold large corporate clients; now that he has succeeded in making the firm more responsive to the many changes that have occurred on Wall Street in the last decade, he is spending more and more of his time with the corporate finance group. And though he still may not be on close terms with as many top company executives as is Gordon, the fact remains that DeNunzio, like his mentor, is an informed, perceptive, and persuasive banker able to call upon a skilled staff for whatever information and support he requires.
DeNunzio's rise to power at Kidder, Peabody is due, of course, to his own intelligence, competence, and drive. But it is also true that his substantial accomplishments in preparing Kidder, Peabody for the challenges of the next decade would not have been possible without the full cooperation and support of the firm's senior officers, particularly Gordon, who worked closely with him for some fifteen years, helping to train him for a position of leadership. Unlike some Wall Street leaders, Gordon showed himself willing not only to yield responsibility but authority as well. And while he continued to head the firm, serving as its chief executive officer longer than any of his predecessors, it has been DeNunzio who, in Gordon's words, "has been running the place for the last half-dozen years."
