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Boston Capital

Fidelity’s next step

By Steven Syre
Globe Columnist / January 22, 2010

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It’s got to be now or never for Abby Johnson.

Johnson, 48, has been a lot of things at Fidelity Investments over the years: Mutual fund manager, senior executive, largest shareholder, the boss’s daughter. But she’s never been the clear heir apparent to run Boston’s most important financial company. If not now, when?

Executive succession at Fidelity is the city’s longest-running business soap opera, with a decades-long run. The cast keeps changing but a few things remain constant: chairman Edward C. Johnson is always firmly in control of the family business and his daughter’s future remains a mystery central to the plot.

The latest episode played out this week when president Rodger Lawson said he would step down as Fidelity’s second in command at the end of March. Lawson’s job will be carved up among Abby Johnson and eight other executives, all reporting to Ned Johnson.

So the investment giant that manages $1.5 trillion for millions of customers will be run by a chief executive who turns 80 this year with no second in command on the organizational chart. Obviously, this is a temporary solution.

I don’t know why Fidelity chose to manage its latest round of executive change that way. Lawson, who came back for his second tour at Fidelity three years ago, was always a considered temporary management solution and speculation about his departure started to appear in print six months ago. He didn’t wake up last week and decide to move on.

But Fidelity has a lot of experience managing transitions among its highest executive ranks. For many years, very good talent rose through the ranks only to discover a glass ceiling at the very top. Most of those executives eventually quit.

Salesman extraordinaire Bob Reynolds packed his briefcase and now runs Putnam Investments. Before Reynolds, lawyer/enforcer Bob Pozen quit and became chairman of MFS Investment. Long before either of them, Sam Bodman took a walk to run Cabot Corp. and eventually went to Washington.

The presumption was always the same: Fidelity is a family business and none of those executives was named Johnson (nonfamily employees actually own a slight majority of Fidelity today but no one doubts who runs the place). Abby Johnson was always a presence in the wings. She moved up and sometimes just around the organization but she never got a public nod identifying her as the person who would run Fidelity after he father.

Over those years, Johnson had done a lot of things. She managed mutual funds with middling results. She oversaw Fidelity’s investment management arm. Now she leads fund sales to individuals and corporate retirement services. It’s hard to say how well she did, but Johnson certainly has broad executive experience at Fidelity by now.

Those executive departures and succession questions were relatively minor problems at Fidelity for years because Ned Johnson was in charge, period. But by the time Reynolds quit three years ago, observers began to worry. Johnson, by then deep in his 70s, wasn’t going to be there forever.

Those concerns are more pronounced now. Whoever emerges from the latest executive scrum really will be in line to run the company. The alternative, going through this exercise again in another three years, seems difficult to imagine.

One wildcard no one mentions about the future: Few people outside the highest ranks of the company know if Abby Johnson really wants to run the company. Fidelity watchers can speculate about desire and temperament, but they don’t really know.

When Reynolds left Fidelity, the company promoted the highly regarded Ellyn McColgan to run its distribution business. It wasn’t hard to imagine a day when McColgan might become chief executive and Johnson serve as chairman of the company. That would have been one way to go.

But Lawson arrived in a matter of months and McColgan found herself working for him, suddenly a step down the ladder. She quit in no time flat. So much for that idea.

Now Fidelity is faced with its most important executive decision since Ned Johnson became the boss more than three decades ago. I don’t know if Abby Johnson will finally be chosen as the person to succeed her father, who took over for his father, who had founded the company in the first place.

But either it’s going to happen this time around, or it’s probably not going to happen at all.

Steven Syre is a Globe columnist. He can be reached at syre@globe.com.