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Every afternoon at 5:00 a mail pouch arrives at the 49th floor, mid-Manhattan office of Richard Jenrette, the chairman of Equitable Cos. Inside the pouch are the day's financial results from Equitable's subsidiary, Donaldson, Lufkin & Jenrette, the brokerage firm co-founded by Jenrette 35 years ago. Behind beveled-glass French doors in his antique-filled office, Jenrette pores over those results daily. "If I see anything unusual, like a big loss or a big gain," says Jenrette, "I call John Chalsty."
Chalsty, of course, is the CEO of DLJ and a longtime colleague and friend of Jenrette; the two men met when Chalsty, a South African by birth, came to the U.S. in 1955. "I think he's the best manager on Wall Street," says Jenrette, who's also the chairman of DLJ. Indeed, over the past eight years that Chalsty has been running DLJ, the firm has provided Equitable, struggling in the early 1990s to cope with a variety of problems, with steady profits.
Since 1987, when DLJ repositioned itself from a research house to a more broadly based investment firm, its head count has doubled, from 2,000 to 4,000. During the past two bullish years, DLJ has shown a 62 and 51 percent pretax return on equity and doubled its capital base to $1 billion. Last year the firm made $302 million pretax.
Seventy-odd blocks south of Equitable, at 140 Broadway, Chalsty is ensconced in his own cozy, parlor-like office straight out of "Masterpiece Theater" (complete with nonworking fireplace). Chalsty looks the very model of the senior statesman, with his snow-white hair and gentlemanly manner. But he bristles at the notion that Jenrette is looking over his shoulder: "I can honestly say that Equitable has never, ever felt it appropriate to impose some direction on us."
Perhaps. But though Jenrette himself denies ordering Chalsty around, many of his ideas continue to find a place at DLJ. Jenrette has long favored DLJ's niche strategy: seeking out areas like junk bonds and merchant banking that have been abandoned or underserved by others. Related to that nichemanship is Jenrette's belief that "a new business [should] be profitable relatively quickly." If it takes five or six years to turn a profit, "it's probably not a very good business," he avers. Indeed,...