Dive Brief:

• Ally Financial has named Michael G. Rhodes as its next CEO, effective April 29, the bank said Wednesday.
• Rhodes, 58, assumed the CEO post at card issuer Discover this year, after being named to the role last December. In February, Capital One announced it’s seeking to acquire Discover for $35.3 billion in stock.
• Rhodes submitted his resignation Tuesday to Discover’s board, effective April 1, according to a filing with the Securities and Exchange Commission. Discover board member J. Michael Shepherd will serve as interim CEO and president of the company and interim president of the bank, Discover said.

Dive Insight:

At Detroit-based Ally, Rhodes will follow Jeffrey J. Brown, who left the CEO post in January after almost nine years. Doug Timmerman, Ally's president of dealer financial services, has been interim CEO of the $196 billion-asset bank since then. Rhodes will also join Ally’s board when he takes the CEO post next month.

Rhodes was “not expected to have a long-term role” at Discover, following the card company’s merger with Capital One, Riverwoods, Illinois-based Discover noted in its filing announcing his resignation. 

During an investor call in February addressing details of the Capital One acquisition, Rhodes said he anticipated assuming an advisory role, reporting to Capital One CEO Richard Fairbank, for a year after the deal’s closure. 

Executives expect the deal to close later this year or early next, pending regulatory approvals. 

Rhodes will serve as an adviser to Shepherd until April 12, and continue to receive his base salary through the remainder of his employment, Discover said in its filing. His unvested equity awards will be forfeited, and Rhodes will pay back certain cash payments made to him by Discover, the filing said. 

At Ally, Rhodes will receive an annual base salary of $1 million, according to the company’s SEC filing Wednesday. He has a total target incentive opportunity for fiscal 2024 of $10.5 million, with the amount earned payable after the year’s end in the form of a cash incentive (30%) and equity-based awards (70%). Equity awards are 60% performance-based stock units and 40% time-based restricted stock units.

Rhodes will also receive a one-time cash award of $900,000 from Ally “to make him whole for certain compensation he is forfeiting or otherwise foregoing from his prior employer in connection with his transition of employment,” and make-whole equity grants valued at $16.2 million, Ally noted in its filing. 

Capital One’s acquisition of Discover was likely high among Rhodes’ reasons for the move, said Shawn Cole, president and founding partner of executive search firm Cowen Partners. 

“It may not have been disclosed to him during the interview process,” leaving him blindsided, Cole said in a Thursday email. “It’s likely, given the timing, that he was speaking with Ally along with Discover anyway. [Then] took the job at Discover, and Ally reached back out once the merger was announced.”

Such quick executive moves can occur due to “significant” personality clashes with the board or chairperson, or the discovery of nonpublic information after accepting the job, Cole noted. For Rhodes, it could also mean Ally was always his top choice but acted too slowly and wooed him over later, Cole said.

Rhodes’ exit leaves Discover without a leader, again, even as it faces regulatory scrutiny over past business practices. Also, the proposed acquisition by Capital One has drawn fire from lawmakers concerned about concentration in the banking industry.

As Discover’s interim CEO, Shepherd will receive a base salary of $1.25 million and a restricted stock unit award with a grant date value of $5.75 million, according to Discover’s filing. The stock award will vest on the completion of the merger with Capital One or the one-year anniversary of the grant date, whichever occurs first. 

Shepherd will remain a director of the company, but will leave the board’s risk oversight committee while serving as interim CEO and president, Discover said. Shepherd was appointed to Discover’s board last August, as the company sought to get risk and compliance issues under control and after former CEO Roger Hochschild abruptly exited.

Prior to taking the top post at Discover, Rhodes spent about 12 years at TD, serving as group head for Canadian personal banking since January 2022. He joined TD in 2011 to lead the North American credit card and merchant services business, and has some 25 years of experience in financial services.

Shepherd is a former chairman and CEO of BancWest Corp. and its subsidiary, Bank of the West, which BNP Paribas recently acquired.