In an industry not short on egos, Mr. Strong stood out as a hard-driving taskmaster and a control freak. Interviews with former employees and industry experts portray Mr. Strong as smart and competitive, but also as someone who refused to relinquish control. That reluctance to delegate impaired the firm's ability to grow. It also hindered installation of much-needed internal compliance, some observers said.
Werner F. M. De Bondt, the Richard Driehaus professor of behavioral finance at DePaul University, Chicago, who knows Mr. Strong, likened Mr. Strong's situation to a Greek tragedy.
Mr. Strong's "greatest strengths are also his greatest weaknesses," Mr. De Bondt said. "My impression when sitting in a room with him was that he had to be completely in charge, and even though there were other people around who were paid a lot to have opinions, those others didn't get to express their views. …"
"It's a mixture of wanting to be on top and feeling a little lonely once he got there, because there are few to contradict him. Entrepreneurs like him look for mastery. It's what drives them, to get control of the project, to experience the pure joy of doing it right," Mr. De Bondt said. "There is no logical reason for it. The money doesn't mean anything to him."
An industry consultant who knows the firm and its founder well, but preferred to be anonymous like many interviewed for this article, explained: "I think it's ego and arrogance that are behind this. … I don't know that he thought he was doing anything that risky or that wrong. …
"The notion of entitlement and winning is what drives Mr. Strong, who has a super A-type personality," the consultant continued.
"Super egos like his are great for starting a business, but can stifle its growth. Strong should be a $200 billion complex by now, but it's not. (It had $42 billion under management as of Sept. 30). It's been stuck at this level for a while, because it needs a broader set of skills, personality and culture to grow to the next level. A company can get just so big built around a single personality."
Another problem at Strong is the lack of people with operating backgrounds, observed Mark Esposito, managing partner at the New York office of executive recruiters Christian & Timbers.
"Their compliance and control infrastructure is way out of whack. It's either underutilized or underfunded, and they didn't take it seriously. None of these companies (cited in Mr. Spitzer's investigation into trading at mutual funds) did, and these investigations are just the beginning of a windstorm blowing across the industry. Everyone has been focused on returns. Companies didn't have these issues until the business grew so much in the last five or six years. A risk management infrastructure didn't exist. No one was accountable, because the leadership didn't understand this kind of thing can happen. Most people (in the industry) don't have operational backgrounds. They need to bring in people from outside the industry who have it."
Strong announced late last month that it was implementing more rigorous monitoring policies of its trading and enhancing its monitoring and compliance systems for associates trading in the mutual funds.