Lehman Brothers, Leadership and Business Bankruptcy

 

Leadership and Business Bankruptcy

Bennigan’s, Mrs. Fields and Lehman Brothers. Not really three names you’d ever expect to see in the same sentence, but all three have one thing in common: they all declared bankruptcy in 2008 and substandard leadership is to blame.

Lehman Brothers is certainly the most shocking name on this list. A 158-year old company, Lehman Brothers should have been able to withstand anything. They withstood the Great Depression and two World Wars didn’t they? Economic conditions that would have sunk most companies had no long-term effects on the sturdy Lehman Brothers.

Then came the mortgage meltdown of 2008. Something as truly innocuous as a housing slump was able to cause the collapse of a company started before the Civil War.

How Does A 158-Year Old Company Declare Bankruptcy?

Well, it seems it’s not very hard to do. All you need is egocentric leadership making millions in the short-term without having any regard for the future or (as maybe the case for Lehman) leaders who are asleep at the wheel.

Henry Lehman, Emanuel Lehman and Mayer Lehman founded the company in Montgomery, Alabama in 1850 as a general store that would soon start trading in cotton. Lehman Brothers would eventually grow into one of the most respected and revered names in financial services in the world.

This past weekend, they announced that they could no longer survive and Lehman Brothers declared bankruptcy. Clearly CEO Richard Fuld, Jr., who had been with Lehman for nearly forty years, was the not the servant steward that companies need in their top office.


Whether ego or greed or simple inattention to the risks of the new economy, Fuld, his management team and Lehman’s Board of Directors failed Lehman’s shareholders (the real owners of the company) and destroyed one of the best names in global finance.

We would be remiss if we failed to provide you with the names of all of those responsible for the failure of this great institution. Henry, Emanuel and Mayer Lehman founded the company, and these men and women failed to provide true leadership and they, in effect, destroyed it:

Lehman Brothers Senior Management:

  • Richard S. Fuld, Jr. – Chairman and Chief Executive Officer
  • Riccardo Banchetti – Co-Chief Executive Officer, Europe and the Middle East
  • Jasjit S. Bhattal – Chief Executive Officer, Asia-Pacific
  • Gerald A. Donini – Global Head of Equities
  • Eric Felder – Global Co-Head of Fixed Income
  • Scott J. Freidheim – Co-Chief Administrative Officer
  • Michael Gelband – Global Head of Capital Markets
  • David Goldfarb – Chief Strategy Officer
  • Alex Kirk – Global Head of Principal Investing
  • Hyung S. Lee – Global Co-Head of Fixed Income
  • Stephen M. Lessing – Head of Client Relationship Management
  • Ian T. Lowitt – Chief Financial Officer and Co-Chief Administrative Officer
  • Herbert H. McDade III – President and Chief Operating Officer
  • Hugh E. McGee III – Global Head of Investment Banking
  • Christian Meissner – Co-Chief Executive Officer, Europe and the Middle East
  • Thomas A. Russo – Vice Chairman/Chief Legal Officer
  • George H. Walker – Global Head of Investment Management

Lehman Brothers Board of Directors:

  • Richard S. Fuld, Jr.
  • Michael L. Ainslie
  • John F. Akers
  • Roger S. Berlind
  • Thomas H. Cruikshank
  • Marsha Johnson Evans
  • Sir Christopher Gent
  • Jerry A. Grundhofer
  • Roland A. Hernandez
  • Henry Kaufman
  • John D. Macomber

The sad fact for American business is that all of these senior managers made millions from Lehman shareholders, and they’ll surely land in new roles with other companies despite their record of poor leadership in the face of economic changes.

More disturbing is the fact that the members of the Board of Directors will probably escape unscathed in this mess. Their role and goal is to protect the shareholder. That’s simply not possible when you serve on multiple boards or continue to operate your own company while serving.

Nothing will change with these absentee boards until we take business failures more seriously – and that includes prison time for directors who so miserably fail to protect shareholders.

The Biggest Lehman Joke

I think the biggest joke bestowed on shareholders can be found on the Lehman website where you can view an ironic page entitled Sustainability (also take time to read the Mission Statement). Here’s a link to the Sustainability page that should work for the next few days. In case Lehman has already taken down this embarrassingly ironic page, here’s the verbiage:

Sustainability

We believe that Lehman Brothers has a role to play in delivering environmental and social solutions. Our vision is to build partnerships and value for our clients through environmental and social opportunities, be one of the most responsible investment banks, and contribute to superior returns for our shareholders.

Lehman Brothers Sustainability Principles

o        Transparency and accountability – We will report regularly on the implementation of these principles

o        Operations – We will aim to minimize negative environmental and social impacts of our operations

o        Employees – We will engage with employees on environmental and social issues impacting our operations and business and encourage the development of innovative solutions

o        Assessing risk – We will assess the environmental and social risks posed by our operations and business. We will engage with clients on critical issues (such as climate change, biodiversity loss and water scarcity)

o        Delivering opportunity – We will seek opportunities across our business that deliver commercial, environmental and social benefit

o        Market-based solutions – We believe that market-based solutions can deliver commercially feasible environmental and social benefit. We will apply our knowledge and understanding of financial markets to develop and implement innovative environmental and social market-based solutions

o        Investments – We will build our knowledge of how environmental and social issues impact business performance into advising clients, investing on clients’ behalf and deploying our own capital

o        Thought leadership – We will conduct research and analysis on key environmental and social issues and make the results publicly available. We will engage in public policy dialogues to contribute to the development of effective policies

o        Governance – These principles are approved and owned by our Executive Committee. The Executive Committee will oversee and receive regular reports on implementation and performance

Well, we’re glad Lehman Brothers cared about sustaining the environment and society, we just wish they could have SUSTAINED THE COMAPANY.

(That would be really funny if this business failure was not so tragic.)