Did Lehman CEO Dick Fuld (LEH) move quickly to sack CFO Erin Callan and COO Joseph Gregory because he was horrified at how the firm’s credibility had been destroyed?
According to Sue Craig at the WSJ, Fuld only noticed that there was a problem when Gregory came to him and said he–Gregory–needed to be fired because the Street had lost confidence in the firm and wanted a head. And Callan? She soon walked into the room and said she needed to be canned, too:
Wednesday afternoon, as Mr. Fuld was returning from a staff lunch to his office on the 31st floor of the firm’s Manhattan headquarters, Mr. Gregory asked to speak to him.
“Are you OK?” Mr. Fuld asked him, according to a person familiar with the exchange.
“No,” Mr. Gregory reportedly said.
At first, Mr. Fuld resisted Mr. Gregory’s attempts to offer his resignation, this person said. “It is deeper than me,” Mr. Gregory said. “Erin has come to see me, and she feels she is no longer effective.”
The discussion moved to a few offices away, as Messrs. Fuld and Gregory walked down to see Mr. Russo, the chief legal officer and another long-time Lehman executive. As they were talking, Ms. Callan walked by and joined the discussion, another person familiar with the matter said.
“I should leave, too,” she said as she walked in.
This version of the story presumably came from Gregory, because it makes Gregory look like a martyr and it’s hard to believe that Fuld would allow himself to appear so out of touch. But let’s assume that it’s a fair representation of what happened. What planet is Dick Fuld living on?
It’s true that the Street wanted a head (or heads), but this fact should have been screamingly obvious to Fuld–who already seemed to be living in his own private universe. It’s also true, however, that the head the Street really wants is Fuld’s. Blowing out underlings deflects the blame and shows that you’re not completely asleep at the switch–but the buck still stops with you.
We sympathize with Dick Fuld for not being eager to stick his head in the press wood chipper. We’re also glad to see that folks who work at Lehman are team players willing to fall on swords to save each other. But Lehman Brothers is in a crisis. Fuld needs to
- Demonstrate that he still has a firm hand on the tiller,
- Assure Wall Street that the $6B deal closed and Lehman has the cash
- Assure Wall Street that the firm has written down every security it owns using the most conservative assumptions possible.
- Assure Wall Street that, even after these writedowns, Lehman’s capital position is still strong.
- Articulate a plan with which Lehman will begin to recover from this crisis.
Short of that, Dick Fuld’s legendary reign at Lehman is history.
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