Lehman CFO Callan, President Gregory Replaced

Lehman removed its high profile, recently appointed CFP Erin Callan (who will return to investment banking and its president Joseph Gregory (who ) when aggressive PR campaign failed to shore up confidence in the embattled bank. (Correction: the initial information at the Financial Times was wrong, ) The markets appear to approve of this move, as reports:

Shares of Lehman Brothers opened at their lowest since March on Thursday but then erased losses as investors digested the news the investment bank has demoted its chief financial officer, Erin Callan, and named a new chief operating officer

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From :
Lehman Brothers Holdings Inc replaced Chief Financial Officer Erin Callan and President Joseph Gregory after the firm’s efforts to shore up capital and shed unwanted assets failed to quell speculation about additional losses and stem a 60 percent plunge in the stock this year.

Callan, 42, ….. will be succeeded by co-chief accounting officer Ian Lowitt, the New York-based firm said today in a statement. Herbert “Bart” McDade, the 48-year-old head of the equities business worldwide, will replace Gregory…..

“The new investors who bought in this week probably asked for some heads to roll,” said Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors, which oversees $13 billion and invests in options to buy and sell Lehman shares. “But when you don’t bring a proven captain to turn things around, it’s more like re-arranging the deck chairs on the Titanic. This might be too little at this point.”…..

Fuld’s decision to push aside top executives amid the credit- market turmoil mirrors steps taken by his counterparts at rival Wall Street firms.

Bear Stearns Cos. CEO James “Jimmy” Cayne ousted co- president Warren Spector in August, and wound up losing his own post and then his firm to a takeover by JPMorgan Chase & Co. Morgan Stanley CEO John Mack has fared better since firing Co- President Zoe Cruz, whom he held responsible for the bank’s mortgage-related losses.

Gregory “has been my partner for over 30 years and has been a driving force behind who we are today and what we have achieved as a firm,” Chief Executive Officer Richard Fuld, 62, said in the statement. “This has been one of the most difficult decisions either of us has ever had to make.”

Callan got high marks from investors and analysts during her first earnings conference call after being appointed in December for being direct and open about the firm’s finances. Her credibility was damaged when she had discussions with hedge fund manager David Einhorn, who then publicly accused her of changing her story about one of Lehman’s private equity investments after he pressed on some details. Einhorn has bet that Lehman shares will fall…..

Fuld “was forced by his board to offer up sacrificial lambs,” George Ball, chairman of Houston-based brokerage Sanders Morris Harris Group, said in a Bloomberg TV interview. “That is what they do on Wall Street.”

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7 comments

  1. Peripheral Visionary

    Unmentioned in all the talk over executive turnover is the impact it will have on executive compensation. At one point the perception among boards was that talent was scarce and the competition for it was fierce; but with high turnover and executives being shown the door, that argument doesn’t really hold water any more. In addition, with internal employees being tapped to fill vacancies, there is not the high-drama external executive search that invariably pulls in the compensation consultants.

    Overall, the conditions are in favor of a slowdown in executive compensation increases. If boards continue to approve big raises for the executive suite, investors should put some very hard questions to the directors.

  2. etc

    Maybe new management gets vigorish by pushing the stock price artifically low due to excessive write-downs or whatever, so they can get stock options with strike prices set at prices way below fundamental value, and then hope the stock price recovers to reflect the fundamentals, so they can get option compensation equal to the excessive losses.

  3. Anonymous

    Etc – If only they were so smart – they probably would not be in this situation.

  4. Anonymous

    So (according to the market’s wisdom) all’s well at LEH now then, now that these two are gone?

    Lehman’s high profile anti-Einhorn PR campaign right before they reported ugly losses and started shaking the trees for $6B very likely didn’t start and end at Gregory and Callan.

    In an honorable world, the CEO of a flailing company like LEH would step down and leave the firing or retention of the loyal staff to the new one.

  5. Anonymous

    So Charlie Gasparino has called up and apologized I take it. He was playing another silly game today with Blackstone and Lehman. Is he completely dense or does he just lack the self-respect to care that he’s obviously being used as a propaganda tool? He’s a joke.

  6. Anonymous

    OMG, he lied… give him a gazillion and wipe BB’s butt; it’s disgusting to look at.

  7. Anonymous

    I apologize for my last comment, it was completely inapropriate. If I could retract it, I would.

    I am sorry.

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