Lehman Brothers Shakes Up Upper Management
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
Lehman Brothers Holdings Inc. replaced its chief financial officer, Erin Callan, and its president, Joseph Gregory, after the firm failed to quell speculation about mounting losses and stem a 65% plunge in the stock this year.
Ms. Callan, 42, who has been Lehman’s public face in television appearances and magazine profiles since she was promoted to CFO six months ago, will return to the firm’s investment banking unit and be succeeded by co-chief administrative officer Ian Lowitt. Herbert “Bart” McDade, the 48-year-old head of the equities business worldwide, will replace Mr. Gregory, the New York-based firm said yesterday in a statement.
The ability of the chief executive officer, Richard Fuld, to maintain Lehman’s independence has been called into question this week after the 158-year-old company posted the first quarterly loss since it went public in 1994 and turned to outside investors for a $6 billion cash infusion. Merrill Lynch & Co., Wachovia Corp., and Oppenheimer & Co. cut their ratings on the stock and a hedge-fund manager, David Einhorn, said the firm hasn’t fully disclosed its high-risk assets.
“Our credibility has eroded,” Mr. Fuld, 62, said in a memo to his employees yesterday. “The current market environment is forcing us to take a number of measures to regain the confidence of all our constituents.”
“The new investors who bought in this week probably asked for some heads to roll,” a senior portfolio manager at Huntington Asset Advisors, which oversees $17 billion and invests in options to buy and sell Lehman shares, Peter Sorrentino, said. “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.”
The former CEO of American International Group Inc., Maurice “Hank” Greenberg, and New Jersey’s pension fund are among the investors who paid $28 a share on June 9 to buy $4 billion of Lehman common stock and $2 billion of convertible preferred shares.
Mr. McDade, who ran the fixed-income division for three years before being chosen to head equities, is considered by current and former Lehman executives to be a leading candidate to succeed Mr. Fuld.
