The Wall Street Journal broke the story that Bear Stearns’ 74 year old chairman James Cayne has told board members he will give up his CEO role but stay on as chairman. 57-year old president and investment banker Alan Schwartz is expected to assume the CEO post.
I complained back in November that the Wall Street Journal had run an oddly timed and unduly harsh piece on Cayne. At the time I pointed out that Cayne had been smart enough to secure an investor for Bear early on, on terms that appeared highly favorable to the firm; subsequent deals have been much more favorable to the investors. Similarly, Bear, despite its heavy involvement in subprime origination, hasn’t taken the big writeoffs that other securities firms have. So despite the huge black eye of its hedge funds’ meltdown and the continuing legal wrangles (manager Ralph Cioffi is alleged to have pulled some of his funds out while other investors were blocked from doing so; however, this may have been permitted under the term of the offering agreement), Cayne can be argued to have done a better job than many of his Wall Street peers.
But Cayne is of an age when it would be logical for him to move on; he may have decided that there was no way for him to leave on a high note and better to reduce his responsibilities when there was no crisis looming.
But even though Alan Schwartz may be able, he comes from the dealmaking side of the house when the tsuris are in the fixed income operations. It would be better to have a leader with more experience in that arena. The flip side is that Bear is a tough, scrappy firm, and it would be difficult for an outsider to be effective.