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