Management Turnover as Change Agent

Thursday, June 12, 2008

Erin Callan and Joseph Gregory, Lehman's CFO and COO Ousted - Management Reeling for an Answer

Days after announcing nearly $3 billion in losses and receiving over $6 billion in new capital to help the firm weather the mortgage crisis, Lehman Brothers Holding Inc. LEH (NYSE) ousted its most recent public face and fiercest defender, CFO, Erin Callan. Lehman also ousted COO, Joseph Gregory. Callan will be replaced by co-chief accounting officer, Ian Lowitt and Gregory will be replaced by Herbert McDade , the head of the equities business worldwide.

Callan, an often times controversial figure, has been rigorously defending the embattled financial firm. She has attempted to take on David Einhorn of Greenlight Capital who has been shorting the stock in a highly public confrontation with the firm's management. Callan, while serving as the public face of the firm lately, has at times found herself on the wrong side of the facts. Lehman's CEO, Dick Fuld has been straining to find some way to avoid the fate of Bear Stearns and if possible avoid a takeover of the firm.

The change in management comes after another big drop in the company's shares this week. According to the company's press release Richard Fuld, the company's Chairman and CEO, was quoted to say,
“Joe (Joseph 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. This has been one of the most difficult decisions either of us has ever had to make,”
There was no specific mention in the press release of how hard the decision was in relation to Callan. Both Gregory and Callan will be remaining with the firm at least for now. It is difficult to determine if these moves will help quell the continuing crisis. Past expereince is not a perfect guide, it did not work for Bear (James Cayne) but may have been what worked for Morgan ( removal of Zoe Cruz). Neither of these two situations, however, were exactly the same.

Stay tuned for the continuing roller coaster.

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