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Failed leadership and poor decision making comes to an end: Lehman CEO Richard S. Fuld to resign

By Amarendra Bhushan for CEOWORLD Magazine Updated:November 6, 2008 Become a writer!

Finally Lehman Brothers Holdings has announced that their current Chief Executive Richard Fuld would leave his position at the company by the end of the year. He would not be given any severance or bonus when he departs. He would however continue working in the company as a non-management chairman of the board. Lehman Brothers has not announced his replacement at the moment.

The company recently created history by filing the largest-ever U.S. bankruptcy case. Lehman Brothers spokesman Jonathan Doorley spoke about this new development: “For the record, Mr. Fuld offered to provide this transition cooperation without any claim to severance or other bonus payment at the end of his employment.”

The announcement comes one day after New York State Comptroller Thomas DiNapoli accused Fuld of leading Lehman to its chaotic, pre-dawn Chapter 11 filing on Sept. 15.

“Mr. Fuld’s decisions drove the company toward ruin, as his board stood idly by,” DiNapoli argues in court papers filed late Tuesday asking a bankruptcy judge to appoint an independent investigator in the case.

A spokesman for the comptroller, Jim Fuchs, said, “His resignation would be a good first step.”

Fuld had offered to resign after Lehman sold its broker-dealer business to Barclays Capital on Sept. 20, but Chief Restructuring Officer Bryan Marsal asked him to stay until the end of the year to help with the transition, a spokesman said.

“Lehman Brothers is such a mess at the moment, it’s difficult to know what he’d be contributing in a transition process,” said Paul Hodgson, a senior research associate at The Corporate Library. “There are few CEOs, I think, who would think their employment was guaranteed after overseeing such a major collapse.”

The bankruptcy filing of Lehman Brothers Holdings Inc. was the biggest in U.S. history. It entered court protection with assets of $639 billion and debt of $613 billion.

Since the filing, Fuld – along with 11 former or current Lehman managers or officers – have been subpoenaed by federal prosecutors in three grand jury investigations. Those are being led by investigators in the Southern and Eastern Districts of New York and the District of New Jersey.

DiNapoli is not the first to ask for an independent investigation into Lehman. Hedge funds using the Harbinger name, as well as The Walt Disney Co., Freddie Mac and several others have made similar motions in the case. U.S. Bankruptcy Judge James Peck is scheduled to consider many of those requests at a Nov. 18 hearing.

When Fuld appeared on Oct. 6 in front of the House Oversight and Government Reform Committee, he faced outrage and sarcasm. During the hearing, Rep. John Mica, a Florida Republican, told Fuld, “If you haven’t discovered your role today, you’re the villain, so you have to act like the villain.”

Last year he received $22 million and $34.4 million with bonus. Even after he leaves, Fuld will continue as nonmanagement chairman of the board, Lehman spokesman Jonathan Doorley told Reuters (not exactly “Saturday Night Live”’s Fuld in a barrel).

Fuld did offer to resign after the sale of Lehman’s U.S. asset sale to Barclays plc in September, but restructuring firm Alvarez & Marsal woundn’t have it and kept him on to help smooth the transition over to Barclays.

Richard S. Fuld, Jr.
Director
Chairman and Chief Executive Officer

Richard S. Fuld, Jr. has been chairman of the Board of Directors of Lehman Brothers Holdings Inc. and Lehman Brothers Inc. since 1994 and chief executive officer of the Company since 1993.

Mr. Fuld was president and chief operating officer of Lehman Brothers Holdings Inc. and Lehman Brothers Inc. from 1993 to 1994. He was president and co-chief executive officer of the Lehman Brothers Division of Shearson Lehman Brothers Inc. from 1990 to 1993. Mr. Fuld was a vice chairman of Shearson Lehman Brothers from 1984 until 1990 and has been a director of Lehman Brothers Inc. since 1984. He joined Lehman Brothers in 1969.

Mr. Fuld is a member of The Business Council. In addition, he serves on the Board of Trustees of NewYork-Presbyterian Hospital and Middlebury College.

Mr. Fuld received his B.A. from the University of Colorado and his M.B.A. from the New York University Stern School of Business