Will the Real Richard Fuld Please Stand Up?

June 16, 2008

Which hat was Mr. Fuld wearing when he said he took responsibility? And where was the Lehman board while this crisis was unfolding? No one bothered to ask.

Lehman Brothers formally reported today what it had announced last week: a staggering $2.8 billion loss for the second quarter. At a conference call, CEO Richard S. Fuld, Jr. said the buck stopped with him:

“This is my responsibility…,” he told analysts and the media on the call.

But which Richard Fuld is taking responsibility? The Richard Fuld who leads Lehman’s management team and is its CEO, or the Richard Fuld who heads the Lehman board to which he reports and is its chairman? Or is it the Richard Fuld who chairs Lehman’s two-man executive committee? Perhaps Mr. Fuld wears so many hats that even he is confused about what department his “responsibility” falls under.

Did Mr. Fuld not agree with the investment decisions that resulted in the huge loss? One notices that he did not offer to return any part of his bonus or compensation for the years in which Lehman’s poor decisions were being made. The seeds of the $2.8 billion loss, and much more in write-downs, weren’t sown just in the past three months, you know.

We have raised Lehman’s corporate governance shortcomings here before. What is surprising is that no questions of this type were introduced by the media or analysts when they had Mr. Fuld on the other end of the call today.

It might have been appropriate to ask if the board signed off on the recent changes that saw the ousting of President and COO Joseph Gregory and CFO Erin Callan. Is the risk committee meeting more frequently than the two occasions it did in the past year? What thought has been given to separating the positions of CEO and board chair or mothballing the executive committee as most companies did decades ago? Are there any plans to attract new blood into Lehman’s aging boardroom, which already sees two 80-year-olds playing key roles?

It is not possible to contemplate or tolerate a situation where one person holds three top positions in a company and then puts responsibility for a multibillion-dollar loss on those lower down. If you want all power concentrated in one set of hands, so too must be the blame for calamity when it strikes.

It was an ideal opportunity to inquire about the board culture and structure that has brought Lehman to its reversal of fortune and will shape the tone and future of the company for years to come. The media and analyst community, who like to portray themselves as guardians of the interests of ordinary shareholders, missed it this time.

They often do.

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