Leadership at Lehman

With Lehman Brothers bruised and staggered from its $2.8 billion loss in the second quarter, analysts and financial pundits have been writing rough-draft predictions that the bank may soon be joining Merrill Lynch, Citigroup and Bear Stearns as an institution in free fall, an institution that, despite its best efforts, simply could not overcome the unforgiving gravity exerted by the mortgage-backed securities meltdown. And while Lehman’s posting of its first quarterly deficit since going public 14 years ago is cause for concern, the bank’s shareholders, and Wall Street at large, began to breathe a bit easier this week as the firm’s chief executive officer, Richard Fuld, stepped up to take sole responsibility for his firm’s troubles. Because when the numbers are going south, the last thing any company needs is a frenzy of finger-pointing and blame-gaming within top management. Instead, Mr. Fuld showed himself to be a fiercely engaged leader who understands that, even though his firm was hardly alone in being the victim of the tight credit market, he’s still the boss and, as such, he’s the guy who has to answer to clients and shareholders.

It’s true that Mr. Fuld and his team could have made better decisions in how they spent the firm’s capital, and acted more quickly to keep Lehman Brothers from taking such a devastating hit. But Mr. Fuld has done a deft job of managing the crisis, acting to reassure shareholders and clients by reducing the bank’s leveraged positions, demoting his longtime friend, president Joseph Gregory, and chief financial officer Erin Callan, and announcing a $6 billion infusion of new capital from top-drawer investors. “This is my responsibility,” he said. “We’ve made a number of changes. It’s now my job to make sure that we execute.”

Mr. Fuld’s stance distinguishes him from CEO’s of other troubled banks, who have tended to grasp for excuses rather than solutions. All signs indicate he will continue to be a good leader and will rebuild Lehman Brothers—a firm founded by a great New York family, with a proud tradition—into the powerhouse it was and will be again.