Untold Stories and Leadership Lessons: An Exclusive View of the Chaos Inside the Lehman Brothers Bankruptcy

• In Event: Working at the Top: Corporate Culture, Disruption, and Transformation

Short Description

The 2008 global financial crisis unfolded as Lehman Brothers filed for bankruptcy. A senior executive with Lehman Brothers during the crisis will share untold stories of its employees and leaders, discussing organizational culture, ignored signals, the preservation of the status quo, and leadership behaviors and lessons learned.

Detailed Abstract

On September 15, 2008 at 1:45 A.M. Lehman Brothers filed for bankruptcy, nearly causing a meltdown of the world’s financial system. A few days later Bernanke made his famous statement that “we may not have an economy on Monday” (Thomas and Hirsh, 2009). The bankruptcy filing came after a weekend of heated negotiations among regulators and Wall Street firms about Lehman's fate. The U.S. government refused to backstop Lehman's worst assets the way it backstopped Bear Stearns’ sale to JPMorgan Chase. Government officials told banks to support Lehman or else be prepared for more investment banks to lose investor confidence and fail. However, prospective bidders refused to buy Lehman without government support. In the end, Lehman Brothers, the investment bank that was known on Wall Street for its unique culture of entrepreneurism, innovation, and top talent was allowed to fail. The bankruptcy filing represented the end of a 158-year-old company that survived world wars, the Asian financial crisis and the collapse of hedge fund Long-Term Capital Management, but not the global credit crunch.

Leaders of government and business, as well as citizens of all continents were left to respond to a rapidly deteriorating financial unrest. Bank closings, job losses, housing foreclosures, and government debt were increasing rapidly. While the press has fortuitously examined the why of the financial collapse of Lehman Brothers, it had not done a thorough job of examining the employees and leaders and their role in the financial collapse at Lehman Brothers and the follow on activities.

In this presentation, an explanation will be shared. Attendees will gain insight into the chaos and actual events of the bankruptcy from a senior HR executive with Lehman Brothers during the crisis. Participants will hear untold stories about the employees, leaders, and media. A comprehensive presentation on the bankruptcy lifecycle will include ignored signals, preservation of the status quo, employee impacts, and most importantly, leadership behaviors and lessons learned. The presentation opens with an overview of the Lehman Brothers’ climate, culture, and behavioral attributes that led to its demise. Investment banking’s emphasis on success is a characteristic of Wall Street’s culture. Failure is not often tolerated and anxiety amongst leaders and employees is commonplace. Gabriel (2008) asserts that excessive anxiety may generate aggression and even lead to destructiveness. As the events prior to, during, and after the bankruptcy unfolded, leaders suffered from “power stress”, what Boyatzis (2006) claims results from exhaustion and burnout and ultimately, dissonance. Botyatzis (2006) further claims that dissonance can become the default and result in cognitive functioning being impaired and since emotions are contagious, the dissonance infiltrates quickly and eventually permeates the organization.

Attendees will gain insight into how the bankruptcy affected the people of Lehman Brothers. The presenter will provide a synopsis of the occurrences during the bankruptcy, including, untold stories about employees and leadership challenges and behaviors. A specific focus will be on leader and employee actions and inactions. A brief discussion on commitment theory will provide insight into how employees reacted. Next, attendees will learn about the leadership actions after the acquisition by Barclays. The presenter will answer questions such as: What do you think are some of the immediate actions Barclays leaders did to integrate the companies and how did the Barclays culture affect the integration of Lehman?

Then the session will move to an open discussion format focused on whether post bankruptcy federal regulations will protect us from such bedlam happening again. Pointed questions such as, what would audience members have done if they were Dick Fuld or Hank Paulsen will be facilitated.

Today, all organizations are evolving and in constant change. Attendees will learn how leaders can best manage in chaos. The presentation closes with lessons on effectively leading during dynamic, complex times.

Participant

• Linda M. Pittenger, Embry-Riddle Aeronautical University