FUTURE INSTITUTE OF MANAGEMENT &

TECHNOLOGY

Chairman and chief

executive

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Officer, Lehman
Brothers Holdings
Richard Severin Fuld, Jr.

Biography of Richard Fuld

Nationality: American.

Born: April 26, 1946, in New York City, New York.

Education: University of Colorado, BA, 1969; New York

University Stern School of Business, MBA, 1973.

Family: Son of Richard Severin Fuld and Elizabeth

Schwab; married Kathleen Ann Bailey; children: three.

Career: Lehman Brothers, 1969–1984, managing

director; Shearson Lehman Brothers, 1984–1990, vice

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chairman; Lehman Brothers, 1990–1993, president

and co-CEO; 1993, co president and co-COO; 1993–
1994, president and COO; Lehman Brothers Holdings,
1993–1994, CEO; 1994–, chairman and CEO.

Address: Lehman Brothers Holdings, 745 Seventh

Avenue, New York, New York 10019;
http://www.lehman.com.

• The original Lehman Brothers were the German

Jewish émigrés Henry, Emanuel, and Meyer
Lehman, who started their firm around 1850. As
family-business owners they would have
appreciated the continuity of the company man
Richard Fuld, himself Jewish. Fuld began his
career at the firm in 1969—at the end of an era,
when the last members of the Lehman family
ceased working at the firm. Over a 30-year career
Fuld helped transform Lehman from a bond
house into a major investment banker.

With 2003 sales of $17 billion, Lehman Brothers

was an investment bank known as an aggressive
trader. The firm offered investment and
merchant banking services as well as the
underwriting of equities and fixed-income
products (such as bonds and other debts), asset
management, institutional sales, and private
client services. In addition Lehman traded stocks,
currency, derivatives, and commodities. After
being weakened by economic turmoil in Russia,
Lehman was growing again, forming joint

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ventures for investment banking with the Bank of

Tokyo-Mitsubishi and for online bond offerings
with SOFTBANK. The firm was also a leading
online bond offered in the United States. Its 2003
acquisition of Neuberger Berman brought assets
under management past the $116 billion mark.

FROM THE TRADING FLOOR

TO THE EXECUTIVE SUITE
• Richard Fuld joined Lehman in 1969 as a
commercial-paper trader and earned his
reputation running the firm's fixed-income
business. In the early 1980s at the age of 37 Fuld
became the supervisor of both the fixed-income
and the equities divisions, overseeing all trading
at Lehman. Fuld had met with great success as a
trader, but his skills as a manager were less
obvious. His interactions with coworkers were
decidedly limited; when he did speak, he tended
to use monosyllables. He was notoriously
described in Ken Auletta's 1987 book, Greed and
Glory on Wall Street: The Fall of the House of
Lehman , as "the 'digital mind trader,' someone
who spent so much time in front of his green
screen or making rat-tat-tat decisions that he
was no longer human." Yet with his new
responsibilities Fuld had 22 managers reporting
to him in divisions that accounted for two-thirds
of the company's profits. Fuld excelled, and in
1982 his divisions generated record profits.

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AN EXECUTIVE SURVIVES
A CUTTHROAT CULTURE
• Fuld, who earned his MBA from New York
University at night, was considered by many in
the industry as one of Wall Street's supreme
traders. One Lehman partner said of Fuld in
Investment Dealers' Digest, "This is a very smart
guy, tough as nails" (August 24, 1992). As
reported by Fortune, a notorious temper earned
Fuld, a weightlifter, the nickname "gorilla"
(December 11, 1995).
• Toughness was a prerequisite to surviving
Lehman's cutthroat corporate culture. Intense
acrimony nearly brought the firm to its knees in
1984, due to a power struggle between the firm's
top trader and top investment banker, and again
in early 1990, due to a clash between the
Shearson Lehman chief executive and the
chairman of American Express.
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A TENSE TRIUMVIRATE
• The history of Lehman Brothers could justifiably
fill several books, with a chapter or two devoted
solely to the firm's relationship with American
Express. Shearson/American Express acquired
Lehman Brothers in 1984; six years later
Shearson Lehman Brothers split its operations
into a Shearson retail division and a Lehman
Brothers investing banking/trading division. A
primary figure during this period was Fuld.
• After the 1990 operations split, Fuld became co-
CEO of the Lehman Brothers division, sharing the
title with J. Tomilson Hill. The pair of executives
comprised two-thirds of a power struggle that
also involved Fuld's longtime protégé T.
Christopher Pettit. Pettit, the West Point
graduate who joined Lehman in 1977, worked
side by side with Fuld for much of his career and
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emerged in the early 1990s as a controversial

rally-the-troops leader. Pettit managed to insert
fixed-income executives personally loyal to him
in top operating positions firmwide, provoking
tensions between him and Fuld. Hill was
ultimately ousted by the American Express
Company chief executive Harvey Golub; Pettit
and Fuld, meanwhile, would meet with further
confrontation later on.

HEADED FOR DISASTER

• In the mid-1990s Lehman Brothers mirrored a
dysfunctional family intent on tearing itself
apart. After the company finally reclaimed its
independence in 1994—having been spun off
from American Express 10 years after it was first
acquired by the firm—infighting abounded. The
squabbles had the potential to ruin Lehman at a
crucial moment in its history. On the competitive
front, the company had claimed a commanding
position in the bond business, but it had yet to
obtain a significant presence in the high-margin
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businesses crucial to success in investment

banking. In 1994 Lehman Brothers' ranking in
Institutional Investor’s poll sank to number nine
after the company had claimed the top position
for three consecutive years in the early 1990s.
Lehman also lacked a major international
presence overseas.
• When the smoke from the spin-off process
cleared, Fuld emerged unscathed. His fixed-
income division was the only segment of Lehman
Brothers making any significant money. One
head of debt-capital markets at a rival Wall
Street house noted in the Financial News , "If
Dick and his bond team had walked to, say,
Morgan Stanley, it is likely that Lehman would
have folded within six months" (March 25, 2002).

A KEY RELATIONSHIP FAILS

• Fuld, who was named chairman in April 1994,
made substantial human-resources changes after
his company broke free from American Express.
One of the most notorious personnel shake-ups
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involved his protégé Pettit. Fallout between the

mentor and younger employee arose after Pettit
was given day to-day operating control of the
company and overstepped his boundaries. Pettit
made a few dubious moves—essentially in
attempts to give himself more power—and his
relationship with Fuld deteriorated. As news of
Pettit's alleged affair with a subordinate spread
throughout the firm, tensions between him and
his mentor were exacerbated further. In April
1996 Fuld stripped Pettit of his day-to-day
business responsibilities and removed most of
his handpicked executives. Six months later
Pettit resigned. Just a few months afterward he
was killed in a snowmobile accident on his 52nd
birthday. Through the beginning of the 21st
century Fuld refused to discuss the matter
publicly.

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LEHMAN'S DURABILITY
THROUGH STRIFE
• After regaining its independence, Lehman raised
its return on equity to nearly 14 percent in 1996,
from the low of 3 percent reached just after the
firm was spun off from American Express. Roy C.
Smith, the professor of finance at New York
University's Stern School of Business, called
Lehman "a cat with 19 lives" in the New York
Times, commending the company on its ability to
survive a slew of stressful changes; he noted,
"They're a bit like an accordion—they can
squeeze when they want to. They're amazingly
durable. Some of the credit for that goes to Fuld"
(June 3, 1997).

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A NEW TEAM TAKES OVER

• Fuld would come to change the leadership in
each of the company's three major operating
units—investment banking, equities, and fixed
income. He focused the company's investments
in high-margin businesses like mergers and
acquisitions and also equities by recruiting
several expensive hires. In January 1997 Fuld
approved $48 million for additional executive
compensation—a full $46 million of that was
earmarked for the investing, banking, and
equities divisions, leaving just $2.4 million for
the fixed-income division's recruits. His strategy
was crystal clear: move Lehman away from its
age-old reliance on fixed income.
• Such a shift could not happen overnight, but that
did not prevent Fuld from feeling pressure. As
reported by Investment Dealers' Digest, in
addressing analysts at a 1997 meeting Fuld said,
"The process of building our high-margin
businesses and shifting our overall business mix
takes time. It starts with leadership at the top,
then at the next level, then the talent needed to
meet client needs and produce revenues. Once
all that is in place, it takes time to get the
resources to work together properly to build or

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expand relationships, and create revenues"

(August 25, 1997).
• As Fuld worked to get his company back on track,
he was forced to contend with endless rumors
and speculation that Lehman was on the market
for purchase. He remarked in the New York
Times, "We are building a strong independent
investment bank. We are certainly not looking to
be bought" (June 3, 1997).

A TRAGEDY FOCUSES A FIRM

• Lehman's investment-banking business began to
seriously take root in the midst of a massive
crisis: the September 11, 2001, terrorist attacks
and the loss of the firm's World Financial Center
headquarters in downtown New York. The
midtown Sheraton Hotel became the company's
temporary central offices. There, instead of
grouping bankers by the type of financing in
which they specialized—the typical setup—
management grouped bankers by industry. So for
the first time the bankers who underwrote debt
and the bankers who put together stock offerings
worked side by side in the same makeshift office
—a cocktail lounge. The setup worked so well
that the arrangement was retained when the
company moved into its new headquarters in
2002, resulting in increased communication
among bankers and more innovative financing
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solutions for clients. In the past the company had

measured success on individual bases; after the
restructuring, noted Fuld in Business Week, "it
was all about the team" (January 19, 2004).

THE TOP OF THE CEO

PAY CHARTS
• In 2001, amid the global recession and stock-
market collapse, Wall Street firms felt the
economic pains most of all. Lehman at least
outperformed the industry; Fuld's reward was a
2001 compensation package worth $105 million,
making him the fourth-highest-paid chief
executive in the United States. Most Wall Street
chief executives—including those at Goldman
Sachs, Morgan Stanley, and J. P. Morgan Chase—
reduced their pay packages at the time.

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• Despite Fuld's laudable performance in turning

Lehman Brothers around, outsiders criticized his
payment package as irresponsible in a year
during which shareholders—even those who
owned a piece of Lehman—suffered: Lehman's
stock had started the year at around $75 and
finished at around $65. Ian Kerr of Financial
News described 2001 as "the type of year when
small shareholders and retail investors might
have gawked at the investment bankers' seaside
mansions in the Hamptons and the boats in Sag
Harbor and asked, 'But where are the customers'
yachts?'" (March 25, 2002).

THE KEYS TO SUCCESS

• Fuld was a long-term player and knew that better
days were ahead. Lehman's rebound continued in
the first few years of the millennium, as the firm
earned a reputation for its stellar management
through three primary accomplishments: First,
the company kept employees' salaries in line with
earnings, with the ratio of compensation costs to
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gross revenues hovering around 51 percent.

Second, Lehman maintained a strong focus on
U.S. government bonds, global fixed income, and
credit derivatives at a time when the equities
and investment banking markets were losing
propositions. Finally, the firm retained its best
managers by handing them substantial portions
of stock in the firm. In 1994 employees owned 4
percent of Lehman; by 2004 they owned 35
percent. In 2001 the firm allocated $544 million
for stock-based pay, accounting for 15.8 percent
of its total compensation expenses, as compared
with the 6.4 percent allocated for such purposes
at Merrill Lynch. Fuld's message to new recruits:
If you join us, we promise to make you rich—
perhaps seriously rich. And he delivered on that
promise—by 2002 the company was teeming with
self-made millionaires.
• Despite its success, Lehman Brothers still
lingered in the shadows of such mega firms as
Goldman Sachs and Citigroup. Although its
market cap grew from $2 billion in 1994 to $15.8
billion in early 2002, the firm still lacked the type
of balance sheet that would allow it to make a
significant acquisition.

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NOT JUST A BOND HOUSE

• In October 2003, after several painful years of
sitting on the sidelines, Lehman Brothers seized
on an opportunity to expand its business. Thanks
to historically low interest rates, the bond
market exploded—along with Lehman's profits—
and a sizable acquisition finally proved financially
feasible. The target was Neuberger Berman, a
money-management firm focusing on the
affluent. In 2004 Lehman Brothers acquired
Neuberger Berman in a deal valued at $2.63
billion.
• For Fuld the Neuberger acquisition was the
realization of a strategy he had been espousing
since the mid-1990s: to diversify the company's
business and lessen its reliance on the bond
trading market. The company expected the
acquisition to increase its percentage of fee-
based revenues from 13 percent to 21 percent.
The move put Fuld's company on equal footing
with Morgan Stanley, Merrill Lynch, and Goldman
Sachs, all of which had significant money-
management businesses. In Neuberger Berman,
Lehman had obtained a firm with $63.7 billion
under management, a well-regarded cadre of
mutual funds, and a slice of the sought-after
business of financial services provision to high-
net-worth clients. As quoted in the New York
Times, Fuld said in a conference call, "Neuberger
Berman is one of the largest and most respected,

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independent, high-net-worth managers. When

Neuberger is combined with our existing wealth
and asset-management group, Lehman Brothers
will emerge as one of the leading providers of
services to a highly desirable marketplace" (July
23, 2003).

A POWERHOUSE EMERGES
• In 2003 Daily Deal awarded Lehman Brothers the
"Top 5 Global M&A Announcements of 2003 Deal
of the Year" for its consultation with Travelers for
the company's $16 billion merger agreement with
St. Paul Companies. All told Lehman consulted on
$99 billion worth of U.S. mergers and
acquisitions in 2003, increasing its market share
by 6.2 points to 18.9 percent, according to
Thomson Financial. That gave the firm the lead in
mergers and acquisitions in the industry, over
Credit Suisse First Boston, Merrill Lynch, and J. P.
Morgan Chase. Among major Wall Street firms,
Lehman claimed fourth place in mergers and
acquisitions overall, up from ninth in 2002. In
2003 the company raised $314 billion in debt and
equity issues for clients, cementing its position
as the number-two underwriter of securities in
the United States—behind Citigroup—up from the
number-four spot in 2002.

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• Lehman Brothers' success stories were largely a

byproduct of Fuld's focus on offering a complete
array of financial services, including advisement
on corporate merging, raising capital, hedging
risk, and making debt payments. Fuld's
transformation showed foresight. As the
economy picked up, bond insurance was
expected to soften; Lehman's investment
banking operations would be the counterbalance
to the expected downturn in bonds. In a nod to
Fuld's efforts, Blaine A. Frantz, the senior credit
officer at Moody's Investors, told Business Week ,
"It is a much more diversified shop than it was
five or six years ago, and it operates in an
extremely disciplined fashion" (January 19,
2004).

ONE OF THE "TOP CEOS"

• Another nod from Wall Street came in January
2004 when Institutional Investor ranked Fuld first
in its annual Best CEOs in America survey in the
Brokers & Asset Managers category.
• Plenty of room for improvement, however,
existed within Lehman Brothers' overseas
operations. The company was ranked fourth in
European M&A work in 2002, with a market share
of 19 percent, but it fell from number eight to
number nine in the global rankings for

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announced mergers. As of early 2004 one of

Fuld's goals was to improve the company's
overseas market share, partly by appointing two
top executives in Asia and Europe to the
company's executive committee.
• In good times and bad Fuld displayed
unquestionable consistency and strength. One
would expect nothing less from the leader of one
of the top investment firms in the world. In a
tough business few proved tougher than Richard
Fuld.

RECOMMENDATIONS
• My recommendations are in the favor of Richard
Fuld. Because he is a most popular leading man
for our country and the whole world also. Richard
Fuld joined the Lehman Brothers in 1969. And till
1984 he was the Managing Director of Lehman

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Brothers. And from 1984 to 1990 he was

Shearson Lehman Brothers. From 1990 to 1993
he was Vice Chairman of Lehman Brothers. In
1993he was president and co-CEO of Lehman
Brothers. And from 1993–1994 he was co
president and co-COO of Lehman Brothers. From
1993–1994 he was president and COO of Lehman
Brothers Holdings. And from the 1994 he is the
Chairman and CEO of LEHMAN BROTHERS.
• In the last days of Richard Fuld had lot of records
and the present time also and I think that
Richard Fuld will carry that particular BRAND in
the coming few years and get the name as he
wants from his workings.
• The success of LEHMAN BROTHERS is totally goes
to Richard Fuld because he is the only person
who builds the LEHMAN BROTHERS as a
MOUNTAIN of HIMALAYA.
• And my recommendations for his future works
that he should be join the new company or start
a new own business and should reach the new
company or the business on the PEAK as
according to the LEHMAN BROTHERS.
• And besides it he can give the knowledge of his
experiences to the other subordinate or the other
relational then he will reach on the peak again.
• He could exchange his working methods from
other caulis and he will get the more and more
profits and the name or the brand name also.
• My recommendations is in the favor of Richard
Fuld.

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