Sunday, October 12, 2008

Lehman Brothers not any longer a family business

The fall of Lehman Brothers from the pinnacle also reflects the extent to which the organization has lost its character after the departure of Robert Lehman in 1969, the last member of the family to hold the top post. He served as the Chairman for 44 years until his death in 1969. Since then the organization has ceased to be a family business though the name was retained. (please see the following links for more relevant information:; ).

A close look at the history of the company would reveal that it started losing the trust element, that is the core of banking. One of the core values of such an organization is stewardship, which means that the individuals involved, particularly the leadership, feel themselves as stewards, who are there to offer selfless service. The core value of a family is also the same. Families that last generations honestly believe that they are the trustees of their respective family’s wealth and play only a custodianship role. They own nothing but have a responsibility to preserve the wealth and grow it to transfer to the subsequent generation, but not to destroy it in anyway.

With the passing over of the management of Lehman Brothers into leaders who, unfortunately, did not share the same core values of trusteeship, the organization was inviting trouble. Incidentally, the Wikipedia link (above) gives a lot of information on recent developments. One quote that reflects the lack of trusteeship value from it is reproduced here:

On October 6, 2008, CEO Richard Fuld testified before Congress. Rep. Waxman pointed out that Fuld had made nearly $500M since 2000, a salary incomprehensible to the average taxpayer, while Fuld was guiding Lehman to bankruptcy. Waxman said to Fuld, "My question is a simple one. Is this fair?" Fuld did not give a straight answer to the question, but only a meandering reply.

It is difficult to imagine a family member who is proud of the family’s reputation and integrity doing the same. We all know that the root cause of the current crisis is extreme greed to show quarter-to-quarter performance without looking at the implications for the people whose money banking institutions hold.

Families and businesses that are built to last have a combination of values and processes: trusteeship, otherwise called stewardship, coexist with strong systems and processes. All their decisions are guided by the core value of trusteeship but they do not lose sight of their commercial competitiveness.

The lesson for family businesses is clear: Remember the trusteeship role they are expected to play while taking business and family decisions. Family and business will naturally perpetuate. As noted by Prof John Ward of Kellogg School of Management (, family businesses that last several generations are not driven by short term performance goals but long term growth and asset creation goals because they are clearly guided by the values of trusteeship in their members.

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