The Firing of Erin Callan
By: Bailey McCann
Last week’s big news in the on going fall out inside the financial services industry was the fall of Erin Callan and Joseph Gregory. While there are varying levels of speculation on why Ms. Callan was demoted so quickly after her promotion to the CFO position, one thing is clear: in this industry when things get tough CEO’s start shuffling the desk chairs. When banks start to falter, the pressure hits everyone in the bank but ultimately lands squarely on the CEO.
Richard Fuld, the CEO of Lehman is no exception and now makes the most current example. Promoting Callan to the CFO position was controversial, and it seems clear when the quick turnaround didn’t happen he moved her out. Fuld has been the CEO of Lehman for a long time, but if he can’t pull the bank out of its disarray he may well be the next casualty of this economic downturn.
The history of these moves is well established, the CEO is usually the last to go but only after the CEO has fired or demoted everyone he or she possibly can to stave that off. Before this it was Zoe Cruz at Morgan Stanley, and before her it was Geoffrey Boisi at JP Morgan Chase, just to name a few. Markets and investors tend to take few excuses and have little patience in times like these.
Perhaps Fuld is on his way out, moves like this tended to signal the beginning of the end for others such as Phil Purcell or Stanley O’Neil. These kinds of firings put a face on the financial crisis and mistakenly place the blame on individuals, when the real problem is a lack of clarity and accountability for what is on a bank’s balance sheet. All the banks are facing continued pressure from the markets and investors who aren’t pleased with the lack of recovery; indeed in some cases the bottom may not even be established to recover from as new losses have recently been revealed.
Surprise losses like the one Lehman announced, combined with the ouster of Erin Callan and Joseph Gregory increase the scrutiny on the bank and the CEO rather than relieve pressure. Banks have to be able to prove that they can stop the bleeding and have enough capital left to stay the course through recovery – a CEO shuffling names and titles is a cosmetic fix at best.
In Callan’s case, her own high profile increased the shockwaves around what seems to be an all too typical move. Having only held the CFO position for seven months, she quickly gained a lot of press for being a woman in this male dominated position, and for her public sparring match with activist investor David Einhorn. After the firing of Zoe Cruz, Callan was the most senior woman on Wall Street and she didn’t shy away from the moniker, thus making her ouster that much more public.
With so few women holding senior positions in Wall Street’s firms, when one of them gets promoted or demoted it’s news, and Callan’s embrace of that made her open for backlash on her way back down. While her firing was likely gender neutral, it does add an extra level of publicity and disarray Fuld may not have been banking on.
The future of Lehman is unclear, as is the level to which this sector will have to trim down and possibly consolidate to come out on the other side of this downturn. One thing is for certain, it has been a tough year for everyone working on Wall Street, not just the women.
