Amusing? Or appalling? You be the judge.
Vicky Ward shares this story in her new book, The Devil's Casino (John Wiley & Sons), about the collapse of Lehman Brothers. The tale goes back to the days when Lehman was first being spun out of American Express. Amex's then-chairman Harvey Golub was giving the Amex board a presentation about the benefits of the spinoff of the investment banking firm.
Ward writes: "The presentation — a basic rundown of the businesses within Lehman, and what the economics looked like going forward — went over well, and the board signed off on the deal. Two memorable moments occurred.
"First, when former Secretary of State Henry Kissinger, then on the American Express board, opened a sweetener packet, emptied it into his iced tea, then stirred the beverage with his pencil — eraser end first.
"The second was when another board member, former U.S. President Gerald Ford, asked Golub if he could please explain the difference between 'equity' and 'revenue.' There was an awkward moment of silence as everyone digested this.
"One person in the room recalls that Golub 'did a very skillful job. I was very impressed. It's a very basic concept, and he explained it to the former president without making it sound like he was talking down to him.' "
The Henry the K anecdote is amusing. The Gerald Ford anecdote? Not so amusing.
You read something like that and it sure explains a lot about the ability of these financial institution boards to oversee the complex wheelings and dealings of the firms, including — and most ironically — the abject failure of the Lehman board to prevent the firm's annihilation.
