Greed and Glory on Wall

Greed and Glory on Wall Street Ken Auletta's book Greed and Glory on Wall Street: the Fall of the House of Lehman tells the story of how the old and prestigious company Lehman Brothers Kuhn Loeb (LBKB) self-destructed from within because of infighting among its leaders. The author reveals the strengths and weaknesses of the most influential executives of the company during that time.

In the process the author illustrates how company dynamic, corporate culture and interpersonal relationships can serve a company well during one period of time but spell its doom under more unfortunate circumstances. The two individuals who figure most prominently in the chain of events that resulted in LBKB, with a proud history dating back to the Civil War, ended its corporate life as a subsidiary of another major financial corporation -- Shearson/American Express. Without some basic understanding of these two individuals, the events make little sense.

The two most important figures in the collapse of LBKB were Peter G. Peterson and Lewis L. Glucksman. Peterson, called "Pete" by those who knew him well, was actually born Peter Petropoulos. He was the son of Greek immigrants and his father held humble jobs such as dishwasher on a freight train. His parents' marriage was arranged, and George Petropoulos and his wife opened a restaurant serving American food such as hot roast beef sandwiches and mashed potatoes.

His family's experiences were remarkable; at one point the Ku Klux Klan targeted his parents' restaurant Greeks owned it (p. 35). When he went to college, the wealthy family of a classmate, Genoroso Pope, took him under their wing and exposed him to the opportunities available to affluent New York City residents. Also immigrants, the Popes had done well publishing tabloid newspapers -- first one in Italian, and later the National Enquirer. Along the way, Peter's older brother Americanized his surname to "Peterson," and Pete followed suit.

Peter learned from the Popes that appearances and connections count, and Peterson began cultivating a network of influential friends. This, along with his brilliant business acumen, put Peterson on the fast track to high achievement in business. However, he irritated some people with his name-dropping and the differing treatment he gave clients and people he viewed as important, compared to co-workers and those under him. Asked to describe New York once, he used the opportunity to pepper his answer with famous names including Henry Kissinger and 13 other famous people (p. 15).

The answer was classic Pete Peterson, who often bored others with his personal monologues and name-dropping. Lew Glucksman, who succeeded in ousting Pete Peterson from LBKB, said of him, "Pete was a guy totally obsessed with the world hearing the name Pete Person." (p. 18) While Peterson was putting the best possible shine on his humble background by Americanizing his name, Lewis L. Glucksman took a different approach. The son of Jewish Hungarian immigrants, he said in an interview once that his father was a factory worker.

In fact his father owned the factory, but Glucksman was not interested in gilding his own lily. However, he felt somewhat disciminated against in a couple of important ways. First, in the Jewish community of New York, Jews from western European countries such as Germany had more status than Jews from eastern European countries, such as Hungary. In addition, although Glucksman was highly successful at it, he was a trader, not an investment banker, and traders we looked down upon by the investment bankers on Wall Street.

The individual traits of the two men sometimes complimented each other and sometimes rankled. Auletta describes Peterson as a "smooth corporate titan," and Glucksman as a "jungle fighter." Other people were not so kind to either man. One board member called him an "angry pig" who wanted "power, complete control." He also wanted respect, something Peterson saved for power brokers outside LBKB and clients. Peterson could be downright rude to his partners at LBKB, and Glucksman believed Peterson treated him like a "flunky." (pp.

16-17.) This particularly angered Glucksman, because it was Glucksman who ran the day-to-day affairs of the company. He was chairman of the operations committee, a committee Peterson did not even serve on (p. 17). No doubt when Peterson appointed Glucksman his co-CEO, Peterson saw it as a rational, logical decision. Peterson was driven more by reason, while Glucksman was more emotionally driven. On paper the combination probably looked like the perfect combination of strengths, giving the company as CEO position with more strengths than any one CEO could ever have.

However, this rational decision did not account for the sharp differences between the two men. Peterson in fact had prided himself on being a bit of a lion tamer, reining Glucksman in and leading him to be a more reasonable partner to work with. Promoting him to co-CEO was in part a reward for that "new and improved" Glucksman. Unfortunately Peterson, who was often unaware of the feelings of those around him, did not pick up on the seething rage Glucksman felt toward Peterson.

Glucksman had learned to hide it well enough that Peterson thought Glucksman had changed in a fundamental way. He had not. Peterson continued to grossly misread Glucksman's signals, a significant error since Glucksman tended to be blunt and direct. When Glucksman asked Peterson to step aside on July 13, 1983, it was the opening volley of a civil war that Peterson misred as low-level talks (p. 20-22). Ultimately, one of Peterson's greatest mistakes was his differential treatment of people.

At the time Glucksman started his drive to oust him, there were partners Peter hadn't spoken to in months, except perhaps, a hello to them on the elevator that might have been given by others to a total stranger (p. 25). He made no real connection with the people who could support either him or Glucksman in this crisis. Peterson had some great strengths. He was a strong strategist.

He was able to look ahead to the future, predict what economic circumstances were likely to arise, and consider ways that LBKB could profit from such economic shifts. But he lacked the ability to read the people around him. He did not see Glucksman chipping away at his authority until it was too late for Peterson to establish a strong enough power base to retain his position. Peterson and Glucksman had a written agreement about how they would make decisions; Glucksman simply ignored it (p.

78), making unilateral decisions Peterson did not agree with. In the end, Peterson's interpersonal weaknesses overrode his tremendous business acumen, and he was forced out. Without Peterson to balance out Glucksman's impulsive nature, LBKB soon experienced significant difficulties. Many on the board realized that Glucksman did not have what it took to run the company, but they had been caught off-balance by Glucksman's swift coup, and it was clear to them that Peterson had to go (p. 111). Glucksman did not understand the culture of lavishness that had been LBKB's style.

When he changed the accessibility to free cigars only slightly, the partners revolted, and the new rule lasted only a day (p. 123). Where Peterson was blind to the nuances of personal relationships, Glucksman did not see that he could not take a "my way or the highway" approach to changing LBKB culture. Some who worked at LBKB described Peterson as Glucksman's rudder. By himself, Glucksman was not equal to the challenge of running LBKB. Gradually he came to be seen as impulsive, emotional, ruthless, and not to be trusted.

He arbitraily changed how bonuses were distributed, and he seemed to be trying to recompense traders for being given less in the way of bonuses in the past. He felt considerable anger about the pecking order on Wall Street. At the same time, the SEC relaxed certain investing rules, which made it tempting to ignore the long-term picture -- Peterson's strong suit -- in favor of short-term investment decisions -- Glucksman's preference. But for long-term stability, the company needed to consider the long-term picture when making short-term decisions.

Glucksman could not or would not do that. The market turned from bull to bear, and LBKB's profits began to decline (p. 144). Meanwhile, Glucksman nominated Robert S. Rubin, a man who openly stated that he might not be suitable.