Losing Jobs and Getting Rich

It’s tough to fear the loss of a job.  It’s particularly tough when it’s the result of bad management by those who’ve gotten rich.  This scenario is playing out now in the case of Lehman Brothers.  Lehman has filed for bankruptcy, meaning that fear has turned into reality for thousands of employees and the loss of much of their savings which had been placed in Lehman stock. 

For 158 years, Lehman has been one of Wall Street’s stalwarts.  In 2007, its stock sold for $86 a share.  At the end of last week, it was selling for $4 a share.  Today, it’s worth nothing.  That’s a problem for lots of Lehman employees who have in recent years increasingly received much of their pay in stock and stock options.

In light of the bankruptcy, Lehman’s CEO won’t come out of this as well as many CEOs who get the boot after not being held accountable for too long.  At the stock’s peak, Lehman’s CEO held stock valued at $956 million.  Last week, it had fallen to $40 million.  Now, he’s in the same boat as other stockholders of Lehman’s worthless stock–with one exception.  During the 15 or so years of being at Lehman’s helm, he has become quite wealthy.  The CEO and other Lehman executives will be fine, unlike many of Lehman’s 25,000 jobless employees.  Moreover, the CEO is entitled to $16 million in pension payments and $5.6 million in deferred compensation, although the bankruptcy might eliminate those benefits.

We haven’t heard the end the financial industry’s troubles.  Bank of America has agreed to buy Merrill Lynch for half of what it was worth a short time ago.  Merrill Lynch has 60,000 employees, and it’s a safe bet that BOA has no intention of keeping a large percentage of them, including Merrill’s management team.  But not to worry, just as was the case with Lehman, Merrill’s executives will be able to make it just fine with the millions they’ve earned while running the firm in a way that placed its survival in jeopardy.

Regardless of the industry you’re in, a lot of your employees are concerned about job security.  It’s important that you treat them with honesty, consistency and respect during these troubled financial times.  That’s one way to keep their job losses (if it comes to that) from becoming your litigation.