Lehman Brothers—Ten Years Later—One Eternal Lesson to Remember

• Trends
• September 14, 2018
• by Merrie Spaeth

News outlets and commentaries are talking about the tenth anniversary of Lehman Brothers’ bankruptcy, an event that many experts believe pushed the U.S. into the worst recession since the Depression. Analysts are again debating the wisdom of the Treasury Department and Federal Reserve letting Lehman go belly up after having bailed out Bear Stearns. There’s one eternal lesson to remember from Lehman; that is, there’s no barrier between internal and external information. In other words, it’s very risky to say one thing internally and something else—totally contradictory—externally.

Courtesy of the Wall Street Journal in the aftermath of the debacle, we can see that on September 9, 2008, Lehman was internally discussing how to arrange to restructure its debt and estimated it would need between $3 to $5 billion. Their bankers advised against holding a conference call saying it would generate too many questions. Twelve hours later, Lehman held the conference call anyway, and CEO Richard Fuld assured investors that the restructuring (which was anything but secure but was portrayed as a done deal) would “create a clean, liquid balance sheet.” Their CFO Ian Lowitt said that they had “maintained strong liquidity and capital profiles,” which was an outright lie. To cap it off, when an analyst asked about raising billions, Lowitt said they “don’t feel that we need to raise that extra amount.”

Why should we care about a decade-old communication example? The headline of a recent USA Today editorial reads, “The next financial crisis is a matter of when, not if.” Think of all the news that has broken this year. Google and Facebook spying on customers and selling their data. Uber mistreating drivers. Company after company discovered fostering toxic environments where sexual harassment and abuse of women was tolerated, even encouraged. All these companies initially claimed, “Not us, no how,” only to be uncloaked. Yes, Lehman taught us many lessons, and what has been learned? Not much. However, there is an opportunity to learn and grow via this one simple principle: your internal and external messages should be in alignment.