Lehman says thanks for sticking around
Posted
Jul 03 2008, 01:23 PM
by
Matt Koppenheffer
In an unusual move, Lehman Brothers decided to try and engender some employee goodwill by handing out a mid-year bonus. Unfortunately, it was in stock. Worse still, it was in Lehman stock.
Now before you go and assume that this is a bad idea because Lehman stock has been so badly beaten up, let's be clear -- this is bad for a whole lot of reasons. And instead of getting hung up on minutiae like whether it's really an incentive when you're handing out shares of a plummeting stock, think about what this says about the bigger picture at Lehman.
Most companies at some time or another have talked about their people as their greatest asset. While there's often some truth to that, it's dead-on when it comes to the investment banking industry. An investment bank is nothing without good people.
So what does it say when a firm like Lehman thinks it has to go off schedule and pay a mid-year bonus? Are employees getting restless? And will they be OK with getting even more stock? According to Bloomberg, pay packages at Lehman this year will have a heavier dose of stock than last year as Lehman tries to conserve cash.
From the perspective of keeping Lehman an independent company, handing out stock to employees -- who already own about 30% of the company -- makes it incrementally tougher for a hostile buyer to swoop in. But again, that these are pressing questions for Lehman management says a lot about where the firm is today.
Investors in The Motley Fool's CAPS community can't seem to come up with enough bad things to say about Lehman. Among CAPS All-Stars -- players ranked in the top 20% of the community -- there are more than two Lehman bears for every bull. One of those All-Stars, amnmann, shared his bearish thoughts last month simply saying, "They can't raise enough capital to save them. This ship is filled with cement and just has not sunk yet."
Cash is crucial for brokerage shops like Lehman these days. However, if there's one thing more important it's confidence in the business from creditors, counter parties, and investors. And if there's one thing that Lehman seems to be burning faster than cash it's credibility.
Matt Koppenheffer is a Top Stocks blogging partner.
