Dick Fuld: A Gilded Leader

A person has expert authority when he has the talent, knowledge, skill and experience that someone else needs. This is a common form of power and has become the foundation of associations, organizations, corporations and even political parties where the code of specialization allows other complex enterprises to be launched.

Expert Power – Obtaining compliance through one’s knowledge or information. Managers generally have this power since they tend to have information that their employees don’t.

A Colossal Failure of Common Sense was one of many books to be published in the aftermath of the Financial Crisis of 2007. After seeing the global economy stall in the face of massive losses in word financial markets, many Americans sought to better understand the crisis and its causes. This book, written from the perspective of a financial market insider, provides a glimpse into the world of global finance and also seeks to explain how the players in this world were involved in the crisis. In the words of the author Lawrence McDonald, “My objective in writing A Colossal Failure of Common Sense was twofold. First, to provide … a close-up, inside view of how markets really work…..And, second, to give… as crystal clear an explanation as possible about the real reasons why the legendary Lehman Brothers met with such a swift end”1. By writing about his personal experience at Lehman Brothers and recounting stories from within the famous investment banking firm, Mr. McDonald largely succeeds at his first goal. However, the elements of personal biography and the chronological order of the book make it difficult for the reader to fully appreciate all of the varied causes of the financial crash. I believe that the main value of reading this book is in understanding these causes, with Lehman Brothers acting as a microcosm of the greater financial universe. As such, in this review I have isolated elements from Mr. McDonald’s book which highlight how the crisis

During the times leading up to the power struggle, the power dynamic within Lehman was steadily shifting as trading profits became increasingly more important to Lehman versus traditional investment banking profits. Thus, Glucksman was able to step into the spot light and Peterson became more expendable. Peter Peterson’s core

Power is the emphasis is an employment situation. While employed you have a certain amount of power, both over your work environment and your own life.

The topic of leadership evokes curiosity about our leaders and their approaches in decision making, leadership styles and the effectiveness of their leadership. At time leaders are critiqued for their actions or views on different business affairs. In today’s working environment leaders set the tone, vision, and goals of any organization. Leadership has a huge impact on the culture of an organization and how people communicate within the organization (Northouse, 2009). The actions of leaders should inspire and positively impact their followers. The approach of leaders in handling adversities highlights many features of their character.

Leadership is the process of influencing employees to work together towards goals of the organization. Leadership involves motivation, communication and team building. Many times, the plans of leaders do not happen in the way that they were designed to happen. Sometimes, the results can be catastrophic. Leadership derailment is happening more and more in companies around the world. Whether it is from lack of communication to leader’s arrogance, these failures can bring an organization to its knees. Our group paper will discuss the happenings at Procter & Gamble under Durk Yager and ways to get the leadership back on track.

At the height of the 2008 financial crisis, Mr. Lawrence G. McDonald wrote a book on the fall of Lehman Brothers, entitled "A Colossal Failure of Common Sense." This book is a risk manager 's guide to the right and wrong moves on Wall St., and explains why investors must stay ahead of policies coming out

So, from the above definitions we may draw a difference between leaders and managers as leaders do have a vision, goal and objective, which he tries to make effective and purposeful. On the contrary, the managers only have to maintain their efficiency on day-to-day basis. In other words administration is the task of managers but innovation is the characteristic of leaders and there is a possibility of a manager becoming a leader by setting high standards and goals for his people. It is not the task of this paper to present a difference between both but it is important to present it only because of its being necessary to clear the concept of a leader. So, a good leader is a person who can look high into the horizons when the people are looking down in the bottom line. This makes other people follow their footsteps as everyone wants to move towards horizon to explore new dimensions of practicality.

It is important for managers to understand the sources of power and influence as they must rely upon the cooperation of subordinates in order to be successful. Strong managers rely upon more than just authority they also use leadership skills and power to obtain the most productivity from their staff. According to French and Raven (1959) there are five sources of power. Referent power seems to be the most influential and the least affected by change. To quote Paul Argenti,

Both Robert Wade’s and Charles Kindleberger’s respective pieces, “Wheels Within Wheels: Rethinking the Asian Crisis and the Asian Model” and “Manias, Panics and Crashes: A History of Financial Crises”, show how credit booms can lead to market failure. On Wall Street, Kindleberger recounts how the housing bubble collapsed and how this breakdown affected United States banking institutions. Firms with a lack of capital income and low capital reserves could not pay off their debts when scared investors pulled their money out of banks during bank runs. Many firms had risky investments and low reserves because they believed that the government would bail them out, but Lehman Brothers, the fourth-largest investment bank at the time, was allowed

When we analyze the success of large corporations like Ford, General Electric and International Business Machines, it is evident that they had series of leaders who were visionary and believed in empowerment of people. When we analyze tough phases of a company or companies that had a fall and ultimate demise, we clearly see a linkage between failure of company and absence of effective leadership (Canwell, Dongrie, Neveras, & Stockton, 2014). The successful organization had leaders who made right decisions at right time and implemented them strategically. The implementation part needs excellent human resources and the ability to lead to them to get the task done. While different situations may need different style of leadership, the sophisticated manpower fueled by technological advancements and globalization have made some leadership styles less effective and some leadership styles to be highly effective (Feser, Mayol, & Srinivasan, 2014). This paper will discuss a tough situation faced in one of my former organization. The organization needed a different leadership style to tide over the falling sales and attrition. Three different leadership styles, their pros and cons, and the likely success in solving the problem will be discussed in this paper.

In 1994, Richard S. Fuld took control of Lehman Brothers as its Chief Executive Officer (CEO). Under Fuld’s aggressive leadership, the company flourished and became one of the largest investment banks in the United States. （Crossley-Holland 2009) reported that in 1994, each Lehman Brothers stock was averaging at $4 and by 2007 it catapulted to $82 creating a 20 fold increase. From 1994, Lehman Brothers gradually adopted an aggressive growth business strategy by expanding into highly complex and risky products such as Credit Default Swaps (CDS) and Mortgage-Backed Securities (MBS). By 2007, Lehman Brothers was the biggest underwriter of mortgage-backed securities of the U.S. real estate market.

| Referent power is an influence of a leader’s characteristic or charisma on his/her followers, which could develop respect and trust for the leader. Leader with referent power can easily motivate his follower (Rao, 2010).

Expert power is the power that a manager expertise, knowledge and professional ability give them, particularly over those that need the knowledge or information.