Is Cayne the next major CEO for chop?
Bear Stearns Cos Chief Executive Officer James Cayne plans to resign as the securities firm's shares languish following unprecedented losses from the collapse of the subprime mortgage market, according to a source.
Cayne, 73, has begun notifying members of his board that he will step down as CEO and remain chairman of the New York-based company, according to the person, who declined to be identified because the decision isn't public. He's expected to be succeeded by President Alan Schwartz, 57, the source said.
Cayne would join former Citigroup Inc CEO Charles Prince and his counterpart at Merrill Lynch & Co, Stan O'Neal, who were forced out after the sinking value of assets tied to mortgages eroded earnings. Bear Stearns' fourth-quarter loss of $854 million was the first in its history and the company's stock dropped 53 percent in New York trading during the past year, more than any Wall Street rival.
"Jimmy's been so engaged with the company for a long time, he and Ace have been the personification of the company," Bear Stearns board member Henry Bienen said in an interview, referring to Cayne's predecessor, Alan "Ace" Greenberg. "Jimmy's still a huge shareholder. It's the board's view that Jimmy would stay very involved."
Bear Stearns spokesman Russell Sherman declined to comment. The Wall Street Journal reported Cayne's plan to resign on its website on Monday, citing people familiar with the matter. Bear Stearns rose 2.2 percent to $77.95 in German trading yesterday.
Cayne, who joined Bear Stearns in 1969 and was named CEO in 1993, faces the prospect of losing his job to a crisis his firm helped create. The fifth-largest US securities firm by market value spurred last year's crash in the market for home loans to people with poor credit when two of its hedge funds, which invested in securities tied to the mortgages, collapsed in July, prompting investors to shun the debts.
About 30 percent of Bear Stearns' fixed-income revenue comes from mortgages and related securities, according to estimates from Sanford C. Bernstein & Co analyst Brad Hintz. The company's $1.9 billion mortgage writedown wiped out revenue in the three months ended November 30.
Bear Stearns shuttered the two failed hedge funds and Cayne ousted his co-president, Warren Spector, whom investors considered the heir-apparent. Ralph Cioffi, the manager of the two funds, left last month amid probes by the US Securities and Exchange Commission and the US Attorney in Brooklyn. The government investigators haven't accused Cioffi or Bear Stearns of any wrongdoing.
Agencies
(China Daily 01/09/2008 page17)
