For Lehman Employees, the Collapse Is Personal

In the last few days, employees of Lehman Brothers have wrung their hands as the value of their stock evaporated before their eyes. Now, many fear losing their jobs, too.

In scenes eerily reminiscent of the final days of Bear Stearns, the megawatt energy within Lehman Brothers has dimmed to a hum as employees focus on the fate of the firm and what it might mean to them. To make matters worse, pink slips for previously announced layoffs were being handed out this week.

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“Everyone is walking around like they have just been Tasered,” said one Lehman employee, who, like many interviewed for this article, declined to be named because he was not authorized to talk publicly. “Everyone was always hoping we would pull through. Now, that is not really an option.”

On Lehman’s third- and fourth-floor trading floors overlooking Broadway’s lights in Midtown Manhattan, traders continued working at their terminals, or at least were giving the appearance of doing so. At the same time, many polished their résumés and contacted recruiters.

If Lehman is sold — as now appears likely — the buyer will fire many of them. And they know that tens of thousands of other Wall Streeters laid off in the tsunami sweeping the financial industry — including many recently let go from Bear Stearns — are already chasing after too few jobs.

Wall Street is used to ups and downs, but this latest round of cuts brought about by the credit crisis is turning out to be one of the worst in recent memory — a fate compounded by a shrinking economy. As of June, many of the more than 83,000 employees dismissed from banks and brokerage firms worldwide have come from firms based in the New York area.

Everyone at Lehman knows what happened at Bear Stearns: Star employees did not have a hard time finding work when Bear was sold in a fire sale this year, but JPMorgan initially kept only about 6,500 of 13,500 employees. Many are still looking for work.

As at Bear, many at Lehman have taken a hit from a plummeting stock price. From an all-time high of $86.18 a share in early 2007, the stock has plunged, closing at $4.22 Thursday.

In an arrangement that is typical of Wall Street, Lehman employees have gotten much of their pay in stock and stock options in recent years. That figure could range from 10 percent to 60 percent in Lehman stock, according to a person close to the company.

“Over the past decade an increasing amount of the compensation had been given in stock and stock options,” said Robert Willens, a tax expert who worked at Lehman from 1987 to this year. “Employees were paid in restricted stock that took several years to vest. Stock was granted at the current price.”

As recently as last week, Lehman’s stock was selling for $16 a share, and many Lehman employees were still betting that their chairman and chief executive, Richard S. Fuld Jr., would figure out a way to salvage the bank, and their future — a hope he reinforced Wednesday with assurances to Wall Street that the firm could remain standing alone.

On Thursday, those hopes ran dry as the share price plunged so low and so fast that potential suitors came out of the woodwork to see if they could snap up the 158-year-old institution for a bargain-basement price.

As employees left the firm’s Seventh Avenue headquarters Thursday, a Lehman trader said people were trying to keep a stoic face. “They are not showing anything,” he said.

As widely respected and liked as Mr. Fuld has been at the firm, now that the cold prospect of losing a life savings in Lehman stock has become more of a reality, many employees have grown resentful.

“We feel like we have been controlled by events and haven’t controlled them,” said one rank-and-file employee. “And it has just been the most punitive market. Is there frustration with the management team? Of course.” Another employee who left Lehman earlier this year lamented that he had put enough faith in the firm to retain shares — a decision he is paying for. “My children’s education fund is wiped out,” said this person.

“I’m not a millionaire like a lot of these guys. Of course this is on Dick’s hands,” he said, referring to Mr. Fuld. “It all happened on his watch.”

The investment bank said that Mr. Fuld was not available for comment.

A number of Lehman employees said the widespread support at the firm for Mr. Fuld was not as strong as it had been, largely because his strategy to save Lehman, including the partial sale of Neuberger Berman, its money management unit, would not be enough. These people said they had expected and hoped that Mr. Fuld would step aside Wednesday and let Herbert H. McDade III, the firm’s president, ascend and start anew.

Mr. Fuld himself has seen much of his wealth disappear. At the stock’s peak, his 11.4 million shares of various types of stock and 2.5 million stock options were worth about $956 million, according to James F. Reda Associates, a consulting firm. Now, they are worth only about $40 million. But employees know that Mr. Fuld has reaped rich rewards in his decade and a half at the helm.

Even if he loses his grip at Lehman, he stands to collect more. He does not have a severance agreement if he loses his job, but if he were terminated without cause, Mr. Fuld could expect to collect a $16 million pension and $5.6 million in deferred compensation.

Michael J. de la Merced and Ben White contributed reporting.