Jimmy Cayne is finally passing the torch. While the 73-year-old Bear Stearns Cos Inc. boss doesn’t appear ready to leave the joint entirely, he has told directors he’s prepared to give the chief executive’s title to investment banking chief Alan Schwartz. It’s about time. Cayne’s management of Bear’s financial crisis from the golf course and bridge table wasn’t just embarrassing—it singed the firm’s once-storied reputation as a Wall Street bastion of risk management. Cayne spent 10 of 21 working days in July either playing golf or bridge, when two Bear hedge funds imploded. There have been other misdemeanours. The abrupt firing of his deputy and heir apparent Warren Spector for the firm’s travails smacked of buck-passing. And revelations in the Wall Street Journal that Cayne enjoyed the occasional puff of marijuana after a long day of playing bridge lent an added whiff of, er, indifference to Cayne’s management style. Rolled together, these ingredients made it difficult for even Cayne’s handpicked board to continue their unqualified support. The final hit was surely a financial one. Bear recorded the first loss in its 84-year history last month. The stock has slid from about $173 (Rs7,647 then) a share a year ago to $76 on Tuesday. That’s not only a price below book value, it’s a performance even worse than that of Merrill Lynch and Co. Inc., which chocked up greater losses and ushered out its chief. This reflects investor concerns that Bear looks underweight against its more global rivals, be they Merrill in investment banking or Goldman Sachs Group Inc. in prime brokerage.
This will be Cayne’s legacy. At a time when the business of Wall Street globalized, Bear largely stood still. The contrast between Bear’s fortunes and those of one-time US bond-house cohort Lehman Brothers Holdings Inc. are striking. Cayne’s stepping aside from everyday management may give Schwartz more leeway in accelerating expansion, perhaps with an infusion of foreign capital. But with Cayne clinging to the chairman’s job, it’s hard to see more than a half-baked future for the investment bank.