Don’t panic
He was a huge success at Bear Stearns, and eventually became a millionaire. He donates large sums to charities that help the poor, as he suffered from poverty himself.
Allen Greenberg, who served as Bear Stearns chairman for 16 years, kept after his employees for the smallest things. He would tell them that they had misunderstood, that FedEx was not a subsidiary company of Bear Stearns. He would explain that it cost the firm as much as $50,000 for FedEx’s door-to-door delivery service last year, and that the postal system provides good service at a reasonable price. If you do not know how to put a stamp on an envelope, he would say, ask me.
Greenberg was known for his irreverent management style, and his regular memos to employees were turned into a book called “Memos from the Chairman.” Still, the firm paid much bigger performance-based bonuses than other companies. Greenberg also made sure his company’s stocks were in order before the dot-com bubble burst.
The company emerged as the most stable investment bank on Wall Street by bolstering a management style focusing on common sense and self-discipline. Bear Stearns won high praise from Warren Buffett himself. It was a legendary company that continued to be in the black from its founding in 1923 up until 2006.
However, Bear Stearns has come crashing down. Six years ago, Greenberg stepped down from his post after working for the company for 52 years. With the collapse of Bear Stearns, analysts are predicting the worst crisis since the Great Depression.
However, if we take a closer look, there is no need to be frightened. The major culprit behind the current predicament was Bear Stearn’s misunderstanding of the importance of common sense management after Chairman Greenberg left the company six years ago. The main source of the trouble was mainly its heavy investment in real estate credit. The legend of Bear Stearns evaporated with the subprime crisis.
Bear Stearns achieved its significant success by implementing common-sense management. Its failure has helped to open our eyes once again to the importance of this style of financial leadership.
The writer is an editorial writer of the JoongAng Ilbo.
By Lee Chul-ho [newsty@joongang.co.kr]
with the Korea JoongAng Daily
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