Dick Fuld Was Actually Not the Top Guy at Lehman in 2007

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By Jonathan Weil

More than three years after Lehman Brothers filed for bankruptcy protection, it's increasingly obvious we still don't know the half of what actually went on there. For example: The person with the highest pay package at Lehman in 2007 was not its chief executive, Dick Fuld, but a managing director, Robert Millard, who was the bank's head of principal trading.

That's according to a Los Angeles Times story this morning, citing internal documents that were submitted in Lehman's bankruptcy proceedings, that showed Lehman awarded almost $700 million to 50 of its highest-paid employees less than a year before its 2008 collapse. For 2007, Millard was in line to make $51.3 million running a group that invested the firm's own cash, the newspaper said. By comparison, Fuld was awarded $40 million.

Millard told the Times that more than half of the compensation was in stock, which became worthless when Lehman failed. Millard is now managing partner of Realm Partners LLC, a New York-based hedge fund.

No. 2 to Millard on the list: Marvin Schwartz, a managing director in Lehman's asset-management group, who was allotted $31.1 million for 2007. He's now a portfolio manager at the investment firm Neuberger Berman, which Lehman used to own. Other notables on the list included Mark Walsh, who ran the firm's disastrous global real estate business; he was awarded a $17.5 million pay package for 2007.

Outrageous? Sure. But there's also a policy angle here. In 2006, the Securities and Exchange Commission revised its executive compensation disclosure rules. Under the agency's original proposal, Lehman probably would have been required to disclose Millard's 2007 pay package in its proxy statement.

That proposal would have required companies to disclose compensation information for as many as three additional employees who receive greater yearly pay than any of their named executive officers. The SEC backed off the idea in response to widespread criticism, however. Critics dubbed the proposal the "Katie Couric rule," because it probably would have resulted in disclosing the pay packages for lots of movie stars, athletes and other highly paid celebrities.

Maybe the proposal would have stood a better chance had it been called the "Robert Millard rule." Looking back, it probably was a good idea after all.

(Jonathan Weil is a Bloomberg View columnist. Follow him on Twitter.)

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-0- Apr/27/2012 16:49 GMT