Read an Excerpt
The Last Supper
The Thrill of Getting Fired:
Tarrytown 1981
So there I was, thirty-nine years old
and essentially hearing, "Here's $10 million; you're history." One
summer morning, John Gutfreund, managing partner of Wall
Street's hottest firm, and Henry Kaufman, then the world's most
influential economist, told me my life at Salomon Brothers was
finished.
"Time for you to leave, " said John.
On Saturday, August 1, 1981, I was terminated from the only
fulltime job I'd ever known and from the high-pressure life I loved.
This, after fifteen years of twelve-hour days and six-day weeks.
Out!
For a decade and a half, I'd been an integral part of the country's
most successful securities trading firm, even of Wall Street itself. Not
just in my head. If my press was to be believed, in everyone's.
Suddenly, though, needed no longer. I was a general partner. An
owner rather than an employee. Nevertheless:
Fired!
I wasn't going to know what was happening, wasn't going to be
making decisions, wasn't going to share in "my" company's profits and
losses, wasn't going to be part of it at all. "We" had become "them
and me."
"What do you think about us selling the company?" asked Henry.
"If I'm being thrown out, better now than later," I replied.
Of course, there was the $10 million I was getting. America's a
wonderful country.
* * *
The Salomon Brothers Executive Committee had decided to merge
the seventy-one-year-old partnership with a publicly held commodities
trading firm, Phibro Corporation (previously part of Engelhard
Minerals and Chemicals). We found this out on a hot, summer Friday
night at a hastily called, "mandatory attendance, utmost-secrecy
required," mysterious partners' meeting at the Tarrytown Conference
Center, the former New York estate of society hostess Mary Duke
Biddle. Security guards surrounded the complex, checking in each
participant as he arrived. (Unfortunately, security missed seeing a
Fortune magazine photographer who'd been tipped off and was hiding
in a tree. So much for confidentiality!) For sixty-three of us, it was our
last meeting as Salomon partners and the occasion when Gutfreund
and Kaufman told me my time at Salomon Brothers was over.
We got together in a big conference room before dinner. Expensive
lawyers and accountants, being paid at overtime rates, hovered to the
side. Exchanging furtive glances, they oozed a nervousness, perhaps in
fear that some prewritten script would go awry. Tables and chairs
were arranged in rows with the Executive Committee seated in front,
facing "the troops." At each partner's seat was a dark gray
personalized leather folder. I sat at my assigned place and, though we
had been told to wait, like everyone else I immediately opened the
book in front of me. The first enclosures were financial projections for
our company after a proposed merger with Phibro, this almost
unknown oil, metals, and agricultural commodities dealer. Pro forma
income statements, balance sheets, legal documents, and other
corporate gibberish were attached.
But the second presentation in the book was infinitely more
interesting: the effect of the deal on me as an individual. It meant
millions of dollars in my pocket!
The pointless speeches went on and on. The Executive Committee
was determined to sell the assets of the Salomon partnership. This
transaction was a foregone conclusion: The process, a jury trial
parody, where witnesses saw the accused pull the trigger, no
mitigating circumstances are entered as evidence, and the judge
instructs the jurors to deliberate. Everybody walks into the jury room
and the foreman asks, "Did he do it?"
Twelve people instantaneously answer, "Guilty."
"Let's go back."
"We can't. We've got to give the accused some consideration. Let's
sit around and talk for an hour."
So at Tarrytown we talked for sixty minutes. We were solemn. We
were serious. Some asked about differences in corporate culture,
others about earnings potential, a few about management structure
and duplication of staff functions.
Irrelevant! The Executive Committee wanted this merger and could
have voted it through on its own. Yes, we were presented with a fait
accompli. But, make no mistake. There was 100 percent approval
from the rest of the general partners. Nobody in that meeting gave a
moment's thought to rejecting the sale, including me. It was such a
lucrative deal for us, as owners.
By the time we sat down to eat, everything was said and done. We
were all as serious and businesslike as we possibly could be while
trying to stifle the enormous grins on our faces. Everybody attending
this meeting was now wealthy beyond his dreams. Previously,
partners' money had just been numbers in a capital account ledger
book, "funny money." We could give it to charity, or retire, and wait
another ten years to get at it. Other than that (and 5 percent interest
paid out to us yearly), our fortune was only on paper. That was then.
But this was now. All of a sudden, it was real. And ours. In our
pockets. In cash!
We were told not to tell anyone until the public announcement the
coming Monday. Nobody, inside the company or outside, had known
that a sale was even being considered. (Still, my friend and partner
Bob Salomon guessed, the day before, that whatever was brewing
involved Phibro Corp. He showed me the company's symbol on his
stock monitor before we drove to the Tarrytown meeting. Smarter
than the rest of us!) The Executive Committee hadn't told the retired
limited partners. Not even Billy Salomon, the grand, old man of the
company. He was informed personally in a much criticized surprise
helicopter visit to his Southampton summer home two days later.
Strict instructions to the contrary notwithstanding, some partners did
telephone their wives that Friday night. I thought it was nonsensical to
make your spouse a possible leak suspect. What difference would it
make if she didn't know for an extra day? Others didn't share my
view. One partner called his wife while she was at their country club.
She ran back into the club's dining room screaming, "We're rich, we're
rich!" Fortunately, nobody paid any attention to her.
After the meeting, we ate greasy steaks and drank hard liquor. We
shot pool, smoked Cuban cigars, played poker, and laughed
uproariously. It was a great big wonderful fraternity party. Boozing
and carousing into the wee hours. No thoughts of others. A moment
just for us. We had worked for it; and whether or not we deserved it,
we got it!
* * *
The next day, Saturday, with enormous hangovers evident all
around, each partner sat down with two members of the Executive
Committee. My meeting was with Gutfreund and Kaufman. Most of
the sixty-three partners were asked to stay on as employees of the
new company. Not me, though. A half a dozen other guys were
pushed out at that time as well.
"Since you don't need me anymore, I'm going home."
There was no reason to stay for the meetings with the new owners.
I wasn't going to be involved.
Was I sad on the drive home? You bet. But, as usual, I was much
too macho to show it. And I did have $10 million in cash and
convertible bonds as compensation for my hurt feelings. If I had to go,
this was the time. I was getting my money out of the firm then instead
of ten years later. With Phibro paying a merger premium, I was
doubling my net worth. Since somebody else had made the decision,
I'd even avoided agonizing over whether to stay at Salomon--a timely
question, given my then-declining prospects in the company.
Still, it was unsettling that future discussions would be about
someone else's company, a firm that until then had been mine. If
they'd said, "We have another job for you"--say, running the
Afghanistan office--I'd have done it in a second, just as I did at an
earlier career turning point in 1979, when Billy Salomon end John
Gutfreund told me to give up my sales/trading responsibilities and
supervise the computer systems area. I was willing to do anything they
wanted. It was a great organization and I would have been happy to
stay. I'd never have left voluntarily: There'd be no reason to in good
times, and I couldn't have abandoned them in bad times. Unfortunately
(or fortunately for me, as it turned out), staying wasn't an option.
Afterward, I didn't sit around wondering what was happening at the
old firm. I didn't go back and visit. I never look over my shoulder.
Once finished: Gone. Life continues!
* * *
Although Phibro technically bought Salomon, Salomon soon ran the
combined companies. The power shifted with record speed. Phibro
took over when the transaction occurred, and Phibro became
Phibro-Salomon. As the securities business boomed, the commodities
business collapsed. Soon the entity became Salomon Inc., with Phibro
Energy and Philipp Brothers as subsidiaries. The
Philipp name went back to the obscurity it had had five years earlier.
The acquirer never knew what hit it. The acquiree dominated almost
from day one. A total mismatch.
With the merger, the Salomon partners got their freedom and their
fortunes, but in the process, they ended their own firm as it had
existed for decades. By losing control of its key employees, Salomon
destroyed its greatest strength. Until then, partners had a long-term,
firmwide perspective insured by the golden handcuffs of a ten-year
capital "lock-in." After the merger, everyone was just a hired gun.
Today, at Salomon, as at Phibro, virtually all who were there at the
time of the merger are gone. The then-partners may have gotten rich,
and today the resulting combined organization may be doing very well,
but both old-line companies "lost" in the end.
* * *
I went to see Billy Salomon a week after the merger was
announced. "So long, thanks for everything, and goodbye" was the
purpose. He was not happy. He was, in fact, furious and embittered
that "his" firm had been sold and that he had had no part in the
decision.
"You screwed me," he said.
"Billy, these were your rules. You dictated years ago that
nonexecutive general partners and all limited partners [as he had then
become] had no say. You decided that the Executive Committee ruled
absolutely. You personally picked every one of its members. Rightly
or wrongly, they're your legacy. They made this decision to merge, not
the rest of us."
I never thought Billy had a real bitch. One of style maybe, but not
of substance. John and the Executive Committee had a responsibility
to do what they thought was right for the firm--which is to say, for
its owners. Billy had selected the people who made the decision. They
followed the rules he had set. He just didn't anticipate or like the
results.
Although I did say "So long" to Billy Salomon, my recollection is that
John Gutfreund didn't say goodbye to me. The next time I saw him
was seven years later at the surprise fiftieth birthday party for Jack
Kugler, our former partner. "Hello, young man, and how are you?" he
said to me.
"Fine, and younger than you."
"You always were a wiseass."
That was it. Thanks, John. He had hired me as a fresh MBA when
I needed a job--and he had fired me when my era there had really
passed. In both instances, his timing was impeccable.
Even though my Salomon career ended involuntarily, I owe a great
debt to William Salomon and John Gutfreund. They were my mentors.
They taught me ethics, philanthropy, hard work, and to take care of
others. They encouraged me to strive for success and supported me
fully, even when I failed. They gave me the opportunity to prove
myself, not to mention the chance to walk away with an almost
unseemly fortune, which I used later to start my own firm. Given all
the people Salomon Brothers employed over the years, there are
myriad others who must feel the same about both of them.
Though their careers ended very differently, Billy (who retired
voluntarily) and John (forced out when an underling cooked the books)
have both made their respective contributions. Wall Street is a better
place because of their efforts--and I'm a smarter, better (and richer)
person because of them. To this day, I consider them both friends.
* * *
During the week after the Salomon partners' last supper in
Tarrytown, I went to a furrier on Third Avenue and ordered a sable
jacket for my wife, Sue. We had been married for five years at that
point, during which time I was a Wall Street star. Unfortunately, from
that Tarrytown dinner onward, when she met somebody in the street
and was asked, "What does your husband do?" she'd be
tempted to answer something like, "Well, he used to be a very
important Salomon Brothers partner." The sable would be a surprise
to get her mind onto something else.
While I was never embarrassed to say that I'd been fired and was
now running a small start-up business, I'm tougher than many others
(or, perhaps as a psychological defense mechanism, I have convinced
myself not to care what others think). But I was worried that Sue
might be ashamed of my new, less visible status and concerned I
couldn't support the family. A sable jacket seemed to say, "No sweat.
We can still eat. We're still players."
I asked the furrier to stay open until 7:30 P.M. on my last day of
work, September 30, 1981, and I put in my normal twelve hours. On
the way home, I picked up the jacket. Sue was delighted. We drank a
bottle of champagne, gave our daughter, Emma, a kiss, and went out
to dinner. Next morning, I started Bloomberg, the company. The rest
is work in progress.
