The ouster of Peterson was treated as a major news story, one in which Glucksman was usually depicted as a pirate. However, because the press release was relatively candid, there was little else the media could uncover. To probe Glucksman’s thirst for power, his psyche or Peterson’s surrender when the bottom-line numbers at Lehman glittered, and when Peterson had publicly praised Glucksman, would put the press in the uncomfortable position of an agitator seeming to foment trouble if it pursued the story more deeply. The prevailing attitude outside Lehman, and probably inside as well, was: Give the man time!

Pleased to be navigating Lehman alone, Glucksman moved swiftly to seize command. He brought to this task a sense of mission. Lew Glucksman was determined to break up Lehman’s independent baronies; to impose rigorous, centralized management, a chain of command. He would supplant the independent princes who jealously guarded their prerogatives as if they were national borders. He would not allow trading and banking to operate as separate duchies, as he believed Peterson did. He would not permit internal squabbling, as Peterson did. He would not spend hours at lunch with prospective clients, call endless marketing meetings, seek public acclaim, as Peterson did. Lew Glucksman prided himself on being Mr. Inside. He assumed that the same tight, hierarchical structure typical of trading—partners arriving early, huddling, agreeing to a course of action, and plunging ahead—could profitably be imposed on the banking division. He assumed that the team spirit he had engendered in the commercial paper division could be spread to the entire House of Lehman. He rejected the notion that he had been selfish in supplanting Peterson, and jarred many bankers with this argument, which he made often: “At the margin no one investment banker is as important as a good manager who is running the business well.” He spoke of how, from the day he had joined the Navy as a teenager, he always admired the military, and now, he enthused, perhaps a dose of spit, polish and discipline might alter Lehman’s culture, generate a team spirit, induce the independent baronies to pull together as one.

The new chairman’s first management decision involved Robert Rubin. Glucksman says that he first talked with Rubin about assuming the presidency of Lehman after his initial confrontation with Peterson but before the climactic board meeting and that although Rubin at first resisted, he finally agreed to accept.*

One of the first to learn of this decision was Enrico Braggiotti. Glucksman knew that Braggiotti was unhappy that Peterson, who had induced him to invest in Lehman nine years earlier, had been deposed; he also knew that Braggiotti was displeased to see so much money shoveled to Peterson, which Braggiotti likened to “a bribe”; he could sense that Braggiotti was worried about BCI’s more than 4 percent ownership of Lehman. In fact, Braggiotti was appalled by what had happened and feared that Glucksman, though he considered him an astute trader and an able manager, had neither the stature nor the statesmanship to serve as chairman. Sensing this, Glucksman took care to phone the Italian banker on the morning of the July 26 board meeting.

In early August, he invited Braggiotti to visit him at Lehman Brothers. The regal, usually impeccably polite Braggiotti got down to business at once. Distressed that he could not be present and was not represented at the meeting, Braggiotti asked to have an observer sit in for him at those meetings he could not attend. Glucksman readily agreed. Then, much as a bank loan officer probes an applicant, he asked a series of questions, including: “Who will you put in as president?”

“I will put in Rubin,” he recalls Glucksman responding.

“I cannot agree. He is totally unable to become president.” Braggiotti protested that he was never satisfied with his own tense relations with Rubin, who made no secret of his opposition to bringing in BCI as a shareholder. Braggiotti complained, he recalls, that Rubin was too taciturn, too private, too much an insider; in other words, too much like Glucksman himself. What was needed, he said, was the blend of talents displayed by Peterson and Glucksman, Mr. Outside and Mr. Inside.

Glucksman was unfailingly polite to his business partner, trying to soothe him by saying, recalls Braggiotti, that Rubin would be president only a short while, to be succeeded by Sheldon Gordon, a smooth, outgoing professional much admired by the smooth, outgoing Italian. What Glucksman didn’t say was that he fundamentally disagreed that he and Rubin were alike. Lew Glucksman thought of himself as a superb public speaker, an adroit salesman, a far more likable person than Peterson, as a man whose natural public flair had been stifled by Peterson and by those who tried to pigeonhole him as “a trader.” Now, he was convinced, the true Lew Glucksman would emerge.

That summer Glucksman moved slowly, first paving the way toward Rubin’s presidency by placing him on the seven-member operating committee, the firm’s day-to-day management body, which usually met every Tuesday and Thursday. “Talk to Rubin if I’m not here,” Glucksman began to tell select partners. Jim Hood remembers getting calls from the press early in September asking who was to be selected as Glucksman’s heir apparent. Glucksman told Hood to answer, “No comment.” Then, when questions persisted, Glucksman instructed him to say, “No president has been named, nor do we anticipate naming one. But Bob Rubin is the chief operating officer.”

Stalling the appointment of Rubin was one of the few cautious steps Glucksman took that summer. Over the next two months he announced that Shel Gordon, whose career had been in sales and trading, would be shifted as head of the nine-hundred-employee equity division (which covered all common stock trading, all retail and institutional distribution, and all of Lehman’s proprietary trading, including risk arbitrage) to run the banking department, displacing the troika of Roger Altman, François de Saint Phalle and Vincent Mai. Although banking partners were not happy with the unwieldy, relatively inexperienced troika, to impose someone from trading on the forty-fourth-floor banking department—no matter how personally agreeable Shel Gordon was—made many bankers queasy. “Lew’s idea of breaking down the barrier between traders and bankers was for a trader to come up here,” says one longtime Lehman banker.

Glucksman merged the equity division with the fixed-income division, which included all commercial paper and all trading in government securities. To manage the merged department, he elevated his thirty-seven-year-old protégé, Richard Fuld, who had been running fixed income alone. This move, in particular, made partners uneasy. Fuld was a man who, for all his abilities as a trader, was almost defiantly antisocial toward bankers; he avoided the partners’ dining room and complained openly about those “fucking bankers” who hogged Lehman’s shares. Some bankers referred to Fuld as “the gorilla,” in part because he spoke in monosyllabic grunts. He was a stranger to most of his partners. And what especially jarred them was that although Fuld had limited managerial experience, he now had twenty-two departments reporting to him and supervised one of the three principal divisions of the firm (banking and money management being the other two). Fuld’s new division at the time accounted for two-thirds of Lehman’s profits.

Personnel decisions came rapidly. This confirmed the partners’ suspicions that Glucksman was hopelessly mired in the mind-set of a trader, making rat-tat-tat intuitive judgments. Dissatisfied with Lehman’s rank in the second tier of public finance, Glucksman removed the head of the public finance department and replaced him with Peter M. Dawkins, a retired Army brigadier general, Heisman Trophy winner and Rhodes Scholar. Dawkins was an attractive man with no public finance or investment banking experience whatsoever. Glucksman knew that public finance—advising state and local governments and authorities on how to raise money from investors—hinged on personal relationships at least as much as technical skills, since each investment bank recruited technically proficient people and had roughly the same fee structure. He knew that Lehman, like other firms, had volunteered to do pro bono work for government and maintained a political action committee (PAC) to funnel campaign funds to candidates, all in the hope of massaging relationships with elected officials. Surely a forty-five-year-old “golden boy” like Dawkins could open doors to city halls and state capitols. Who wouldn’t want to meet Pete Dawkins? Besides, there were internal reasons. “I’ve always loved basketball and football players,” explains Glucksman. “A guy who’s been a basketball or football player—his success depends on interaction with other people. For the same reason, I also did well over the years by hiring a lot of ex-service academy people.” When he was recruited that summer, Dawkins remembers Glucksman’s bluntness: “He talked about the fact that Lehman had a history of people behaving principally on the basis of selfish self-interest rather than the interest of the firm as a whole … he really wanted to correct that.”

On the recommendation of his friend, banker Eric Gleacher, Glucksman met and offered Cravath, Swaine & Moore partner Allen Finkelson, an able lawyer who had worked on various Lehman deals, a partnership as a banker. This offer shocked people at Lehman because, like the Dawkins appointment, it had not been taken first to the board, as was customary.

That summer there was also grumbling among bankers who assumed that Gleacher would eventually return as head of the mergers and acquisition department, a speculation fanned by Gleacher himself, who pressed Glucksman for the job. Glucksman tried to do the noble thing, telling Gleacher that the decision would rest with the management of the banking division. He sent him to Shel Gordon, and Gleacher told partners that Gordon had “committed to do it.” (Gordon says they spoke of it, but no committments were made.) There was also a major blowup when Peter Solomon learned that Gordon was to move from trading to banking. Solomon offered to run the banking department until Gordon had completed the management task he wanted to finish downstairs and Dick Fuld could surround himself with more executive talent. “I’ll run it for a year, and then Shel can come up to banking,” Solomon volunteered in a meeting with Glucksman and Rubin.

“You’ll never run anything here!” shouted Bob Rubin, outraged by the suggestion. Glucksman said nothing.*

Counting the management changes he had engineered in the previous twelve months—including the removal of the well-regarded William Welsh as head of retail sales, bringing in John Levy from the outside to oversee institutional equities, installing young Michael Schmertzler as the chief financial officer, replacing Ed Hajim with Henry Breck as the head of Lemco—by the fall of 1983, Glucksman had installed his own men at the head of most departments in the firm.

Even Glucksman’s allies worried that he was moving too fast. His closest adviser, Bob Rubin, says of the management upheaval that summer: “The speed was too fast. We didn’t give enough thought. Frankly, that was supposed to be part of my role.” Rubin was supposed to have served, he says, “as a moderating influence on Lew. I think Lew needs that.”

*Questions were later raised about this, since Rubin negotiated Peterson’s severance agreement on behalf of the board at a time when he had an “interest” in the outcome.

*The three men confirm the conversation.