On January 1, 1984, Lew Glucksman achieved his American dream: he became chairman of Lehman Brothers Kuhn Loeb. He moved into Peterson’s suite of offices, claiming the corner office with its panoramic view of New York Harbor. Up on the walls and bookshelves went the bright red fire chief’s hat, the pictures of clipper ships and fish, the tool catalogues, the books on maritime warfare and marine life.

Yet Lew Glucksman felt no joy. He was worried about the weakened business climate, about liquidity, his partners’ unhappiness with how he was managing the firm, the personal insecurity of partners, their desire to participate in a single transaction that would net each a handsome premium. All of these factors came together at the same time that he realized his life’s dream of becoming chairman of Lehman Brothers.

Something else seemed to be gnawing at Lew Glucksman, and it was observed by former partner and then Deputy Mayor Kenneth Lipper, who was invited back to smoke the peace pipe with Glucksman, with whom he had often feuded. Over lunch, Lipper remembers Glucksman saying, “We’re both from the streets. You know how hard it is to make it. I just wanted to square things. We’ve both made it, and I know you can appreciate it.”

Lipper felt sympathetic toward his former partner. He looked at Lew and said, “Lew, you’ve got it all. But do you really feel you’ve got it all?”

“I don’t know what I’ve gotten from it,” answered Glucksman, sadly shaking his head.

Lipper thought Glucksman was surprised to feel no joy after finally getting to the top. “When I walked out,” Lipper says, “I thought, Here’s a man who went to Brooks Brothers and bought a suit to go to Harvard. For thirty years he had gone on a quest. He believed that once he opened the door, there would be sun. When he finally got there and opened the door, all he saw was darkness. He didn’t get invited on any more boards. He found that you don’t get to be one of them just by taking over the company.”

At the next Monday board lunch, on January 9, it was immediately clear that power had shifted from Glucksman to the board. New board members became more assertive, as did Shel Gordon. Before the meeting, Gordon, who was installed next door, in the office that once served as Peterson’s conference and dining room, met privately with Glucksman and urged him to appoint a committee to probe the “capital question,” which Glucksman knew was a euphemism for sale.

Gordon’s footprints were beginning to show. He had left marks when he tried to stall Rubin’s appointment as president, a maneuver that had displeased Glucksman. And now it was obvious to Glucksman, as well as to the other leading partners, that Shel was not only becoming more assertive on the capital issue but that he was speaking for the partnership. He had emerged as the one person in the firm who commanded the respect of a broad cross section of traders and bankers. “He had the broadest functional experience of anyone on that board, including Lew Glucksman,” says Richard Bingham. “He had worked in all areas of trading. And for four to five months he had been running investment banking. He’s a balanced individual. He was someone who was respected by a number of people.” Shel Gordon, clearly, was the rising star at Lehman.

By January 1984, most members of the board wanted out from under Glucksman’s rule. They wanted the opportunity, which some feared Glucksman would deny them, to receive a lucrative premium on the sale of their stock. If, for instance, Lehman had been sold to ConAgra for more than three times its book value, the average partner would have received about $8 million. A partner who owned 2,000 shares, as almost one-fifth of the partners did, would have received about $12 million.

At this board luncheon partners discussed the capital issue more frontally than they had before. They talked about inviting an outside investor to purchase shares, about how much capital was needed to expand the business, about merging with a larger firm, about what kind of sale would be acceptable to the partnership and how it might change the nature of the partnership. The debate had shifted. No longer were they debating whether it was necessary to seek outside capital; now they focused on how to do it.

Bill Morris suggested a two-man committee, he recalls, composed of Bob Rubin and a partner who was not a board member. There was no way partners who wanted to sell would entrust their fate to Rubin, who did not. So that proposal was quickly scratched and was followed by a lengthy discussion. Finally, with Glucksman’s reluctant approval—“I responded to what the board wanted,” admits Glucksman—he recommended and the board passed a resolution to appoint a three-member committee (Glucksman, Rubin and Shel Gordon) “to examine capital alternatives, including the adequacy, permanency and liquidity” of Lehman’s capital.

There were no dissents about appointing a committee, in part because board members were voting for different things. To most of Glucksman’s allies, the vote served two purposes: to appease a potential runaway board, and to forestall the outright sale of the firm by bringing in an outside minority investor, thus strengthening Glucksman’s rule. Dick Fuld walked away from the meeting believing they were resolved to look for additional capital, perhaps from an insurance company, as they had done in September with Prudential. “I was not thinking along the lines of a partner or a merger,” he says. To the emergent majority of the board, however, the committee was meant to lead to the partial or total sale of the firm, to the weakening of Glucksman & Company.* “There was a feeling—a consensus view—that the vote meant we would sell a substantial portion of the firm or all of the firm,” says Harvey Krueger. “If the committee had come back with a 60 percent deal, I don’t know that it would have been agreed to. People wanted to get their capital out.”

In adopting a posture to sell part or all of Lehman, the board may have spoken for a majority of the partners. It certainly spoke for the overwelming majority of banking partners, says partner Stephen W. Bershad, who he says by this time were motivated by equal parts of both fear and greed: “Fear in the sense that if we didn’t sell, what little we have here would evaporate or we would get pushed out. Greed in the sense that you might wind up with zero and someone might offer you two times the value of your stock.” Peter Solomon summarizes the view of the board and the partnership starkly: “Anxiety about the future at that moment overwhelmed their fear of Glucksman.”

To underscore its new strength and courage the board set a March 19 deadline for the committee to report on its “capital search.” The board also insisted on adding a fourth member to the committee—Peter Solomon. Suddenly, Solomon was no longer a pariah. In fact, it was his thorny independence that made him so attractive to the board. “A number of us felt there should be someone on the committee who brought balance to the discussion,” says one board member. “Rubin was against it. Glucksman didn’t know what he should do. And Gordon was trying to hold the whole thing together. It made sense to have Peter Solomon on to give it push.”

Solomon knew that Shel Gordon was responsible for his emergence, and why. “I have a lot of admiration for how Shel handled himself,” he says. “He was fortunate to have me on the left, or the right, of him. He needed someone to establish the poles.” Board members believed that Solomon would never permit Glucksman or Rubin to maneuver to avoid the sale of the firm. And they knew that of the four members, Peter Solomon might have the most valuable business contacts.

Glucksman also knew who was responsible for Solomon’s emergence. “I think Shel and Peter Solomon made a deal a long time ago,” he told intimates. It could not have been pleasant to accede to placing their number-one adversary on this critical committee, but Glucksman and Rubin went along. “I was in favor of adding Solomon on the theory that it’s always good to see where people are who are antagonistic to you,” says Glucksman.

One other matter was resolved this day, and it was partly inspired by Jim Boshart. In the weeks prior to this lunch, Glucksman and Rubin had heard Boshart’s laments about partners who were trying to sell the firm and swapping secret data with others, had heard him speak eloquently about how selling the firm would constitute a betrayal of all those associates who were reaching for the brass ring that would make them partners at Lehman Brothers. Boshart, who had been well-liked as a person but dismissed as a “staff man,” neither a tough administrator nor a premier financial analyst, was becoming increasingly alienated from banking partners; instead of serving as a bridge, as he had been to Peterson, now Boshart fed Glucksman’s sense of betrayal. He honestly did not understand the hatred or terror Glucksman and Rubin inspired in some partners, and why this might drive them to drastic measures, which Boshart deemed immoral and they deemed necessary. “He became bitter,” recalls Dick Bingham. “Beginning around January 1984, Boshart was unable to communicate with certain board members on even the most superficial matters. He was developing hostility that became quite emotional.” Boshart concedes that his personality changed and that he stopped speaking to certain partners. “I’ve never seen such greed and absolute lack of concern for people we had responsibility to,” he says.

Goaded by Boshart, and mindful of the damage a press leak could cause, before the meeting concluded Glucksman proposed the following resolution: “Anyone who divulges what we are talking about at these meetings will be asked to resign.” It passed unanimously.

The board approved the secrecy resolution, agreed that premature disclosure would weaken Lehman’s, bargaining position; but typical of the Rashomon-like quality of communications at the firm, different partners heard different things. Glucksman allies thought the secrecy resolution was in the best interests of the partners; other members of the board heard something else: another blustery threat from Lew Glucksman.

This meeting, and the turn of events, left Glucksman depressed. He blamed Lehman’s poisoned culture, and blamed himself for failing to change this culture, not for failing as a leader/statesman. “We did a lousy job of changing the culture of Lehman to a better culture,” he says. “A culture where people work cooperatively. God, we had guys running around this place—Solomon, Schwarzman—and talking about the firm on the outside.* We never made a culture where people were concerned with the firm and not just each other. We had a level of greed here and personal selfishness that was disgraceful.”

Glucksman thought he had dealt with the concerns of partners for more personal liquidity in October, when he agreed to boost the annual dividend on their preferred stock from 1 to 3 percent, when he announced the $25,000 hike in salary for each partner, the new personal loan program, and agreed to advance three small quarterly bonus payments during the year so partners might have more liquidity to purchase their $2 million Manhattan co-ops or their weekend retreats in the Hamptons. Glucksman had parted company with Rubin in coming to believe a minority investor was necessary to shore up Lehman’s capital. But he says, “the last thing they [the board] wanted was a minority shareholder and not being able to sell their stock at a premium. I wanted the money to go into the business.” Like partner pressure to increase the dividend, he believed they wanted the money to swell their pockets.

Lew Glucksman saw support slipping away. He sensed that Shel Gordon was using Peter Solomon as his battering ram, and no longer counted on Shel’s certain support in a showdown. He believed Harvey Krueger—who like most partners had his wealth tied up at Lehman—was determined to sell because, nearing sixty, Lehman policy required him to begin selling back his stock at book value. Glucksman also knew that Krueger wanted to spend more time raising money for Israel. Although Glucksman got along with Krueger, to friends he lumped together Krueger and Solomon: “The only thing they have in common is Our Crowd,” he said. He felt William Welsh, who was then fifty-two and had been shunted aside by Glucksman in the Lehman management structure and who had spoken often of learning foreign languages and traveling, was also inclined to sell. He knew that Bill Morris and Henry Breck, though dependable allies in a corporate power struggle, were now resigned to selling the firm; they were hard-edged cynics. He complained that three of the newer board members—Altman, de Saint Phalle and Bingham—probably thought more of the cash than the independent Lehman tradition. No one had to tell Lew Glucksman that the stock market was not then on his side. Stable interest rates had slashed profits; a slowed stock market meant less volume and fewer commissions; and the business outlook was dim at Lehman as it was all over the Street, particularly in trading and sales.

Glucksman felt secure that in any showdown he could count on the loyal support of Rubin, Boshart and Fuld. But he also knew they preferred to shrink the firm rather than seek more capital. “My allies were not my allies,” he says, ruefully. “I was caught between two groups … It was clear to me the board wanted to sell the company. That’s where I disagreed with Dick and Bob and Jim Boshart. I felt it was difficult to oppose the board and a clear mandate of what the partners wanted. So I became an advocate of a position I didn’t want.”

*Recollections of what was actually voted on vary dramatically. François de Saint Phalle came away thinking the board left “unclear” how much it would sell; Bob Rubin and Roger Altman say they resolved to try and sell “at least” majority control—Rubin says “at least 80 percent,” though Rubin continued to act as if the firm need not be sold; Lew Glucksman says they “did not vote to sell a majority” interest.

*Schwarzman concedes he actively sought a buyer; Solomon acknowledges that he had discussions with Shearson/American Express in late 1982, but “to the best of my knowledge” had no other unauthorized conversations.