Cohen Resigns as Chief of Besieged Shearson Lehman

Peter A. Cohen resigned Tuesday night as chief executive of Shearson Lehman Hutton Inc., the beleaguered Wall Street firm. He was replaced by Howard L. Clark Jr., chief financial officer for American Express Co., which owns 61% of Shearson.

Shearson also said that on March 1, F. Warren Hellman, general partner of the investment banking firm Hellman & Friedman, will become chairman, a title Cohen also held.

Separately, Shearson also disclosed that it is scrapping its proposed sale of 20 million new shares of common stock, which had been a key part of its plan to raise $850 million in badly needed capital. Instead, late Tuesday American Express said it would reduce its stake in Shearson to 45% by issuing its stockholders shares in the brokerage as a special dividend.

Cohen, 43, has been under increasing pressure from American Express to improve Shearson’s performance. It was not clear whether American Express Chairman James D. Robinson III pushed for Cohen’s resignation, although analysts who follow the Wall Street firm said it is likely that he did and that American Express clearly is putting a tighter grip on Shearson’s operation.

“Normally you don’t do things like this voluntarily,” said Perrin Long, who follows the brokerage industry for Lipper Analytical Services.

Clark, who turns 46 on Thursday, was a classmate of Cohen’s at Columbia University’s business school, where biographical data shows they both earned MBAs in 1968. Clark’s father, Howard Clark Sr., was chief executive of American Express for 16 years, building the company in the 1960s and 1970s into a huge financial services firm.

Cohen’s resignation comes after Shearson stumbled in selling the stock. Morale at the firm also has been sinking since late last year, when commissions were cut, 800 people were laid off and senior management was realigned. To make matters worse, Wall Street is experiencing a severe downturn.

Hostility toward Cohen personally has been building in recent weeks as well. The Economist, a British financial magazine, reported this week that Cohen was asked, during a Jan. 27 meeting about the stock sale, why he was still running Shearson. According to the magazine, Cohen replied, “If Robinson wants to punch my ticket, he can.”

Cohen also is a key figure in the current best seller “Barbarians at the Gate,” which details the $25-billion takeover battle for RJR Nabisco in 1988. Cohen linked up as a partner with former RJR Nabisco Chief Executive F. Ross Johnson in an audacious, unsuccessful bid for the firm. He is portrayed in the book as an arrogant, abrasive executive who made a number of critical blunders in losing the battle for RJR Nabisco to financier Henry Kravis of Kohlberg Kravis Roberts & Co.

Cohen has been traveling extensively this month to drum up interest in Shearson’s stock offering among brokers and institutions, and he was on such a trip to Boston on Tuesday.

The stock was a hard sell because of its sagging stock price and the weak market in general. Shearson’s stock, sold to the public in 1987 for $34 a share, closed Tuesday at $11.25, up 75 cents.

Institutional investors and stock analysts said they had sensed a shake-up was coming at Shearson. Long of Lipper Analytical said Cohen seemed indifferent at a presentation earlier this month on the stock sale. Long said the sagging morale among Shearson employees may have been the main reason for the resignation.

“You needed someone people can respect. You have not had that in the case of Shearson and Mr. Cohen,” Long said.

Shearson last week reported 1989 profit of $110 million, up from $96 million a year earlier, although one-third of the profit came from the sale of a money management unit.

Cohen was a protege of former Shearson Chairman Sanford I. Weill, now chairman of Primerica Corp., and was named chief executive in 1983.

Under Cohen, Shearson transformed itself from being largely a retail brokerage to the second-biggest investment firm on Wall Street through two major acquisitions--Lehman Bros. Kuhn Loeb in 1984 and E. F. Hutton in 1987. The Hutton acquisition in particular was problematic, coming just before the October, 1987, stock market crash. Shearson also suffered embarrassments, such as when its Boston Co. subsidiary was found to have overstated its income.

Clark, who will have the additional title of president at Shearson, began his Wall Street career as an investment banker with the former Blyth Eastman Paine Webber firm and has a close working relationship with Robinson, who succeeded Clark’s father in 1980. Clark joined American Express in 1981, serving as chief investment officer before being promoted to chief financial officer in 1985.

Clark has been instrumental in restructuring American Express’ operations, including selling a 13% stake of Shearson in 1987 to Nippon Life Insurance of Japan for $538 million, spinning off its Fireman’s Fund insurance unit as well as ridding the company of its Warner-Amex cable TV venture.