Former regulator: Lehman disclosure not enough to aid shareholders

A former Securities and Exchange Commission official said greater disclosure of investment banks’ highest-paid employees – aside from corporate officers – would not necessarily aid shareholders.

Lynn Turner, who was the SEC’s chief accountant from 1998 to 2001, said knowing top employees’ compensation packages is not as important as knowing how much risk they are taking on and what companies are doing to mitigate those risks.

“People in America get way too carried away with wanting to know what everyone else’s salaries are,” Turner said.

Richard Fuld, who was chief executive of Lehman Brothers until the investment bank collapsed in 2008, was awarded $40 million in compensation the previous year, even though the bank was engaging in increasingly risky bets. Fuld’s pay package was disclosed to shareholders in proxy statements.


“But did that disclosure give you what was most important with respect to what was going on with that company?” Turner said. “The answer is no.”

Investors knew Fuld’s compensation, but they “took their eye off the ball” – that is, how Fuld was governing Lehman.

“What Fuld was doing was a hell of a lot more important than the raw dollar numbers of what he was getting paid,” said Turner, who is now managing director at LitiNomics, an economics and forensic accounting consulting firm in Mountain View, Calif.

The Times revealed Friday that Lehman’s top 50 highest-paid employees were awarded increasingly high compensation packages even as the firm neared its epic collapse in September 2008.


Lehman’s top 50 employees stood to make about $1.65 billion in compensation from 2005 to 2007, according to documents that emerged in the bank’s protracted bankruptcy proceeding. Much of that was to come in the form of stock, which Lehman’s demise rendered worthless.

In the last decade, the SEC proposed requiring public companies to disclosure their highest-paid employees, regardless of whether they were corporate officers, Turner noted. But companies, such as those in the entertainment industry, pushed back, arguing that it would force them to disclose pay packages to celebrities. As Bloomberg News noted, critics called the proposed regulation “the Katie Couric rule.”


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