It's Official - Schwartz Anointed as New CEO of Bear Stearns; Cayne Remains Chairman

By Jennifer Yousfi
Managing Editor

The Bear Stearns Companies Inc. (BSC) Chief Executive Officer James E. "Jimmy" Cayne will retire from his post, effective immediately, but will remain on as chairman of the board of directors, the company said in a statement.

His successor will be long-time insider, President Alan D. Schwartz, who has a 30-year tenure with the firm. 

"I am honored to have the opportunity to lead one of Wall Street's great franchises," Schwartz said. "Bear Stearns has a bright future. Our franchise is rock solid thanks to Jimmy's leadership; investors, customers and employees should not expect any abrupt changes in the period ahead."

But that might not be what shareholders want to hear. Change is exactly what investors are looking for after 2007's dismal performance. Bear Stearns' stock suffered more than any of Wall Street's other firms, dropping 53% in 2007. The fourth-quarter loss of $854 million was the first in the esteemed firm's long history.

Meanwhile, other rivals in the troubled sector - such as Merrill Lynch & Co. Inc. (MER) - are replacing their top managers with industry veterans and company outsiders that bring new ideas to the table. Some experts question whether Bear Stearns' choice of a longtime insider as its new CEO - coupled with Cayne's commitment to stay heavily involved as chairman - really represents the substantive change required to bring about badly needed improvements in the investment bank's operations and corporate culture.

"Cayne's changing role is not a sign of radical strategic change by Bear," Brad Hintz, an analyst at Sanford C. Bernstein, told MarketWatch. "[Bear Stearns] is a very conservative company, and its management team has largely stayed in its comfort zone over the last decade. We expect that to continue."

While some clearly feel Cayne continuing as chairman is a miracle, if not a mistake, after Bear Stearns' 2007 performance, the board seems determined to keep the company's fifth-largest stakeholder around. As of the most recently published reports, Cayne and his wife owned 5.7 million shares of Bear Stearns.

"The question will be, 'Does [Schwartz] have enough autonomy to change things?'" John Challenger, chief executive officer of Chicago-based placement firm Challenger, Gray & Christmas Inc., told Bloomberg. "Is it still really Jimmy Cayne's team? Have they just made a cosmetic change, or will they really turn the reins over to this person?"

News and Related Story Links: