The CFO Who Was “Ill Equipped” to Save Lehman Brothers

**Ben Hillman** (0:00)
February 2007, what were you doing around that time, CJ?

**CJ Gustafson** (0:04)
February of 2007, I was playing basketball, I think freshman or sophomore year in high school. That's what I was doing. I was not worrying about the economy, I'll tell you that much.

**Ben Hillman** (0:13)
I want to take you back to that time. There was this woman, Erin Callan, and she got a call from the president of Lehman Brothers. And he and the CEO of Lehman Brothers, Dick Fold, wanted her to be the firm's new CFO. And she had become the first woman ever on Lehman's 13-person executive committee. So she's basically the most senior woman in all of Wall Street.

**CJ Gustafson** (0:36)
That's crazy. And I don't think she'd been a CFO before, right?

**Ben Hillman** (0:39)
No, she had never been a CFO before. Just to give you a little more color, she was 41 years old, Harvard undergrad, NYU Law. She was a tax lawyer who spent 12 years climbing the ranks at Lehman, running the Global Hedge Fund Coverage Group, and taking companies like Blackstone and Fortress Public.

**CJ Gustafson** (0:55)
She is not a dummy.
She is like a 10 out of 10 on paper at least. She has the requisite experience to be someone who's top of her craft on Wall Street. I'm curious though how the CFO role now intersects.

**Ben Hillman** (1:07)
By any measure, this was a remarkable rise by her. There was just one big problem. So Callan lacked a background in accounting, treasury or operations. These are the three tracks that traditionally lead to the CFO office. CJ, what was your background? Did you fit into one of those three?

**CJ Gustafson** (1:23)
I'm not a CPA by trade, so I always felt a little bit of an imposter, actually, that I didn't have an accounting degree. But I came up in the FP&A world, which is operational in the sense that you're the person coming up with the budget, you're creating the operating plan, and you're also getting reps in behind the CFO at the time. So I didn't come to the CFO seat completely from like outside. I wasn't an external candidate or anything like that. I did very much come up the ranks internally, but no, I was not an accountant.

**Ben Hillman** (1:51)
She had her own word for herself when she got the job or her own phrase, ill-equipped. She later wrote that when she first moved to Lehman from law, she would constantly interrupt meetings to ask what basic financial terms meant. They used to call her Erin the Interrupter. I don't think she adopted that name herself.

**CJ Gustafson** (2:09)
I feel like great leaders though do interrupt in like a friendly way though, and in a way that actually shows that they care about what other people are working through. I often credit my learning curve to just saying, can you walk me through that again?
Can you take me through that again? Can you just explain that to me one more time? Sometimes even with my team, especially if it was something that was technical in nature accounting, I would go through it three times. That sounded like a broken record. But I looked at it like, hey, you know what? They gave me the position. I can ask the stupid questions now.

**Ben Hillman** (2:40)
No, for sure. I don't mean to say any of this disqualified her.

**CJ Gustafson** (2:44)
No, not at all. But I think it does show that she felt like a fish out of water, and she was interrupting a lot to clarify, and try to quickly download, I think, what she did now.

**Ben Hillman** (2:55)
Absolutely. I think we're probably seeing a lot of this after the fact because of just what came next. When Lehman started unraveling and the CEO Fold retreated from public view, Callan became the face of the firm, the person that was on every earnings call defending the balance sheet on live television. It was a balance sheet that critics later said she may not have fully understood.

**CJ Gustafson** (3:17)
Yeah, that balance sheet was a ticking time bomb. The economic scenario certainly did not help. As Warren Buffett says, when the tide goes out, you figure out who's swimming without a bathing suit on, and Lehman Brothers was swimming without a bathing suit on. That sucks for her though, that she was left to hold the bag. Everyone else was like, I got to go now, and she just stand in there like I'll just vamp on the teleprompter here.

**Ben Hillman** (3:39)
Yeah, this is me speculating here. I have to imagine that perhaps maybe she was set up a little bit. Again, I'm not accusing anyone of anything, but looking back, it kind of looks a little bit fishy.