Lehman Brothers
2008
2×
risk committee meetings a year (2006 & 2007)
What happened
Heavy leverage in real estate and credit products led to the largest bankruptcy in US history in September 2008.
What the board did
A House hearing found the finance & risk committee, chaired by an 80-year-old director, met only twice a year. The board lacked current financial expertise.
Inside the boardroom: timeline
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2006–07Finance & Risk Committee, chaired by an 80-year-old director, meets only twice a year.
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10 Sep 2008CFO tells investors liquidity ‘remains very strong’ ($42B pool), without saying much was pledged as collateral.
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12–14 Sep 2008Rescue talks at the NY Fed fail; no government bailout.
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14 Sep 2008, eveningBoard is told for the first time that much of its liquidity is tied up at clearing banks, then votes to file for Chapter 11.
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15 Sep 2008Lehman files the largest bankruptcy in US history.
Lesson
A board must understand, and actively oversee, the company’s risk appetite.
General Motors
2009
60 days
to deliver a credible restructuring
What happened
The recession hit GM hard and its restructuring plan was rejected by the White House as not credible.
What the board did
The government made CEO Rick Wagoner’s exit a condition of more aid. GM went through bankruptcy and returned to profit in 2010.
Inside the boardroom: timeline
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Dec 2008GM takes federal bailout loans; directors later work for $1 a year.
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29–30 Mar 2009White House forces out Rick Wagoner. Fritz Henderson becomes CEO; director Kent Kresa interim non-executive chair.
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1 Jun 2009Board authorizes the Chapter 11 filing.
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Jun–Jul 2009Most of the old board leaves; ex-AT&T CEO Ed Whitacre named chair. New GM board: 10 picked by US Treasury, 1 by Canada, 1 by the UAW, plus the CEO.
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1 Dec 2009Board accepts Henderson’s resignation after concluding he moved too slowly.
Lesson
In a bailout, outside stakeholders can override the board.
Silicon Valley Bank
2023
8 months
without a chief risk officer
What happened
Rising rates hit SVB’s bond holdings. A capital raise triggered a bank run and the second-largest bank failure in US history.
What the board did
The CRO left in April 2022 and wasn’t replaced until year-end. Only one of seven risk-committee members had a risk-related background.
Inside the boardroom: timeline
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Apr 2022Chief Risk Officer Laura Izurieta steps back; no replacement until late Dec 2022.
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During 2022Board risk committee meets 18 times (vs 7 in 2021) as rates rise; only one of seven members had risk experience.
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3–8 Mar 2023Proxy reveals the CRO gap; capital raise announced.
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9–10 Mar 2023Bank run; regulators seize SVB, the 2nd-largest US bank failure.
Lesson
Risk oversight can never have gaps, especially when rates move fast.
Airbnb
2020
25%
of staff cut (1,900 people)
What happened
COVID-19 froze global travel. Airbnb expected 2020 revenue to fall by more than half and its IPO plans were in doubt.
What the board did
Within weeks it raised $2B, cut non-core bets and laid off 1,900 staff with 14 weeks’ pay. It went public in December 2020.
Inside the boardroom: timeline
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Mar–Apr 2020Bookings collapse; guests allowed to cancel free; $250M promised to hosts.
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6 & 15 Apr 2020$1B in debt/equity from Silver Lake and Sixth Street, then another $1B.
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5 May 2020CEO letter: 1,900 of 7,500 staff laid off with 14 weeks’ pay; hotels, flights and studios paused.
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Dec 2020Airbnb goes public.
Decisions were announced by the CEO; board votes weren’t published.
Lesson
Fast, transparent decisions in a shock can save the company.