Cayne to Remain Chair of Bear Stearns' Board

Bear Stearns president Alan D. Schwartz yesterday replaced James E. Cayne as chief executive. Cayne who resigned amid turmoil will retire from the firm but stay on as chairman of the board of directors.

Cayne, who had served as CEO of Bear Stearns since 1993 and as chairman and CEO since 2001, said, "I am gratified that the board has continued confidence in me, but I believe this is the right time to implement our succession plan. We are beginning a new year and are at a pivotal point in the development of our business at a time of rapid change on Wall Street," he said. "Leading Bear Stearns and its wonderfully talented people has been one of the great joys in my life for nearly 15 years. These are people who know how to create value, who know how to serve clients well and who I am confident will continue to do so for many years in the future."

In an interview with the Wall Street Journal yesterday, Bear Director Henry Bienen, who is president of Northwestern University, praised the new corporate structure. "Alan knows the firm very well," he added, but "Jimmy's contacts, his knowledge, are very important, and I wouldn't want Bear Stearns to lose that."

Bienen and others told the WSJ that Cayne started considering a departure last month. At a Bear board meeting held shortly before its fourth-quarter loss was announced Dec. 20, Cayne asked the non-management directors to stay afterward for a private discussion during which he suggested that Schwartz succeed him, Bienen said.

Some board members had also become worried about Bear's weakening position. Cayne's absences from the office during critical junctures amid the meltdown of two internal hedge funds last July also didn't sit well with some directors. "Being absent at a time of crisis is not a good thing," said Bienen. "At a time when things are going very haywire in the credit markets...it's really important to be seen."