Alan C. Greenberg

"The developments at Bear Stearns certainly seem to be positive and as a result we will, of course, intensify our surveillance of all positions and expenses. You know how I feel about the dangers of overconfidence."

"You should also be hearing shortly from Marvin Davidson about our ballooning departmental expenses. It is up to all of us to fight our unrelenting enemies—complacency, overconfidence and conceit."

"He pointed out to me that the tendency is to cut expenses when things are tough and how stupid that line of reasoning is. When things are good, you should be even more careful of expenses because it is ridiculous to leave anything on the table when you hold a royal flush. We must continue to be alert, aggressive and never complacent. And last, but maybe most important, the partners of this firm must continue to work together and learn to overlook petty differences. We are all expendable and I hope that your Executive Committee does not have to prove that to any of us."

"When mortals go through a prosperous period, it seems to be human nature for expenses to balloon. We are going to be the exception. I have just informed the purchasing department that they should no longer purchase paper clips."

"Bear Stearns is probably going to sell stock to the public, and there is one guarantee that I would like to give the potential buyers of our stock—they are going to get the fairest shake from us that management can give any public shareholder. This place is going to be run tight, and the reasons are not all altruistic. We are not going public for the perks. We are going public for a number of reasons, and one is that we want the stock to appreciate."

"I think it is particularly important that all of us take a little time and review some fundamentals: 1. We must continue doing our best to control expenses. Every dollar we save on expenses goes directly to the bottom line. That is what all of us should be concerned about, or you are at the wrong firm. Expenses should be watched at all times, but especially when business is good. 2. We must continue to be alert for scams and con artists. We must watch for unusual behavior by the people we work with. What is unusual behavior? Something subtle like somebody who drives a Rolls-Royce on a salary that can barely support roller skates. 3. Do the people you work with answer phone calls in a courteous manner? Are all phone calls returned? I couldn’t care less what a person does in his own home, but I am a nut about returning phone calls that are made to our personnel during the workday. I do not care if the caller is selling malaria. Calls must be returned! 4. Are the receptionists and telephone operators in all of our offices warm and courteous, and if they are, are they thanked appropriately? Remember that in most cases the first contact a client has with us is through a telephone operator or receptionist. 5. Do you and your associates leave word where you are at all times so that finding you is not like hunting for the Andrea Doria? 6. In September of 1983, a memo was distributed with a quote from the works of Haimchinkel Malintz Anaynikal. It is worth repeating. “A man will do well in commerce as long as he does not believe that his own body odor is perfume.” That still holds true. We must not get cocky or over-confident."

"I was just shown the results for our first quarter. They were excellent. When mortals go through a prosperous period, it seems to be human nature for expenses to balloon. We are going to be the exception. I have just informed the purchasing department that they should no longer purchase paper clips. All of us receive documents every day with paper clips on them. If we save these paper clips, not only will we have enough for our own use, but we will also, in a short time, be awash in the little critters. Periodically, we will collect excess paper clips and sell them (since the cost to us is zero, the Arbitrage Department tells me the return on capital will be above average). This action may seem a little petty, but anything we can do to make our people conscious of expenses is worthwhile."

"Our pretax margins were 26.6% for the first 9 months of this year and are the highest in the industry. I am sorry to report that for the same period our return on equity was 25% and ranks only 2nd in the industry. This ranking of our R.O.E. is disappointing to me and particularly to Haimchinkel Malintz Anaynikal. We are obviously doing something wrong. Let us all set about correcting it. The only statistic I care about is return on equity. After many sessions with some of our business school graduates (yes, we do have some), I think they have helped me understand the secret to improving our R.O.E. It seems that if we increase revenues and cut expenses, return on equity goes up and that is what makes me happy. Please make me happy! I can be very unpleasant when I’m not."

"Remember what Haimchinkel Malintz Anaynikal said—“The time to stop stupidity and be tough on costs is when times are good. Any schlemiel* and most schlimazels* try to cut costs when times are bad.”"

"Then there are Friedman’s “five forbidden phrases.” • “I don’t know.” It should be replaced with “Let me check and find out.” • “We can’t do that.” Instead, tell callers what can be done. • “You’ll have to . . .” The caller doesn’t have to do much of anything, certainly not sit on hold. Instead, the employee should say, “You’ll need to . . .” • “Hang on a second, I’ll be right back.” It’s a lie and should be replaced with “I’ll need to put you on hold for a few moments, if you are able to hold.” • “No.” It should no longer appear at the beginning of a sentence. That makes people think about what they’re saying before they start talking."

"It is safe to say that our error account is running at almost 100% efficiency. We have got to do something to stop these insane mistakes, because the loss comes right off the bottom line, and you know how I feel about that particular statistic. We have been rather cavalier about not charging people for errors. This system obviously has not been working, and when something does not work I believe in change. From this moment on, we reserve the right to debit people who make errors, and this includes managing directors. From this day on, if I or someone who works for me does something stupid, I am going to pay for it. So I would suggest that all of us be careful."

"Consequently, we want all Managing Directors to begin critically examining their areas. Here is a list of some of the things you should be reviewing: A. Your work force 1. Who is not sufficiently productive? 2. Who should be replaced? 3. Who should be eliminated and need not be replaced? 4. Before hiring anyone new, ask whether your existing staff can be assigned additional responsibilities. 5. Do you have employees performing functions that are duplicating those performed in other departments, such as Accounting or Data Processing? B. Other items to watch and do that will keep us neat & clean. 1. Are you paying for unused or uneconomic news or quotation services? 2. Are you paying outside vendors for services or material that are not really needed, or duplicate what is already available in-house? 3. Do you have too many telephones and underutilized fixed wires? 4. Are you controlling such things as Federal Express, messenger services, and personal long-distance calls? 5. Do you & your associates reread daily my major memos on rubber bands, paper clips and envelope recycling (I feel that adhering to those memos was the main reason last year was a success)."

"I can guarantee very little about the future, but there is one thing you can bet on. Your executive committee is going to spend a lot of the new year stressing fundamentals. I do not think our success has been due to luck (although all of us welcome and appreciate good luck). Football teams that are in great condition and can block and tackle, win. We are going to win because we constantly keep in mind certain axioms such as: 1). It is our job to inspire receptionists and secretaries to smile and sparkle when speaking to or seeing clients. The top people at Bear Stearns set an example by returning all calls promptly. 2). Avoid the herd mentality. 3). Control expenses—even more so in good times. 4). Every department should be staffed with the best and the brightest because I cannot tell you which area of our business will be “hot” six months from now. 5). Reduce expenses. 6). We are going to stick to the things we think we know something about. I am too old to start selling cars, costume jewelry or life insurance. 7). Conceit and complacency are dangerous, particularly in our line of work. If I ever feel that the people at Bear Stearns start thinking their body odor is perfume and I cannot convince them otherwise—I will sell my stock. 8). I like people who conduct their business “neat and clean.” If you do not understand that, call me. 9). Cut expenses. 10). We must always be on guard in dealing with new relationships, and our associates must always be aware that we are watching the shop and them at all times. The best protection against in-house fraud is for management to have a great rapport with associates big and small. They will see aberrational behavior in a co-worker four years before internal audit spots the deception."

"Please note that I do not agree with all of their suggestions: 1. Sickness No EXCUSE . . . We will no longer accept your doctor’s statement or note as proof. It is clear that if you are well enough to get to the doctor’s office, you are well enough to come to work. 2. Leave of Absence (For an operation) We are no longer allowing this practice. We wish to discourage our associates from exposing any part of their body to a knife. Knives cut and cuts cause blood and that’s bad. We hired you as you are and to have anything removed would clearly make you less than we bargained for. Therefore, anyone having an operation risks termination. 3. Death (Your own) This will continue to be a valid excuse, but we will now require a two-week notice since we will have to replace you. MEMO FROM THE DESK OF ALAN C."

"We should have anticipated this culture shock because when a person joins us from a firm that has been losing billions, they should feel that we do things a little differently than the pack; but we do not want them to get the bends."

"1. He is a strong believer that people who talk too much seem to have bad luck. 2. People who do not return phone calls promptly do not seem to make the grade at a highly profitable firm. 3. People who object to end runs will never make it in football, or with successful investment banking firms. Certain groups do need to observe a “chain of command” atmosphere, but highly motivated, intelligent people do not need this handcuff. 4. A firm that has enthusiastic receptionists and telephone operators starts off with a tremendous advantage over the dummies of the world. Keep in mind that the first impression people receive from Bear Stearns is with those associates. 5. If a business person has to ask his accounting department if he is making a profit, he will not be in business very long."

"We need your help. Please help us get a message out to every associate. It is essential that once again we stress that we welcome every suspicion or feeling that our co-workers might have about something they see or hear that is going on at Bear Stearns that might not measure up to our standards of honesty and integrity. This should be a H.M.A.* crisis-control yellow warning. We want people at Bear Stearns to cry wolf. If the doubt is justified, the reporter will be handsomely rewarded. If the suspicion proves unfounded, the person who brought it to our attention will be thanked for his or her vigilance and told to keep it up. Forget the chain of command! That is not the way Bear Stearns was built. If you think somebody is doing something off the wall or his/her decision-making stinks, go around the person,** and that includes me."

"Our earning power has changed materially, but some things have not changed one bit: 1. We have no more layers of management now than we had in 1978. 2. We still realize the importance of trying to cut expenses. 3. We still realize how important it is to be on guard against conceit and arrogance. 4. We still are deeply concerned about the well-being of every person associated with Bear Stearns."