Trang Dai Carnes

Lessons from Lehman Brothers: Will We Ever Learn?

1. Describe the situation at Lehman Brothers from an ethics perspective. What’s your

opinion of what happened here?

Lehman Brothers didn’t practice the strong culture concept into their organization but did

the risk-oriented culture instead. Lehman Brothers let their own employees and also top

management teams making an unethical and very risky decisions more than they can

control for financial gain because of the huge rewards. On top of that, the management

teams overlook questionable behaviors and let their employees make their own decisions

and took a huge risk without controlling, therefore, people put behind the morale value

for huge profits without any control factor stopping them being irresponsible, and the

process keep repeat which lead to the failure of the organization later. Furthermore, the

culture indirectly encouraging corruption among the managers pass through their

employees. Also professional ethics were ignored and employees can’t question over

anything that they suspect would turn out bad because “making questionable deals hailed

and treated as conquering heroes.” I think the management teams should let their

employees make their own decision with the management teams have to look over it and

monitor it, which is controlling, just to make sure the decision is less risky for the

organization. They need to exert their influence towards their employees, and that’s a

strong culture concept which help to organization become more and more successful in

the future by developing managers-employees’ strong relationships.

2. What was the culture at Lehman Brothers like? How did this culture contribute to the

company downfall?

Like I mentioned above, Lehman Brothers practice a risk-oriented culture because of

their negligence and corruption among the organization. Furthermore, they didn’t follow

the due process in their financial report and also make a false statement on their financial

report to fulfill their greed over the profits which is a big contributor to the company

future financial lost and lead to the downfall of the organization. The top executive just

focused on the huge financial rewards and leave their people making all the risky

decisions against internal limits. Their culture would stress their people out because all

these people there were only care about making more money to fulfill their greed and did

not care about moral value or culture ethics. The top management did not concern when

being asked by their employees because there were some illegal transactions they tried to

hide and was afraid to answer it. Lehman Brothers exerted a weak culture among their

employees which encouraged unethical practice among employees, and moreover, most

of the employees become selfish and disloyal because they have no faith about the

culture. They only want to make money as much as they can while they still have the

jobs, and that what make them engaged in a risky deal.

3. What role did Lehman’s executives play in the company’s collapse? Were they being

responsible and ethical? Discuss

Lehman Brother’s executive play a big role in the company’s collapse by being

irresponsible and also violate the business ethnic. For example, they falsified their

financial statements by filed an inaccurate financial report then put it elsewhere in order

to help them to hide all the transactions and balances on the financial statements. Ernst &
 Young would take part of responsible for their financial statements because they’re

Lehman audit firm but failed to alert to the company when the manipulation was taking

place nor question anything that they’re suspicious. Furthermore, they created a culture

where all of their employees can practice unethical because of the huge rewards which

contribute to the company downfall because there is no existence of moral value

whatsoever, and it showing that their main goals to work there is profits. On the other

hand, they cut down their employees’ insurance benefits because the top executives want

to have more profit which is extremely unethical. They are also not listen to their

employees’ opinions and concerns which cost them a great deal later and also ruin the

whole organization reputation.

4. Could anything have been done differently at Lehman Brothers to prevent what

happened? Explained

There are a lots of things that the top executive of Lehman Brother could been done to

prevent the downfall of the company. The first thing it could be done is being

responsibilities and responsiveness. All of the organization important goal is making

profits in order to survive but they have to follow the legal terms and being responsible

for their employees’ actions and behaviors. The top executives should let their employees

take actions if needed but they can’t let them freely engage in any activities could go

overboard because the sooner they stop the bad behavior, there would be a different

outcome at the end. They need to listen to other employees concern and value their

opinions so they can emphasis on ethical value and make right decisions would help

tremendously. Moreover, the top executives need to show the care for the organization

other than themselves by understanding and maintain the business skills concept like
 strategic managements. Strategic management is what managers do to develop the

organization’s strategies. It’s an important task involving all the basic managements

functions-planning, organizing, leading, and controlling (Robbins, 236).

5. After the public uproar over Enron and then the passage of the Sarbanes-Oxley Act to

protect shareholders, why do you think we still continue to see these types of situations?

Is it unreasonable to expect that businesses can and should act ethically?

Not only just Lehman brother case but also people around the world always try to seek

for an easy way to make the most money for themselves to fulfill their greed. Most of the

people are willing to find the opportunity to play unfair or even do illegal works to try get

more money because money is one of the greatest temptation that have ever created by

human race. The Sarbanes-Oxley Act (SOX) is an act passed by Congress in 2002 to

protect the shareholders from the possibilities of any fraudulent activities by corporations.

The main purpose of SOX was to let all the organizations notice that all of their financial

activities are being watch and monitor by the government. But despite all the rules and

regulations, there would be impossible to monitor thousand or more of all of the

corporations and because it can be reduced most of the illegal activities but very difficult

to eradicate, and of course, there still will be a gap for them to practice an unethical act.

It’s not unreasonable to expect that businesses can and should act ethically because they

all need to respect all the rules and regulations passed by Congress for their own good.

All of the organization need to have their financial up-to-date to maintain a financial

healthy and being ethical to the society, but it would be hard to make a large percentage

of people doing the same things and that why we have so many rules and regulations

from the government.

 References

Robbins, Stephen and Coulter, Mary (2016). Management 13th Edition. Boston:Pearson

Education.(236)

Hoang Anh (2013). Copy of Lesson from Lehman Brothers. Retrieve from

https://prezi.com/zabmcsoshv78/copy-of-lessons-from-lehman-brothers/