Collapse of Lehman Brothers: Overview of Problems
Abstract
This paper will provide a brief overview of the problems that led to the collapse of Lehman Brothers and the concerns expressed by former Senior Vice President, Mathew Lee. Next we will explore the kind of behaviors that led to the downfall of Lehman Brothers and other ill-fated companies. Additionally we will explore several theories regarding actions that leadership can take to create an environment, which encourages transparency and prevents large-scale ethical breaches. Finally we offer perspectives on why ethics hotlines are not a reliable means of detecting and avoiding unethical behavior.
Introduction
Former Senior Vice President Mathew Lee had been with Lehman Brothers for 14 years (Stevens & Buechler, 2013). In May of 2008 he courageously stepped forward and presented a memo to the Lehman’s Chief Financial Officer and Chief Compliance Officer detailing what he perceived to be violation of the company’s code of ethics (Jennings, 2012). Lee described irregular accounting practices, which involved the movement of large sums of debt from the company’s balance sheet. For his bravery, Lee was terminated. Lehman attributed Lee’s departure to downsizing necessary due to the company’s financial trouble (Stevens & Buechler, 2013). Lehman filed for bankruptcy in September of 2008, after several failed attempts at salvaging and or selling the company.
Discussion
Behaviors Leading to Collapse
The primary culprit in Lehman’s decline was former Chief Executive Officer, Dick Fuld. According to reports Fuld knew the danger posed by his actions. He also knew that the company’s practices were deceptive and unethical (Stein, 2013). Fuld was a dominating, aggressive leader, who surrounded himself with individuals that supported and agreed with his actions (Stein, 2013). The problem with Fuld, and similar top executives may be attributed to narcissism. Stein contends:
This deluded and
This paper will provide a brief overview of the problems that led to the collapse of Lehman Brothers and the concerns expressed by former Senior Vice President, Mathew Lee. Next we will explore the kind of behaviors that led to the downfall of Lehman Brothers and other ill-fated companies. Additionally we will explore several theories regarding actions that leadership can take to create an environment, which encourages transparency and prevents large-scale ethical breaches. Finally we offer perspectives on why ethics hotlines are not a reliable means of detecting and avoiding unethical behavior.
Introduction
Former Senior Vice President Mathew Lee had been with Lehman Brothers for 14 years (Stevens & Buechler, 2013). In May of 2008 he courageously stepped forward and presented a memo to the Lehman’s Chief Financial Officer and Chief Compliance Officer detailing what he perceived to be violation of the company’s code of ethics (Jennings, 2012). Lee described irregular accounting practices, which involved the movement of large sums of debt from the company’s balance sheet. For his bravery, Lee was terminated. Lehman attributed Lee’s departure to downsizing necessary due to the company’s financial trouble (Stevens & Buechler, 2013). Lehman filed for bankruptcy in September of 2008, after several failed attempts at salvaging and or selling the company.
Discussion
Behaviors Leading to Collapse
The primary culprit in Lehman’s decline was former Chief Executive Officer, Dick Fuld. According to reports Fuld knew the danger posed by his actions. He also knew that the company’s practices were deceptive and unethical (Stein, 2013). Fuld was a dominating, aggressive leader, who surrounded himself with individuals that supported and agreed with his actions (Stein, 2013). The problem with Fuld, and similar top executives may be attributed to narcissism. Stein contends:
This deluded and
References: Appelbaum, S. H., Keller, S., Alvarez, H., & Bédard, C. (2012). Organizational crisis: Lessons from lehman brothers and paulson & company. International Journal Of Commerce & Management, 22(4), 286-305. Jennings, M. (2012). Business ethics. Mason, OH: South-Western Cenage Learning. Stein, M. (2013). When does narcissistic leadership become problematic? Dick fuld at lehman brothers. Journal Of Management Inquiry, 22(3), 282-293. Stevens, B., & Buechler, S. (2013). An analysis of the lehman brothers code of ethics and the role it played in the firm. Journal Of Leadership, Accountability & Ethics, 10 (1),43- 57.