Case Study 1
1. Describe the situation of the Lehman brothers from an ethics perspective. What’s your opinion of what happened here?
Lehman’ executives exploiting loopholes in the accounting standards to manipulate their balance sheet in order to mislead the investing public is the ethical issue that contributed to the company’s collapse. Lehman was able to clear vast amounts of unprofitable assets off of its balance sheet instead of selling them at a loss by using Repo 105. There was evidence that the chief executive knew about the use of Repo 105, but pretended to not know anything about it. The main motivation behind Repo 105 was to keep the investors’ confidence by trying to prevent a crash in the stock. The result was that Lehman was projecting a false image of its financial status. Investors were tricked into believing that their investments were safe as Lehman forged accounting reports.
2. What was the culture at Lehman Brothers like? How did this culture contribute to the company's downfall?
At Lehman brothers, employees that too excessive risks were rewarded and employees that questioned said risks were ignored and dismissed. Also, questionable deals were rewarded heavily, and company managers made many business mistakes. The risks caused Lehman to make a vast amount of business mistakes and provided a culture that produced bad judgment and poor decisions making. The culture pushed anyone that did not agree to what others were doing to the bottom of the ladder.
3. What role did Lehman's executives play in the company's collapse? Were they being responsible and ethical?
The executives at Lehman did not act ethically. Said executives took risks and were rewarded when there was a positive result. Executives were making bad calls and writing up misleading reports. When they saw an asset they did not like, they wrote it off as opposed to selling it at a loss. People have lost faith in the market because executives making bad and risky decisions, and for having
Lehman’ executives exploiting loopholes in the accounting standards to manipulate their balance sheet in order to mislead the investing public is the ethical issue that contributed to the company’s collapse. Lehman was able to clear vast amounts of unprofitable assets off of its balance sheet instead of selling them at a loss by using Repo 105. There was evidence that the chief executive knew about the use of Repo 105, but pretended to not know anything about it. The main motivation behind Repo 105 was to keep the investors’ confidence by trying to prevent a crash in the stock. The result was that Lehman was projecting a false image of its financial status. Investors were tricked into believing that their investments were safe as Lehman forged accounting reports.
2. What was the culture at Lehman Brothers like? How did this culture contribute to the company's downfall?
At Lehman brothers, employees that too excessive risks were rewarded and employees that questioned said risks were ignored and dismissed. Also, questionable deals were rewarded heavily, and company managers made many business mistakes. The risks caused Lehman to make a vast amount of business mistakes and provided a culture that produced bad judgment and poor decisions making. The culture pushed anyone that did not agree to what others were doing to the bottom of the ladder.
3. What role did Lehman's executives play in the company's collapse? Were they being responsible and ethical?
The executives at Lehman did not act ethically. Said executives took risks and were rewarded when there was a positive result. Executives were making bad calls and writing up misleading reports. When they saw an asset they did not like, they wrote it off as opposed to selling it at a loss. People have lost faith in the market because executives making bad and risky decisions, and for having