Culture in a workplace can be determined based upon values, beliefs, interests, and experiences. At the Lehman Brothers they rewarded risk at any cost without validation. One of the main issues was their rapid growth over a 13 year period with very little change to their corporate culture. Questionable deals, unnecessary risks, and short-term profits were rewarded by management. The culture promoted unethical behavior and ignored concerns from conservative associates.
The majority of the workers at Lehman Brothers had an understanding that these short term gains may not be in the interest of the company, but their behavior was consistently incented by management and anyone who posed objections was manipulated into following suit.
To make matters worse, there was a serious disconnect between executive management and lower level associates and management that contributed to the downfall of their business. These circumstances culminated in an eventual crash, causing the Lehman Brothers to file the largest bankruptcy case in history.
The culture of rewarding risk and manipulation of financial reports lead to the Lehman Brothers demise. What role did Lehman’s executives play in the company’s collapse? Were they being responsible and ethical? Discuss. Part of culture is unspoken and unwritten rules for working together that leads to making ethical decisions. Lehman Brothers executives turned a blind eye because of the high bonuses and rewards given to them that lead to the company’s collapse.
In addition, the executives were altering their financial statements to give the appearance that performance was better than it actually was while lining their own pockets.
Poor judgment, a lack of professional ethics, and a blatant disregard for honest business dealings lead to their collapse. Although executives may have claimed that they were unaware of these dealings, it is their responsibility as stewards of the company to set and maintain an appropriate corporate culture that will result in positive gains.
They failed to do this and are thus responsible on all accounts. Their neglect and irreprehensible greed led to the fall of the fourth largest investment bank in the United States. After all 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? As noted in the Parable of the Sadhu, ethics can be relative if one does not have a strong personal sense of ethics.
As the climbers were influenced by each other to make the wrong decision and place the value of life below their own personal self centered goals, so in business the slope can be slippery when everyone is cooperating in unethical behavior. This can be even more powerful when money is involved. For this reason we continue to see examples like the Lehman Brothers and Enron where corruption when unchecked can run rampant. Placing regulatory measures like SOX (Sarbanes-Oxley Act) is necessary to maintain transparency and protect investors from this type of corruption.
SOX provides security to investors as companies are now held accountable for their financial reporting. Regardless of these measures, companies or individuals continue to find ways to beat the system. As long as there is greed in the world, there will be corruption. Strong ethical leadership is imperative and corporate culture trickles down from the top. While corporate hierarchy may be necessary, it is critical that leaders at the top be fully aware of what is taking place in all aspects and levels of their organization.
It is reasonable to expect that all businesses act ethically and laws that regulate their performance while maintaining our freedom and democracy are imperative for the success of our economy. With companies like Enron and Lehman Brothers, acting ethically was clearly not an expectation and the corporate climate at the time helped executives and individuals employed to make bad decision because it was encouraged and easy to do so. As a consumer, why do business with a company that has no value in making the right decisions.
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