The Collapse of Lehman Brothers

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The collapse of Lehman Brothers in 2008 was not an event that happened overnight, but a culmination of ethical lapses and corporate greed over the course of a few years. Richard Fuld, CEO, was known to be stubborn and ambitious. He created a cult-like culture1 within the business whereby he expects absolute loyalty from employees with a ‘no questions asked’ attitude. Risk-takers were often lauded and rewarded handsomely. There was no checks in place to manage the risk undertook. Lehman Brothers had the ample opportunities to clarified its fragile financial situation but it choose to lie and project an impression that Lehman Brothers was financially healthy to weather the looming financial crisis. They employed “Repo 105 A1”, for 2 consecutive quarters to manipulate its leverage, painting an inaccurate picture of a stable and financially healthy company to the various stakeholders. By the time the authorities and investors knew what was going on within Lehman Brothers, it was too late to salvage the situation. The biggest victim of the Lehman Brothers’ downfall was its investors. In weeks leadings up to the downfall, investors, unaware of the storm brewing within, were still being sold its financial products.4 This caused a loss of significant wealth for many when the company collapsed. A great amount of public trust was also lost. As Lehman Brothers is one the biggest financial institute in the world, its collapses caused ripples in the financial world, eventually contributing to the financial crisis. What Could Have Been Done Differently The ego of the top management doomed the company. They refused to admit defeat and seek help until the very last minute . The people were lied to by the top management. Moral Rights & Virtue Approach - Top management could have asked themselves if they are respecting the rights of various stakeholders’ such as the right

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