Ethical Issues in the Collapse of Lehman Brothers

1864 Words Dec 22nd, 2012 8 Pages
Serge IRAGUHA
Business and Society
November 25, 2012
Ethical Issues in the Collapse of Lehman Brothers

Lehman Brothers Holdings Inc. used to trade on the NYSE under the symbol LEH as the fourth largest investment bank in the US. It provided global financial services in investment banking, fixed income sales, trading US treasury securities, investment management, private equity, and banking. But on September 12, 2008 it found itself under financial predicaments when it filed for bankruptcy. With $600 billion in debt, LEH stands as the largest bankruptcy in world history. The company experienced an alienation of most of its clients, drastic losses in its stock, and loss of its assets when it got devaluated by credit rating agencies. This
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According to Attorney Tony Valukas, who led the investigation into the collapse of Lehman Brothers, they were shipping assets to London during difficult times to make loans appear like revenue. Surprisingly, the practice was technically legal and within the rules, but was it ethical? There is a blur area between what’s legal and ethical. The blurred area was the gap that allowed many financial institutions to cause the global financial crisis, Lehman Brothers included.
The collapse of Lehman Brothers was sudden and caught a lot of investors by surprise; consequently everybody tried to bail out as soon as they could. The market did not have enough time to digest the news, which led to panic. If Lehman Brothers had disclosed their financial standing clearly, they could have found a collaborative way to deal with the crisis with the different stakeholders of the company. This process would have been smoother and the consequences would have been minimized. By not disclosing information to the public, Lehman Brothers made its downfall steeper. When their unethical practices came to light, everybody panicked and reacted accordingly.
Worth mentioning is the culture at Lehman Brothers that rewarded risk taking; the company had a bonus system that compensated people for generating stellar returns when the company was performing very well, but when the

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