The Last CEO Of Lehman Brothers Case Study

A decade ago the Lehman Brothers were the fourth largest investment bank in America. Dealing with Investment banking and investment management, the Lehman Brothers was one of the largest global financial service providers. Consequently, the subprime mortgage crisis left the company filing for the declaration of the chapter 11 bankruptcy protections, due to the unnecessary undertaken risk and obnoxious negligence accusations directed towards the group. Companies should utilize observational and analytical pundit functions in identifying the presence of crisis situations to avoid an economic downturn in the business (Pontell, 2014). The fraud would have prevented through stronger and better internal controls, which

The word “fraud” was magnified in the business world around the end of 2001 and the beginning of 2002. No one had seen anything like it. Enron, one of the country’s largest energy companies, went bankrupt and took down with it Arthur Andersen, one of the five largest audit and accounting firms in the world. Enron was followed by other accounting scandals such as WorldCom, Tyco, Freddie Mac, and HealthSouth, yet Enron will always be remembered as one of the worst corporate accounting scandals of all time. Enron’s collapse was brought upon by the greed of its corporate hierarchy and how it preyed upon its faithful stockholders and employees who invested so much of their time and money into the company. Enron seemed to portray that the goal of corporate America was to drive up stock prices and get to the peak of the financial mountain by any means necessary. The “Conspiracy of Fools” is a tale of power, crony capitalism, and company greed that lead Enron down the dark road of corporate America.

The significant finding from this article is that the world of finance is a very strange world. This world can offer opportunities to many, and at the same time, it can prove to be a mess for the others. Many people are not corrupt in their person, but by being negligent or by being careless, they fail at doing their duty successfully at some points in time. However, what the article talks about is the complete picture. Steven A Cohen faced a problem. He got entangled in an enormous financial mess.

This paper is about how did “Shadow Banking” precipitate the financial Crises. Then discusses the impacts of the crisis on the major financial institutions.

The handling of power is also paramount in an organization. Boleman and Deal offer meaningful insight in this aspect. They observe the following,

When looking at French and Raven’s Five Forms of Power in this situation, you can understand where the power comes from in this workplace (French, Raven, 1960). I see only four of the five forms being actively used in the RetailMax scenario. The CEO, who helped put the company back into a positive growth, has legitimate power since he believes that he has the right to make demands and get compliance from others in the organization. This can be seen as he authorizes another department to make an offer to Cam. Vince Mangini, Vice President of Professional Services (PS), has reward power and is able to compensate Cam for joining his department with a higher salary and a larger bonus. Cam Archer has the expert power and he wields is well. He has become a more-rounded team player and is continuing to gain credibility and experience in the company. And Regan Kessel has the referent power since he has gained the respect of other workers. With over twenty years of experience in the industry, he is a trusted leader. This has been shown by the relocation of the marketing team under his purview.

In the world we live in today the roles of power and leadership are often confused. Although they have similar meanings, they can be distinctly defined between the latter. The key difference between the two is the term of effect. Power is the exercise of leadership, and leadership is only defined if you have power. Leadership always involves attempts on a leader to affect behavior or a follower in a situation, whereas power is not equivalent with influence on another person’s behavior. Although power and leadership have similar meanings, they are certain differences that can point out what makes

In addition to power established because of organizational hierarchy or role, power is also established based on the level of influence or status one holds in an organization (Anichich, Fast, Halevy, Galinsky, 2016). “Status is the outcome of an evaluation of attributes that produce differences in respect and prominence” (Ketner et al, 2003 p. 266) They co-exists but are not co-dependent on each other. It’s possible to have status without power and power without status (Ketner et al, 2003). Whether one’s control comes through status or positional power, lauding control or significant influence over another inevitably leads to conflict.

Enron’s ride is quite a phenomenon: from a regional gas pipeline trader to the largest energy trader in the world, and then back down the hill into bankruptcy and disgrace. As a matter of fact, it took Enron 16 years to go from about $10 billion of assets to $65 billion of assets, and 24 days to go bankruptcy. Enron is also one of the most celebrated business ethics cases in the century. There are so many things that went wrong within the organization, from all personal (prescriptive and psychological approaches), managerial (group norms, reward system, etc.), and organizational (world-class culture) perspectives. This paper will focus on the business ethics issues at Enron that were raised from the documentation Enron: The Smartest Guys

Joel Bakan’s book, The Corporation: the Pathological Pursuit of Profit and Power, is a decisive look into the mind of the corporation, or big business. It outlines the importance of profit in business and how ruthless corporations are willing to be in order to bring in substantial revenue. The book uses a historical timeframe to portray the ruthlessness of business ever since the idea of the corporation arose in the 17th century. It provides an insight into a world of cheating, lying and stealing in order to advance in society; which is ultimately the goal Bakan was looking to reach. He provides many cases, examples and accounts which help the reader to understand the scheming which takes place and how

Henry Lehman in Montgomery, Alabama established Lehman Brothers in 1844. The company started out as a grocery store and was changed to Lehman Brothers in 1850 after Henry’s two brothers; Emanuel and Mayer linked with him in the business. Soon after, Lehman Brothers developed into a brokerage company distributing cotton. It opened offices in New York in 1858 and this gave the firm a stronger presence in the commodities trading, as well as it gave it a foothold in the financial community. During the construction of the railway, Lehman Brothers merged with Kuhn, Loeb & Co and became the primary financial advisors and underwriters to the railroad industry. The company began financing emerging businesses such as airlines, oil and electric companies. Over its long existence, American Express acquired the company, but Lehman later broke off and started operating as an independent company until the day of its collapse (Swedberg, 2010).

On September 15, 2008, Lehman Brothers filed for bankruptcy. With $639 billion in assets and $619 billion in debt, Lehman 's bankruptcy filing was the largest in history, as its assets far surpassed those of previous bankrupt giants such as WorldCom and Enron. Lehman was the fourth-largest U.S. investment bank at the time of its collapse, with 25,000 employees worldwide. The consequences for the world economy were extreme. Lehman’s ' fall contributed to a loss of confidence in other banks, a worldwide financial crisis and a deep recession in many countries. Lehman 's collapse roiled global financial markets for weeks, given the size of the company and its status as a major player in the U.S. and internationally. Many questioned the U.S. government 's decision to let Lehman fail, as compared to its tacit support for Bear Stearns, which was acquired by JPMorgan Chase & Co. (JPM) in March 2008. Lehman 's bankruptcy led to more than $46 billion of its market value being wiped out. Its collapse also served as the catalyst for the purchase of Merrill Lynch by Bank of America in an emergency deal that was also announced on September 15.

It is important for managers to understand the sources of power and influence as they must rely upon the cooperation of subordinates in order to be successful. Strong managers rely upon more than just authority they also use leadership skills and power to obtain the most productivity from their staff. According to French and Raven (1959) there are five sources of power. Referent power seems to be the most influential and the least affected by change. To quote Paul Argenti,

On September 10, 2008, Lehman Brothers announced the lowest decline as the shares dropped to 45%. It left the market value at $5.4 billion after the Korea Development Bank rejected to make an investment deal that could rescue Lehman. The company would seek capital from other investors in order to recover their financial situation. These efforts faltered and the situation grew more severe, even after the US government had already saved the Bear Stearns and Fannie Mae and Freddie Mac. Though it is less likely that the US government will keep Lehman's bailout, there should be a resolution from the Federal Reserve System to bolster Lehman’s finance so as to prevent the US economic declination.

Before the firm became bankrupt, they had more than $275 billion in assets under management. Furthermore, since the time the bank went public in 1994, the firm had increased net revenues over 600% from $2.73 billion to $19.2 billion and increased its employee headcount over 230% from 8,500 to almost 28,600 (Demyanyk, Y. S. and Hemert, O. V. 2008).