Enron Case
1. Describe the situation at Lehman Brothers from an ethics perspective. What’s your opinion of what happened here?
To attribute Lehman’s failure to “unprecedented adverse events in the financial markets” completely overlooks the irresponsible ethical behavior of employees and managers.
Students should mention the culture of corruption that existed at Lehman’s and the lack of controls that ultimately resulted in their downfall. An interesting finding was the acceptance of a rule, Repo 105, that allowed the company to write off and hide bad decisions. Even those unfamiliar with financial decisions will see the danger in the overuse of such a policy – something that was later denied by the CEO of Lehman’s.
2. What was the culture at Lehman Brothers like? How did this culture contribute to the company’s downfall?
The culture of Lehman’s was based on the ideals of risk taking and the pursuit of large financial rewards. Culture, from chapter 2, is rooted in the values, principles and traditions of the organization. Organizational values and principles dictate what is acceptable and unacceptable behavior. In the case of Lehman’s the disregard of accepted accounting principles and the push for lower costs and greater profits created a situation that would ultimately lead employees of the company to a potential unethical and/or illegal behavior.
3. What role did Lehman’s executives play in the company’s collapse? Were they being responsible and ethical? Discuss.
It is the CEO and top managers that establish the ethical context for the organization. Values and goals flow down from the top of the organization – not from the bottom up. According to the case, the “former chief executive Richard Fuld was at least grossly negligent in causing Lehman to file misleading periodic reports.”
Ethical failures by top management set the tone for the rest of the organization. It is easy to see how Lehman employees looking at the questionable behavior of Fuld engaged in
To attribute Lehman’s failure to “unprecedented adverse events in the financial markets” completely overlooks the irresponsible ethical behavior of employees and managers.
Students should mention the culture of corruption that existed at Lehman’s and the lack of controls that ultimately resulted in their downfall. An interesting finding was the acceptance of a rule, Repo 105, that allowed the company to write off and hide bad decisions. Even those unfamiliar with financial decisions will see the danger in the overuse of such a policy – something that was later denied by the CEO of Lehman’s.
2. What was the culture at Lehman Brothers like? How did this culture contribute to the company’s downfall?
The culture of Lehman’s was based on the ideals of risk taking and the pursuit of large financial rewards. Culture, from chapter 2, is rooted in the values, principles and traditions of the organization. Organizational values and principles dictate what is acceptable and unacceptable behavior. In the case of Lehman’s the disregard of accepted accounting principles and the push for lower costs and greater profits created a situation that would ultimately lead employees of the company to a potential unethical and/or illegal behavior.
3. What role did Lehman’s executives play in the company’s collapse? Were they being responsible and ethical? Discuss.
It is the CEO and top managers that establish the ethical context for the organization. Values and goals flow down from the top of the organization – not from the bottom up. According to the case, the “former chief executive Richard Fuld was at least grossly negligent in causing Lehman to file misleading periodic reports.”
Ethical failures by top management set the tone for the rest of the organization. It is easy to see how Lehman employees looking at the questionable behavior of Fuld engaged in