Lehman Brothers Ethical Reasoning

Describe the maculation at Lehman Brothers from an morals perspective. Whats your opinion of what happened there? The respectable issue here was that Lehmans executives put-upon loopholes in the score standards to manipulate their balance sheet in order to mislead the investing public. utilize Repo 105, Lehman was able to clear huge amount unprofitable assets off its balance sheet sooner of selling at loss. Evidence pointed out that the chief executive, Richard Ruld, knew approximately the use of it just now faked ignorance in defence.Even the auditors from Ernst and unseasoned knew about the use of the suspicious Repo 105 but chose to keep quiet. I believe that the prime aim behind the carry was to retain investors confidence by cloging a plummet in stock charge. Hence, the significance was that Lehman was projecting a false image of its strong financial position, meaning that its stock price was overvalued. finished falsified accounting reports, investors were trick ed into believing that their investments were safe, incurring huge losses when Lehman defaulted. Investors lost faith.The consequences were devastating as it created a general crisis of confidence in the banking industry as all other banks froze lending to reduce their exposure of Lehmans undesirable Repo 105. Lehmans employees suffered too as they lost their jobs overnight. Could anything be done differently at Lehman Brothers to prevent what happened? Explain. After extensive research, it was appargonnt that a written Code of Ethics was present at Lehman Brothers. However, for an morals code to be effective, the tone at the crest executives needs to be set upright so that the entire organisation can feel connected to the firms ethical values and beliefs.The lucid failure we witness in Lehmans case was that the exculpate management, led by Ruld (CEO) and Erin Callan (CFO), were guilty of wrong negligence and wrongdoing. Therefore, it is vital for the Shareholders to screen with their selection of the Board of Directors extremely stringently to ensure the employment of the right leaders. As the top management was already corrupted, the Ethics Programs at Lehman had limited use in ensuring the upholding of the Ethics Code, as these top executives can wield their axe down on any whistleblowers that puts their military unit in jeopardy.This was the exactly what happened at Lehman, when whistleblower Matthew Lee, was axed. Therefore, Lehman needs to ensure that ethical leaders are at helm for this control mechanism to work, so that the Ethics Code can be reinforced through compliance-based ethics programmes to serve as determent. Simultaneously, integrity-based ethics programmes must come into play to instill and influence an item-by-item responsibility for upholding ethical behaviour, with compliance continuously playing the role of monitoring, to prevent any future reoccurrences.On top of this, Lehman could have adopted the Moral Rights Approach to b ase their decision on whether their behaviour was ethical or unethical. Using this approach, they would not have committed fraudulent accounting, as it violates the natural rights that investors deserve from the use of their accounting report which is to provide a faithful and accurate representation of the company for investors to evaluate investing decisions. some other preventive approach is the Fairness or Justice Approach to assist Lehman in weighing their ethical decision.The top executives decisions impact many groups of stakeholders, and the fraudulent acts only brought about harm to all stakeholders involved, as could be seen from the negative repercussions of the banks default shareholders losing money, employees losing jobs, other banks losses due to lending to Lehman, publics loss of confidence and stock markets crashing. If they did go about reporting their losses honestly, perhaps their stock price and profitability will fall, but at least the negative impacts woul d be localised within the firm, sort of of triggering a banking shockwave.After all the public uproar over Enron and then the passage of the Sarbanes-Oxley Act to protect shareholders, wherefore do you think we still continue to see these types of situation? Is it unreasonable to expect that businesses can and should act ethically? Analysing from the concept of Organisational Code of Ethics, it can be easily deduced that ethical failures from organisations usually stems from the individual ethics component. Unlike societal ethics and professional ethics which are based on established affectionate norm and a certain set of standards, individual ethics is the only component that is not conformed to a certain enchmark. Every individuals ethics differ from one another as it is mold from the influence of their upbringing. While honesty can be ones core value, it can likewise be the most neglected value of another. As seen from the case studies of Lehman and WorldCom, personal intere st and greed of the top executives to remain in power motivated them to trample on ethics, resulting in their obstructionist approach. Managers must freshman understand that ethical decision making is dynamic and every element must be guardedly weighed to prevent unethical issues.In applying the five ethical notions, it can be argued in Lehmans case that handling brings about apparent utilitarianism for everyone ( high stock price for shareholders, more bonuses for employees, stronger creditors faith and higher managements bonuses) in the short run. However, it is not justified for the stakeholders to be denied their fundamental rights of having accurate information of the bank, nor is it fair and justifiable that it brings about harm for all stakeholders in the long run when it went bust. It is very reasonable to expect businesses to act ethically.This could maybe be achieved through a two pronged approach. The first, which aims to resolve unethical issues in the long run, requ ires the need for a stronger emphasis on rearing. Simple as it may sound, but the lack of ethical education is extremely glaring. In this profit driven world, where money speaks louder than anything else, there seems to be a shift towards higher reward and recognition for profits rather than ethical behaviour. Education serves as the most effective and fundamental way to resolve and prevent unethical issues altogether as it tackles the root of the problem to instill the right mindset.The second, perhaps shorter term measure, deals with governance. To prevent the evil temptation of dishonesty, there needs to be much harsher consequences and deterrence, much(prenominal) that temptation will vanish upon thought of the possible sentences that potential manipulators will face. Currently, the punishments of fines and jail terms are simply not severe enough to deter off such seduction of greed. With a softer but more effective measure through education to correct mentalities in the long run, and a harsher deterrence factor in the short term, ethical behaviour can be definitely be achieved.