Lehman Brothers Ethical Reasoning

Describe the accompaniment at Lehman Brothers from an morals perspective. Whats your opinion of what happened there? The ethical effect here was that Lehmans executives exploited loopholes in the accounting standards to manipulate their eternal rest sheet in order to mislead the investing public. Using Repo one hundred five, Lehman was able to clear huge amount unprofitable assets off its labyrinthine sense sheet instead of selling at loss. Evidence pointed out that the hirer executive, Richard Ruld, knew or so the role of it but faked ignorance in defence.Even the auditors from Ernst and Young knew about the use of the suspicious Repo 105 but chose to keep quiet. I believe that the prime quantity motivation behind the act was to retain investors confidence by retaining a plummet in mental strain expenditure. Hence, the implication was that Lehman was projecting a stupid image of its strong financial position, meaning that its stock price was over take to bed. through a nd through falsified accounting enunciates, investors were tricked into believing that their investments were safe, incurring huge losings when Lehman defaulted. Investors lost creed.The consequences were scourge as it created a systemic crisis of confidence in the banking industry as all other banks froze lending to reduce their exposure of Lehmans hateful Repo 105. Lehmans employees suffered too as they lost their jobs overnight. Could anything be done other than at Lehman Brothers to prevent what happened? Explain. After extensive research, it was apparent that a indite Code of ethics was present at Lehman Brothers. However, for an ethics code to be impressive, the tone at the elapse executives inescapably to be set recompense so that the entire organisation can feel connected to the wholes ethical values and beliefs.The obvious failure we witness in Lehmans aspect was that the top wariness, led by Ruld (CEO) and Erin Callan (CFO), were guilty of wrong negligence an d wrongdoing. Therefore, it is vital for the Shareholders to screen through their selection of the Board of Directors passing stringently to ensure the appointment 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 power 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 avow mechanism to work, so that the Ethics Code can be strengthened through complaisance-based ethics programmes to serve as deterrence. Simultaneously, integrity-based ethics programmes must stimulate into play to instill and influence an somebody responsibility for upholding ethical conduct, with compliance continuously playing the role of monitoring, to prevent any future reoccurrences.On top o f this, Lehman could have adopted the Moral Rights Approach to base their decision on whether their behaviour was ethical or wrong. Using this approach, they would not have commit fraudulent accounting, as it violates the fundamental 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 treasure investing decisions. Another preventive approach is the Fairness or justice Approach to assist Lehman in weighing their ethical decision.The top executives decisions cushion 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 silver, 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 exit fall, but at least the negative impacts would be localised within the firm, instead of triggering a banking shockwave.After all the public garboil over Enron and then the passage of the Sarbanes-Oxley Act to protect shareholders, why do you think we still continue to see these types of situation? Is it un likely to impart 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 social ethics and professional ethics which are based on realised social 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 determine from the influence of their upbringing. While honesty can be ones core value, it can also be the most neglected value of another. As seen from the case studies of Lehman and WorldCom, personal interest and greed of the top executives to go a huge in power motivated them to trample on ethics, resulting in their impedimenta approach. Managers must first understand that ethical decision making is propellant and every element must be carefully weighed to prevent unethical issues.In applying the five ethical notions, it can be argued in Lehmans case that manipulation brings about apparent utilitarianism for everyone (higher stock price for shareholders, more(prenominal) bonuses for employees, stronger creditors faith and higher managements bonuses) in the short run. However, it is not warrant 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 possibly be achieved through a deuce pronged approach. The first, which aims to resolve unethical issues in the long run, requires the need for a stronger emphasis on education. Simple as it may sound, but the overleap 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 learning 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 comely to deter off such seduction of greed. With a softer but mor e 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.