Aine Nodera

BSBA 3202

Many companies around the world are affected by bankruptcy at a certain time in their
financial year. When a company is declared bankrupt, it can no longer invest in the stock
exchange. The government declares the company insolvent. An example of such company is the
Lehman Brothers, a housing and real estate company that went into bankruptcy in 2008.

Lehman Brothers financial services filed bankruptcy on September 15, 2008, in the New
York Southern District U.S. Bankruptcy Court. Resulting in an immediate 500 point drop in the
Dow Jones. This day became known as ‘‘Dark Monday’’. This was to date, the largest
bankruptcy filing in history unleashing a “crisis of confidence that threw financial markets
worldwide into turmoil, sparking the worst crisis since the Great Depression.” However this
financial icon’s fall is no surprise. The bankruptcy examiner released reports saying that the
firm’s executives and auditor, “lambasted” for what they did to cause the collapse of the firm.

The Lehman Brother culture was one of risk and reward. At the company, excessive risk
taking by employees was openly lauded and rewarded handsomely. Employees knew they could
give risky ideas and they would get rewards for them. Individuals making questionable deals
were hailed and treated as ‘conquering heroes’. If anyone would question decisions made or
speak out in disagreement, executives would not listen. In addition, the executives would
overrule and go with the least desirable decision. Most companies would be wary of taking so
many risks and only give reward after that risk had proven to be a good decision.

The Lehman Brothers case is another unfortunate financial crisis. Their company affected
many shareholders and financial institutions around the world. The leadership of Lehman
Brothers failed to uphold their mission statement and the financial rewards for themselves
undermine their decision-making processes. Self-interest led them to make decisions that were
extremely risky than their own internal controls were designed to control, and top executives
received high compensations for taking such risks. It appeared that other personnel with various
intentions also made irresponsible decisions without regard to those who would be adversely
affected. Their company culture turned into “getting the biggest bang for your buck,” no matter
what the potential cost of failure may be. Ethics were not a concern to Lehman executives, as
they did everything that was bad for the business, and tried very hard to cover it up until the very
end. Of course, emphasizing on ethics and decision making tactics would have helped
tremendously.