Question

the main causes and factor of lehman brother bankructy in 2008 with references

Answer 1

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.

Main Causes:

1. Undoubtedly, the complexity and unpredictability of the external environment-market forces/stakeholders influenced the way and manner Lehman's CEO, Mr Richard Fuld behaved. He involved himself and his organization into unethical practices due to so many expectations on them. The market competition was getting very fierce, so he had to "bend the rules" in order to keep his organization profitable.

2. Market complacency, weak financial regulations, lack of transparency and poor internal financial control policy led to the demise of Lehman Brothers. Mr Fuld adopted the omnipotent view of management but told the U.S House of Representatives' Committee on Oversight and Government Reform that the collapse of his firm was totally out of his control-i.e. symbolic approach. This indicated a weak moral culture/development at the preconditional level. His ethical inclination indicated a utilitarian approach which involves decision making based on favorable anticipated outcomes.

3. Clearly, the fall of Lehman Brothers was a preventable man-made disaster. He enshrined a very poor risk management culture in the organization by offering highly leveraged Mortgage Backed Securities.

4. Lehman never engaged in "real" Corporate Social Responsibility, rather what they did was philanthropy with ulterior motives in mind. They never issued a CSR report of any kind depicting lack of transparency and accountability.

5. As a result of Lehman's desperate attempts to compete fiercely with its core rival, Morgan Stanley for market share, it employed several under-arm tactics that exposed it to several bitter brushes with the law amounting to multiple litigations. This further hurt its corporate image by brewing fear, panic, distrust amongst its stakeholders resulting in it been abandoned during its time of need.

References:

1. Kirke L (2012) What Caused the Failure of Lehman Brothers? Could it have been Prevented? How? Recommendations going forward. SMC University.

2. Azadinamin A (2012) The Bankruptcy of Lehman Brothers: Causes of Failure &      Recommendations Going Forward. SMC University.

3. Schapiro ML (2010) Testimo ny Concerning the Lehman Brothers Examiner's Report.    Before the House Financial Services Committee. Securities and Exchange Commission, USA.