“Lessons from Lehman Brothers: Will We Ever Learn?” Essay

Published: 2021-06-15 23:45:04
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? “Greed” and “Crooks” are a sampling of remarks recorded on a rendition of Lehman’s main executive Richard Fuld by creative person Geoffrey Raymond. who placed his painting outside of Lehman’s New York City offices and handed out markers to employees and walkers so they could compose a message sing the firm’s proclamation that it was registering for bankruptcy. On September 15. 2008. fiscal services house Lehman Brothers filed for bankruptcy with the U. S. Bankruptcy Court in the Southern District of New York.
95 That action—the largest Chapter 11 filing in fiscal history—unleashed a “crisis of assurance that threw fiscal markets worldwide into convulsion. triping the worst crisis since the Great Depression. ” The autumn of this Wall Street icon is. unluckily. non a new 1. as we’ve seen in the narratives of Enron. WorldCom. and others. In a study released by bankruptcy court-appointed tester Anton Valukas. Lehman executives and the firm’s hearer. Ernst & A ; Young. were lambasted for actions that led to the firm’s prostration.
He said. “Lehman repeatedly exceeded its ain internal hazard bounds and controls. and a broad scope of bad calls by its direction led to the bank’s failure. ” Let’s look behind the scenes at some of the issues. One of the major jobs at Lehman was its civilization and wages construction. Excessive hazard pickings by employees was openly lauded and rewarded handsomely. Persons doing questionable trades were hailed and treated as “conquering heroes. ” On the other manus. anyone who questioned determinations was frequently ignored or overruled.
For case. Oliver Budde. who served as an associate general advocate at Lehman for nine old ages. was responsible for fixing the firm’s public filings on executive compensation. Infuriated by what he felt was the firm’s “intentional under-representation of how much top executives were paid. ” Budde argued with his foremans for old ages about that affair. to no help. Then. one clip he objected to a revenue enhancement trade that an outside accounting house had proposed to take down medical insurance costs stating. “My gut feeling was that this was merely reshuffling some documents to acquire an disbursal off the balance sheet.
It was non the right thing. and I told them. ” However. Budde’s foremans disagreed and okayed the trade. Another job at Lehman was the firm’s top leading. Valukas’s study was extremely critical of Lehman’s executives who “should have done more. done better. ” He pointed out that the executives made the company’s jobs worse by their behavior. which ranged from “serious but nonculpable mistakes of concern judgement to actionable balance sheet use. ” Valukas went on to state that “former main executive Richard Fuld was at least grossly negligent in doing Lehman to register misdirecting periodic studies.
” These studies were portion of an accounting device called “Repo 105. ” Lehman used this device to acquire some $ 50 billion of unwanted assets off its balance sheet at the terminal of the first and 2nd quarters of 2008. alternatively of selling those assets at a loss. The examiner’s study “included electronic mails from Lehman’s planetary fiscal accountant confirming that the lone intent or motivation for Repo 105 minutess was decrease in the balance sheet. adding that there was no substance to the minutess. ” Lehman’s hearer was cognizant of the usage of Repo 105 but did non dispute or oppugn it.
Sufficient grounds indicated that Fuld knew about the usage of it as good ; nevertheless. he signed off on quarterly studies that made no reference of it. Fuld’s lawyer said. “Mr. Fuld did non cognize what these minutess were—he didn’t construction or negociate them. nor was he aware of their accounting intervention. ” A interpreter from Ernst & A ; Young ( the hearer ) said that. “Lehman’s bankruptcy was the consequence of a series of unprecedented inauspicious events in the fiscal markets. ” Discussion Questions 1. Describe the state of affairs at Lehman Brothers from an moralss position. What’s your sentiment of what happened here?
2. What was the civilization at Lehman Brothers like? How did this civilization contribute to the company’s ruin? 3. What function did Lehman’s executives play in the company’s prostration? Were they being responsible and ethical? Discuss. 4. Could anything hold been done otherwise at Lehman Brothers to forestall what happened? Explain. 5. After all the public tumult over Enron and so the transition of the Sarbanes-Oxley Act to protect stockholders. why do you believe we still continue to see these types of state of affairss? Is it unreasonable to anticipate that concerns can and should move ethically?

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