The Lehman Brothers’ Failures: The Importance of Organizational Culture
Nowadays, employers and business owners have started to pay more attention to the importance of organizational culture and its role in its well-being. An ecological and healthy atmosphere in the company can lead it to the property. In contrast, the neglect of fairness and corporate codex inevitably leads to the failure and decline of the company. It happened to the Lehman Brothers due to many mistakes and schemes that prevailed in the management. The root of all the issues that consequently destroyed the organization is the centralization of the power in the hand of its CEO Richard Fuld. Although Lehman Brothers had a few control mechanisms, it did not affect much because the CEO never listened to the board of directors and chased profit maximization.
The downfall of the company and its following failures happened because of the constant fraud practiced among the management that was encouraged by Fuld. He borrowed too much money investing it into the mortgage market and never considered the interests of the shareholders (Ceil). Moreover, The SEC did not intervene when they knew that Lehman Brothers was trying to overstate their balance sheets because of their influence in the financial sphere (Ceil). Some of those failures could have been avoided if they had more independent managers and directors to criticize the policy and suggest different approaches to the company’s ruling.
The poor corporate culture of the Lehman Brothers resulted in the total collapse. The inability of the management to influence the CEO’s decisions led to more severe and significant illegal actions. Therefore, when only one person is in charge of all the organization’s activities, it becomes hard for the management to change the situation. Thus, if the company had more autonomous directors and shareholders who participated more actively in the company’s business, the situation would be different still with the centralized CEO power.
Ceil, Chenoy, Corporate Governance at Lehman Brothers (2019). Web.