Week-3
Lehman Brothers: The Unethical Decisions Which Paved Way to its Downfall
Personal & Organizational Ethics
LehmanBrothers:TheUnethicalDecisionsWhichPavedWaytoitsDownfall
Introduction
Lehman Brothers slowly rose to expansion which paved the way to their success,
thanks to proper decision making and investments. However, Lehman Brothers had its
share of troubles when it had undergone CEOs that failed to realize the vision of making
Lehman Brothers, resulting in multiple internal problems. By the late 1990s to early
2000s, Lehman Brothers would break profits by focusing on mortgage-backed securities
(MBS) and collateralized debt obligations (CDOs) that will be an important subject that
led to their ultimate downfall. The paper identifies the unethical problems which
ultimately led to the downfall of Lehman Brothers: (1) failure to give attention to the
doom that was about to arrive since the firm ignored the math due to the short-term
success provided by mortgage-backed securities, and (2) failure to disclose their financial
status to their stakeholders and the investigators for mortgage-backed securities which led
to their downfall. CDOs and MBS are methods to diversify the mortgage risks. The
problem is that it makes the prediction of risk difficult to assess. Both derivatives are
made to meet the needs of the whole market (Segal, 2021). Due to its complex setup, it
creates a false sense of trust between the investor and the CDO manager. The CDO
managers might tend to fail to disclose important elements to the credit. Brokers were
making a profit by selling their deals to the market itself. One of the brokers would
, attempt to sell deals to the Wall Street Banks, which would then pay higher for riskier
deals. This activity would create a chain of events that would create the 2008 “bubbe”
that would result in the 2008 Great Recession (Duffie & Garleanu, 2001).
The Unethical Practice
Thesis:
Lehman Brothers practiced unethical decision-making by failing to disclose credits to
its shareholders and investment investigators.
The Ethical Theory Behind the Thesis:
Kant’s ethics can provide a solid argument for the premise given by the thesis
statement. Kant believed that ethics can be incorporated into an ultimate principle to
which all our obligations are derived. This principle was called the categorical imperative
(Sullins, 2012). According to the categorical imperative, the first rule of rational action is
to “act accordingly to that maxim by which one can at the same time will that it should be
a universal law” (Sullins, 2012). This means that man can make self-defined rational acts
that lean more on the principle of autonomy. The second rule states that persons should
“act so that you treat humanity, whether in your personal or in that of another, always as
an end and never as a means only” (Sullins, 2012). This would mean that man should be
treated with dignity which is the root of human rights. As rational beings, an individual
must treat another with dignity and not as a means to achieve something. Kant’s principle
in this rule is formed from the idea that humans are the absolute value and that such value
may be diminished when another individual may treat another as a means to an end
(Sullins, 2012).
The Premise
Lehman Brothers: The Unethical Decisions Which Paved Way to its Downfall
Personal & Organizational Ethics
LehmanBrothers:TheUnethicalDecisionsWhichPavedWaytoitsDownfall
Introduction
Lehman Brothers slowly rose to expansion which paved the way to their success,
thanks to proper decision making and investments. However, Lehman Brothers had its
share of troubles when it had undergone CEOs that failed to realize the vision of making
Lehman Brothers, resulting in multiple internal problems. By the late 1990s to early
2000s, Lehman Brothers would break profits by focusing on mortgage-backed securities
(MBS) and collateralized debt obligations (CDOs) that will be an important subject that
led to their ultimate downfall. The paper identifies the unethical problems which
ultimately led to the downfall of Lehman Brothers: (1) failure to give attention to the
doom that was about to arrive since the firm ignored the math due to the short-term
success provided by mortgage-backed securities, and (2) failure to disclose their financial
status to their stakeholders and the investigators for mortgage-backed securities which led
to their downfall. CDOs and MBS are methods to diversify the mortgage risks. The
problem is that it makes the prediction of risk difficult to assess. Both derivatives are
made to meet the needs of the whole market (Segal, 2021). Due to its complex setup, it
creates a false sense of trust between the investor and the CDO manager. The CDO
managers might tend to fail to disclose important elements to the credit. Brokers were
making a profit by selling their deals to the market itself. One of the brokers would
, attempt to sell deals to the Wall Street Banks, which would then pay higher for riskier
deals. This activity would create a chain of events that would create the 2008 “bubbe”
that would result in the 2008 Great Recession (Duffie & Garleanu, 2001).
The Unethical Practice
Thesis:
Lehman Brothers practiced unethical decision-making by failing to disclose credits to
its shareholders and investment investigators.
The Ethical Theory Behind the Thesis:
Kant’s ethics can provide a solid argument for the premise given by the thesis
statement. Kant believed that ethics can be incorporated into an ultimate principle to
which all our obligations are derived. This principle was called the categorical imperative
(Sullins, 2012). According to the categorical imperative, the first rule of rational action is
to “act accordingly to that maxim by which one can at the same time will that it should be
a universal law” (Sullins, 2012). This means that man can make self-defined rational acts
that lean more on the principle of autonomy. The second rule states that persons should
“act so that you treat humanity, whether in your personal or in that of another, always as
an end and never as a means only” (Sullins, 2012). This would mean that man should be
treated with dignity which is the root of human rights. As rational beings, an individual
must treat another with dignity and not as a means to achieve something. Kant’s principle
in this rule is formed from the idea that humans are the absolute value and that such value
may be diminished when another individual may treat another as a means to an end
(Sullins, 2012).
The Premise
