Ethics in Decision Making + Financial Accounting
Dec 1st, 2010 by palimarrao
Today, I was just doing some general reading and I came across a well known financial services organization – Lehman Brothers- who had recently filed for Chapter 11 bankruptcy protection. Lehman Brothers – up until its bankruptcy in September 2008- was a firm well known for its services in investment, private banking, private equity etc. Reading more about this very interesting case of the fall of Lehman Brothers re instilled the belief in me that ethical business practices aren’t optional any more. It is imperative and crucial for the very stability of the economy to follow ethical practices. Lehman Brothers, it was found out, had some top level executives who often cooked the numbers and changed the financial statements of the company to make the business seem stable and less prone to risk. While this image of the company was important for them to continue providing services and for its clients to retain trust in the company, the methods used for this purpose was by no way acceptable.
What is important to consider here is that such huge scandals when discovered not only shake up the company itself but can also have a ripple effect on others. For example, small private investors and other small bond holders who all depended both directly and indirectly on Lehman Brothers, were all affected badly. Also, the Lehman shareholders suffered greatly- Lehman shares dropped 90% on September 15 2008.
An important idea to be noted here is that often businesses are inclined to play their dominant strategy when competing in a market, no matter if the strategy is unethical or even illegal. So, the responsibility then falls on the law enforcers and other society and business watchdogs to pay attention to business practices. This is because in this interconnected world that we live in, every firm or individual is in a symbiotic relationship with others- one’s failure can might as well translate into failure for all.
Trumbull, Mark. Lehman Bros. used accounting trick amid financial crisis – and earlier. The Christian Science Monitor. March 12, 2010.