Free Essay

Week 6 Team Learining

In: Business and Management

Submitted By rushboys
Words 1116
Pages 5
Week 6 Learning Team Reflection

Week 6 Learning Team Reflection
Question #2
There are various degrees of unethical behavior ranging from stealing office supplies to embezzling money within your organization. Unethical behavior becomes common practice if this is the organizational culture finds this as an acceptable practice. As in the case of Lehman Brothers, the top level executives demonstrated this type of unethical behavior and encouraged the employees to behave in the same way. Employees quickly realized there are no internal controls in place to prevent them from practicing unethical behavior and ultimately spilled over into their business dealings. Why? The reason is less risk of getting caught for this type of behavior.
The company culture at Lehman Brothers was a reward-driven organization, which promoted employees to perform to the highest level and in exchange would be rewarded. One of the risks involved in this approach is that employees will do whatever it takes to continue to perform at that rate for the benefits of reaping the reward. The core values of these employees will eventually reveal themselves and the individual will arrive at a crossroad by either doing what is right or wrong. Moreover, top level management at Lehman Brothers misrepresented information to the stakeholders, such as lying about how much top level management was getting paid, and manipulating the data on reports to hide any wrongdoing of misappropriating funds. In the case of Lehman Brothers, the organization’s culture and value system ultimately led to their downfall. This company lacked the organizational values and ethics necessary to have success; this resulted in Lehman Brothers and affiliates claiming chapter 11 bankruptcy. All of which could have been prevented if the company put in place the proper internal controls and risk management; document the policies & procedures, conduct internal audits, acquire external auditors, etc. All of this would have provided transparency to stakeholders and significantly reduced the risk of any wrong doing by top level executives and employees.
Question #3
The crumbling of the Lehman Brothers Empire was not the consequence of one unethical slip executed by an employee's foolish mistake. Lehman Brothers was Wall Street's giant for many years and crushed its kingdom would take more than an isolated decision. Instead, the company's downfall was a team effort by several executives and third party participants. These crimes can be cataloged into three steps: Mistruths told by Chief Executive Officer Richard Fuld; the cover-up approved by Chief Financial Officer Erin Callan; and negligence on behalf of Ernst & Young (Montgomery, 2014).
In 2007 when the housing market began to take a dive, Fuld failed to reorganize the business’ strategy and anticipate the pending doom of the mortgage industry. Instead, Fuld decided to keep increasing Lehman’s mortgage-backed security investments within a highly risky marketplace. Fuld held steadfast to this precarious strategy when he realized his mistake, did not admit to any guilt or responsibility of his actions. In 2007, Fuld had the chance to communicate to Wall Street his apprehension about the company’s actively pursuing untrustworthy loans. Unfortunately, he lied and told the investors there was no need for concern. If Fuld behaved in an ethical manner, he could have prevented or reduced the financial disaster ahead of him.
The second unethical endeavor was the deliberate plan of Callan approving the draining of assets from Lehman accounts into Hudson Castle, the fictitious subsidiary that was formed strictly to falsify the actual financial health of the parent company. Callan’s endorsement, along with the execution of Repo 105, was a deliberate falsification of Lehman’s financial condition, which grossly manipulated the bank’s stakeholders.
Finally, Ernst & Young, the sole third party that knew the truth of what was going on behind the scenes of Lehman Brothers, did not disclose that senior management was doing everything in their power to hide its financial issues from the public. The fact that Ernst &Young is a firm of certified public accounts which, by law, are under federal regulations to respect and support industry-wide code of ethics is an example of a gross disregard of corporate responsibility.
Question #5
Many controls have been implemented for the elimination of unethical practices such the Sarbanes Oxley Act of 2002 but there have been multiple studies on how wealth and managers’ personal behavior impact such unethical behaviors. Sunday Babalola (2009) defines unethical business “as an act that is illegal or morally unacceptable within the business setting and larger community. In business, unethical behavior contradicts the expected business in a civilized society” (p. 62).
There have been many recessions since the depression of 1929 which provides multiple ways to learn from past experiences but some companies continue to practice actions that contradict with the trust society has given them. Studies mention how the will of a person to succeed will contribute to the practice of unethical behaviors (Babalola, 2009). The contribution of unethical behavior does not consist to greed for money alone; there are other factors that open the door for individual to defend their unethical choices. “Cognitive processes have also been implicated in increasing the entrepreneur’s susceptibility to biases and errors in reasoning and judgment under conditions of time pressure, high level of uncertainty, strong motions and even fatigue” (Babalola, 2009, p. 63).
Today, or perhaps in a few years, there will be a company that will perform unethical actions because of their collective understanding of what is good of right or their willing to cover information that will prevent shareholders from losing money. Michael Long and Spuma Rao (1995) share their point of view by saying, “Although most individuals believe that ethical violations are wrong, there are contracting viewpoints on whether or not it is harmful to shareholders. One view is that the cost of acting responsible will be put a firm at an economic disadvantage compared to other firms acting less responsible” (p. 1). It will be a great investment as private and governmental increase the emphasis to develop business environments that will promote honesty, trust, and values for the betterment of local and international business.

References Montgomery, A. (2014). Macaulay Culkin Found . Retrieved from

Babalola, S. (2009). Determinants of unethical business among owner-managers. Journal of Human Values, 15 (1), pp. 61-75. Retrieved from

Long, L & Rao S. (1995). The wealth effects of unethical business behavior. Journal of Economics and Finance, 19(2), 65-73. Retrieved from

Similar Documents