Corporate Responsibility and Governance: Lehman Brothers Analysis

This essay undertakes a critical analysis of the corporate failure of Lehman Brothers, a major financial institution, focusing on the application of Schein's (1985) six culture-embedding mechanisms. The analysis delves into how poor management of culture, values, and ethics, coupled with a lack of effective leadership behaviors, contributed to the company's downfall. The essay highlights the role of leaders in setting the organizational tone and culture, emphasizing the significance of corporate codes of conduct, leader engagement, and the reinforcement of a positive corporate culture. The study examines the causes of the scandal, including cosmetic accounting practices and the mortgage crisis, and evaluates how these factors led to financial instability and ethical breaches. The recommendations underscore the importance of ethical leadership, proper resource allocation, employee engagement, and the establishment of a positive working environment to prevent future corporate failures. The essay concludes by emphasizing the importance of aligning corporate goals with ethical practices and promoting responsible corporate citizenship.

Running head: CORPORATE RESPONSIBILITY AND GOVERNANCE
Corporate responsibility and governance
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Table of Contents
Executive summary....................................................................................................................3
Introduction about company......................................................................................................3
Body or main content.................................................................................................................4
Recommendations and conclusion.............................................................................................7

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Executive summary
From the case study revolving around the business organisation named Lehman
Brothers and its downfall, it could be understood that poor management of culture, values and
ethics and lack of leadership behaviours and management aspects have contributed to its
downfall. Based on the Schein’s model or framework, it has also been understood that the
company could have again regained its existing status and mange proper codes of conduct
along with maintaining moral behaviours too. Due to this, the leader engagement and their
behaviours are essential for guiding the employees, thereby, promote positive behaviours
with the help of managing good corporate behaviours, emphasize on corporate goals and
reinforce the corporate culture to ensure development of good corporate culture and positive
behaviours among the employees too.
Introduction about company
From the consideration of the case study, the corporate failure that has been
experienced is the corporate scandal revolving around the bankruptcy of Lehman Brothers.
Lehman Brothers was one of the major banking and financial services provider that has been
specialised in the mortgage origination and soon after that, it became a real estate hedge fund,
which has often been considered by many, as the investment bank. The company has been
one of the major companies in Wall Street that has emphasized on the mortgage origination,
thus becoming a major driving force in the prime market (Veronica, 2013). The company
possessed assets of over $680 billion while the working capital was just $22.5 billion. Thus, it
was also a major considerable thing that the real estate holdings were much higher than the
working capital, which also resulted in decline of estate values and benefits along with
reducing a wholesome amount of capital furthermore. During the final months, the company
experienced a gradual downfall in the management of mortgage, which led to crisis and even

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made the company incur huge amount of loss, thereby, failed to achieve the desired level of
profit in business too (Adriaanse, Cobourn & Frawley, 2016).
Considering this corporate scandal, it was found that the causes of such scandal
include the regular use of cosmetic accounting gimmicks during so as to ensure that the
finances look much lesser false than those really are. This was kind of a repurchase
agreement, which resulted in preventing enough securities, furthermore, declined the
company’s financial income and it was clearly see in the balance sheet of the company
(Shelley, 2013). Thus, it was already a scandal, which stated about misleading the actual
picture of the company and its financial condition in the late 2007 and 2008, thereby,
affecting the overall business functioning too.
Body or main content
The mortgage crisis was the major issue faced by Lehman Brothers and due to this,
not only inaccurate financial status of the company was presented, but also the company was
unable to sell the bonds that were rated lower, thereby deteriorated the entire case and created
complexities for the business to sustain in the marketplace (Northouse, 2018).
The analysis of the case scenario could be done with the use of Schein’s (1985) six
culture-embedding mechanisms or framework, which also represented the fact about how the
leaders played a major role in setting the tone and culture within the organisation. Based on
the statement of Bolman & Deal (2017), it has been understood that the corporate codes of
conduct are necessary to be followed for developing a positive and effective corporate
culture, furthermore, create positive influence on the behaviours and attitudes of the
employees so as to make them perform to their potential (Bolman & Deal, 2017). The
corporate codes of conduct could only be successful, as stated by Cameron et al. (2014),
when the behaviours of employees have been influenced by the commitment and dedication

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of the management team. The values and beliefs managed along with the decisions made by
the senior management have also helped in reinforcing a good corporate culture, furthermore,
make the leaders engaged to become a part of the decision making as well as overcome the
cultural issues and failures that might be experienced at the companies (Cameron et al.,
2014).
The analysis of the corporate failure would be a subject of bringing change and some
necessary improvements so as to maintain a good culture and make the business organisation
create a positive mind sets among the employees as well as the clients. Thus, based on the
Schein’s (1985) six culture-embedding mechanisms or framework, the primary mechanisms
include the ability and skills to pay attention to the leaders, when the leaders communicate
the important message and information to the employees and also through clear signals so as
to keep the informed about the corporate codes of conduct. It was also found that the
company, i.e., Lehman Brothers filed for bankruptcy within the investment banking sector
and with the huge amounts of debts, it was one of the major corporate failure experienced till
date (Hackman & Johnson, 2013). Moreover, it was also found that with the demise of the
business organisation, it became the major victim of subprime mortgage induced financial
crisis, which further contributed to the huge loss and poor capitalisation of market too. The
stock level also started failing, which also resulted in its downfall with over 1200 mortgage
related jobs eliminated along with permanent shut down of the BNC Unit.
Also stated by Chemers (2014), the Schein’s model or framework applied to the
Lehman Brother’s case, it was evident that a profit driven culture was set up at the company,
rather than prioritising on the actual goals and objectives, i.e., to meet the requirements of
customers, Due to this profit driven culture, the company faced losses and finally led to its
decline. The leaders of the organisations must be more prominent, act as role models and also
react to crisis situations by developing a good brand reputation and portray a good

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management style, which could maintain proper values, beliefs and ethics effectively
(Chemers, 2014). Though the leaders of the organization might not be a part of these kinds of
deceptive activities, still they must comply with the ethical values and be responsible towards
prevention of such incidents and maintain standards too.
The corporate failure, as stated in the case study, has been analysed with the use of
this framework, which also represented the fact about how the leaders need to create new
norms, values and beliefs along with working procedures that are needed to make important
assumptions. The leaders should also manage the resources properly by allocating those
effectively and even using those in a perfect manner for ensuring that the leaders act in a
responsible manner and as a role model to the employee by guiding them towards the shared
vision, goals and objectives much comprehensively (Hogan & Coote, 2014). The leaders
must also be cautious of providing both monetary and non-monetary rewards to the
employees for assisting them to get encouraged, thereby, remain motivated all throughout to
bring out their best potential. The criteria for selection and dismissal also has been a major
role of the leader to make sure that the workforce constitute of skilled and qualified
employees (Bezuidenhout et al., 2013).
To deal with such kinds of corporate culture, not only the development of a proper
cultural setting is required, but also it is indeed important to make the values and beliefs
visible or exposed to others. This would allow the leader to communicate the crisis situations
with the employees and also guide the employees in the right direction so that they have the
potential to remain aligned with the focus and aim of the leader. The leaders’ duties are to
fulfil their roles and responsibilities properly, thereby, make sure to prevent any crisis
situations and overcome the corporate failures in a responsible manner (AlHogail & Mirza,
2014). Thus, it has also become important for the leaders, according to the framework to

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allocate the resources properly and also behave properly with the employees by setting
examples that they could follow (Alnatheer, 2014).
Recommendations and conclusion
The essay demonstrated about the causes of downfall of Lehman Brothers and how
the profit driven culture could affect business functioning by ultimately leading to a huge loss
suffered by the business. Based on the Schein’s model or framework, it has become essential
for the leaders to comply with the codes of conduct and maintain proper values, beliefs and
ethics, thereby promote good behaviours among employees and also do support them
whenever needed.
Recommendations
 It is recommended for the leaders to follow the codes of conduct and at the same time,
remain aligned with the corporate goals, values and ethics to promote good business
functioning
 In case of such corporate failure, the leaders must allocate the resources properly,
especially the human resources, by appointing the right individuals for the right roles
and responsibilities
 The opinions, ideas and feedbacks of the employees must be considered, which could
assist in the process of decision making effectively
 The development of norms, laws, rules and regulations is also recommended for
maintaining a positive and ethical working environment
 The development of a good culture is recommended as well for managing good
values, beliefs and ethics, thereby, promote positive behaviours and attitudes among
employees furthermore

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 Management of corporate governance is recommended as well while remaining
focused on the short term wins slowly, thereby, become a responsible corporate
citizen

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References
Adriaanse, J. A., Cobourn, S., & Frawley, S. (2016). GOVERNANCE, CSR AND
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AlHogail, A., & Mirza, A. (2014, September). A proposal of an organizational information
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Alnatheer, M. A. (2014). A conceptual model to understand information security
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Bezuidenhout, M., Grobler, A., & Rudolph, E. C. (2013). The utilisation of a career
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Bolman, L. G., & Deal, T. E. (2017). Reframing organizations: Artistry, choice, and
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Shelley, A. R. (2013). Gauging corporate governance for sustainability: public-private
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