Lehman Brothers collapsed at the height of the financial crisis that affected America a decade ago. The company operated in America, which follows a capitalism, economic system governed by market principles. Under this economic system, companies are free to run their affairs in response to the forces of demand and supply and by offering something better than the competition. However, companies have to obey the laws by observing good corporate governance. They have to pay taxes, for instance, and the board offers oversight role in the decisions of the senior management. The issue that led to the collapse of the company was due to unethical senior management and incompetent board of directors (Mensah, 2012). The top management continued to engage in risky behaviors such as selling assets linked to subprime mortgages and did not disclose that information to the board (Wiggins, Bennett & Metrick, 2014). The managers also did not disclose some information about the underperformance of the company in the books of accounts (Schoen, 2016). The board lacked experience and competency to deal with the problem. The relevant laws were broken in this case related to disclosure of when preparing books and boards acting in the best interest of the shareholders.
The ethical issue related to this company is the failure of the board to identify the financial problems facing the company and the unethical conduct of the senior management in hiding material information from the board. Applying deontology to the Layman case, categorical imperative applies to the situation. The theory says that an act is defined independently of the moral good and is morally right regardless of the consequences for human welfare (Dpadvertisingco, 2013). In applying the rule to the Layman case, it is evident that universalizing manipulating books of accounts, non-disclosure of material information to the board, and the failure of the board to undertake due diligence would lead to problems. More companies would fail, and investors lose their investment, and that makes the issue in question unethical.
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References
Dpadvertisingco. (2013, June 05). Kant Ethics. Retrieved from https://www.youtube.com/watch?v=eQcC1qYP08s&=&feature=youtu.be
Mensah, J. M. (2012). Why Lehman Brothers Failed: Preventive Measures and Recommendations. SSRN Electronic Journal . doi:10.2139/ssrn.2156006
Schoen, E. J. (2016). The 2007–2009 Financial Crisis: An Erosion of Ethics: A Case Study. Journal of Business Ethics, 146 (4), 805-830. doi:10.1007/s10551-016-3052-7
Wiggins, R. Z., Bennett, R. L., & Metrick, A. (2014). The Lehman Brothers Bankruptcy D: The Role of Ernst & Young. SSRN Electronic Journal . doi:10.2139/ssrn.2588551
