The bankruptcy of Lehman Brothers, was the largest bankruptcy in U.S. history. After the falling of Lehman, the entire financial sector was in trouble. After the publishing paper in March 2010 about the bankruptcy of Lehman it became clear that Lehman Brothers was aggressively massaging its books. The company was manipulating the balance sheet by overstating the assets with $ 50 billion. By doing so the company looked way healthier than it actually was. This means that they were misleading the share- and stakeholders. The board of Lehman Brothers wasn’t informed about issues such as the rising losses on mortgage-related bonds. The deception was due to fears that Lehman would get a lower credit rating.
If we look on the discourse of morality, then deceiving other people is morally wrong. If stakeholders and shareholders knew that the company was manipulating the figures, then they would lose confidence in the company. This will affect the confidence that investors have in the company; in extreme case the company will go bankrupt. In a well-ordered-society people can only live with each other if there is trust. If you can’t trust other people in the market, the free market is not able to work. So it can be that Lehman Brothers used instruments that were legally correct, like the Credit Default Swaps that they used, but it is not directly saying that it is morally right or permissible. Morality stands higher in the hierarchy than the business and law discourse. This means that Lehman Brothers can only use instruments that are legally and are morally right. From the Hermeneutic perspective humans beings are both moral and self-interested. The rational end is that all the moral principles will be upheld in a well-ordered society. In the case of Lehman brothers not all of the moral principles were uphold, because they were deceiving their stake- and shareholders. Because of this I conclude that Lehman Brothers acted morally wrong.
Background Article
1 comment:
The author of this article is correct in concluding that Lehman acted immorally but in my opinion, is taking the wrong perspective namely: that a corporation strives to pursue a rule-utilitarian approach, which is far from true. As stated by Stone, C.D. (1978) the corporation (like humans) seek first of all survival mostly by adding value and as a result act solely out of duty. Whilst Lehman engaged in absolutely disfavored conduct for survival, many other corporations often engage in qualified disfavored conduct to ensure survival and minimal interruption, with little regard to the law. The law is central in this case as individual moral behavior is subdued to an extent that otherwise moral individuals become immoral in a business setting. More specifically under the hermeneutic approach, the self interested element is significantly more present than the moral element within corporations.
Post a Comment