Ethical Dilemma In Business
Ethical wrongdoing is a problem in the real world wherein the rules can be bent to manipulate financial standing. In some organizations such as Lehman Brothers, we will take a look at how they were able to alter real information that was damaging to the company in such a way to make it look more secure. Before these things can happen the upper management must discontinue listening to their employees and even punish the ones that speak up about issues in the workplace. Slowly an organization can slip into a level of deception and manipulation that can only be alleviated by the eventual bankruptcy of the organization.
Mr. Lee's Concerns
Ethical concerns of how business is performed can cause uncomfortable feelings when the people reported to are the ones that are involved in the process or processes being reported. This can create an uncomfortable situation in the workplace and in the case of Lee, loss of employment. On May 18th 2008 Lee wrote to the CFO of Lehman brothers expressing concerns over breach of the code by senior officers (Jennings, 2012, p. 289).Within this letter he expressed the issues that 10s of billions of dollars were unsubstantiated and the use of Repo 105 to remove $50 billion of debt from Lehman's books (Jennings, 2012, pp. 289-290). Having worked with the company since 1994 he felt comfortable bringing these concerns to the CFO. However after this letter was received, Lee lost his job (Jennings, 2012, p. 290). This is but one very real reason that issues of conduct continue to exist in the workplace.
Repo 105. Repo 105 was a company that in conjunction with Repo 108 were used to offload Lehman Brothers' debt from their books (Jones, & Presley, 2013, p. 56). The only difference in Repo 105 and Repo 108 was in the type of debt moved, For Repo 105 fixed income bonds securities were used and for Repo 108, equities were used (Jones, & Presley, 2013, p. 56). A common tool used by banks is a repo, however the way in which repo 105 and 108 were used was not how they were meant to be used. Repos were supposed to be used as a way to get a short term collateralized loan in which the borrowing party carries the collateralized asset and obligation to pay on their balance sheet (Hines, Kreuze, & Langsam, 2011).This was not the case in respect to Lehman's use of Repo 105 and 108. The Lehman brothers would count Repo 105 and 108 as short term sales, thus excluding the collateralized assets and related liabilities from their balance sheet (Hines, Kreuze, & Langsam, 2011). They would then use the liquid assets from the sale to Repo 105 and 108 to decrease liabilities therefore creating an even lower leverage ratios (Hines, Kreuze, & Langsam, 2011). By using their Repo transitions instead of sales they were able to hide the reality of being in financial trouble. On September 15th, 2008 Lee was proven correct and Lehman Brothers filed for bankruptcy (Jennings, 2012, p. 290). If the company had spent more time...