Lessons from Lehman Brothers: Will We Ever Learn?

Time Context

2007
When the housing marketing began faltering in 2007, Richard Fuld was entrenched in a highly aggressive and leveraged business model, not unlike many other Wall Street players at the time. This led to the bankruptcy of the firm and ignited the global recession. This, in fact, is the largest bankruptcy case in the United States.

Viewpoint
Richard "Dick" Severin Fuld, Jr.
an American banker best

known as the final Chairman and Chief Executive Officer of Lehman Brothers had held this position since the firm's 1994 spinoff from American Express until 2008 was nicknamed the "Gorilla" on Wall Street for his competitiveness

Relevant Facts
Lehman Brothers Holdings Inc.
a global financial services firm fourth-largest investment bank in the US at 1:45 AM, the firm filed for Chapter 11 bankruptcy

protection following the massive exodus of most of its clients, drastic losses in its stock, and devaluation of its assets by credit rating agencies 23, 340 employees became jobless after the bankruptcy

Problem Statement/Issues
Incompetent Top Managers
Culture and reward structure Irrational decisions of managers No transparency Corruption

Lies told by the CEO

Negligence on behalf of Ernst & Young

Alternative Courses of Actions

Alternative 1 Repo 105 Alternative 2 Replacement of top managers Alternative 3 Selling the firm to other firms

Analysis and Evaluation

Alternative 1 Repo 105
Advantage - creates favorable net leverage and liquidity measures on the balance sheet, which was key for credit rating agencies and consumer confidence. Disadvantage - pretends there is stability in the firm

Alternative 2 Replacement of top managers Advantage - there will be a possibility of reviving the firm since there is a total change in terms of management techniques and strategies. Disadvantage - the employees will have a hard time in adjusting to the new system

Alternative 3 Selling the firm to other firms Advantage - a stable company will be able to pay their debts as well as provide the needed capital to revive the firm. Disadvantage - the stockholders will lose all their shares and the employees will have a hard time adjusting to the new management.

Conclusion and Recommendation

Our group concludes that the best possible

solution is to sell the firm to other stable and reliable company that will reestablish the firm. This is best and most practical way to save the interest of the employees and the other stockholders. Through this action, there will be a huge possibility that the company will regain the trust of the investors. The efforts to sustain the firm for the last 158 years (fourth largest investment bank in US) will not be put into waste.

References
http://sevenpillarsinstitute.org/case-studies/thedearth-of-ethics-and-the-death-of-lehmanbrothers http://en.wikipedia.org/wiki/Lehman_Brothers http://www.investopedia.com/articles/economics/09/ lehman-brothers-collapse.asp