Corporate governance Essay Example | Topics and Well Written Essays - 2000 words - 1

Corporate governance - Essay Example After several events, the organization became the fourth largest investment banks in America. The organization filed for bankruptcy protection on September 15, 2008. Due to several reasons and controversies Lehman Brothers collapsed. Global financial crisis, inadequate management style and poor performance of the chairman and managing director, Dick Fuld are the major reasons behind the collapse. Objectively, the reasons behind the collapse can be divided into two groups, such as corporate governance failures and technical issues (Wearing, 2005, p.121). The organization was following very inadequate corporate governance arrangements. Corporate governance is an important and effective system that helps an organization to direct and control (Solomon, 2007, p.52). It helps to determine the activities of the board of an organization. Effective corporate governance practices help an organization to set and address the organizational value. Lack of effective corporate governance practices, lack of transparency, Dick Fuld’s inadequate leadership strategy and neglecting the significance of effective corporate governance drove the organization towards bankruptcy. Corporate Risk Management and Corporate Governance failure Risk was part of Lehman Brothers day-to-day business. ... In reality, the executive committee of Lehman Brother’s met only twice before the bankruptcy in the year 2006 and 2007 respectively (Choudhury, 2012, p.147). Moreover, the organization started to practice high risk business operations before its collapse. In this particular period the organization had to focus on the aggressive growth strategies in order to overcome the challenges. During 2006-2007, Lehman Brothers developed exposures to structured products, risky subprime lending, high-risk lending for leveraged buyout and commercial real estate but it did not considered the fact that the loans were not liquid. In addition, Lehman Brothers exceeded their internal risk limits and higher earning pursuit control. These facts are considered as the beginning of the collapse (Rosenberg, 2012, p.244). It is evident that the top level executives and officers of the organization violated their duties and responsibilities by exposing their firm to potential liability by wrong financial statements. Repo 105 was the specialty of the misleading transactions of Lehman Brothers. Through Repo 105 the organization could remove more than billions of liabilities from the balance sheet. The misuse and existence of Repo 105 is huge controversial and it goes beyond the corporate governance. The specific corporate governance structure of Lehman Brothers can be considered as the pre-programmed plan to collapse. Over mighty CEO, inefficient executive team, power struggle between the key players and top lieutenant exposed the risk factors. The board of the directors was filled with inexperience and non-executive individuals. This was a toxic combination. The major individual in the