Individual Case Challenge: The Fall Of Lehman Brothers

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Individual Case Challenge – The Fall of Lehman Brothers

The challenge I am going to approach in this Individual Case Challenge is the largest bankruptcy in the US history and one of the biggest worldwide, the fall of Lehman Brothers, with the company holding over $600 billion in assets.
Changing the way a leader acts is not an easy task and I believe it will be important to organizations because it will help understand how the failures of a leader can cause a major step back on the organization goals or even, in extreme cases as Lehman Brothers, bankruptcy. Moreover, I hope this analysis can help other leaders facing the same challenges to proceed in a different way.
There are many stakeholders involved in this challenging situation. In order …show more content…

Prior to that, LB was the fourth biggest investment bank in the US and it’s considered that this fall had an important (even decisive) role in the unfolding of the 2008 world financial crisis.
At that time, the CEO (Chief Executive Officer) of Lehman Brothers was Richard Fuld. Fuld maintained his position since 1994 until the end, in 2008 and is criticized by many of having a major role on the outcome of the company. Since the beginning, he was viewed by the Americans as one of the top leaders of Wall Street. Little did we know that behind that figure was a man that led the company towards failure.
In the summer of 2005, Mike Gelband, the global head of fixed income, spoke to the administration about the firm’s high levels of leverage (22 times the equity worth). He predicted that a housing bubble would burst with massive repercussions, not only for LB, but also for the entire financial system. These effects from the bubble would come between 2007 and 2008 according to his predictions. However, instead of thinking of a response to these threats to the company and the American financial system, Fuld changed his position of a Leader to a mere decision-maker. He tried to create immediate profit for the bank, which involved increasing the activity of the mortgage-securities department. He didn’t take into account all the risk implied on this move and, even after hearing what Gelband said about the real-estate market, …show more content…

We can verify these characteristics on the Mike Gelband’s approach and consequent decision on increasing the activity of the mortgage-securities department, one of the origins of the bankruptcy. There is a common thought that this entire situation could have been avoided. Fuld’s traits as a leader were not suited for the job and if only somebody had noticed that, Lehman Brothers could still be one of the most important financial banks in the world. The CEO was definitely a charismatic leader but he lacked several aspects that an Ethical Charismatic Leader should have in order to achieve positive results in the relationships among the employees and to give profit to the company. Fuld was considered a god in the financial business, as he raised the company’s market capitalization from $2 billion to $45 billion between 1993 and 2007. This feeling of greatness got to his head and made him focus on himself and on his own reflection to the financial world and this made him the person he was in his last two years in front of the company. An arrogant, narcissist, blunt and a confrontational CEO, as some describe

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