Corporate Scandals

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Corporate Scandals |

Business & Ethics |

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Contents

1. Corporate Scandals 3

1.1. Collapse of Lehman Brother 3

1.2. Parmalat Scandal 3

1.3. Collapse of HIH Insurance 4

2. Stakeholders 4

2.1. Lehman Brothers Stakeholders involved 4

2.2. Parmalat Stakeholders 4

2.3. HIH stakeholders involved 5

3. Ethical and Governance issues 5

3.1. Ethical and Governance issues at Lehman Brothers 5

3.2. Ethical, Legal and Governance issues at Parmalat 6

3.3. Ethical, Legal, Accounting, and Corporate Governance issues at HIH 7

4. Comparisons with Enron 8

4.1. Comparing Lehman Brothers collapse with Enron 8

4.2. Comparing Parmalat scandal with Enron 9

4.3. Comparing HIH collapse with Enron 9

5. Improvements to assist in the prevention of future scandals 10

5.1 Improvements at Lehman Brothers 10

5.2 Improvements and changes – Parmalat 11

5.3 Improvements and changes – emphasis HIH & Enron 11

References 12

1. Corporate Scandals

1.1. Collapse of Lehman Brother

On September 15, 2008, Lehman Brothers filed for chapter 11 bankruptcy. At the time of their bankruptcy Lehman Brothers had $639 Billion worth of assets and $619 billion in debt making it the largest bankruptcy filing in history (Jeffers 2011).

This report has identified a number of factors that led to the collapse of Lehman Brothers. The first major issue identified was the company’s investment strategy. At the time of the Housing boom in the US, Lehman Brothers strategy was to borrow excessively and invest all proceeds into the commercial and domestic property market (Petukh 2010). However, in 2007 when the property market started to decline, Lehman Brothers strategy was to invest even larger amounts into mortgage-backed security investments and to continuously grow the company’s asset portfolio to a level of unreasonably high risk given the impending economic situation that was coming (http://sevenpillarsinstitute.org 2010).

The second issue...