Essays on Communication Failure Led to the Collapse of Lehman Brothers Case Study

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The paper 'Communication Failure Led to the Collapse of Lehman Brothers" is a good example of a management case study. Language is a platform that people use to share values, meaning, images, attitudes and beliefs. In business circles, communication uses language to communicate intention, actions and strategies. Moreover, there is verbal and nonverbal communication which can be used to communicate between employees, management, customers, regulators and financiers. However, failure by the sender, in written language, to incorporate key aspects of grammar and facts may lead to miscommunication. On the other hand, spoken language requires the use of speech to persuade, inform and demonstrate.

Lehman Brothers at the height of its collapse showed the urgency to use both written and spoken communication to reach its key stakeholders. As language and words have meaning in different situations, using them to communicate determines the trust and sustainability of the business. While an attention statement is just enough to cause panic to investors, punctuality in communication dispels rumors and false claims. During the financial crisis, markets are jittery and investors are likely to withdraw their funds in fear of a possible collapse.

At this time, appropriate messages and facts are required to keep the company at a realistic point of view. This essay highlights the use of communication and language to accurately report the position of a company during the financial crisis. Communication failure led to the collapse of Lehman Brothers Companies experience communication failures when the sender and the receiver do not share meaning or understand each other. This failure has often led to conflicts or total collapse of some of the leading companies around the globe.

Lehman Brothers before its collapse in 2008 were one of the biggest financial services providers in the United States. The Securities and Exchange Commission (SCE) supervised the Lehman parent company and its core subsidiaries, securities broker-dealers. Although the Federal Reserve had no authority to supervise Lehman, it employed its statutory lending powers to demand financial information from the company on an ongoing basis (Posen, 2009). While Barclays Bank was interested in salvaging the institution, it required government funds of which the UK or US government could not commit. Elliot and Treanor (2009) point out that the collapse of Lehman Brothers was due to a breakdown in communication between the UK and US governments.

Each party believed that Barclays, public investors and either government would step in to rescue the troubled Wall Street Bank. In the second quarter of 2008, the Chief Operating Officer had resigned so as to communicate with the markets how Lehman had lost $2.8 billion and was instituting management changes. Similarly, the public had seen the government intervene in the case of Bear Stearns and was expecting the same rescue to be applied to the Lehman Brothers.

Through the Federal Reserve, the United States government declined to bail out the company. Nonetheless, the response was too late and the company had to close shop. According to Pearson and Nelson (2000), communication is about sharing meaning and understanding which requires initiative, teamwork and communication skills, both written and verbal. In the transaction model of communication, participants not only play the source and receiver roles at the same time but also blur the conversation (McLean, 2003). For example, the US government was sending signals of refusal to commit resources while the same time the UK communicated that it did not want to expose England to unnecessary risks.

A prepared communicator is one that is concise and punctual. The Federal government was inconsistent in the application of bailout decisions which led to uncertainty among financial institutions and the investors (Posen, 2009). Besides, most business communications are required to be brief and up-to-date without overloading or confusing the audience. The ability of the audience to grasp the message is hindered by indulging n tangents or talking in circles.

Although ethical communication is egalitarian, some board of management fail to communicate with shareholders, regulators and other investors. As a result, their expectations, rewards of participation in the group, access to information is jeopardized. Lehman Brothers managed its balance sheet using Repo 105 transactions which were not within the knowledge of Federal Reserve as it should (Piontek & Metrick, 2014). Moreover, the company’ s board did not access these transactions which would have helped in rescuing the company a bit early.


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