Henkie Essay

6.1 Lehman Brothers Lehman Brothers was one of the important casualties of the US end of the global financial crisis that began in 2007. The US Government, fearing the loss of confidence in the financial markets bai conduct out Fannie May and Freddie Mac, AIG, and some other financial ecesiss. But when it came to Lehman Brothers, then the fourth largest investment posit in the US, the Government refused to support and the bank filed for bankruptcy. Whether this was a sound decision is, probably, not the subject for this showcase though that decision did precipitate a lot of subsequent chores.Rather the case has been written to take discussion about the domination of a major institution by one man Richard S. Fuld younger The case claims that Lehman Brothers was dominated by Richard S. Fuld Jr. Was this desirable? What steps could expect been taken to avoid it? Who could have initiated these steps? The discussion should raise questions where was the board, particularly the in dependent outside directors? Did they understand the risks involved in the credit line model being pursued by the CEO? Were they acquiescent, pliable, too-trusting, or dominated by the man who was hot seat of the board, chairman of the decision maker committee, and CEO? Where was the audit committee, indeed, where were the auditors? Where was the nomination committee, which should have been considering board structure and membership? Indeed, where was anyone loose of standing up to Fuld?The second issue concerns the directors ages. Certainly umpteen of them had relevant past experience, but many were old. True, some old people can contribute significantly to board discussions from the experience, knowledge and wisdom. But others send packing with age. The Lehmans board lacked a balance.The third question is it possible for the research analysts of a financial institution to give independent investment advice to clients about a company when the financial institution has an int erest in that company? can generate an important discussion that corporate regulators still struggle to control6.2 The reciprocal ohm AG case 1. What might Kleinfeld have done to avoid resigning? Given the apparent cultural wreck between Kleinfelds apparent Anglo-Saxon approach to tough-minded management and the more socially-concerned German supervisory board perspective, there might have been little he could do, other than, perhaps, communicating more tight with the labour and financial members of the supervisory board.In fact, subsequent rumours about the situation surfaced, which suggested there was more to the problem than a clash of expectations. Students might be able to unearth more information from press reports.6.3 capital of Japan Electric Power and the disaster at Fukushima Daiichi This case exemplifies how a company can report confidently that it has satisfied all the required corporate politics criteria and yet have serious governance flaws that led to a serious p roblem becoming a catastrophe. 1. Did the structure of the board contribute to the failures? The board was large, executive and lacking any sense of independent outside directors. This is typical in many well-established Japanese companies, as we will see in this chapter. Attempts by the Japanese Government and some international institutional investors, such as US CalPers, have largely failed to change attitudes in the boardroom, to where power should reside and who should be promoted to the board.2. How do you account for the discrepancies between the companys alleged concern for corporate governance on its website and the catastrophic failure? This was a company that apparently did not accept the significance of professional corporate governance thinking, but went through the motions to satisfy the regulators and stock market investors.3. What advice would you give to the chairman of TEPCO? Encourage the students to appreciate the individualized and cultural aspects of the sit uation. Replace the board with a majority of independent directors is not a satisfactory answer. This is not the US or the UK. There is no tradition of independent directors, it runs contrary to many top executive beliefs. Moreover, where are these INEDs to come from? Pressure from institutional investors to resign might work but there has to be a replacement. Alternatively, consulting advice, mentoring, attitude changing activities, experience on other boards could all be among the ideas suggested.6.4 The TYCO case What should a board do to ensure that a CEO does not treat the company as a private fiefdom? Recognize that the CEO probably played a major part in the particular date of the other directors. Furthermore, resignation from the board may have little effect on the CEOs behaviour. This is another corporate governance classic. The challenge to students is to go beyond normative generalisations about how boards should be conventional and how directors should behave. They need to realize that personalities really matter. As in many corporate governance sagas mentioned in the textbook, aright people can exercise considerable charisma, influence and authority over others particularly if they have chosen them themselves. What was required was a group of INEDs who would insist on knowing what was going on, and if dissatisfied stand up to the CEO/chairman. If appropriate, this case can be explored further from a legal aspect to see what offences Kozlowski committed.