Lehman Brothers Scandal Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Lehman Brothers Scandal Case Solution

General Discussion of Corporate Governance and Accountability

Corporate governance includes various systems of process, rules, and practices that help the organization towards its direction and control. It plays an essential role in balancing the overall interest of the organization's stakeholders, which mainly includes the senior management, shareholders, suppliers, customers, the government, and the community. Corporate governance helps in delivering a proper framework to the organization that ultimately makes the organization able to achieve its objectives. It also helps the organization in its action plans and internal control of the management to improve performance.

Corporate governance provides a set of rules and policies that directly put over the organization's behavior. Advisors and shareholders are the most important stakeholders inside the organization, which directly affect the governance system. Maintaining the communication process with the organization's corporate governance consider a key factor for the communal and financiers' interactions. There is an example of (Apple Inc.) in which its investors set a summary for its corporate governance that ultimately help the governance to gather information related to documents, rules, stock possession procedures, and articles of incorporation.

Academic Theories to Corporate Governance

Various academic theories come under the corporate government, which mainly processes to discourse the challenges of governance raised inside the organization in moving time. It is considered a process that helps in decision-making and also helps in processing the decisions that are ultimately used to implement in large organizations. There is a total of four theories are discussing, which help to understand the relations of stakeholders inside the organization when performing their practices for the organization.

Agency Theory

It is a theory that helps in understanding the principles between the shareholders of the organizations and the agents inside the organization like (directors). Agency theory defines that principals of the organization are responsible to hire agents that can perform work and these principals also deliver the work of running the organization to their directors or managers, which ultimately consider agents of the shareholders. There is an expectation from the shareholder's side that the agent's effort according to make a decision in the concern of the principal but on another hand, the conflict raises, and agents don't have to decide on the best concern of principals.

Moreover, these agents might work for their self-interest and present unscrupulous conduct that ultimately down the expectations of principals. The main purpose of using this theory is to help in separating ownership and control. Agency theory presents that employees or staff inside the organization are liable to be responsible in their roles and tasks and on other hand, the recompenses and penalties have also been used that help to accurate the main concern of agents.

Stewardship Theory

The second theory of stewarding presents that it helps in protecting and maximizing the wealth of the shareholders by increasing the overall performance of the organization. Stewards are known as (Agent), who works for the shareholders as (executives or manager) and they provide protection and help in increasing profits for shareholders. It is notified that stewards become motivated and satisfied after the organization reaches success (Sama, 2022). Now the pressure increase on the employees and the executives of the organization to work more efficiently which ultimately helps in maximizing the returns of shareholders.

Stakeholders Theory

This theory helps in uniting the organization's accountability with a wide-ranging of stakeholders and it also describes that the managers inside the organization maintain a network of interactions that help in serving their (suppliers, business partners, and employees) (Naciti, 2021). Stakeholder theory mainly focuses on managerial decision-making and also includes the interest of all stakeholders that presents essential value for the organization and there is certainly no set of concern occur that control others' interests.

Resource Dependency Theory

The last theory is discussing in this part is resource dependency theory, which mainly focuses on the board of directors' roles in delivering entrance to the resources desirable in the organization. This theory presents that directors inside the organization play a key role in providing or protecting important resources for the organization by using their links or contacts in the external environment.

Providing an accurate amount of resources inside the organization ultimately helps an organization to increase its performance, and functioning, and maintain its existence in the industry. The major role of the directors is to provide resources to the organization in terms of (skills, information, key suppliers, public policymakers, buyers, and social groups). There is a division present among the directors, which classified them into different operations like (corporate specialists, funding specialists, insiders, and communal influential)..............

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Lehman Brothers Scandal Harvard Case Solution & Analysis