Leadership Studies

Question

Please answer these two questions:
Q1 Discuss the attributes and leadership style of Henry Paulson and Dick Fuld?

Q2 Elaborate as the concept of moral hazard with my view as a taxpayer?

Note: *Henry Paulson (Former United States Secretary of the Treasury) *Dick Fuld (Richard “Dick” Severin Fuld Jr. was the final Chairman and Chief Executive Officer of Lehman Brothers) Please the answers must be related to the Lehman Brothers Disaster.

Answer

Case Study: Lehman Brothers Disaster

Lehman Brothers was a global financial services firm that had been operational for over 150 years. It was founded in 1850 by Henry, Emmanuel and Mayer Lehman in Montgomery, Alabama. In September 2008, the company filed for bankruptcy following the devaluation of assets its and massive loss of clients (Zingales 1).

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Richard S. Fuld Jr., the Chief Executive Officer of Lehman Brothers, demonstrated poor managerial skills and autocratic leadership during his time at the company. As CEO, he failed to demonstrate flexibility when faced with the facts which contributed to the company’s ultimate collapse. By the time Fuld was ready to sell Lehman Brothers, it was a little too late (Sharpe 10). Moreover, Fuld’s internal locus of control may be said to have been a factor in the sad fate that befell the company. On the other hand, Henry Paulson, the former US Secretary of Treasury, demonstrated democratic leadership style in trying to help Fuld in every possible way. In a powerful show of empathy consulted with various government officials in trying to figure out how to help Richard Fuld throughout the process (Taibbi, 53).  

A moral hazard is a situation that arises when one party decides to take certain risks with the knowledge or the idea that another party would bear the cost of the risks that have been taken. For instance, taxpayers’ money is often used to bail out private companies. This explains why Lehman Brothers took the risks with the hope that the government, would step in if the company failed to recover from the financial crisis (Okamoto, 183). Speaking as a taxpayer, I would say that such public policy is unacceptable because it may mean that all big companies that are considered ‘too big to fail’ will easily end up incorporating the moral hazard at some point during their existence.

Works Cited

Okamoto, Karl S. “After the bailout: Regulating systemic moral hazard.” UCLA Law Review, 57 (2009): 183. Print.

Sharpe, William F. “Asset allocation: Management Style and Performance Measurement.” The Journal of Portfolio Management, 18.2 (1992): 7-19. Print.

Taibbi, Matt. “Wall street’s Naked Swindle.” Rolling Stone 15 (2009): 50-59. Web.

Zingales, Luigi. “Causes and effects of the Lehman Brothers bankruptcy.” Committee on Oversight and Government Reform US House of Representatives, 2008. Web.

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