Decline Strategy In The Lehman Brothers, And The Margin Call
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A company is faced with the challenge of having to retrench many of their employees, one of them being a head risk manager, who was involved in a project analysing the company risk. He’s assistance completes the analyses, realizing the company is in trouble, calling his two colleagues to confirm whether the company is heading for disaster .What follows is a series of double checking double dealing as the senior staff and directors prepare to do whatever it takes to save the company from significant loss in share capital and assets value even if it means doing so in an unlawful and unethical manner.
The form of dismissal used operational reasons also known as retrenchment
What is retrenchment it is cutting down or off, as by reduction of expenses.
The correct procedure for retrenchment
Employee may be retrenched only if employer has tried everything to avoid it.
Consultation and negotiations with employees and their representatives must take place.
Employer…show more content… 7•
The strategy suggested to fix the problem is decline strategy
A decline strategy occurs after a business has been experiencing difficult period of time, or management decide take advantage of more viable opportunity in a different area and decline another .The strategy used in the Margin call is the decline divesture strategy selling assets and part of the business being the toxic assets. It is highly unethical because they are selling toxic assets before the market learns of their worthlessness. In this situation there’s only one solution to the problem which is moral absolutism. What is portrayed in the Margin call is investment fraud.
Market capitalization is a public company that is trading shares in the public, therefore share price multiply by the number of shares sold in public equals to capitalization, capitalization is that total number of all shares bought.