What are the lessons of Lehman Brothers?
In a week that marks the one year anniversary of Lehman Brothers’ announcement of bankruptcy and the start of the collapse of the global financial house of cards, it is appropriate to reflect on the implications of this event and what the wider business community can, and should, learn from this.
One factor that caused the company’s collapse, and that of the rest of the financial sector, was short term thinking. The idea that sub prime mortgages, however many times you pass off the risk, are not going to come back and bite you where it hurts most is about as unrealistic as thinking that offsetting is going to reduce the risk of energy poverty or accelerated climate change in the years to come.
Another lesson is that, although the news was full of hype at the time, the fact is that most of the ex-employees were on full salaries until they found new employment and the vast majority of them still received those tastelessly large bonuses that there are calls to ban – did no-one notice that the Lehman people interviewed leaving the building on the 15th September 2008 did not appear all that upset? So, just as with the energy crisis and carbon emissions issues the business community is facing, the financial sector is probably not taking this lesson on board as they should.
The final lesson to be learnt is that, although Lehman Brothers were allowed to go to the wall, no other financial institution has been forced to suffer the same fate; it is therefore strange that the media are making such a big deal out of a story that proves the exception, not the rule.
When it comes to the fact that the carbon energy resource that the business community has available to it is dropping at an alarming rate and that the solutions provided by governments, around the world, are actually inept at best and irresponsible at worst, there is no reason to believe that any action of consequence will be undertaken by any of the global giants. The proof of the pudding is in the eating, and so far we have all been left with a bad taste in our mouths.
The following holds true for both the financial sector as it does for environmental concerns.
1. Short term thinking will not solve the problem – it hasn’t for the financial sector and it will not for the looming carbon energy crisis or carbon emissions fallout.
2. At some point, we actually have to take some responsibility for our actions – the financial sector still has not done this and continues to elicit tax payers’ money to subsidise its corporate negligence by implicitly threatening governments in the western world with global economic collapse as an alternative. Similarly, the big corporations are publishing CSR reports that highlight their apathy and their low regard for shareholders by palming everyone off with token gestures and truisms.
3. Relying on governments to make everything good is also not a solution. The bailing out of the financial sector has only served to plummet the populace into a level of debt that our children will have to learn live with and suffer under and, worse, placed the majority ownership of some of these institutions into the hands of people who can’t even work out how to send an e-mail, never mind run a bank. As far as environmental issues are concerned, we have seen already that most governments are content to run a talking shop until the Titanic finally sinks.
It is a historical fact that, as a race, we generally only take the necessary actions when we are at the edge of the precipice; the question is, how bad do things have to get before we actually do anything this time around – how many more Lehman Brothers’ fallouts do we have to suffer before the business community wakes up and smells the coffee? How close do we have to be to carbon energy starvation before the business community realises it’s ‘game over’ if they don’t act… now?
