According to the New York Times, formal channels at Lehman Bros. failed to alert senior management about issues that ultimately lead to the compay's demise. John Zinsser deconstructs the situation further and argues that an Ombuds program could have saved the investment bank.
Think for one moment about an alternative scenario. Mr. Lee approaches the Lehman Organizational Ombudsman, a skilled professional, operating a properly structured program, with appropriate reporting lines to the Chairman of the Board and the Audit Committee. The issues are safely raised. Lehman’s board leads a responsible set of counter measures. The Investment Bank does not collapse. The rest of the financial system is concerned, but not at risk. The Bailout is not required, or only at a fraction of the amount actually spent in our reality.
How different would the economy, our political situation, our future be, had this alternative scenario occurred?
Zinsser says that an effective Ombuds would have cost pennies on the dollar compared to the ultimate loss. He also points out that the Times article appears facing an update on financial regulation reform legislation. He urges Senator Dodd to require Organizational Ombuds for the financial sector. (Conflict Benefit Blog.)
Slight clarification -
ReplyDeleteFormal Channels at Lehman (as well as auditor Ernest & Young) kept LEE from getting information to THE BOARD. Technically Lee was SR. MGMT.
He was also FIRED for blowing the whistle. Please see:http://online.wsj.com/article/SB10001424052748704588404575124134271085018.html?mod=WSJ_Markets_MIDDLETopNews
Yet another argument for an OO - Confidentiality would have helped.
Thanks for the correction, John. I appreciate your work giving the ombuds field a 30,000' perspective.
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