Red Flags For Risk Management From The Corporate...

3. Identify red flags for risk management from the corporate governance of Bear Stearns and Lehman Brothers. Assess difference and similarities for these two banks. Similarities: 1) Short-Term Compensation Mix Both Bear Stearns and Lehman Brothers’ Compensation Committees had approved mixes of cash bonus compensation, stock options and stock awards which appeared to favor and reward short-term performance. We put a red flag on this area. This conclusion is based on the facts that management job security and salaries rely on the company performance, which gives management level incentive to commit fraudulent financial reporting activities. 2) Older Directors When we see the component of Bear Stearns Board of Directors, with thirteen member, eleven member are older than 60-years old. Same situation happened in the Lehman Brothers, among eleven Board of Directors, only one is younger than 60-years old. If a company’ board of directors has too many directors older than 60-years old, it is a red flag sign. It is well established that an elderly people couldn’t devote too much energy on company daily operations. Beside, we think if a company wants to keep up with current trend, it should hire younger staff. 3) CEO Duality James Cayne has been Chairman of the Board and Chief Executive Officer (CEO) of Bear Stearns for the past several years. Richard Fuld has been Chairman of the Board of Directors since 1994 and CEO of Lehman Brothers since 1993 and serves as Chairman of theShow MoreRelatedFundamentals of Hrm263904 Words   |  1056 Pagessave money From multiple study paths, to self-assessment, to a wealth of interactive visual and audio resources, WileyPLUS gives you everything you need to personalize the teaching and learning experience.  » F i n d o u t h ow t o M A K E I T YO U R S  » www.wileyplus.com ALL THE HELP, RESOURCES, AND PERSONAL SUPPORT YOU AND YOUR STUDENTS NEED! 2-Minute Tutorials and all of the resources you your students need to get started www.wileyplus.com/firstday Student support from an experienced