Failure to communicate the potential risks and aversion strategies was also one of the major breaches of ethical performance by Bear Stearns to its borrowers. This was done at multiple stages. Firstly, Bear Stearns failed to disclose risks to borrowers in case of the failure of these assumptions. Secondly, in case of failure, which was quite likely in light of these unrealistic assumptions, the role of Bear Stearns was not defined.
Executives at Bear Stearns failed to communicate the same high risks to the board of directors and the stockholder, when sub-prime mortgage industry started to evolve, risks that were associated with the previously listed assumptions if they did not hold true. When the market collapsed because of the mortgage failures, these same executives implemented their plan without communicating the potential risks and, yet, accepted and received excessive compensation and golden parachute agreements. Decisions that created problems were not stopped or examined for appropriateness, nor was any accountability or responsibility accepted in this context.
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