Examining the Negative Effects of Bankruptcy on Companies

The overall behavior of management as it affects the desires and abilities of members of an organization under the restrain of bankruptcy is difficult to perform effectively. To have effective leadership there must be a match between all the company\u27s sources, including organizational structure, information systems, reward systems, allocation of resources, and leadership. This is a complicated task to perform when an organization is dying. Senior management might try to ease your mind by saying there is no need to worry , but the truth is normally everybody suffers psychologically and emotionally. When a company files a petition with the federal court seeking protection from its creditors it virtually gives up control of the company. Therefore uncertainties in management will occur and the current position of the company is everybody\u27s consideration. Management\u27s future, promotions, salaries, recognitions, and security are in limbo because the company had to file bankruptcy. Management\u27s values and belief changes to play the game of survival. The values that provided a sense of direction for employees diminish because of changing circumstances. A manager could be terminated at any time without notice. This could have an adverse effect on an employee who knew the manager was a person who worked hard, and took his or her responsibilities seriously. But the final thought lingers in most people\u27s minds is God thanks for not letting it be me who got the ax . Now management has a responsibility to act on the behalf of the unsecured creditors and the investment committee, not the shareholders whose investment and earnings are at stake. This thesis will attempt to show the reader how management can deal with the emotional and psychological impact of an organization under the restrain of Bankruptcy Code 11 and 7. Also, an attempt will be made to show the readers strategies and survival skills necessary to stay in the ball game and the consequences with have to be understood and accepted