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Mf Global Strategic Management

Essay by   •  April 27, 2018  •  Case Study  •  924 Words (4 Pages)  •  643 Views

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The ethical issue that I have considered for analysis is Jon Corzine’s decision to ask Edith O'Brien to find $175 million to settle the overdraft account (of their company) with JP Morgan. Jon Corzine is the CEO of MF Global and former head of Goldman Sachs, U.S. Senator, and governor of New Jersey. Edith O’Brien is a mid-level manager at MF Global. The major ethical concern is that Jon Corzine is aware that they have cash crunch and by asking O’Brien to find the money, Corzine implicitly approved the payment even if it were from inappropriate accounts, and tacitly used the power of his title over a mid-level manager to get the issue settled without discussion. Now although the decision to skim the customer funds lies with Edith, given the position Jon Corzine is in, it is very difficult for someone to deny the request. Also, if Edith had chosen not to skim the customer funds, Jon Corzine would not have hesitated to find another means to use customer funds to pay off the overdraft. According to the virtue ethics, Corzine failed to ask himself if this act fits with his self-image or company’s image.

The stakeholders involved in this case are Jon Corzine, Edith O’Brien, the customers managed by MF global, employees as well as lenders.

Unfortunately, any decision chosen in this case has an adverse consequence on the stakeholders involved. If they plan to use the customers money, the customers are cheated. Customer funds are supposed to be segregated and invested. Instead, MF Global appears to commingle customer money into firm accounts to pay off the firm’s debts. This act represents an ethical failure by the leaders of MF Global [who are morally obligated to investor rights agreements under SEC] who have a fiduciary relationship with their clients based on trust and mutual understanding of investment policy.

Edith O’Brien has to weigh the consequences of doing things the right way vs engaging in fraudulent course of action. She has to consider possible legal action, her reputation and even the possibility of losing her job. The employees may lose their job as the company may go bankrupt or company’s funds may be seized as a result of legal action. The employees will also have to deal with the damaged reputation as the employers might hesitate to employ them in future. The banks/lenders have a fear of losing their money and finally Jon Corzine has his reputation at stake as a successful CEO.

        The following alternative courses of action could have been considered:

  • Raising money the right way: Here the possible actions could have been by issuing more debt by issuing bonds, lending additional funds from financial institutions/shareholders, finding financial clients by merging or getting acquired by another company.
  • Admit the wrong choices in investment decisions and coming clean and thereby filing for bankruptcy protection.
  • Selling off company assents and the reserves (if any) in terms of bonds, debentures.

Utilitarian ethical theory proposes actions that produce the greatest good for the greatest number of people. Tampering with customer funds is a crime under the Commodity Exchange Act of 1936, because customer money must be segregated from firm money.

 Raising funds the right way does not violate any ethical issues. Based on Utilitarian ethics, consequential view defines the goal of decisions made as bringing the most good to the greatest total number of people. In this case, if Jon Corzine tries to sell off assets and raise debt, it does bring out the greatest good to all as it outweighs the negativities arising from filing bankruptcy. All individuals are informed about the companies decisions and there is transparency in the companies decisions, so investors do know about the companies decisions and therefore the customers who are willing to take risk can continue to let the company manage their investment.

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