QSN 1: “Determine which moral philosophy, (Teleology, Egoism, Utilitarianism, Deontology, Relativist, Virtue Ethics, and Justice) is most applicable to an understanding of the banking industry meltdown. Explain your rationale”.
Among the moral philosophies of Teleology, Egoism, Utilitarianism, Deontology, Relativist, Virtue Ethics and Justice, Utilitarianism stands out as the most applicable philosophy that comprehensively explains the attitude that drove the key persons involved in all the Banking Industry Meltdown case studies discussed. According to Mason (2009), Utilitarianism is a theory stating that the worth of an action or undertaking is described by the result emanating from that action. Thus, a comprehensive knowledge of all consequences is needed to justify how appropriate that action is. This is because all the case studies of the banks mentioned in the bank meltdown featured unprofitable results. This justifies that the decision making process by the chief executives of the banks was poor and not based on transparency and wise choice making.
QSN 2: “Analyze the case study and discern if the “white collar” crimes committed differ in any substantive manner from other more “blue collar” crimes”.
White-collar crimes characteristically involve money. People of high social class such as bank executives perpetrate these crimes, which include fraud and money embezzlement. This is in contrast to blue-collar crimes that are more common in lower social classes and include such acts as Rape and Shoplifting.
In all the case studies, the financial crimes committed by the bank executives involved a lack of transparencies in the use of derivatives as financial instruments, which should have generated profit for the banks. All the cases involve hurried decisions by the decision makers, mainly the CEOs and bank managers that involved a lack of comprehensive education and information for the investors, shareholders and customers concerning their money invested in the banks. This indeed amounted to white-collar crimes on their part, which was mainly deceptive to the investors. No force was used in the channels that the investors’ money was put to unlike other crimes, which would normally involve the use of force to manipulate a person to oblige to do something. Armed robbery is an example.
QSN 3: “Determine and discuss the role that corporate culture played in the banking industry scenario. Support your response with specific examples”.
Leadership strategies and practices need to be aligned to all the organizations corporate cultures, (Mellyn, 2009). Leaders need to be the role models of the exact practices that need to be shown by all individuals in the organization’s culture.
In the Barings Bank, Nick Leeson had so much autonomy and authority within the bank. There was a lapse in terms of the teamwork structure within the bank’s corporate culture, such that he ended up making crucial decisions on transacting on the banks derivatives that ended up in failure, (Mellyn, 2009). Much of what he did was shrouded in secretive. His efforts to mitigate the effects of his previous decisions regarding the banks futures ended up in more failure because of several factors. Some of these were external factors were beyond his control, such as the Kobe earthquake that hit Japan.
The United Bank of Switzerland was also marked with dubious deals. These practices were perpetrated by the banks executives and involved use of off shore accounts in USA as well as tax evasion. Overreliance on specific derivatives’ transactions such as mortgage-related securities led to the biggest losses in any lender, in Europe. The executives’ decisions were not analyzed critically to ascertain their risk-margin, and hence the bank suffered massive losses.
The Bear Stearns Bank fell because of an operational lapse in the representation of the client’s loan applications. Again, poor leadership in the bank’s corporate culture should be blamed for this.
The Lehman Brothers is another firm that fell because of the subprime mortgage crisis that eventually led to the loss in value of the company’s shares, (Tibman, 2009). As the company fell, the executives continually received millions of dollars in bonuses, and eventually the firm became bankrupt. A lack of accountability in the firm’s corporate culture is directly responsible for the firm’s eventual bankruptcy.
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QSN 4: “Postulate how leaders within the banking industry could have used their influence to avert the industry meltdown”.
Tibman (2009) stated that leadership is key to the posterity of a banking organization; Leeson should have been consultative before he engaged the bank’s derivatives in high-risk transactions. Probably he could have gotten more advice on possible financial investments and could avoid heavy losses like those suffered by Barings Bank. The high-social class of the executives at the United Bank of Switzerland, the Bear Stearns Bank and the Lehman Brothers could have accorded them a hearing with other industry players involved in the potential profitability and legality of the bank transactional decisions and investments they made. They did not have to undertake dubious deals involving client money.