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Corporate Culture on the Example of AIG - Essay Example

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Corporate culture shapes up the working practices, behavior and even ethical conduct of the employees within an organization. However, when this culture gets plagued by defective policies, faulty leadership and subdued organizational objectives, demise of the company is sure. …
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Corporate Culture on the Example of AIG
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"Corporate Culture on the Example of AIG"

Download file to see previous pages Similar happened with American International Group (AIG) - one of the world’s leading insurers.
This case analysis is built up at delving deep into corporate culture factors which paved the way for AIG’s doom, conduct of AIG executives worsening the situation and alternative route AIG could have taken to prevent its downfall.
Role of AIG’s corporate culture in its downfall
Corporate culture of a firm constitutes the environment in which employees work, rules and regulations which mold their working practices and even the leadership under which employees learn to differentiate between right and wrong. AIG’s culture was not up-to-the-mark in terms of true leadership, correct human resource policies and even ways and means to capture and exploit business opportunities.
Hank Greenberg, the CEO of AIG was into lobbying and made use of back-door tactics to get hold of contracts and business leads. His ethical philosophy was misleading from the very beginning of his youth when he used to violate rules while he was in army. Activities which were not allowed by senior officials were done by Greenberg silently and he supplied the proof of doing something different to army officials (Jennings 19).
This instance makes clear that Greenberg was a man who did not care about ethics. He had his own way of doing things which he himself wished to, and also maintained a pseudo personality ready to pretend that he is abiding by the rules. As such, under his leadership, the employees of AIG too developed this habit of fulfilling their personal interests and supplying wrong information and proof to the outside world that everything is under control. Moreover, culture at AIG was not one that placed greater emphasis on company’s mission. It focused on profits and growth first. Stakeholder wealth management principle came second. This is evident from the fact that AIG employees were paid bonuses and incentives for their excessive and unnecessary risk taking activities. Dazzled by short term gains and exponential growth, the company and top management overlooked what it owes to its investors, shareholders and stakeholders. Before any growth comes the benefit of people whose money is with the company. Rewarding system at AIG was crippled as it encouraged unethical risk taking endeavor of its overexcited employees of Financial Products Division. The corporate culture at AIG was developed into a form that had started taking undue advantage of its reputation and standing in the financial market. High-profile joint ventures, global outreach, revolutionizing business concept and astronomical growth in the beginning- all blinded the officials and employees at AIG to move ahead at lightning speed without conforming to the risk management rules and ethical compliance obligation. It did not offer complete disclosure of credit investment information, entered into risky ventures, came up with a host of derivatives and products and get itself engaged in deals and businesses which seemed lucrative superficially. Lack of transparency, complete disclosure and complex jargon of financial market mislead the public at large. This was all attributed to how employees at AIG were learning from its leaders, how their compensation plan was devised which did not account for risks but only unaccrued income. Lastly, stakeholder wealth maximization principle was totally lost from the corporate charter of the company. Ethical conduct of AIG executives Jennings (15) highlights multifarious unethical behavioral dimensions which lead to an ethical breach of duty. At AIG, these dimensions were numerous and have reached to a very high level- level which was irreparable and punishable. The executives not only ...Download file to see next pagesRead More
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