Global Financial Ethics: Response to a Movie - Coursework Example

Name : xxxxxxxxxxx Institution : xxxxxxxxxxx Course : xxxxxxxxxxx Title : Global Financial Ethics Project B: Response to a movie Tutor : xxxxxxxxxxx @ 2011 Global Financial Ethics Project B: Response to a movie Introduction Money Never Sleeps sets sights on the orchestrators of today’s global financial crisis through a strong melodrama, recounting shameful government bailouts for unclean business plans. Jake’s love for Winnie, his unwillingness to commit outright felonies, and his idealistic backing of a fusion-power company for a greener world make him a better hero than the easily corruptible and shallow Fox character (Muller 2010). Proper governance in the corporate world is unavoidable for its growth. Each and every shareholder group need to put into practice of good corporate governance in business corporations. Anything other than this can lead to the breakdown of corporate organizations. Therefore, every undertaking of these corporate organizations must carry out activities that are only legal. They help to maximize the value of the shareholders in the cleanest manner possible. The movie sets sight on the orchestrators of today’s global financial crisis through a strong melodrama, unfolding disgraceful government bailouts for unclean business tactics. There are a variety of concepts of corporate governance. Some of the main concepts of corporate governance include; the agency theory, the stewardship theory and the stakeholder theory (Daniel 2011). There is a scene where Jake is shown sitting at his working desk, watching Keller Zabel Investments stock crashing more than 30% in one day. The managing director, Louis Zabel holds a meeting with the chiefs of key financial institutions and the Secretary of the US Treasury at the Federal Reserve Bank of New York. He attempts to organize a bank bailout for Keller Zabel Investments, but his efforts are blocked by Breton James, the Chief Executive Officer of an imaginary firm called Churchill Schwartz, that Zabel had refused to bail out eight years earlier. The major approach under the agency concept is the explanation and facilitation of market methods that can moderate the agency hitch. It aspires to find a well-organized market for corporate control, management labor and corporate information. In this connection, the management takes the costs of its own bad behavior. This will as a result generate motivation for self-control (Solom 2004). The theory criticizes Zabels behavior. For one, we can see that he has become very disappointed with the corporate business. He is so disappointed to a point that he does not comprehend how he can be told a loss is a profit. Considering that he is the managing director of Keller Zabel Investments, he ought to maintain his calm in the particular rough patch that his company is undergoing. Agency theory shows that corporate organizations should be managed in the interest of the stakeholders. There is definitely no way that the company shareholders would have stomached the fact that their managing director, who they have assigned the task of controlling the company’s undertakings on their behalf, was giving up so easily (Daniel 2011). The agency theory perceives the head of a company being an agent of the stakeholders. Therefore, any action or decision that he or she takes should be guided by the shareholders’ wishes. It is possible for corporate companies to maximize the wealth of the stakeholder in an agency theory and the same time fulfills a wide range of shareholder desires. Zabel should have come up with a way with a way like this. This can be attained by adjusting the agency theory and slotting in stakeholder-oriented approach which aids to accommodate the broad variety of shareholders’ wishes and welfare. The theory encourages the separation of decision-making and risk bearing to control the problems of the agency. The following morning, Zabel wakes up, goes down to the subway, and, as a train pulls in, he jumps on the tracks, killing himself (Daniel 2011). Breton James is the Chief Executive Officer of an imaginary firm called Churchill Schwartz. He thwarts Louis Zabel’s attempts to organize a bank bailout for Keller Zabel Investments. He portrays himself as a person willing to commit outright felonies, which make him an easily corruptible person. Jake delves on some information and learns that Bretton James personally benefited from the Keller Zabel Company collapse. So as to get the attention of Breton James, Jake spreads gossip about the nationalization of an African oil rig that Breton’s company owns. As a result, his company loses $120 million, and Bretton asks for a meeting with Jake. During the meeting, he tells Jake that he is impressed and offers Jake a job, making it clear that if Jake does not take it up, he is probably not going to be employ anywhere else. At some point in a bash, Bretton informs Jake that the Chinese are going to invest $100 million in Jake's fusion research. However, in a spontaneous motorcycle ride, Bretton tells Jake that the money the Chinese invested is going into fossil fuels as a replacement for Jake’s fusion research. This infuriates Jake since he learns that Bretton is trying to sabotage the research in view of the fact that it is unbeneficial for him, despite the fact that it would do good to the whole world. Bretton represents a cunning manager who does only what is of profit to him. He appears not to understand the fact that excellence in corporate governance assists in making the most of the value of the stakeholders justly and on lawfully sustainable grounds. In this particular case, agency theory shows that corporate organizations ought to be managed by the wishes of the stakeholders. In addition, it encourages the separation of decision-making and risk bearing to control the problems of the agency. Jake, accepted a job offer from Breton James (Muller 2010). Further, Jake presents him with the fusion research he has been supporting. Bretton is impressed by Jake's idea and pleased with the new infusion of funds. He informs Jake that the Chinese are going to invest $100 million in Jake's fusion research. However, he changes his mind so that he could benefit himself at the expense of the entire universe. On changing his mind, he came up with an alternative unilaterally. He does not involve Jake who is a shareholder in this initiative. After some time, with the use of some earlier information that Gekko had collected about Bretton, Jake puts together everything from Keller Zabel’s collapse to the economic bailout of Bretton’s company. He later gives the information to Winnie, telling her that it would put her website on the map permanently as a genuine source of information and that he misses her like crazy. Winnie runs the story, and Bretton James is let out in the open. The board of directors kicks Bretton out of the company, and he is forced to testify to his felonies. But according to the agency concept, shareholders have a right to residual claims in view of the fact that they are the residual risk bearers (Anthony 2010). The agency concept can also be applied in the case of Gekko. Gecko is one man who had spent some time in jail. He lost his son to drug overdose and his daughter did not want anything to do with him. However, after he comes from jail, Jake mistakes his signs of renaissance as being a born-again father, and entrusts him with business counsel in exchange for information on his separated daughter, Jake’s fiancée. When Jake’s aging boss Lewis Zabel commits suicide after being ousted by his colleague bankers for his firm’s unrecoverable debt, it leaves Jake without a guide. Gekko fills the vacuum but on a fringe manner. A moment comes when Gekko tells Jake that he can use his old contacts to move $100 million which is in Winnie’s account. This money would be used to aid his fusion research. Jake believes him and goes to talk to Winnie. She agrees, and they both go to Switzerland where she signs the money over to Jake. Jake then entrust the money with Gekko so that he can legitimize the money for investment in the fusion company. A few hours on going back to New York, Jake gets a call saying that the money never arrived. He goes to Gekko's apartment building and finds neither Gekko nor his belongings. At that moment he discovers that he has left. Later on, he leaves resentfully and trails Gekko to London. He is managing a financial company and the funny thing is that he started with the $100 million meant for Jake’s fusion research. As per the agency theory, corporate organizations ought to be managed in the interest of the shareholders. This was not the case here. Gecko does what best suits him (Muller 2010). These are some of the events in this movie that the agency concept deconstructs. There is also another concept called the stakeholder model. It is another major model of corporate governance. It defines organizations as mutual accord between the enterprise and its shareholders. This association is a structure of shareholders who work under the larger society that offers business chances for the association. The stakeholder concept defines the purpose of the firm as generating wealth for the shareholders. This is the extreme contrast of what is happening in the movie. Gekko tells Jake that he can use his old contacts to move $100 million which is in Winnie’s account to aid his fusion research. Jake believes him and goes to talk to Winnie. She agrees, and they both go to Switzerland where she signs the money over to Jake. Jake then entrust the money with Gekko so that he can legitimize the money for investment in the fusion company. On returning to New York, Jake gets a call saying that the money never arrived. He goes to Gekko's apartment building and finds nothing. He realizes that Gekko had left. Later on, he leaves resentfully and trails Gekko to London. He is managing a financial company started with the $100 million meant for Jake’s fusion research. At this particular time, he acted as the manager of Jake’s money since held it in trust of Jake. At the same time as management may receive money from stakeholders, they depend on employees to accomplish the planned goals. However, he Gekko never did this at all. Instead he tricked the people he was entrusted with to offer help to them. After a while, he informs both Jake and Winnie that he had deposited the money into Winnie’s account. But this was after he had fulfilled his dream of being a billionaire since the $ 100 million had turned to an amazing $ 1.1 billion. Consequently, he could not feel a pinch giving the small amount back that to him was an act of charity. The board has got to reflect on the outcome of corporate resolutions on each and every shareholder in the company. As per Clarke T. 2004, pp 78, “the stakeholder theory explains the governance of multinational corporations due to the value placed on the stakeholders of the corporation. Modern multinational corporations show interdependence between the company and its shareholders and hence can be said to be using the stakeholder theory of corporate governance” (Alexander 2006). The stakeholder theory of corporate governance has a variety of strong points. One of these strong points is that is that terms a shareholder as one who has put in to the company’s particular assets. There is an event in this movie where Jake’s broker friend talks about gossips that Keller Zabel Investments is under threat, with billions of sub-prime toxic-debt off its balance sheets that may well bring the company to its knees. Jake brushes it off, claiming that "I'll make you a bet right now. I've got a million dollars left in my bonus, it's yours tomorrow a.m. You put it in Keller Zabel Investments shares; you leverage that to the maximum. That's how much I believe in this company." He is a complete opposite of Bretton James who is behind its collapse. Instead, Bretton is running an imaginary company where he later gets kicked out by the board. He cannot be considered a shareholder of that company since he has not put into the company’s particular assets. He is behind the collapse of Keller Zabel Investments and also an economic bailout of the Bretton Company for dirty business plans (Alexander 2006). These two particular concepts, i.e. the agency concept and the stakeholder concept give an explicit picture of how badly the corporate companies were managed or treated in this movie. They provide strong grounds for attacking the managements of these companies. Without good governance, the corporate companies will most definitely fail. However, good management ensures that there is transparency and accountability (Clarke 2004). In conclusion, it is possible for companies to maximize shareholder wealth in an agency theory while satisfying a broad range of shareholder needs. This is achieved by modifying the agency theory and incorporating stakeholder-oriented approach that helps to cater for the wide range of stakeholder needs and interests (Pinsdorf 2004). Bibliography Alexander, E., 2006, Entries & exits: visits to sixteen trading rooms. Volume 228 of The Wiley trading series, John Wiley and Sons, New York. Anthony, S., 2010, Goodbye Gordon Gekko: How to Find Your Fortune Without Losing Your Soul, John Wiley and Sons, New York. Clarke T., 2004, Theories of corporate governance, Routledge publishers, New York. Muller, D., 2010, Wall Street: Money Never Sleeps, VDM Verlag Dr. Mueller AG & Co. Kg, New Jersey. Solom J. 2004. Corporate governance accountability. John Wiley and sons, New York. Daniel, B., 2011, Flash Foresight: How to See the Invisible and Do the Impossible, HarperCollins, New York. Pinsdorf, M., 2004, Communicating when your company is under siege: surviving public, Fordham Univ Press, Toronto. Read More