Alga case study ay macabre Coping with Financial and Ethical Risks at American International Group (GIG) 1 . Discuss the role that Gig’s corporate culture played in its downfall. Ere corporate ethical culture at GIG was far from a good one. The corporate culture focused on high risk taking schemes that were only there to focus mostly on short- term financial gain. The Alga Financial Products unit specialized in derivatives and other complex financial contracts that were tied to Supreme mortgages or commodities.
While its dealings were risky, the unit generated billions of dollars of refits for GIG. Nevertheless, during his long tenure as Geoff GIG, Maurice “Hank” Greenberg had been open about his suspicions of the Alga Financial Products unit. 2. Discuss the ethical conduct of Alga executives and how a stronger ethics program might help the company to strengthen the ethics of its corporate culture. Investigators believe that Alga may have goosed its financial performance with dubious transactions and improper accounting.
A stronger ethics program might help the company to strengthen the ethics of its corporate culture. Ethics programs envoy corporate values, often using codes and policies to guide decisions and behavior, and can include extensive training and evaluating, depending on the organization. They provide guidance in ethical dilemmas 3. What could Alga have done differently to prevent its failure and subsequent bailout? Treasury Secretary Tim Eighteen recommended the mandatory formation of clearinghouse as a means for preventing future financial crises.
This view that clearing could have prevented the Alga problem, and the necessity of spending amounts of huge taxpayer dollars in a bailout, is based on an incomplete understanding of how clearing actually works. A more complete analysis demonstrates that it is unlikely that clearing would have made a blow up less likely, and it would almost certainly have made things worse by concentrating the risk on fewer systemically important banks.
Holding Gig’s positions constant, clearing would have not substantially affected the allocation of losses among its trading parties, and if these losses required a bailout Introit a clearinghouse, they would have required them with a clearinghouse If anything, the losses from an Alga default would have been concentrated at fewer ankhs (the members of the clearinghouse, a subset of Gig’s counterparts).
This case first examines the events leading up to the 2008 meltdown, including the philosophy of top management and the corporate culture that set the stage for Gig’s limes. Then it reviews the events that occurred in 2 008, including ethical issues related to transparency and failed internal controls. Finally, the analysis looks at the role of the government and its decision to bail out GIG, taking 79. 9 percent ownership in a company that grossly mishandled its responsibility to its stakeholders.