What are the facts?
A law dispute developed between the Commodity Futures Trading Commission (CFTC) and the CEO of MF Global, Mr. Jon Corzine. CFTC accused Mr. Jon Corzine of coaxing one of the middle level managers at his establishment, Edith OBrien, of redirecting customer assets that were worth millions of dollars for the sake of covering the bank overdraft that threatened the continuous progress of their institution if it were not handled in the shortest time possible and with great precision.
What are the ethical issues?
The ethical issue in this case lies in the fact that MF Global decided to use the assets that were owned by their customers worth billions of dollars to cover their losses thus prevent their establishment from sinking without consulting the customers themselves. If the establishment would have consulted their consumers concerning whether to use their assets or not and they agreed then it would have been okay for the company to use the customer assets to settle their overdraft. However, since MF Global failed to consult with their esteemed consumers yet the company still ended up using their customer assets to settle their debts they violated their customers trust. It is the sole responsibility of any company to protect the best interests of their consumers at all times. This was regardless of the drawbacks that they faced at any point in time.
What are some alternative?
Instead of using consumer assets to settle the overdraft that was bound to sabotage operations at the company, officials at the company would have organized a meeting with members of staff at the institute and other stakeholders. In this way, management teams at the company would have attained assistance in coming up with ways in which funds could be raised in order to cover the debts of the company in the best way possible. This was without infringing on their rights of consumers or other stakeholders both of whom play a very important role in ensuring that the establishment stayed afloat in carrying out its daily undertakings.
Who are the stakeholders?
Stakeholders that make part of the establishment include customers, investors, money lending institutions such as banks, sponsors and suppliers. In the case of MF Global, it would have been quite productive if they relied on the assistance they were bound to acquire from the stakeholders instead of deducing that it was best to use customer assets to resolve their stalemate. This was despite it being that they knew quite well that such course of action was bound to taint the viable relation that subsisted between the company and their customers. If the company would have developed a fruitful relationship between them and other stakeholders then the management team at the institute would have been able to salvage themselves from the overdraft situation the company was subjected to or at least avert being subjected to the overdraft situation they found themselves in leading to their unauthorized use of customer assets.
What is the most ethical alternative?
It is no doubt that it would be difficult for CFTC to negotiate with their creditor to reach an amicable solution to their problem in the state that the company found itself in after overdrawing from JPMorgan Chase bank. Therefore, the company could hire a credit-counseling agency to help the establishment come up with a proficient debt management plan to assist the establishment wade out of its debt situation. The credit counseling agency would aid MF Global Company come up with the most suitable debt repayment plan that would be developed based on the institutions debt and revenue earnings.
What are the tradeoffs in selecting this alternative?
However, if the establishment relied on the aforementioned alternative then there is bound to be a conflict of interest. This is because in a number of occasions, the debt counseling agencies were paid the largest proportion of their funds by the creditors. Therefore, if the creditor, which in this case was JPMorgan Chase Institute, declined that they would not pay for the services issued by the consulting firm then it would be difficult for the institution to utilize such an alternative in tackling the current financial problem that it encountered. Nevertheless, if JPMorgan Chase Institute agrees to pay for the services issued by the consulting firm then it would be easy for MF Global to employ the alternative mentioned above in carrying out its undertakings.
What will you do?
If it were to me, I would have done everything within my power to come up with ways through which I could work with the creditor to come up with the best alternative to repaying the debt the company owed JP Morgan Chase. This would be by convincing the creditors to agree to a repayment plan that would not be destructive to the establishments operations or at least one that would help salvage the company from its devastating state of financial ruin.
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