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Corporate culture

Corporate culture

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Corporate Culture

The case presents some of the error that the mortgage Companies did. Despite the New York

Times warning in 1999, the Companies went ahead and guaranteed $12 trillion in the mortgage

market. The situation severely affected them in the 2008 economic crisis. They committed

themselves despite the fact that the homeowners could not afford to pay for the mortgages. The

government further relied on their reports, which had accounting errors, and passed new

regulations to allow them buy $200 billion subprime loans. For example, Fannie Mae was

charged with criminal offence for misleading financial statements. The government assisted AIG

Company by giving it some injection worth about $180 billion. This was a measure to rescue the

Company from facing total bankruptcy in 2008 economic crisis. The government therefore

became a shareholder in the Company holding up to 79.9 percent of the ownership. This

indicated a sort of cooperation with the government. However, the government aimed at rescuing

other Companies that depended on AIG from possible bankruptcy. Issues of ethics violation were

rampant especially in the face of excessive risk-taking and rewards.

Corporate culture is necessary in establishing integrity of all relations in the Company. If there

lacks an appropriate governance that build on checks and balances, the top officials have a

chance of neglecting the stakeholder’s interest for their personal interest. Therefore, corporate

culture prevents cases of misconduct and penalties from violation of certain regulations.

Executive compensation is a factor that has been attributed to the 2008 downfall of most of the

Companies. Despite the financial constraints, the executive continued to receive very high

bonuses. For example at Merril Lynch Company, the top executives were awarded $3.6 billion as

bonuses while the Company was undergoing financial problems. In AIG, the corporate culture

and the leadership style also influences accountability. In his expansion of the Company,

Maurice used an autocratic style to ensure accountability in his decisions. In the period 2008-

2009, bad leadership led to lack of accountability. Cassano and Sullivan continued to reassure

investors, who demanded of the market indicator, of their new identified areas of exposure to

residential housing.

The regulations that the government enforces is associated with some other costs. Economist has

classified the costs as either social or economic. The former relates to cost that governs the

consumer’s health and safety in their environment. Economic cost relates to the business costs.

This cost amounted to $51 billion in 2009. They are a burden to the business sector and the

public since the parties have to meet the cost. Regulated firms usually spend huge amounts to

avoid an additional regulation. On the other hand, the costs are beneficial to incur since they

boosts equality in the workplace. In addition, it enhances safer working conditions, and resources

for the disadvantaged groups in the society. In the long run, the society have safe commodity

basket to choose from, clean air and water and preserved natural habitats. Companies that fail to

comply are forced out of the industry through competitive means. Competition is the key to

newer product creation using high technology levels. The entire market adjustment leads to low

prices for the commodities in the market.

In my opinion, the benefits outweighs the cost since in the future, the well-being of the consumer

is guaranteed as the products becomes cheaper and of high quality. Deregulation minimize the

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Corporate Culture The case presents some of the error that the mortgage Companies did. Despite the New York Times warning in 1999, the Companies went ahead and guaranteed $12 trillion in the mortgage market. The situation severely affected them in the 2008 economic crisis. They committed themselves despite the fact that the homeowners could not afford to pay for the mortgages. The government further relied on their reports, which had accounting errors, and passed new regulations to allow them buy $200 billion subprime loans. For example, Fannie Mae was charged with criminal offence for mislead ...
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