Course Code: MGN645

Course Title: Business Ethics & CSR

Course Instructor: Mrs. Megha Mehta

Academic Task No.: 2

Academic Task Title: Case based Assignment

Date of Allotment: 5 Sep, 2015

Date of submission: 30 Sep, 2015

Students Roll no: A21

Students Reg. no: 11404239
Evaluation Parameters: (Parameters on which student is to be evaluated- To be mentioned by
students as specified at the time of assigning the task by the instructor)
Learning Outcomes: (Student to write briefly about learning obtained from the academic
tasks) : I learnt how at work place, a person can face ethical dilemma due to others work and
challenges faced by them.

Declaration:
I declare that this Assignment is my individual work. I have not copied it from any other
students work or from any other source except where due acknowledgement is made explicitly
in the text, nor has any part been written for me by any other person.
Students Signature: Manpreet Kaur

Evaluators comments (For Instructors use only)

General Observations

Suggestions
Improvement

for Best part of assignment

Evaluators Signature and Date:

Marks Obtained: _______________

Max. Marks: ______________

TABLE OF CONTENTS

1.
2.
3.
4.
5.
6.

Background to case
Abstract
Problems
Reasons of writer being in ethical dilemma
Analysis
Suggestions

ABSTRACT

This case Conflicts on a Trading Floor deals with a person who is a junior salesman at
FirstAmerica Bank. He is working under Linda who is very renowned and known for her sales
tactics. She signs biggest deal in history of Bank with Poseidon which will be worth $12.5
million. Actual cost of contract to Poseidon is $1.25 million. This means Linda has manipulated
records and papers and is charging company heavily. She has convinced them that deal
proposed by bank is best for them and has held them in total confidence. When company wants
to enquire about actual price, it is then the problem arises. Linda then directs writer to send
them forged document which shows certain rates to convince them. Now, whole case revolves
around writer and his ethical dilemma. Whether writer should send document or not and reasons
for same are given in case.

BACKGROUND TO CASE

The case opens with an introduction to two employees of First America Banks main trading
floor. The first employee is Linda- a top salesperson and the second is her assistant who works
with three vice presidents including Linda. Linda and the assistant began working on a $700
million dollar deal with one of her clients, Poseidon Cruise Lines. The deal ended up becoming
highly complex and involved complicated currency exchange and long-term yearly payments.
Due to the previously established relationship between Linda and the treasurer and CFO of
Poseidon, she encouraged them to trust her and not shop the deal because it would increase
Poseidons costs of doing this deal. It is at this time that the assistant begins questioning Lindas
method of conducting business and ethics as she over exaggerated the importance of secrecy in
this deal to the client. Additionally, Linda quoted interests rates that were suspiciously high that
would result in an extremely profitable transaction for the bank. Linda had misled Poseidon into
believing the bank would only profit $1.2 million while the assistant calculated a fee of roughly
$12.5 million.
Poseidon began to have some doubts on the structure and the fairness of pricings that Linda had
quoted based on what they knew about current rates. To settle the clients concerns, Linda
demanded the assistant fax over a misleading document. When the assistant requested some
explanation of the deal and the fax, Linda quickly refuses to speak with him. Clearly, the
assistant is suspicious that she is trying to hide information from him as well as the client. The
case ends with the assistant contemplating the repercussions of his sending or not sending the fax
that he knows will unethically mislead the client.

PROBLEMS

There are various problems faced by Junior Salesman in this case. Some are listed below:

Are they committing any fraud by convincing Poseidons CFO that the deal needs to kept
secret and to be not to be shopped to other competitors so as to not move the market

ahead of the trade.

Are they wrong in having to send the Telerate page that grosses up for withholding tax in

spite of the fact that withholding tax does not apply to cross currency swaps.
Linda quoted Poseidon on average 80 points higher than the rates the traders needed for

FirstAmerica to profitably hedge its positions

Quoting to the Poseidons CFO that the profit to The First American Bank is $1.25

million when in reality the profit would be ten times the number at $12.5 million.
Whether the reputation of The First American Bank is under threat if the information

comes public? And if so, what are the short-term and long-term impacts to the bank?
The writer is also facing the dilemma over his future career at the bank.
There was a mismatch between the authors personal values, his expected behavior and
ethics. He knew that the transaction was not the best option for the client and that it was

obtained due to deception by Linda.

At the end, writer is facing dilemma that shall he send forged fax to Poseidons CFO or
shall he stand by his ethics and report regarding the same to higher authorities?

REASONS OF WRITER BEING IN ETHICAL DILEMMA

Reasons to send:

Following Orders: Linda was his direct superior at the bank and her instructions had been
very clear. He strongly believed that it is important to respect the wishes and requests of

people in positions of authority. (His background in team sports, my family, and his

religious upbringing each reinforced this commitment.)

He owe Linda for getting him the job: She was the first FirstAmerica employee to
interview him as a college senior and, ignoring his lack of experience or training, she
recommended him for a position that is normally held by someone with an MBA. He felt
that since she had been willing to "bend the rules" to help him, he certainly owed her

enough to return the favor.

Make money for bank: As an employee of the bank, he had a responsibility to help desk
make as much money as possible. A transaction like the Poseidon one would noticeably
increase all of their bonuses; this deal alone could add $500,000 to $1 million to Linda's
bonus, and as much as 70% of his base salary. The transaction would also help the bank
show positive earnings at an extremely difficult time (the North American real estate

market was deteriorating rapidly), and might even improve the bank's share price.
Job has great potential and he doesn't want to lose it: He had just begun his new job and
felt that he had a great deal of potential. It was extremely important for him to be seen as
a dedicated professional who could be completely trusted. To challenge his boss directly
and to risk losing an extremely large and profitable transaction would almost certainly
end his career at FirstAmerica. In addition, if he could not help execute a large and
profitable transaction because of nagging doubts, he wonders if he could ever hope to be
successful in industry.

Reasons not to send:

Be honest: He is an observant Jew, as well as a generally decent human being. He feels
that basic honesty in human interactions is a crucial building block for an enjoyable and
happy world. Although he did not consciously formalize the dilemma into a religious
question at the time, the religious beliefs that his family instilled in him did affect the way
he looked at the problem. Having grown up in a small but tightly-knit Jewish community,
he was raised in the modern orthodox tradition, which holds that people should obey the
laws of the Torah while interacting with the modern world as much as possible. The

experience that most strengthened his commitment to Jewish belief was the year he took
off from college to go to Israel in order to work and study in a small settlement south of
Jerusalem. There, he spent 10-12 hours a day at a Yeshiva, or Jewish seminary, studying
Jewish law and tradition. He recalled from his studies that there are several specific
commandments in the Jewish tradition that prohibit lying or intentionally misleading
others. The one that seemed most directly applicable is "And before a blind person you
shall not put a stumbling block" (Leviticus, 19). While Linda was not asking him to lie
directly, the information he was asked to convey was certainly misleading enough to

make him make uncomfortable.

Professional responsibility to the client: The reason he felt he should not send the fax was
his professional responsibility to the client. He felt that when he, as a person in a service
industry, accepted a new job, He had committed himself to acting in that client's best
interest. In banking, there is always a tremendous tension because every dollar the banker
earns ultimately comes out of the pockets of his clients. He knew that he would have to
live with this conflict in every transaction he pursued, but the harm being done to

Poseidon Cruise Lines seemed too large to ignore.

Give the company a bad name if truth comes out: It was quite possible that gouging a
major client could have a tremendous negative impact in the long run. If the amount of
profit Linda had built into the trade ever became public knowledge, many of their other
clients would almost certainly turn away. Linda evidently felt that the risk of a negative
outcome was great enough that she did not want to call the CFO herself.

May be rewarded for his honesty: It was possible that there might be professional benefits
from staying completely honest and guarding the client's interest. Perhaps a senior person
at FirstAmerica would be outraged by Linda's behavior and would reward him for not
getting involved.

ANALYSIS
The case moves around a junior salesperson working with The First American Bank, an
assistant on the non-dollar derivative desk. The junior salesman finds himself in a very

difficult situation and as a result has to decide the course of action to take in
misrepresenting material fact to a key client by the name Poseidon who are in the case
with their hedging, French Francs. The case relates to $700 million construction of a
luxurious ship over a five-year period.
According to the information given, the sales department of The First American Bank
was preparing a contract of $700 million loan contract for Poseidon Cruise Lines to
enable them order a large ship from a French shipyard. However, part of the contract
required that it to be signed for five years and in French francs. This raised eyebrows in
the management of Poseidon especially in relation to possible losses especially in dollar
to francs exchange as the cash flow to Poseidon was meant to be in dollars. The contract
elaboration was meant to be dealt by Linda and her assistant Seth. Linda was the top
salesperson at the bank who was known for her volatility and hot temper coupled with an
aggressive business style.
However, Linda was well known to be a prudent person who received full credit for very
good results she closed and it was decided that since Linda and the Poseidon CFO had
good relations, she was to elaborate a structure that was to minimize Poseidons costs and
risks in that particular transaction. It was therefore elaborated in the contract that Fist
American Bank was to provide francs to Poseidon in several transactions and receive
principal and interest rates in dollars eliminating Poseidons francs obligations. But in
reality, this scheme by Linda was offering the bank much more profit and more cost to
Poseidon than in the usual contract.
In my opinion, Linda has behaved very unethically from the beginning of the deal when
she requested the client to not consider any competing offers. By requesting this she
insulated herself from any price competition and from the client receiving any
contradictory information to what she provided. Then by sending this fax, she would be
blatantly misleading the client with false information, which I believe is the most
unethical behavior Linda exhibited. The assistant is in a very difficult position and needs
to make the choice between his career and his faith. If he sends the fax he will be
violating his personal code of ethics but furthering his career and if he does not send the
fax he will most likely lose his job with no recommendation letter but maintain his
personal ethics.

Now, it is upto writer as to which path is he going to follow now. He has valid number of
reasons to send fax and equivalent number of reasons to not to send fax. This entirely
depends on the value system of a person that how he reacts to certain situations. For some
people, forging and lying might not be a big deal. Some people are nurtured up in that
kind of environment where such things dont matter. While for some people, this is really
a big issue and they cannot compromise on their values at any cost.
As the writer describes himself that he has been brought up in a tightly knit family full of
Jewish values and beliefs. Strong sense for honesty, integrity, being ethical has been
nurtured in him since childhood. Hence, he finds this a big deal. Doing such a fraudulent
activity would destroy his belief and value system. Moreover, he is a person who has farsighted vision; he fears that if such a big fraud done by Bank comes out in public. They
would lose their potential customers and it would bring bad name to bank.
Moreover, he is a fresher there at Bank. He needs this job and want to make his career in
this field. If he does-not obey his subordinates orders and goes for whistle-blowing, there
are chances that he may not be heard even. Banks authorities would favor Linda, her
being a senior person at Bank. Therefore, writer risks his job in not complying with his
subordinates orders. He has personal risk in not going for sending fax. But there are long
term consequences to Bank regarding this issue.

SUGGESTIONS
Based on the current situation explained in the case, the board of directors is unaware of
the unethical behavior of their employee Linda. The board could gain the necessary
information if the assistant serves as a whistle blower to one of his superiors about
Lindas unethical behavior. Once the board gets the information, their immediate action
should be to fire Linda as an example that the firm will not tolerate unethical employees.
Then they should work on preserving the relationship with Poseidon with the goal of
completing a deal with them. In the case, it appears that the fellow workers at
FirstAmerica are uninterested and unaware of how to behave ethically as they do not
seem to view Lindas actions as a problem.
Therefore, the board needs to implement an ethics-training course to educate their
employees on how to ethically behave with clients. Additionally, they need to create a

culture of openness and communication so that any employees, no matter their position,
can have the ability to voice concerns about the ethics of a fellow employee or a current
deal.
Cases learned from the case
Honesty is the best policy.
We should always act in the best interest of ourselves as well as those of our

clients conducting any businesses deals.

Trust is as important in business as money is.