Abacus
James Rodden
Business Ethics
Summer 2013
The Goldman Abacus Fund: Ethics You Can Count On
Or
Ethics That Don’t Add Up
Set Up Imagine a physician is on the golf course with one of his colleagues, who happens to be a cardiologist. Somewhere on the back nine the cardiologist begins to tell the physician about one of his patients, a 52 year old man with blood pressure of 145/99, who is 40 lbs. overweight, chain smokes, and enjoys 7 to 8 martinis a day. In spite of medications, in the words of the cardiologist, the patient is “a ticking time bomb.” The first physician asks for his friend’s patient’s personal information, and after the golf game, goes to see his State farm agent, where he takes out a 1 million dollar life insurance policy on the ‘time bomb” guy. Are the actions of the physician ethical? Taking out such a policy is of course illegal, as the doctor does not have what is known as an insurable interest. But assuming the doctor took no steps to encourage the man’s death, under the theory of rational egoism his actions would be justified. Furthermore, as macabre as the doctor might seem in betting on the death of another human being, Sternberg would consider his actions to be within the realm of ordinary decency. In 2007, amid historic economic development, a scenario emerged similar to the one just described. Although the players and events were quite different, the same philosophical question was raised: is it ethical to benefit from someone else’s demise. Living in a society riddled with envy and resentment, many onlookers thought so. Two parties in particular did not. They were John Paulson & Co., a hedge fund company established in 1994, and Goldman Sachs & Co., a global investment banking and securities firm founded in 1869.
The Events
The story has its beginnings in 2005 when 49 year old Paulson, a man with a Wall Street reputation of mediocrity, hired an out
Business Ethics
Summer 2013
The Goldman Abacus Fund: Ethics You Can Count On
Or
Ethics That Don’t Add Up
Set Up Imagine a physician is on the golf course with one of his colleagues, who happens to be a cardiologist. Somewhere on the back nine the cardiologist begins to tell the physician about one of his patients, a 52 year old man with blood pressure of 145/99, who is 40 lbs. overweight, chain smokes, and enjoys 7 to 8 martinis a day. In spite of medications, in the words of the cardiologist, the patient is “a ticking time bomb.” The first physician asks for his friend’s patient’s personal information, and after the golf game, goes to see his State farm agent, where he takes out a 1 million dollar life insurance policy on the ‘time bomb” guy. Are the actions of the physician ethical? Taking out such a policy is of course illegal, as the doctor does not have what is known as an insurable interest. But assuming the doctor took no steps to encourage the man’s death, under the theory of rational egoism his actions would be justified. Furthermore, as macabre as the doctor might seem in betting on the death of another human being, Sternberg would consider his actions to be within the realm of ordinary decency. In 2007, amid historic economic development, a scenario emerged similar to the one just described. Although the players and events were quite different, the same philosophical question was raised: is it ethical to benefit from someone else’s demise. Living in a society riddled with envy and resentment, many onlookers thought so. Two parties in particular did not. They were John Paulson & Co., a hedge fund company established in 1994, and Goldman Sachs & Co., a global investment banking and securities firm founded in 1869.
The Events
The story has its beginnings in 2005 when 49 year old Paulson, a man with a Wall Street reputation of mediocrity, hired an out