Business Ethics

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Business Ethics

By | March 2013
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Coping with Financial and Ethical Risks at AIG

Coping with Financial and Ethical Risks at AIG

Coping with Financial and Ethical Risks at AIG
Abstract
American International Group (AIG) had grown to become a large and well respected insurance company throughout the world. But, this was short lived when AIG collapsed in 2008 and resulted in the government having to bail them out to stay “afloat” during the financial crisis during the years 2008 and 2009. They had a market value of around $200 billion and two years later that number had significantly dropped to a mere $3.5 billion. In this paper I will be discussing the role that AIG’s corporate culture had played in its downfall. I will also be talking about their ethical conduct of the executives of AIG as well as how a stronger ethics program may have helped the company to improve their corporate culture. Lastly, I will be addressing what could have been done differently by AIG in an effort to prevent the failure and bailout from happening.

Coping with Financial and Ethical Risks at AIG

1. Discuss the role that AIG’s corporate culture played in its downfall. According to Ferrell on page 364- The corporate culture of AIG had been involved in a high-stakes-risk-taking scheme supported by managers and employees that appeared entirely focused on short-term financial gain. They had no boundaries as to what type of risk they could take on. This was the main reason for their downfall I believe. A company has to set limits and restrictions as to what is appropriate and what is crossing the line. They had to have known that these high risks they were commonly taking were not always the smartest idea.

2. Discuss the ethical conduct of AGI executives and how a stronger ethics program might help the company to strengthen the ethics of its corporate culture. Several years ago (in the 90’s), a man named Joseph Cassano had increased the business of selling credit default swaps. This was said to be the...