Case Studies

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Case Study: Goldman Sachs and Greece

In reference to Chapter 7, did Goldman Sachs use:
I) Moral management,
II) Immoral management or,
III) Amoral management
when it assisted the federal government of Greece to secure entry into the Eurozone? Discuss and explain your answer.

When Goldman Sachs assisted the federal government of Greece to secure entry into the eurozone it practiced Intentional Amoral management.

Maastricht Treaty created the Euro. As per the treaty the economy deficit level of the country was already predefined for those countries who were willing to enter euro zone. But Greece entered the European union with a budget deficit that exceeded the allowed threshold. The Greek government borrowed heavily and went on spending after the adoption of Euro as their currency. Instead of reducing the spending and borrowing heavily it adopted creative accounting practices to hide its true budget deficit. It was Goldman Sachs that helped the Greek government to borrow billions in the form of loans and assisted it to hide this huge loan amount from the public view by treating it as currency swap. Now as per the European rules it was not required for Greece to disclose this transaction. This favored the Greek government to remain under the European Union’s deficit spending limits and join the euro.

Intentional amoral management
Amoral management is not just a middle position on a continuum between immoral and moral judgment. Amoral managers of this type do not factor ethical considerations into their decisions, actions and behaviors because they believe business activity resides outside the sphere to which moral judgments apply. Such managers think that different rules apply in business than in other realms of life.

In this instance Goldman Sachs knew that Greece was having a budget deficit that was higher than the allowed threshold but still it assisted Greece by adopting unfair accounting practices. Goldman Sachs knew the loopholes that existed in the European rules and they took the undue advantage of it and assisted the Greek government to qualify in the euro zone. Goldman Sachs believed that their decisions, actions and behaviors were fair and the transaction which they did was quite structured and just a strategic move and which do not comply with any moral judgments.

2) How would you apportion the blame, with respect to the ramification of Greece being allowed to enter the Eurozone “under false pretences”? Consider the following stakeholders (note: your apportionment of blame should equal 100%): a) Goldman Sachs

b) The political leaders of Greece
c) The electorate of Greece
d) Eurozone officials
Explain why you have apportioned the blame in the way that you have.

After going through the case study I would apportion the blame as below, with respect to the ramification of Greece being allowed to enter the Eurozone “under false pretences”

I would apportion Goldman Sachs with 25%

In this case Goldman Sachs knew that Greece was having a budget deficit that was higher than the allowed threshold but still it assisted Greece by adopting unfair accounting practices. Goldman Sachs knew the loopholes that existed in the European rules and they took the undue advantage of it and assisted the Greek government to qualify in the euro zone. Goldman Sachs believed that their decisions, actions and behaviors were fair and the transaction which they did was quite structured and just a strategic move and that do not comply with any moral judgments.

I would apportion the political leaders of Greece 20%

Maastricht Treaty created the Euro. As per the treaty the economy deficit level of the country was already predefined for those countries that were willing to enter euro zone. But Greece entered the European Union with a budget deficit that exceeded the allowed threshold. The Greek government borrowed heavily and went on spending after the...
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