Conflict on a Trading Floor

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Conflict on a Trading Floor

The case describes the ethical dilemma occurred in FirstAmerica Bank. The sales department of the bank was preparing a 700 mln. USD loan contract for one of the bank’s former client: Poseidon Cruise Lines. Poseidon intended to order a large cruise ship for their fleet to a French shipyard, which required a contract to be signed for five years and in French francs. This in turn raised concerns in Poseidon management, related to the possible economic costs/losses related to dollar-franc exchange transaction risks, since the cash flow of Poseidon was in dollars. The contract elaboration was assigned to Linda, one of the top salespersons of the FirstAmerica bank and the author of article, as an assistant to her. Linda had a reputation of being volatile and hot tempered person, with aggrieve business style. She was particularly known for her prudence in receiving full credit for the good results of closed deals by her. Since Linda had personal relationships with the CFO and treasurer of Poseidon, she proposed to elaborate a structure, which will minimize the Poseidon costs and risks for those transactions. The elaborated scheme suggested that FirstAmerica provides francs to Poseidon in several tranches and receives the interest rates and loan principal in dollars, thus eliminating Poseidon’s franc obligations. In reality the scheme developed by Linda was offering much more profit for the bank and cost for Poseidon, than it was observed in terms of other usual transactions. This resulted in dilemma for the author, since a definite mismatch between his personal values, ethics and his expected behavior occurred. He knew that this transaction is not the best option for the client and the agreement was obtained in the result of deception from Linda’s side. The dilemma has different dimensions, such as prudential, economic and ethical. The prudential dimension exists, since (1) the author feels him owing to Linda, as she has played a great...
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