Jpmorgan Chase.Financial Management and Stakeholder’s Interests
Paper Unit 1: Financial Management and Stakeholder’s interests
In the first quarter of 2012, JPMorgan Chase lost over $5 BILLION because of the hedging strategy used to "reduce" the risk of their portfolio. This situation caused different reactions, both economic and social. There were also different questions about who had the fault of what happened. In this topic, we can find clearly a division of interests between stockholders and managers. Therefore, in this paper I will do a review of what they want and why, according this real situation. Firstly, I don’t believe CEO should shoulder the whole blame. But they have a percentage of it. A CEO is the highest-ranking corporate officer (executive) or administrator in charge of total management of an organization. An individual appointed as a CEO of a corporation, company, organization, or agency typically reports to the board of directors. In a few words, they are in charge of the performance of the company, in this case, JPMorgan Chase. It is fair to think they are responsible for those results (a loss of $5 billion dollars), because they are who take decisions, apply it, and control it. But, in my opinion, management work is not easy. Economy is not an exact science. Results can vary. And in our case, results were negative. Its job is basically to manage the organization, but they don’t have any power about organization. They just work for a salary, compensations, bonuses, etc. So they will try company earn more money in somehow. However, shareholders, the other part, are the owners of the organization. If company goes badly, they will lose their money. But managers, who don’t lose anything, have only options to earn more money with good and reasonable decisions and actions. Therefore, shareholders will try to keep their money safe. They are not in favor to risky decisions that can be dangerous for the wealth of the company. Here is the main difference, a manager could risk the money of the company in
In the first quarter of 2012, JPMorgan Chase lost over $5 BILLION because of the hedging strategy used to "reduce" the risk of their portfolio. This situation caused different reactions, both economic and social. There were also different questions about who had the fault of what happened. In this topic, we can find clearly a division of interests between stockholders and managers. Therefore, in this paper I will do a review of what they want and why, according this real situation. Firstly, I don’t believe CEO should shoulder the whole blame. But they have a percentage of it. A CEO is the highest-ranking corporate officer (executive) or administrator in charge of total management of an organization. An individual appointed as a CEO of a corporation, company, organization, or agency typically reports to the board of directors. In a few words, they are in charge of the performance of the company, in this case, JPMorgan Chase. It is fair to think they are responsible for those results (a loss of $5 billion dollars), because they are who take decisions, apply it, and control it. But, in my opinion, management work is not easy. Economy is not an exact science. Results can vary. And in our case, results were negative. Its job is basically to manage the organization, but they don’t have any power about organization. They just work for a salary, compensations, bonuses, etc. So they will try company earn more money in somehow. However, shareholders, the other part, are the owners of the organization. If company goes badly, they will lose their money. But managers, who don’t lose anything, have only options to earn more money with good and reasonable decisions and actions. Therefore, shareholders will try to keep their money safe. They are not in favor to risky decisions that can be dangerous for the wealth of the company. Here is the main difference, a manager could risk the money of the company in