MF Global Case

Topics: Ethics, Board of directors, Financial services Pages: 6 (2369 words) Published: November 5, 2013
Assignment Three
MF Global History:
MF Global was founded in the late 1700’s by James Man. It was a pure cash commodities firm that dealt mostly with the trade of sugar and molasses. ED&F Man, as it was known when it was founded up until the late 2000’s, mainly traded pure cash commodities until the late 1970’s. They then started to trade futures and other securities as futures market became more mechanized with the use of the internet. This made for a time of great growth and expansion and in 1994 they listed on the London stock exchange with a total of 650 employees. They acquired offices in Tokyo, Australia, the United States, and London. They remained this way as ED&F Man until 2007 when the company split into two firms. MF Global was the investment branch while a separate entity called the Man Group focused on asset management. MF Global began to be a problem in 2008 when they received fines from the SEC for unauthorized trading and insufficient risk management. There were other intermittent fines until 2010 when Jon Corzine took over MF Global. Then in 2011, Corzine started to put some serious money in debt trades. They were fine at first, but as the Euro zone started to collapse, so did MF Global. After a bad earning report and some defaulted European Debt, MF Global filed for bankruptcy. When the money was being returned to the investors they found that $1.2 billion dollars were missing. The money had just disappeared. 1. Who are the MF Global stakeholders?

According to the research I’ve made about MF Global and the scandal associated with the company, MF Global stakeholders are: Its shareholders: including the preferred stockholder private equity investor J. Christopher Flowers through his firm J.C. Flowers & Co. and all the commons stockholders with the biggest being Pyramis Global Advisors LLC, owning 8.44% common shares; Fine Capital Partners LP, 7.37%; Cadian Capital Management LLC, 6.17%;  TIAA-CREF, 5.77%;  Advisory Research Inc., 5.54%; Dimensional Fund Advisors LP, 5.41%; Rydex Security Global Investors LLC, 5.13%... Its unsecured creditors such as JP Morgan Chase; Deutsche Bank AG; Headstrong Services LL; and Comcast Corp. Its employees: including Jon Corzine himself, the CEO of the firm. The government

2. What are the ethical issues involved?
The actions of Jon Corzine can be looked at under four ethical theories. The utilitarian ethics requires maximizing the happiness of the greatest number. Jon Corzine did not maximize anyone’s happiness. His actions caused the company to close and that had a negative impact on all of the shareholders. Corzine himself no longer has a job, faced legal actions; the employees and their families were negatively impacted because they no longer have jobs; the investors were negatively impacted because they have lost a lot of money; and finally the government was negatively impacted because they lost the tax revenue of all the employees, the company, and the investors. Clearly Corzine’s actions made no one happy and he was acting unethically under the Utilitarian Ethical perspective. Under the individualistic ethical theory (or economic model of ethics) Jon Corzine’s actions were unethical. Individualistic ethics states that the main goal of a person or a company is to profit for the owner. The actions must be legal, but other than that everything is fair game. By losing all of the investors’ money and basically bankrupting MF Global, Jon Corzine did not maximize the profit of anyone. The Kantian ethical perspective states that in order to act ethically one must do three things: act rationally, be motivated by what is right, and that no one is exempt from the rules. Corzine acted as if he was above the rules. He broke several of the companies own rules regarding risk management. He also did not act rationally; he invested over $6 billion dollars in European debt. While this investment may have been good, this astronomical amount was not. Finally he was not motivated...
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