Jon, Edith and MF Global Holdings
July 9, 2013
Last Saturday’s New York Times article, Boss’s Remark, Employee’s Deed and Moral Quandary by James. B. Stewart raises some important ethical issues that could be of concern to both senior management and middle-level staff.
In summary, according to the article, on Friday morning on October 28, 2011, Jon Corzine, the then CEO of MF Global and former New Jersey Governor called Edith O’Brien, an assistant treasurer asking her to transfer $134 million to JPMorgan to cover overdrafts. The firm was on the brink of collapse and as he had been informed the previous day, only had $82 million in cash. According to court documents, Mr. Corzine asked her to find the funds to make the transfer, adding that covering those overdrafts was “the most important thing she could do” that day. Ms. O’Brien did not know what to do. The only way she could execute those orders was by taking money from customers’ accounts and she knew that it was illegal do to so. Yet under pressure, that’s exactly what she did.
The following Monday, MF Global declared bankruptcy and it was revealed that $900 million had been taken from customers’ accounts to meet the firm’s diverse financial obligations. Mr. Corzine claims that he never told Ms. O’Brien to take funds from customers’ accounts. The question, of course, is where did he expect her to find them?
It seems to me that Mr. Corzine’s instructions to Ms. O’Brien sounded like the notorious “do what it takes” comment that does not mention specifically what action is suggested most probably because it is unethical and/or illegal. If that is what happened it seems to me quite unfair for the CEO to impose such pressure on an employee who most likely now will now pay a heavy price for a decision she made to please her boss and to keep her job.
The court will decide the degree of culpability of both Mr. Corzine and of Ms. O’Brien.
For us, the pertinent question is: What if this happens to us? How will we react in a similar situation? We know what we should do (refuse to follow instructions that we know are unethical and/or illegal) but how can we be sure we will do the “right thing” risking wrath and immediate dismissal?
The honest answer is that we simply do not know. We can hope but can’t be sure.
Our corporate structure is based on loyalty and obedience. Professor Edward Soule at the McDonough School of Business at Georgetown says: “As human beings, we are pre-disposed to be obedient to authority, no matter how malevolent it may be.” Going against the flow takes character and courage. One does not build character overnight, it takes practice.
What would also be a wise thing to do is to take a very close look at the culture of the company and the character of the people running it before deciding to join.
Michael Watkins, in his article: What Is Organizational Culture? And Why Should We Care? published by the Harvard Business Review, defines organizational culture as a social control system that promotes and reinforces the “right thinking and behavior” and sanctions “wrong think and behavior.” He believes that the key to corporate culture is the development and understanding of “norms that must be upheld.” He quotes Alan Adler who said:
”Organizational culture is civilization in the workplace.”