American International Group (AIG) - Research Paper Example

This essay discusses that the CEO Greenberg ensured that he networked with everyone including the different presidents in power and hence built himself a fortress of support and built himself and AIG immunity from questions and outside auditing which would have discovered the fraud and illegal business deals that were taking place in the company and which led to the massive expansion of the company and its ultimate downfall. The rest of the executives offered their full support of the illegal Credit Default Swap (CDS) project which even though it brought in a lot of money than any other department in the firm, its activities and ethics were questionable.

The executives even prevented external audit firms from coming to audit them as they did not want their grand fraud and illegal scheme to be discovered by outsiders even though that eventually took place. If only the firm had an organizational culture that necessitated external auditing, then they would not have initiated the program in the first place hence saving themselves embarrassment and government the bailout money. A stronger ethics program would have prevented Greenberg from calling in favors to prevent the firm from being scrutinized and the uncovering of the truth.

The corporate executives were dishonest and harbored business deals that were not illegal but unethical. They also jeopardized the lives of millions of Americans through the unethical deal with CDS as many people whose money was lost in one way or another would have suffered. Their unethical conduct also out at risk the jobs of all their employees some of whom even had no idea what really that financial department that dealt with CDS was all about or that it even existed and hence were caught in the spur of the moment at the discovery of the truth.

If the executives were ethical and honest in the company, the bailout would not have been necessary. A stronger ethics program would have prevented even the illegal department officials to carry out these illegal deals. The corporate executives should be the ones to set a perfect example to their employees and not aid in turning them criminals if they had put in place a stronger ethics culture within the organization. 3. What could AIG have done differently to prevent its failure and subsequent bailout?

AIG should never have set up that department and the CDS financial dealings in the first place. This would have prevented the whole meltdown as it was. Even after its creation, they would have allowed external auditors or even external scrutiny to be carried out which would have unveiled the problem as early as possible hence preventing the government from having to spend over $180 billion bailing it out and preventing it from being fully bankrupt hence preventing other businesses and individuals in America from the already bad economic recession of 2008.

The employees who were aware of the deal should have refused to participate in an unethical deal and even taken the initiative and report the firm to securities and exchange if the corporate culture had taught them how to be ethical. 4. Provide your thoughts/opinion about the importance of Corporate Culture in the Business world? Corporate culture provides guidance to all the employees in an organization starting from the top executives to the downright bottom employee in the chain of command (Flamholtz and Yvonne 3).

This therefore ensures that no unethical behavior goes unreported to the necessary authorities hence preventing an embarrassing situation later on. A business has many stakeholders and a good corporate culture helps to define the roles of each of these stakeholders