A Billion Here, A Billion There


About an hour before our last class this story broke…  Which I thought was quite relevant considering our investigations into AIG and Enron.

I’m going to focus on the second Forbes article which talks about some of the pseudo-hypocrisy involving alleged rogue traders and their superiors.  Adoboli here was a London trader for UBS who allegedly lost over $2 billion with rogue trades over the last 3 months and has been charged with fraud and false accounting.  However, the top executives who get fired after losing even more than this ridiculous sum get a nice healthy pension for their failures in mortgate-backed securities and the like.  This seems like it will probably be the case for Gruebel (CEO) and Kengeter, head of UBS’ investment banking unit.  I’m not absolving the trader of all wrong here, but after all of the issues with the banks in the last few years (UBS needed a substantial bailout by the Swiss government by the way), you would think there would be some sort of internal and external system in place to keep execs (and their traders) accountable.

A quote that stuck out to me was from Jerome Lussan, who is CEO of Laven Partners

“Regulation clearly states that risk management is the responsibility of senior management…  The real problem is that risk management and is not respected in the typically impatient bonus-hungry culture.”

On top of the straight-up $2 Billion Abodoli frittered away, UBS’ shares tumbled 9% in both Switzerland and New York, so that’s even more wealth that is being lost by the shareholders.  At some point shouldn’t the shareholders speak out against the bonuses, the pensions, and the seemingly lack of accountability?  If senior management is being paid to be responsible for risk management than that’s what their bonuses should be accountable to.

Completely Unrelated:  In all this talk about the state of campus let us not sully the name of the real CCR…  And my personal beef with Phil Knight.

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This entry was posted in Cases (Real World), Class, Ethics and tagged , , , , . Bookmark the permalink.

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