Ethical Issues Watch The Movie Margin Call

Ethical Issueswatch The Movie Margin Call In No More Than Three Do

Analyze the business and ethical issues involved in the business practices engaged in by the firm in the movie “Margin Call” as well as the individual characters. Include a concise discussion of the ethical dilemmas involved, the school of thought employed by the various characters, consequences of the ethical decision made by the leaders of the firm, alternative actions the firm and characters might have considered, and the possible consequences of taking different courses of action. Also, provide your opinion on what your recommendation would be if faced with the same circumstances, supported by reasons and a discussion of the likely outcomes.

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“Margin Call” is a film that vividly depicts the ethical crises and decision-making processes within a major financial investment firm during the onset of the 2008 financial crisis. The narrative centers around a critical period where the firm's leadership uncovers the impending collapse of assets due to risky mortgage-backed securities. This scenario provides an excellent lens through which to examine the ethical issues and dilemmas faced by the individuals involved and the overarching business practices that contributed to the crisis. The film encapsulates several core ethical concerns, including honesty, responsibility, transparency, and the balance between profit and societal well-being.

One of the primary ethical issues exemplified in "Margin Call" involves the decision to conceal or reveal the impending financial disaster. The firm, upon discovering the catastrophic potential of its holdings, faces the dilemma of whether to disclose this information to stakeholders, including investors, regulators, and the public. The leadership’s choice to hastily liquidate assets at the expense of transparency epitomizes a focus on short-term profit maximization at the expense of longer-term societal trust. This decision aligns with the adherence to the Inherence School of thought, championed by Milton Friedman, which emphasizes serving shareholders’ interests above other considerations. The executives rationalize their actions by asserting that their primary duty is to protect the firm and its shareholders, even if it entails unethical practices such as deception and market manipulation.

However, the film also showcases the ethical ramifications of such decisions. The leaders' choice to prioritize the firm's immediate survival often results in devastating consequences for the broader economy, including widespread job losses, foreclosures, and financial instability. These outcomes highlight the critical importance of considering larger societal impacts rather than narrowly focusing on shareholder gains. The decision not to disclose and the reckless liquidation may have been driven by a belief in the Invisible Hand school of thought, wherein managers assume that market mechanisms will correct imbalances without government intervention. This perspective discourages proactive responsibility for social consequences, favoring minimal involvement and reliance on laissez-faire principles.

Alternative actions available to the firm could have involved greater transparency with stakeholders, including providing honest disclosures about the risks and potential fallout. Such transparency may have allowed for more orderly adjustments and could have mitigated the severity of the economic downturn. Additionally, the leadership could have adopted responsible risk management strategies aligned with the Societal School of thought, which emphasizes corporate social responsibility and the importance of serving larger societal interests. Although these actions might have resulted in short-term financial losses or reputational damage, they could have fostered long-term trust and stability in the financial markets. This approach aligns with the Enlightened Self-Interest School, advocating that serving societal interests ultimately benefits shareholders and the firm in the long run.

From a personal perspective, if placed in a similar situation, I would advocate for transparency and ethical accountability. The temptation to conceal information or manipulate markets might provide short-term gains, but such practices undermine the integrity of the financial system and can lead to catastrophic consequences, as evidenced in the 2008 crisis. Ethical decision-making should aim at balancing the interests of shareholders with societal well-being by promoting truthful disclosures, responsible risk management, and corporate accountability. Failing to do so risks not only legal repercussions but also long-term damage to the firm's reputation and the economy’s stability. An ethical approach, though potentially costly upfront, sustains stakeholder trust and promotes resilient financial practices.

The ethical dilemmas presented in "Margin Call" emphasize that responsible leadership requires balancing profit motives with moral obligations to society. The decision to prioritize short-term profits at the expense of ethical considerations contributed to the crisis, demonstrating the importance of adhering to broader ethical standards rooted in social responsibility. Incorporating corporate governance practices focused on transparency, accountability, and societal impact can serve as effective measures to prevent such crises. Ultimately, the film underscores that ethical lapses in pursuit of profit can have devastating consequences, highlighting the necessity for ethical vigilance and responsible decision-making in business.

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