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Bank of America

In: Business and Management

Submitted By hamzamakande
Words 2993
Pages 12
NAME: HAMZA .S. MAKANDE
STUDENT NUMBER: TP027192
INTAKE CODE: UC2F1501IBM
BM061-3.5-2-BEG
MODULE NAME: BUSINESS ETHICS GOVERNANCE
TOPIC: BANK OF AMERICA’S MOST TOXIC ASSET (CASE B) INDIVIDUAL ASSIGNMENT
LECTURER: FARAHIDA BINTI ABDUL JAAFAR
DATE ASSIGNED: 06th MARCH 2015
DATE DUE: 17th APRIL 2015

Table of Contents INTRODUCTION. 3 Summary. 3 Ethical Dilemma. 3 Affected Stakeholders. 4 ANSWER FOR QUESTION 1. 4 ANSWER FOR QUESTION 2. 5 ANSWER FOR QUESTION 3. 6 ANSWER FOR QUESTION 4. 7 ANSWER FOR QUESTION 5. 8 ANSWER FOR QUESTION 6. 8 CONCLUSION. 9 REFERENCES. 10

BANK OF AMERICA’S MOST TOXIC ASSET (CASE B).
INTRODUCTION.
Summary.
Ken Lewis was a Chief executive officer of Bank of America, he was appointed as American Banker’s "banker of the year "after purchasing Countrywide Financial and Merrill Lynch. The bank acquisition of Merrill Lynch in 2008 made Bank of America the world's largest wealth management Corporation and a major player in the investment banking market. The deals were applauded and made Ken Lewis even more worth being named as American Banker’s “banker of the year”
During first week of January 2009 both Countrywide Financial and Merrill Lynch were bankrupt with assets in their balance sheet which set a new standard for toxicity in financial market, resulting in forfeiture for the bank and requiring financial assistance from the Federal Government. Bank of America was forced to welcoming U.S. taxpayers as the company’s largest shareholder.
BOA stock was down by 65 percent and almost 90 loss within a year, the shareholders decided to remove Ken Lewis as Chairman and allowing him to remain CEO for a limited time. A $500,000 salary cap had to be introduced by Obama administration for all executives of the banks who were receiving bailout dollars

Ethical Dilemma.
This refers to a situation between two moral principles where both of which are morally correct but in conflict.
As a chairman and CEO of Bank of America, Ken Lewis was responsible to inform shareholders about the acquisition of Merrill Lynch and Countrywide financial so he can get feedback and possible advice if the deal is worth to go on or not, but he didn’t inform shareholders and went on completing the deals which proved to be career enders.
A salary cap of $500,000 introduced by Obama Administration for all executives of banks made no choice for many CEO’s rather than leave for other banks who were not affected by the financial meltdown. Many CEO they wanted more salaries that’s why they went for banks which were ready to pay them more than $500,000 and maintain their highly stylish life.
One of the responsibilities of the top manager is to make sure to serve for the benefits of the company and not for self-interest. Merrill Lynch CEO John Thain, failed to be responsible of the situation in the company and spent $1.2 million for his own interest.

Affected Stakeholders.
Stakeholder is a person, group or organization that has interest or concern in an organization, OR anyone who is directly affected by the corporation such as investors, employees, customers, and suppliers. Apparently many companies have started to view stakeholders as anyone within a community or anyone who could potentially be affected by a company’s decisions. In this case we see shareholders impacted by the decision of Bank of America CEO Ken Lewis. He lied to all of the shareholders and covered up the fact that Merrill Lynch and Countrywide financial companies had been involved in highly unethical and illegal business dealings and they were both on the verge of bankruptcy. Due to poor decisions by Ken Lewis, BOA stock was down 65 percent and almost 90 percent over the preceding 52 weeks. Shareholders were very furious with Ken Lewis and decided to remove him as chairman while allowing him to remain as CEO.

ANSWER FOR QUESTION 1.
The decision by the Obama administration to introduce a $500,000 salary cap for all executives of banks receiving bailout dollars could prompt personnel to leave for other banks which did not receive bailout dollars. The only option for CEO’s who were affected by salary cap was to leave for other banks which didn’t affected by the financial meltdown, and they are willing to pay CEO’s more than $500,000 salary. The reason for the CEO’s to switch companies/Banks would be the fear to lose their highly luxurious life because they get used to receive much more salary but now due to financial meltdown they won’t be able to receive that kind of salary they used to which means they are purchasing power will be low as well.
It is definitely unethical behavior for CEO’s to leave for other banks because of $500,000 salary cap introduced by Obama administration. As CEO’s they should stand with their company and work together in a difficulty time in order to improve the situation of the company instead of living and go somewhere else to gain more interest.
Example in November 25, 2013 voters in Switzerland rejected a proposal to a salary cap, in a ground-breaking referendum on the issue. David Roth, who was the president of Switzerland's Young Socialists and the referendum's leading sponsor he was claiming that the country had unfair pay system which made CEO’s to gain salary by 12 times than that of the company's lowest-paid employees. Final results showed that votes against carried the day by 65.3% to 34.7% in favor. David Roth was so disappointed with the results and promised to fight against unfair pay system.

ANSWER FOR QUESTION 2.
The stripping of Lewis’s chairmanship was not a significant move by the shareholders, since he was still remains as CEO of the company. Ken Lewis did a mistake for purchasing the both company. He failed to set a precise financial articulations that present Countrywide financial and Merrill Lynch as financial stable, operationally productive, and situated for solid future development on the grounds that few month after this securing both organizations were bankrupt. The good move from shareholders would have been to expel Ken Lewis from all his duties within a company as chairman and CEO because the mistakes he did caused a lot of damage to the company.
It was unethical for shareholders not to expel Ken Lewis from all his positions when he cleared failed to protect their interest. You can’t allow someone who go against his responsibility to continue be on the position while he can’t do his job precisely. It was his duty as top manager to protect shareholders interest by making accurate decision but he didn’t.
Example Andrea Jung, who was chief executive officer of Avon (AVP), was forced out from being CEO but remains as chairman through the end of this year. Andrea Jung couldn’t help the company to overcome operational problems, failed to groom a successor, and turned down a $10.7 billion offer from the beauty-care company Coty that, in retrospect, it should have leaped at. Since 2004, the company’s market value has fallen under her leadership from $21 billion to $6 billion. The good move from shareholders should have been expel her from both positions.

ANSWER FOR QUESTION 3.
The matter that John Thain spending 1.2 million on his office when Merrill Lynch was on the verge of bankruptcy cannot justify it. John Thain should have not use company money for his own good, instead he was supposed to look after the company during the difficult time they were going through.
This is unethical behavior, as Merrill Lynch manager he has a commitment to deal with his venture in compliance with common decency, guarding against choice and conduct that advance his own particular limited desire. Instead of doing all that for the sake of the company, he made this expense for his own benefit.
Example on March 15, 2005 Bernard Ebbers, the former CEO of WorldCom, was found guilty for his role in the huge accounting scandal that led to the largest bankruptcy in U.S. history. In 2000, WorldCom was soaring, and his personal worth was more than $1 billion. But in 2002, investigators revealed that WorldCom had executed what was then the largest accounting fraud in history, with more than $11 billion in accounting misstatements. It was also alleged that Ebbers had taken $366 million in personal loans from the company. By the time the carnage settled, WorldCom's stock had plummeted from more than $64 per share to just over $1, costing stockholders more than $100 billion in losses. Ebbers was found guilty of nine felonies and sentenced to 25 years in prison.

ANSWER FOR QUESTION 4.
I think by claiming that he was pressured into completing the Merrill Lynch deal, Ken Lewis was hoping to create public awareness by saying the truth on what really happen and even get public sympathy and possibly compassion and forgiveness so he can be cleared from all the wrong he was accused of and retain his position as chairman and CEO of BOA.
It is Ethical for what Ken Lewis did, affirmed before Congress that he had fears about the acquisition of Merrill Lynch, and was constrained by federal officials to continue with the deal or face losing his job and jeopardizing the bank's association with federal regulators. He just tried to tell the truth to the public and make everyone aware of what really happened since no one had no information concerned the deal. The shareholders were very much aware that Merrill Lynch was on the verge of bankruptcy and consequently approved the buying.
Example the former HealthSouth CEO Richard Scrushy, was convicted in June, 2006 of bribing former Alabama Governor Don Siegelman with $500,000 in exchange for a seat on a state healthcare board Certificate of Need Healthcare Board which reviews and approves the construction of healthcare facilities. Both Scrushy and Siegelman were convicted of bribery, conspiracy and mail fraud. The governor was also convicted of obstruction of justice. In his first on-camera interview since his release from prison, former HealthSouth CEO Richard Scrushy told the Huffington Post that he served nearly six years in jail for a crime he didn't commit. Scrushy claims he "never gave the governor a dime" and the only money in question was a $250,000 payment against a debt held by the Alabama Democratic Party, one he said was made only at the request of former Alabama Power CEO Elmer Harris not Siegelman.

ANSWER FOR QUESTION 5.
Of all the decision made by Ken Lewis, I think the one which most damage his reputation was his statement concerning federal officers pressure him to continue with the deal to acquire Merrill Lynch. As CEO, I think he broke all MBA oath by accept to acquire both Merrill Lynch and Countrywide financial. His statement is a proof of his weakness to perform the manager’s obligation. With this statement he neglects to take full responsibility regarding his move.
It is Unethical for Ken Lewis trying to tell the truth at last when he had a chance to avoid any of the problem to take place. As the highest ranking leader he had all decision whether to acquire or to leave but not to allow anyone convince or pressure him to make decision which he shouldn’t do.
Example Nokia CEO Stephen Elop, made a decision to join Microsoft operating system “windows phone” instead of Android from Google. This was one of the worst decision he ever made, company lost a lot of customers and cause big loss to the company. Shareholders demanded quick turnaround but it was too late until Microsoft decided to acquire the company.

ANSWER FOR QUESTION 6.
As a Chairman and CEO of BOA, Ken Lewis was supposed to make a good research or conduct further study about both company he want to acquire, which directly involved in future development. By doing this it would have protected the shareholders investments and prevent him from money losses of Bank of America. Ken Lewis failed to give out good, accurate and satisfying financial statement which made him lost his job and destroy his reputation.
He should have stand down as the chairman and CEO during the scandal and avoid making any statement accusing federal officials. As the Manager, It was his obligation to make the right decisions which will help protect the shareholders interest and the company.
It is Unethical for a top leader like Ken Lewis to acquire companies without conducting research to see whether BOA could benefit from the acquisition or not. He failed his shareholders and he was supposed to confess that he really did mistake and possibly to resign instead of claiming he was pressured by federal officials.

CONCLUSION.
It is advised for the manager to respect all eight (8) MBA Oath in order to fulfill their responsibilities. The purpose of the manager is to serve the greater good by bringing people and resources together to create value that no single individual can create alone.
Ken Lewis was against his responsibility by acquiring companies which they were about to be bankrupt while he had idea about it. To make things worse he did not inform shareholders about the deal which turn out to be pretty bad. He also claim to be pressured by federal officers to go for the deal but he should have not say that instead he should have admit he made a wrong call and take a possible measures as CEO whether to stand down or argue to be given time in order to prove that the deal was worth.
Despite making mistake on his decisions, Ken Lewis was a very good leader and it was proven when he was named banker of the year twice in six years. Shareholders were not supposed to rush and expel Ken Lewis from his CEO position instead they could have wait to see what happens. Ken Lewis was supposed to be given time to prove his good leadership and try to make alteration from what seem to be poor decisions by the most. He would have turn the company into glory days if he would have been given more time. Although shareholders would have been affected in the short term, but the deal would have turn out to be profitable in the long term.

REFERENCES.
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Businessweek.com, (2005). The Affair That Grounded Stonecipher. [online] Available at: http://www.bloomberg.com/bw/stories/2005-03-07/the-affair-that-grounded-stonecipher [Accessed 16 Apr. 2015].
Culpepper, B. (2015). Former Healthsouth CEO Richard Scrushy claims innocence in 1st on-camera interview since prison release(video). [online] Abc3340.com. Available at: http://www.abc3340.com/story/22261175/former-healthsouth-ceo-richard-scrushy-claims-innonence-in-1st-on-camera-interview-video [Accessed 16 Apr. 2015].
Currier, C. (2012). How Bank of America Execs Hid Losses—In Their Own Words. [online] ProPublica. Available at: http://www.propublica.org/article/how-bank-of-america-execs-hid-losses-in-their-own-words [Accessed 16 Apr. 2015].
Desai, P. (2015). FROM FINANCIAL CRISIS TO GLOBAL RECOVERY. [online] Google Books. Available at: https://books.google.com.my/books?id=1u2XZxqd7_8C&pg=PT24&lpg=PT24&dq=bank+of+america%27s+most+toxic+asset+ken+lewis&source=bl&ots=0v_iW7Ohtq&sig=JT6y_NUI4pwXUrnE-OOJVk1Cq6I&hl=en&sa=X&ei=j08qVaKwBIXiuQSA2ICoAw&sqi=2&ved=0CDUQ6AEwBA#v=onepage&q=bank%20of%20america's%20most%20toxic%20asset%20ken%20lewis&f=false [Accessed 16 Apr. 2015].
Devine, D. (2015). America's Way Back. [online] Google Books. Available at: https://books.google.com.my/books?id=3ocyAwAAQBAJ&pg=PT33&lpg=PT33&dq=bank+of+america%27s+most+toxic+asset+ken+lewis&source=bl&ots=xU7S9NF4L7&sig=jITd9Ub4OOu84Jpp1lTjGky6Ubs&hl=en&sa=X&ei=LVAqVZXgDM6fuQTst4GQCQ&ved=0CCcQ6AEwAjgK#v=onepage&q=bank%20of%20america's%20most%20toxic%20asset%20ken%20lewis&f=false [Accessed 16 Apr. 2015].
Dolcourt, J. and googleplus, (2011). Elop: Why Nokia chose Windows Phone over Android - CNET. [online] CNET. Available at: http://www.cnet.com/news/elop-why-nokia-chose-windows-phone-over-android/ [Accessed 16 Apr. 2015].
Eckblad, D. (2009). Lewis Ousted as BofA Chairman. [online] WSJ. Available at: http://www.wsj.com/articles/SB124101668502368771 [Accessed 16 Apr. 2015].
Fitzpatrick, D. (2009). Lewis Fights for Control of BofA. [online] WSJ. Available at: http://www.wsj.com/articles/SB124096400993265979 [Accessed 16 Apr. 2015].
Garofalo, P. (2013). The Importance of Switzerland’s 1:12 CEO Pay Cap Vote - US News. [online] US News & World Report. Available at: http://www.usnews.com/opinion/blogs/pat-garofalo/2013/11/25/the-importance-of-switzerlands-112-ceo-pay-cap-vote [Accessed 16 Apr. 2015].
Kowitt, B. (2012). Avon: The rise and fall of a beauty icon. [online] Fortune. Available at: http://fortune.com/2012/04/11/avon-the-rise-and-fall-of-a-beauty-icon/ [Accessed 16 Apr. 2015].
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...Bank of America’s CEO and Chairman Ken Lewis, in an effort to purchase Merrill Lynch at the cost of $50 billion misled shareholders by not disclosing all the facts pertaining to the merger. CEO and Chairman Ken Lewis could not have known the controversy and ramifications that would follow his deception or neglect. Or, as he stated himself, there was no intent of deception. The ethical issue here is whether or not Ken Lewis intentionally deceived the shareholders of Bank of America in order to acquire Merrill Lynch. Many question the ambitions of CEO Ken Lewis who had already acquired Countrywide Financial after their failure and now he is acquiring Merrill Lynch. It is reported that Lewis’ investment in Countrywide Financial was $2 billion and his takeover of Merrill Lynch was $44 billion. Reports say that over the last five years Mr. Lewis has spent $100 billion on acquisitions. (Bill Taylor) These acquisitions included MBNA, LaSalle Bank, Fleet Boston and U. S. Trust. It appears that Ken Lewis has built himself a nice little empire. The question here is whether Mr. Lewis acted unethical in his acquisition of Merrill Lynch. Did Ken Lewis bite off too much at the expense of others? We would need to look deeper into the circumstances surrounding his acquisition of Merrill Lynch. Merrill Lynch was a failing company and as part of Bank of America’s agreement to save it, the CEO of Merrill Lynch asked for bonuses for himself and other top management persons. At least 700 of......

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Bank of America

...05/10/2016 Research Paper-FINC 345 Bank of America Today, banks keep our money safe and are highly relied on when it comes to loans and financial securities. Bank of America is the second largest bank in the U.S. and the twenty-first largest company in the U.S. Bank of America is so popular today because of their great customer services and ease of access. When it comes to their technological trends, some of the benefits are their website, online banking capabilities, mobile app and text banking, and email and text alerts. When it comes to customer service, they have a customer service number and even online chat feature that comes with estimated wait times, and there are nearly 5,000 branches in 37 states. Therefore, they are conveniently located almost anywhere. When it comes to their financial aspects, they waive a $12 monthly maintenance fee if you make at least one direct deposit of $250 or more or if you maintain a daily balance of at least $1,500 or if you are a student younger than 23. They are very lenient and they even offer customers to choose between two overdraft options to determine how other transactions like checks and scheduled payments are handled. According to bankofamerica.com, their mission statement is “to offer lending and investment products that serve low and moderate income individuals and families, improve undeserved low and moderate income communities, and create sustainable practices for the long haul”. Bank of America is very unique in......

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Bank of America

...Assignment #1 Bank of America Melissa Shuler February 14, 2012 HRM 532 Dr. Marie-Line Germain Outline the talent management program that led to success for the company. Before we can go into the talent management program that led to the success for the company we must know how the company began. The Bank of America was formed in 1904 when the founder of Bank of Italy, Amadeo Giannini which was solely out of San Francisco in an effort to cater to immigrants that were denied services by other banks based upon their status. According to the article there was a fire in 1906 that was caused by an earthquake that completely took out the bank. In order to make sure things were going to get back to the way they once were, Giannini handed out loans to those who were willing to help rebuild and hoped that things would get back to the way they were and then the loans were repaid (Goldsmith, 2010). Amadeo Giannini had ambitious plans to create a bank trading at a national level. He expanded BankAmerica operations into the western U.S. states, in the process moving into the insurance market (with the support of his holding company, the Transamerica Corporation). However, Giannini’s plans were somewhat thwarted by two factors. Firstly, BankAmerica and TransAmerica’s relationship was curtailed by the 1956 Bank Holding Company Act, which forbade banks from possessing non-banking organizations. Secondly, federal banking regulation dictated that banks should not be active......

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Bank of America

...Brittany Murphy http://www.bankofamerica.com/ More than 175,000 Bank of America associates provide financial products, services, ideas and solutions to customers and clients in 50 states and the District of Columbia. The company is poised to take on Citigroup as the largest provider of financial services and investment services by expanding its investment services network in the coming year. Bank of America has been experiencing tremendous growth against all odds and has made quite a name for itself despite the traditionally aristocratic, sometimes stuffy banking environment. Examine Bank of America's Website. Identify the key members of the Bank of America executive management team. Brian Moynihan, Catherine Bessant, David Darnell, Anne Finucane, Charles Holliday Jr., Christine Katziff, Terry Laughlin, Gary Lynch, Thomas Montag, Charles Noski, Andrea Smith, Ron Sturzenegger, Vruce Thompson are all key members on the Bank of America executive management team. My first impression of these highly educated people was how much of an impact each individual makes to the company. For example Brian Moynihan, the Chief Executive Officer leads one of the world’s largest financial institutions. Catherine Bessant is the Global Technology and Operations executive at Bank of America and is a member of the company’s executive management team. She is responsible for delivering end-to-end technology and operations across the company. She is also responsible for managing the......

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