Question

imagine you are the CEO of Salomon Brothers, where serious and terrible ethical breaches harmed their stakeholders, especially their employees. discuss what specific concrete steps you would take to restore your company’s reputation if it’s been sullied (dirtied)? why are these steps important?

Following is "Salomon Brothers" case

Salomon Brothers Before its implosion in 1990, Salomon Brothers was one of the premier global investment banks—perhaps the most direct competitor of the mighty Goldman Sachs. In December 1990, however, the head of Salomon’s government bond trading desk, Paul Mozer, decided to test the regulatory resolve of the U.S. Treasury. Annoyed by the federal limits on the percentage of Treasury bonds any one firm could bid for in Treasury auctions—the ceiling was 35 percent—Mozer devised a plan to evade the regulation. He submitted a bid for Salomon Brothers, and he submitted an unauthorized bid in the name of one of his customers. The two bids combined represented 46 percent of the auction—a clear violation of the rules. Mozer repeated this several times and in April 1991, he described the tactic to four Salomon executives: Chairman John Gutfreund, President Thomas W. Strauss, Vice Chairman John W. Meriwether, and General Counsel Donald M. Feuerstein. These executives told Mozer to stop his scheme but did not report him to the Securities and Exchange Commission. In June, the SEC subpoenaed Salomon for its auction records. In August, Salomon finally alerted the SEC to Mozer’s activities. Immediately following the disclosure to the SEC, Mozer was suspended from his job; shortly afterward, the board of directors asked the four Salomon executives to resign from the firm and fired Salomon’s outside law firm. The board named one of its own members, Warren Buffett, as interim chairman.61 The publicity generated by the Salomon scandal was devastating to the firm and its shareholders. Its market value dropped by over one‐third—$1.5 billion—in the week following the disclosure. Its debt was downgraded by various rating agencies, and major banks reevaluated Salomon’s loan terms. Because of the firm’s decreased liquidity, its ability to trade was dramatically reduced. In addition to the immediate financial debacle, teams of Salomon Brothers personnel left the firm. Weakened by the bad press and the defections of talent, Salomon Brothers managed to remain independent until 1998, when it was acquired by the Travelers Group and eventually it became part of Citigroup. This is just one more example of how personal hubris (on the part of Mozer) and refusal to report such hubris to the regulators (on the part of the firm’s executive team) can result in a death sentence, especially in the financial industry where reputation is everything.

Answer 1

Answer: I will take three steps for improving the reputation of the company. Firstly I will develop a code of ethics that will define the ethical behaviour that is expected from every member of the organization. The code of ethics will help in promoting the ethical decision making inside the organization as there will be clear expectations defined by the company. This will avoid the incidences like the one in which Mozer was involved.

Secondly I will focus on public relations campaigns. In these campaigns the company will communicate on the steps that it is taking for improving ethical behavior inside the organization. This will help in building confidence in the public that the company is focusing on improving its ethical performance for avoiding the incidences like the one that took place.

The third step that will be taken is of the triple bottom line approach. The company apart from the financial performance will focus on the environmental and social performance and will highlight the same in its regular reporting. The good social and environmental performance along with financial performance helps the companies to develop a positive public image of them.