In the last decade the world has witnessed many incidents of corporate fraud. One of the prominent scandals is the near collapse of China Aviation Oil. China Aviation Oil Corporation Ltd is a subsidiary of China Aviation Oil a petroleum trading and procurement company, operating in Singapore. The company had a monopoly in the Chinese market for supplying aviation fuel and caught public eye in 2005 when it was involved in a trading scandal that led to $550 million loss and the consequent downfall of the company. (Lay Hong, 2008) The following paragraphs will outline the events leading to the debacle and the lessons that can be learned from them.
“A derivative can be defined as a financial instrument whose value depends on (or derives from) the values of other, more basic, underlying variables.” (Hull, 2011:1) There are innumerable types of derivatives however; the three basic types are future, swaps and options. (Whaley, 2006) CAO started its operation in Singapore by trading futures and swaps to enhance the company’s procurement potential and to hedge company risk. In March 2002, CAO began option trading in favor of its clients - the airline companies in spite of the company having no experience or expertise in it. CAO had a risk management manual to instruct and advice on the derivative business however there were no instructions for options trading. (Hong, 2008) A year later the company started speculative trading in fuel options.
In 2003, CAO took a bullish view on oil markets. The company built a geared long position by buying calls and selling puts. The purchased calls were exercised and substantial gains were made as the oil prices increased. (PRMIA, 2007) In the last quarter of 2003, CAO changed its trading strategy and m...
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...e at: http://samples.sainsburysebooks.co.uk/9780470086384_sample_380760.pdf [Accessed 28th February 2014].
Matulich, S. & Currie, M., D. (2008) Handbook of Frauds, Scams, and Swindles: Failures of Ethics in Leadership. United States of America: CRC Press
Hong, T.(2008) Recent Case Studies on Corporate Governance in Singapore: The Good, the Bad and the Ugly. Ph. D. University of London. Available at: http://www.clta.edu.au/professional/papers/conference2009/TanCLTA09.pdf [Accessed 28th February 2014].
PRMIA (20070 China Aviation Oil. [online] Available at: http://www.prmia.org/sites/default/files/references/China_Aviation_Oil_-_090911_v2.pdf [Accessed 28th February 2014].
Deloitte (2006) China Aviation Oil Debacle. [online] Available at: http://www.deloitte.com/assets/Dcom-Belgium/Local%20Assets/Documents/ChinaAviationOilDebacle.pdf [Accessed 28th February 2014].
Derivatives as defined by Warren Buffet are time bombs, both for the companies that make use of them and the monetary framework. Fundamentally these instruments call for cash to change hands at a future date, with the add up to be dictated by one or more reference things, for example, premium rates, stock costs, or money values. Case in point, in the event that you are either long or short a S&P 500 prospects contract, you are a gathering to an extremely straightforward derivatives transaction, with your addition or misfortune determined from developments in the list. Derivatives contracts are of shifting length of time, running now and again to 20 or more years, and their quality is regularly attached to a few Variables.
Leaders who treat their employees with fairness, honesty, and provide frequent, accurate information are seen as more effective. According to Robbins and Judge (2014), “trust is a primary attribute associated with leadership and followers who trust a leader are confident their rights and interest will not be abused” (p.193). The old General Motor Corporation had eleven different CEO’s from 1923 until 2009 each with their own unique leadership style, which directed employees toward the organization goals. Unfortunately, many of the top level managers under the CEO’s had the tendency of filtering out information that did not match up with their pre-conceived notions about a particular issue and they lacked upward communication. One consumer goal of General Motors was to build trust in the company so people would be repeat customers, but building trust between employees and establishing an ethical culture was not a top priority of the organization. Goal directed leadership alone is important, but differs from a structure of leadership based on ethics. It is important to note, that effective leadership may not be the same as leadership founded on ethical principles. Business competence must exist, along with personal leadership accountability in ethical decisions. Within the General Motors organization, ethics and leadership did not interconnect; there were misalignment between the
The hedging strategy that I have chosen is that of Southwest Airlines strategy over the past decade. Up until the 3th quarter of 2008 they enjoyed 69 straight quarterly profits dating back to 1991. In 2008 Southwest had over 70% of its fuel needs hedged at around $51 a barrel. Using an...
Ethics policies are implemented in almost all businesses. Companies search for candidates that will be moral in their actions so they can ensure long-term financial success. Throughout history we have seen businesses fall due to unethical behavior. In recent years the business Enron Corporation is best known for the scandal that led to the bankruptcy of a company with more than 60 billion dollars in assets. We will examine the circumstances that led to the downfall of Enron, how the scandal was realized, as well as the outcome of one of the largest bankruptcies in American history; a case that exemplifies unethical professional behavior.
Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2011). Business ethics: Ethical decision making and cases: 2011 custom edition (8th ed.). Mason, OH: South-Western Cengage Learning.
Joseph, James A. "Leadership And The Changing Role Of Ethics In Public Life." Lecture. Models of Ethical Leadership for a Changing World. University of Texas. Jan. 2001. Web.
The popularity of online options trading has exploded in recent years. The Internet has fueled a booming business of small investors throwing money at the derivatives market. The upside to an expanding array of financial products is a greater potential for profit to be made by investors skilled in daily trading; the downside is increased risk and a more complex trading environment. For the amateur investor who is ready to learn how to trade stock options the derivatives market can be enticing, but also frightening. This article will outline some of the advantages and disadvantages of the stock options market for the average investor.
In this paper I will identify and analyze the Wells Fargo scandal as it pertains to the breakdown of leadership and ethics. I will first identify and analyze the event and discuss the challenges and conflicts the scandal presented. Then I will evaluate the issue by explaining why the issue has interest and concern to stakeholders followed by discussing the challenges presented to individuals and/or organizations around this case. Lastly, I will recommend action steps that should be taken to those involved as well as discuss what I have learned from exploring this topic.
This report gives the brief overview of the concept of corporate governance, its evolution and its significance in the corporate sector. The report highlights various key issues and concerns that are faced by the organizations while effectively implementing and promoting Corporate Governance.
Bibliography: Turnbull, S. (1997). Corporate governance: its scope, concerns and theories. Corporate Governance: An International Review, 5 (4), pp. 180--205.
Since the listing of KOSPI 200 futures in May 1996, the derivatives market has grown into one of the key derivatives markets in the world. In the meantime, the market has achieved a higher level of excellence in market operation and secured a trading system and fair market management, and consequently figures as a decent reference among derivatives markets. The brief history of Korean derivatives market related to the products is as follows:
Prior to 2000, Enron was an American energy, commodities and service international company. Enron claimed that revenue is more than 102 millions (Healy & Palepu 2003, p.6). Fortune named Enron “American most innovative company” for six consecutive years (Ehrenberg 2011, paragraph 3). That is the reason why Enron became an admired company before 2000. Unfortunately, most of the net income for the years 1997-2000 is overstated because of unethical accounting errors (Benston & Hartgraves 2002, p. 105). In the next paragraph, three main accounting issues will identify for what led to the fall of Enron.
Nottingham Trent University. (2013). Lecture 1 - An Introduction to Corporate Governance. Available: https://now.ntu.ac.uk/d2l/le/content/248250/viewContent/1053845/View. Last accessed 16th Dec 2013.
Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2011). Business Ethics: Ethical Decision Making and Cases. Mason, Ohio: South-Western Cengage Learning.