MTGS7601
Individual Organisation
Problem
Analysis
MF Global Case Study

Word count: 2442

Jinghua Chen
43775275

Table of Contents 1.0 introduction...............................................................................................................................................2 2.0 Background 2 3.0 problems statements................................................................................................................................2 4.0 PROBLEMS ANALYSIS..............................................................................................................................................3
5.0 ORGANISTION RESPONSE...............................................................................................................................8
6.0 RECOMMENDATIONS......................................................................................................................................9
7.0 CONCLUSION.................................................................................................................................................10
REFERENCE LIST..................................................................................................................................................11
APPENDICES.......................................................................................................................................................15

1.0. Introduction
The purpose of this report is attempt to analysis critically how the organisation behaviour impact on the operation of MF Global. The MF Global was one of biggest investment company. A once trusted-brokerage with roots dating back to the 1700s, but now is a bankrupt firm suspected of misappropriating customer funds to the tune of at least $600 million (NFA.com 2015). A successful company turn to failure is relevant to many factors, such as financial and organisational behaviour issues. In this report, I try to focus on different organisation behaviours of MF Global to explain how these factors work on the real life.

2.0 Background
MF Global started out as a unit of Man Financial, a financial conglomerate that began as a London sugar brokerage in 1783. Then MF Global transitioned into broader commodities trading, and become a financial service firm focused on commodities futures trading in the 1980s. In 2007, MF Global was separate from MF Financial and went public. They hoped to raise $5 billion but only netted $2.9 billion because of the dark clouds forming over Lehman Brothers and other Financial institution (Bunge, 2011). However, MF Global Inc. filed for bankruptcy liquidation in 2011.

3.0 Problems Statements
There are so many factors lead to MF Global bankruptcy. Firstly, MF Global suffered damage from a "rogue trader" in 2008. An employee in MF Global's Memphis office sold more than 16,000 wheat futures contracts. The employee placed these trades, which exceeded both his personal trading limit and CFTC (Commodity Futures Trading Commission) regulation. For his personal wish is that wheat price would drop down and he could profit by buying back these contracts at lower price. Unfortunately, wheat prices moved higher and MF Global was responsible for covering the $141 million trading loss plus $10 million fine from the CFTC for this and other regulatory lapses (Harris, 2013). Secondly, in order to change the financial dilemmas of MF Global, they want to turnaround to an investment bank. Thus, MF Global hired Jon Corzine as new chairman and chief executive office in March 2010. After Jon Corzine joined in MF Global bring fresh blood and hope to MF Global. Because he help MF Global start turning a profit. However, his strategy also push MF Global go to bankrupt (Farmdocdaliy.com 2013)

4.0 Problems Analysis
In terms of Mcshane, Olekanlns and Travaglione (2013) defined that organisation behaviour is to study people's think, feeling and behaviour in an organisation. Everyone has own personality and traits. As mentioned before, an employee of MF Global make illegal transactions and cause company loss huge profit. The key point of this case of MF Global displays the importance of value in the work place and it lacks of the effectiveness organisation structure. According to Mcshane et al. (2013, p.48) clarify that 'value are stable, evaluative belief that guide our preferences for outcome of courses of action in a variety of situations.' Generally, values can help an employee works hard in a company but also can cause some unethical behaviours in the work place. As an investment company, to ensure legitimacy of the transactions is the basic thing because it has certain duty to their clients and stakeholders. According to Andrew, Baker & Hunt (2010) point out that the value of employee can match with the organisation's value can lead to numerous positive outcomes for both.

Figure 1. Value and person-organisation fit (Source: Andrew, Baker &Hunt, 2010)
Refers to Figure 1 and the theory of Andrew et al. (2010, p.6) can show 'corporate ethical values are hypothesized to lead to higher perceived P-O fit. Next, P-O fit leads to higher levels of job satisfaction and commitment.' In additional, the moral intensity also can impact on person-organisation fit in turn. The reason of MF Global alleged rogue trading occurred is the value of this employee has conflicts with the company. Because value is the important factor to impact personal behaviour on the workplace. Once, the employee put their personal value up to the corporate value can cause negative outcomes. In terms of Maslow (1943) defined that human motivation can be divided into five levels respectively, physiological, belongingness, esteem, self-actualisation. The physiological level is to fulfil the basic human need, such as food, water and money. If the people fulfil the basic need of the life, they will need to pursue the achievement from their life and work. Also, according to Rossiter (2009) point out job satisfaction is related to the personal fulfilment and the greatest dissatisfaction of the job is lack of career development, such as limited to achieve the status and self-actualization levels of the hierarchy of needs. Refers to the behaviour of rogue trader of MF Global can display he cannot fulfil the basic need from his workplace lead to he make this unethical behaviour. Normally, some unethical behaviour can help people to get achievement easier. This employee want to get money from the illegal trade but cause damage to the reputation of the MF Global. Therefore, an organisation want to encourage people to work hard and create huge profit should try to match the organisation's value and personal value. Also, an organisation should attempt to create a reasonable hierarchy to ensure the job satisfaction of their employee. Only to ensure the personal value and job satisfaction is balance in workplace can reduce the unethical behaviour, because it can help the organisation to create a fair work environment.

The second point of rough trader's case is MF Global lack of an effective organisation structure. Figure.2 Effective organisations demonstrate strength in five key areas Source:(http://www.bridgespan.org/getmedia/21150183-a1bb-4398-9bef-b42a17ab3801/3ff57604-3740-44ce-81d7-87aba7efcb09.jpg.aspx)
According to the Figure 2 can display that high performance organisation exhibit strengths in five key interrelated areas respectively, leadership, decision-making and structure, work process and system, and culture. These five areas are link to each other. If one of areas occur problems can cause negative outcomes when an organisation operating. As a famous investment company, MF Global feel proud of itself on it risk management system. The MF Global relies on its strict system to help them to operate successfully more than 200 years (newswire.com, 2007). However, MF Global failed because they are confident for their risk management system. As we can see from this case, there are two main problems occur in MF Global. Firstly, a employee can finish numerous illegal transactions over his power limited can explain that the risk management system has certain problems need to repair. For a successful financial company, the basic thing is guarantee the legitimacy of trade and ensure the funding safety. Therefore, an rigorous risk management system can protect the benefit of MF Global. When this rough trade apply this trade, the system would stop this trade. Secondly, complex organisation structure lead to message delivery slowly. In terms of Figure 3 the structure of MF Global can explain that the organisation structure of MF Global has many branches. When people find out the problem, they should report to their leader. Too many branches can reduce the work efficiency, so they cannot deal with this emergency problem immediately.

The second issue of MF Global is leadership. As mentioned before, MF Global attempt to become an investment bank. Therefore, the stakeholders of MF Global is hired a new chairman who called Jon Corzine. In terms of Mcshane et al. (2013, p.382) support that 'leadership influencing, motivating and enabling others to contribute towards the effectiveness and success of the organisations of which they are members.' Also, Trice and Beyer (2006) illustrate that leaders can help an organisation to set up direction. In additional, Robbins (2005) also defined that leadership can be seen as the ability to influence an organisation to achieve the goal. Firstly, Jon Corzine attempts to help MF Global to get more profit. Thus, MF Global bought lots of distressed European bonds and used them as collateral in a variation of a repurchase agreement known as repurchase-to-maturity (RTM). To buy the distressed European bonds help MF Global to get huge profit in short-term but it is also the main reason leads to bankruptcy. The reason is the European debt situation was deteriorating rapidly in 2010. However, Corzine's strategy was supervised by the MF Global's board of directors and by the chief risk officer, Michael Roseman. In 2010, Rosemen tried to reduce the investment of European bonds but Corzine rejected Rosemen's risk suggestions. In additional, Corzine also asked the board of directors to agree his advice to invest more money in the European bonds. Otherwise, he would leave with his team. As a financial organisation leader, to corporate with the risk officer is very necessary. Jon Cornize as the leader of MF Global should try to help the company to reduce the risk and protect the stakeholder's profit.

Corzine was able to take advantage of a loophole in the tax code to keep certain transactions off its balance. He uses this loophole combine with taking risky position on European debt bonds using a propriety trading account to begin generating returns to the company. This behaviour is to remove the risk from their balance sheet, but in reality continue to carry the risk. Meantime, he took advantage of regulatory changes made in 2000 and 2005 that allowed companies, under certain conditions to use otherwise untouchable funds in customers' accounts providing them with an asset, such as European sovereign debt bonds, in exchange. Corzine's trading activities were highly suspect within MF Global; one employee referred to them as Corzine's "secret sauce" (Burroughs, Cohan & Mclean, 2012). Corzine's behaviour cannot help to protect the stakeholder's profit but gave an opportunity to earn more money (Parloff, 2013).

In terms of Hoyt, Price & Poatsy (2013) described that the role of leader can overinflate individual's felt the importance of the collective goals, thus including them to engage in unethical behaviour in order to achieve the goals. Corzine promises to help MF Global to resolve the financial problems. Therefore, he took advantage of the loopholes to achieve the goals seemingly.

5.0 Organisation response
To avoid the rogue trader case happen again, the MF Global allow to CFTC staff to check their financial information every day. In additional, CFTC staff charged MF Global with day-to-day oversight responsibilities for MF Global also remained informed on MF Global's compliance with undertaking that were part of settlement agreement, which pertained to branch office training manager and establishment of supervisory controls pertaining to the monitoring and supervision trader (CFTC.com, 2011). Through to corporate with CFTC, MF Global can rebuild the reputation and make their clients to trust again.

Compared with rogue trader case, MF Global did not focus on the leadership issue. Thus, inappropriate leadership not only cause mistakes on the direction of organisation but also can lead to leader's unethical behaviour. Firstly, the risk office manager Roseman came up with suspects of Corzine's trading activities. As the members of board of directors of MF Global, they have responsibility to protect their clients and ask Corzine to give a reasonable explanation. However, the stakeholders in order to earn more money so they just ignore the risk of the European bonds. They gave Corzine more power to make decision. Also, the whole organisation know the Corzine's 'secret sauce' but nobody has stop this unethical behaviour. Generally, leader is the main direction of an organisation. Once the leader make an unethical decision to help the organisation to achieve the goals means that the organisation would like to cheat their clients. Therefore, after MF Global field for bankruptcy and suspected of misappropriating customer funds at least $600 million (Goodman, 2011). Facing with the client's doubt, Corzine argued that the failure reason of the investment because the external environment is unstable. He did not explain how this financial disaster can happen. The clients lost their trust of MF Global. As a global financial company, there is nothing more dire than lost trust. This is a really bad example to display how an organisation deal with the critical incidents.

6.0 Recommendations
1. From value and unethical behaviour perspective, as a global financial company have to make the clients feel safety. According to Cojuharenco, Shteynbery and Schminke (2012) support that to understanding unethical behaviour in organisations including many perspectives, such as employee how to view the relationship between the personal and organisation. The rogue trader try to help his family so he made illegal transaction. Corzine wants to achieve the goals, so he used his power to do the unethical decisions. The value and unethical behaviour is the popular issues in the organisation workplace. To avoid the unethical behaviour occur, the first thing is try to make the employee and leader has right opinion to fit the organisation and personal's value. Because the value would guide the people's behaviour in the workplace.

2. From leadership perspective, getting the right people in the right seat is necessary (Collins, 2011). In terms of Strickler (2006) argues that most powerful way to motivate people in the workplace is to create a good environment to help to motivate each others. The most vital thing is create a safe environment. As a leader of a global financial company should be responsibility and accountable. The right leadership is shared leadership. In terms of Mcshane et al. (2013, p.382) support that 'shared leadership is broadly distributed, rather than assigned to one person, such that people within the team and organisation lead each other'. The chairman and risk officer management should use the powers of principle of mutual checks and balances, because it can help MF Global reduce the risk. Do not appear individualism because the duty of leader is to guide organisation's direction. An outstanding leaders should learn how to listen the suggestions come from his employee.

3. To repair the risk system of MF Global's organisation structure. Even MF Global field for bankruptcy but they also can try their best to reduce the loss of clients.

7.0 Conclusion
In conclusion, this report is analysis the major organisation issues of MF Global. Even these organisational behaviour factors cause huge damage to their clients and society but this case also shows the importance of it. Through this case study report, people can know about the value and leadership is vital to an organisation. The value can help the people to make a decision. Majority reason of unethical behaviours because employee dissatisfaction with his job or want to achieve the goals as soon as possible. As a leader to guide MF Global should corporate with team member and uses the right leadership to make to correct decision. Therefore, to build a successful organisation should uses appropriate organisational behaviour factors to make the organisation to work effectively.

Reference list:
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Bunge. J 2011 , MF Global: History From IPO to Bankruptcy, WALL ST. J.

Burroughs, B., Cohan, W. D., & McLean, B. 2012." Jon Corzine’s Riskiest Business" , Vanity
Fair

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<http://www.newswire.ca/fr/story/65805/mf-global-issues-statement-in-response-to-developments-at-sentinel-management-group >

Cojuharenco, I., Shteynberg, G., Gelfand, M. & Schminke, M. 2012; 2011, "Self-construal and unethical behavior", Journal of Business Ethics, vol. 109, no. 4, pp. 447-461.

Collins, J. 2011, "How the Mighty Fall: And Why Some Companies Never Give In". New York,
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COMMODITY FUTURE TRADING COMMISSION 2011, Statement on MF Global: Next Steps Commissioner Scott D.O' Malia, viewed 8 June 2015
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<http://www.bloomberg.com/news/articles/2013-04-16/ex-mf-global-broker-sentenced-to-5-years-for-trades-correct- >

Hoyt, C.L., Price, T.L. & Poatsy, L. 2013, "The social role theory of unethical leadership", The leadership quarterly, vol. 24, no. 5, pp. 712-723.

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McShane, S.L., Travaglione, A. & Olekalns, M. 2013, Organisational behaviour: emerging knowledge : global insights, McGraw Hill Australia, North Ryde, N.S.W.

Parloff, R 2013, 'How MF Global's' 'missing' $ 1.5 billion was lost-and found', viewed 9 June 2015
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Appendices
Figure 3 The structure of MF Global

Baxter, 2011 source: http://amlawdaily.typepad.com/amlawdaily/2011/10/mf-global-bankruptcy.html

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[ 2 ]. Refers to Figure 3 in Appendices