Mgtaig

What role did AIG’s corporate culture play in the decisions made by corporate employees and executives?

In this case, we trace the history of AIG as it evolved into one of the largest and most respected insurance companies in the world, and the more recent events that led to its demise. AIG had a market value of close to $200 billion in 2007, and by 2009 this amount had fallen to a mere $3.5 billion. Only a government rescue of what has amounted to $180 billion in loans, investments, guarantees, and financial injections prevented AIG from facing total bankruptcy in late 2008.

Saving AIG was not meant as a reward, however. The government rescued the company not to keep it from bankruptcy, but to prevent the bankruptcies of many other global financial institutions that depended on AIG as counterparty on collateralized debt obligations. If AIG had been allowed to fail, it is possible that the financial meltdown that occurred in 2008–2009 would have been worse.

This case first examines the events leading up to the 2008 meltdown, including the philosophy of top management and the corporate culture that set the stage for AIG’s demise. Then it reviews the events that occurred in 2008, including ethical issues related to transparency and failed internal controls. Finally, the analysis looks at the role of the government and its decision to bail out AIG, taking 79.9 percent ownership in a company that grossly mishandled its responsibility to its stakeholders.

What are the ethical implications of the federal government bailing out companies such as AIG?

Failure by the Federal Government to bail out AIG would have triggered an even greater disaster because many customers would have had their liquidity frozen, and therefore unable to meet critical financial commitments.

Businesses that are connected with AIG worldwide, would have little or no access to credit, and would most likely unable to meet their wage bill. This kind of scenario would create great havoc right...