What are the costs and benefits of breaking industry norms around the world?

Category: Bank, Industries, Reputation
Last Updated: 12 May 2020
Pages: 3 Views: 311

1.      What are the costs and benefits of breaking industry norms around the world?

Citigroup’s 2004 European scandal disrupted the market and affected many other companies and firms. Their choice to break away from the norm of the market did let them earn a profit of $24 million, but a large cost. There are many factors to be taken into consideration in breaking an industry norm.

Some industries don’t have any written laws about certain things, but are often looked down upon as dirty tricks. There are often advantages in breaking such norms, mainly because these allow for a greater profit or more efficiency. It could be said that the existence of such norms sometimes hinder the achievement of optimal conditions. Breaking industry norms may also result in innovation and the discovery of better and newer technologies or operations.

Order custom essay What are the costs and benefits of breaking industry norms around the world? with free plagiarism report

feat icon 450+ experts on 30 subjects feat icon Starting from 3 hours delivery
Get Essay Help

However, deviance does not always pay off. The risks involved in not following the norms are visible in Citigroup’s blunder. The firm’s reputation may be tarnished, making future business dealings extremely difficult. This is a very large loss for a company that requires consumer trust to get clients. Deviance may also cause a loss of profits, especially when investing money in these plans which could have been better spent in other ventures.

2.      What strategic response did Citigroup’s top management undertake? Is it adequate?

Citigroup’s top management had the company undergo much ethical changes. They issued a new code of conduct for the company, established a Global Compliance unit, and had employees go through ethics training. These were done in order to redeem Citigroup’s reputation in the business and banking sector.

In the Europe banking case, Citigroup issued a statement that the whole scandal was an accident and was not planned by Citigroup. According to their statement, the original plan did not include buying back the bonds; an action that was only caused by the market buying an unexpectedly large number of bonds from Citigroup. However, this statement was criticized by other bankers to be a weak excuse, as other big banks are able take a hit of 500,000 Euros without much problem (EuroWeek).

I believe that Citigroup’s actions were a business risk gone wrong. Provided a more competitive market where such tactics could be employed, Citigroup would have not suffered such losses. I think that their response was inadequate, as their unethical deeds affected many individuals and companies.

3.      Are some of Citigroup’s employees “bad apples” or is Citigroup a “bad barrel”?

I believe that Citigroup can be considered a “bad barrel”. Every company has their own brand of ethics, rules, and principles which are instilled into employees when they become part of the company. Thus, the actions of the employees show the firm’s motives and goals. Also, if Citigroup’s employees were the problem the company should be able to remove them easily, however this has not been the case.

Citigroup’s future dealings also are evidences that they are indeed a “bad barrel.” In 2007, Citigroup was found to be part of the Terra Securities scandal, which involved the sale of high-risk, low-return assets to several Norwegian municipalities (Landler). This is similar to Citigroup’s Japan undertakings, where consumers were also fooled into risky investments.

The company has also been involved in customer credit card theft which was discovered in 2008. Citigroup had been discreetly moving balances from card holders to the bank’s fund from 1992 till 2003. According to the Jerry Brown, California’s Attorney General, Citigroup mostly stole from poor people and those who were deceased, and that these were knowingly (Stempel). The company was to pay over $18 million in fines and consumer refunds.

Works Cited
EuroWeek. Under pressure, Citigroup climbs down on govie raid. Vers. 871. 14 September 2004. Euromoney Institutional Investor PLC. April 2009 <http://www.euroweek.com/Article.aspx?StoryID=436395&IssueID=11029>.

Landler, Mark. U.S. Credit Crisis Adds to Gloom in Norway. 2 December 2007. The New York Times. April 2009 <http://www.nytimes.com/2007/12/02/world/europe/02norway.html?pagewanted=1&_r=1>.

Stempel, Jonathan. "Citigroup to pay $18 mln over credit card practice." 26 August 2008. Reuters. Thomson Reuters. April 2009 <http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSN2636973720080826>.

 

Cite this Page

What are the costs and benefits of breaking industry norms around the world?. (2018, Oct 07). Retrieved from https://phdessay.com/what-are-the-costs-and-benefits-of-breaking-industry-norms-around-the-world/

Don't let plagiarism ruin your grade

Run a free check or have your essay done for you

plagiarism ruin image

We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

Save time and let our verified experts help you.

Hire writer