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Wall Street Report

Group Assignment

Anita Gill, Chelsea McNaughton, Daniel Kwetny, Heiltje Bolen, Michael Mackinnon, Tavish Rai

Course: ORGA 310 Advanced Leadership Topics and Issues

Professor: Jennifer K. Bowerman

August 18, 2011

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Plot Summary: The film, Wall Street, tells the story of a young stockbroker desperate to make it in the fast-paced trading world of the mid 1980s. Bud Fox is a junior stockbroker at Jackson Steinem & Co. and is looking to make his move by pitching several stocks to his hero, corporate raider, Gordon Gekko. Although Bud goes to great lengths to get Gekkos attention, he soon realizes that Gekko is not interested in anything he has to offer. Not wanting to be rejected by Gekko, Bud provides him with inside information on BlueStar Airlines, a company for which his father works. BlueStar had recently been cleared of any wrongdoing in a major incident in which the Federal Aviation Administration had been investigating; however, it had not been made public. Gekko places an order for BlueStar Airlines stock with Bud. Soon after, Gekko places several other orders with Bud; however, they all turn out to lose money. Having taken a liking to Bud, Gekko decides to be a mentor of sorts to Bud and makes it clear he is in the business of dealing with inside information which is to be obtained at any cost. Bud, in his desperation to succeed and from the discouragement from his father with regard to his profession, agrees to go along with Gekko. During this time, Bud begins to rise in the corporate and social ranks of Wall Streets trading scene. He starts making more money and buys himself a penthouse apartment on the Upper East Side. Bud receives a promotion at work from the money he is making through Gekkos business and finds himself upgrading from his former cubicle to a corner office with a view. The entire time Bud continues to do as Gekko suggests, using unscrupulous means to obtain information about companies and determining where the value of those stocks will go.

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Bud then pitches an idea to Gekko; he believes that they could purchase BlueStar Airlines, expand its operations, and make it a successful company. He convinces Gekko to purchase it and turn things around by saving money paid to employees through certain concessions. However, Bud soon learns that Gekko has plans to liquidate BlueStar and dissolve the company. Even though Bud stands to make an enormous amount of money on the transaction, he cannot bring himself to let it happen with his father being an employee and him having many friends in the company. Bud devises a plan to have one of Gekkos rivals purchase BlueStar by leaking information about Gekkos takeover and thus raising the share price to make it more difficult for Gekko to purchase the company outright. When Gekko finds out what has happened, he decides to cut his losses and sell off his remaining stock in the company. However, before he is able to, Bud has everyone dump the stock sending the value of the shares down making Gekko lose a considerable amount of money. Eventually, Gekkos rival is able to purchase the company and they save it from being sold off. Gekko confronts Bud about what he has done and mentions several of the illegal deals they had made. What Gekko did not know was that Bud was wearing a wire and records the entire conversation. Later, Bud shows up to his office and is arrested for securities fraud and insider trading. While it seems as though he will go to jail for his actions, he has been offered a position at BlueStar upon his release. Introduction: Ethics in business emerges as a major leadership topic in the movie Wall Street. Rezania (2002) defines ethics as the standards of conduct that indicate how one should behave based on moral duties and virtues arising from the principles about right and

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wrong (p. 193). Ethics govern how leaders should act while their values will define how they act. Rezania (2002) further states that values are core beliefs that guide our actions (p. 194). It is important that a leaders values align with the organization that they represent, since leaders are the moral compasses for their organization. A leaders ethical behaviour shows the way that business is done and how employees should follow these business standards. When leaders lead the way, employees tend to willingly uphold the ethical practices of their organization. This report thoroughly analyzes the business ethics and ethical behaviour issues found both in the movie Wall Street, and within the main characters of the movie, Bud and Gekko. Furthermore, the analysis then goes on to discuss how business ethics and ethical behaviour are closely related to leadership theories and the leadership issues evident within the film. Emotional intelligence is also discussed, considering it plays a large role in the leadership issues at hand. The emotional intelligence of both key characters is explored, and then leads into whether or not these ethical issues are still a common problem in todays world. After the analysis, essential recommendations are suggested in the conclusion on how to achieve level 5 leadership, and what applications are needed to reach this status of leadership. Business Ethics and Ethical Behaviour Issues: Rezania (2002) illustrates how organizations want to promote ethical behaviours by having the leaders communicate what ethical behaviours are and how to mirror these behaviours (p.205). These organizations must not ignore unethical behaviour, but punish it, and reward those who follow the ethical practices of the organization. Using the golden role, treat others as you want to be treated, speaks volumes for organizations, their leaders, and their employees. This assists in doing what is best for the organization, while

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at the same time, builds a companys ethical reputation. Goleman (2002) mentions the importance for leaders to build trust by having transparency in their lives, especially when dealing with other people (p. 254). These qualities lead to an ethical leader and company, which is crucial since there are a number of positive outcomes for a business that has a reputation of being ethical. Even though a business is in the business to make money, there are many rewards to being an ethical business. Ethical leaders build a positive reputation for the

organization through consistency and integrity. This makes for happy employees, who in return have a higher output and in turn make customer satisfaction a top priority. With quality products and efficiency, an organization builds customer loyalty and reputation. By customers coming back or introducing others to the organization, the organization improves its financial performance. Rezania (2002) states that ethical practices pay off in the long run, since businesses that are only about increased profitability only have short-term gains and do not out-perform organizations that have ethical business practices (p. 191). Often, questionable business practices are solely money driven, only worried about performances, and have unclear policies and indifference to others (Rezania, 2002, p.194). Leaders must understand their own ethics and be able to discuss them. If one knows where one stands, one can draw a line in the sand. It is easy to be drawn into unethical behaviour before one realizes what is happening, especially if the leader is inexperienced. Osland (2002) implies that ethical decisions are complex and a leader may not realize that they are facing an ethical issue (p. 199-200). When in doubt, talk it out with someone that is an expert on moral issues. Often, decisions are made on the

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bases of avoiding punishment and what do I get out of it, rather than looking at all the dimensions involved and deciding what the correct decision would be. It is easier to do what someone tells us to do, rather than take the responsibility to think it through from an ethical point-of -view. This is why it is important for leaders to be ethical. In the film Wall Street, all that matters in the organization Bud works for is that money is being made for the organization. This is clearly illustrated in the movie when a long-term employee is let go after not bringing in the profit he had made in the past. It appears to be an unspoken understanding amongst the organization that profits are all that matter, but do not tell anyone what you did to get them. Consequently, the audience understands Buds desire to land a big account and to get recognition from his boss and make money. Bud only looks at the short-term rewards; he does not think his actions through and he just concentrates on what he would get out of it. As previously mentioned, Bud wants to land a big client who will give him everything that he wants, such as Gekko. Understandably, he is easily lured into forming a relationship with the unethical leader, Gekko, to help reach his goals. Bud gives Gekko some insider information but does not feel that he has done anything wrong. Bud feels uncomfortable with one of Gekkos demands, but gets punished by Gekko when he tells Gekko no. Bud bows to Gekkos demands and foregoes any thought about consequences because he does not want to be left outside of Gekkos circle. Bud is enticed by the relationships that Gekko hands him. During the film, there are two moral compasses, Buds father and Lou, reminding Bud of his values. Bud is told not to judge a man by his wallet, stick to the fundamentals, and money makes you do things you shouldnt [do] (Stone, 1987). It is not until it hits close to

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home and it hurts those he considers family that Bud realizes that he has abandoned his values and must break the control that Gekko has over him. Bud acknowledges that he has to get back to his values after he faces the penalties of his actions. However, Gekko believes that he is untouchable and money is everything. Gekko has come from the streets and still lives by kill or be killed because he does not want to return to the streets. Gekko admits that he has bought his acceptance into society by the large donations he makes, as he did with a donation to the zoo. He feels that the illusions have become real. Osland (2002) states, a leader who is neither a moral person nor a moral manager is an unethical leader (p. 209). The viewer learns early on that Gekko is an unethical leader due to the unmoral dealings, not only in his personal life, but those in his business life too. In Gekkos personal life, he has had affairs and continues to proposition a former mistress to come back to his bed while being married. He enjoys outbidding others for his personal treasures that he only acquires for their value rather than his pleasure. Similarly in his family life, it is all about money and he is obsessive about how much he has to show them and the world. He is very much the peacock, showing off to those he wants as friends. He builds friendships out of what they could do for him as he lords what he has done over them. He has little moral control in his personal life. He lacks self-control in his entire dealings, even though it is much more subtle in his home life. Gekkos lack of moral fibre is very evident in his business dealings. Gekko is very Machiavellian; he does not care about how things get done, as long as they are getting done. When business is not being done right by Gekko standards, he becomes short-tempered, vulgar, manipulative, and uses blackmail to achieve his goals. Gekko

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goes as far as rewarding unethical behaviours. He knows what carrot, a blonde bombshell interior designer, to dangle in front of Bud in order to get him to forget his values. Gekko says, The best commodity is information which he uses against others when there are no positive results. Gekko is delusional, as he believes himself to be a liberator, not a destroyer. An ethical leader would take responsibility for his behaviour and those of his subordinates. However, as an unethical leader, Gekko demands Bud to sign a standard legal document stating that Bud has power of attorney for all investment deals providing Gekko with no knowledge of what Bud does. Gekko will use this document to cover himself and make Bud the scapegoat if any of the investments are deemed unethical. Nevertheless, Gekko keeps Bud on a tight rein and micromanages all the investments to the point that Bud is unaware that Gekko has other things planned aside from what he told Bud. This causes Bud to come to terms with what he would morally tolerate and departs from Gekkos influence. Bud became emotionally involved in the BlueStar deal that went against Gekkos saying of show no emotions. Kohlberg would say that Bud was entering another stage in his moral development. Bud was fulfilling duties and obligation to [family], peers and people that were close to [him] (Rezania, 2002, p. 197). Bud was merely thinking about others rather than himself. With encouragement from the auditing board, Bud upholds the law by gathering damaging information about Gekkos unethical business dealings. Gekko assaults Bud and does not understand why Bud turned on him since he taught Bud everything he knows, and ultimately, provided Bud with the life he thought he

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wanted. Gekko was only thinking about himself and could not understand that Bud had drawn a line in the sand that he would not cross. Even though theories support that personal values are already developed by adulthood, there are still valid reasons to have ethics brought up in business programs. It allows students to be aware of ethical issues, allows future leaders to examine their own values, and allows students the chance to answer questions they may eventually face, in regards to the organizations and ethics. This theory only reinforces that what future leaders have learned as children, will continue to carry them through their lives. Proverbs 22:6 says, Teach a child in the way he should go, and when he is old he will not turn from it (NIV). A child needs direction to know what is ethically right to help develop their values. This is so that they will conduct themselves ethically when in need of making a value based decision. As a result, parents as a community have the responsibility to develop children to think beyond me. This is taught by example, through stories, through involvement, and by a loving, sharing, and caring community. The first five years of a childs life is a time of rapid learning and when fundamentally important values are instilled, more so than any other time in their life. It is also during this time that they learn the importance of right from wrong. Having this solid foundation as a child helps individuals to live by their values and to have ethical practices in adulthood. Leadership Theories and Issues: Gekko, in addition to his business strategies, is very diligent and calculating when it comes to recruiting new trading executives. Early on in the movie, Gekko begins to take the role of a mentor to Bud Fox, after he is impressed with Buds persistence and

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knowledge at their first meeting. Right from the initial trade Bud makes, Gekko takes on the role of a developer, empowering and encouraging Bud to think on his own and stride away from Wall Street's herd of analysts. At the same time, however, Gekko makes it clear that nothing ruins [his] day more than losses (Stone, 1987), thus putting pressure on Bud to perform. By acting this way at the beginning of their relationship, Gekko displays a seemingly contrasting picture of a leader who employs both reward and coercive powers. Throughout the film, Gekko continues to follow this rollercoaster style of leadership. Influenced largely by the state of his firm's stocks, Gekko pampers and promotes Bud when the company is successful, but punishes (in words, as well as actions) him when the company is doing poorly. As a business leader, Gekko's charisma is unquestionable. It can be sensed from the very first impression of him, as he casually strolls around the executive desk in his luxurious office, providing instructions over the phone to other brokers. He talks to everybody Bud proclaims about Gekko's extroversion to a co-worker. And indeed, Gekko does; He is seen shaking hands and making small-talk with acquaintances at the restaurant, at the office, and at the gym. Furthermore, when required to speak in front of the employees of a company, Gekko was able to cleverly persuade the tough audience that he, instead of the current management, was the correct choice for their future leader. In his professional interactions, Gekko consistently behaves in an authoritarian, demanding manner. He does not often consult others, and always provides clear and precise instructions to his employees. Bud becomes closer with Gekko, for instance, when the sly stock tycoon insists that Bud go to lengths to get information on new stocks, and essentially commit insider trading. In another instance, when handing Bud a cheque

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for one-million dollars as an initial investment in him, Gekko makes sure to set out specific expectations as to how the money should be used, what clothes Bud should be buying, and how he should carry himself. Overall, Gordon Gekko fits the definition of a transactional leader almost to a tee. Instead of seeing Buds services as passion and initiative, Gekko believes that Bud, as well as the rest of his staff, act as contracted workers who expect guidance from top management. This is evident in the way Gekko gives feedback to Bud; rewarding him for good productivity, and punishing him for unreached quotas. It is for this fact this unwillingness to change the status quo and look for a deeper, communal purpose in his firm that Gekko couldnt reach level 5 leadership (as defined by Collins). Perhaps the most vivid instance depicting Gekko's non-transformational nature is when he decides to liquidate the soon-to-be-purchased Blue Star Airlines, the company for which Bud's father has worked for years. At that heartless moment, it becomes clear to the audience that Gekko's only real motive in business dealings is to make money. This Machiavellian attitude, accommodated by Gekko's belief that the end justifies the means, shapes his role as a leader that is confident, but one who is driven almost entirely by self-interest. Bud Fox - Emotional Intelligence (EQ) Deficiencies: The thing about money Bud, it makes you do things you dont want to do (Stone, 1987). Bud has a distorted self-image and therefore easily abandons his morals and values for success. As Bud makes his way up the hierarchy of his career, his SocialAwareness and Self-Management qualities, as denoted by Goleman, Boyatzis, and

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McKee (2002), begin to deteriorate; leaving only the hollow shell of a once ambitious and optimistic junior stockbroker. Bud reaps the benefits of insider trading, and commences a double life caught between his highly integral, blue-collar roots and this new hunger for money and success. This internal struggle diminishes Buds transparency: a Self-Management aspect that Goleman et al. (2002) interpret as an authentic openness to others about ones feelings, beliefs, and actions[which] allows integrity (p. 245). Integrity had previously been an important part of Buds upbringing but it attenuates as Bud takes part in the countless unethical practices, at the bidding of his mentor, Gekko. As Bud starts his financial ascent, in such hard economic times, he watches his peers fail. On the same day that Bud is moved into a corner office at his stock brokerage firm, he watches another co-worker getting fired and begging for another chance at his job. Bud does not offer words of condolences to his peer, and appears almost unaffected by the exchange. The juxtaposition of these two characters is especially intriguing: had it not been for Buds erosion of empathy and integrity, which led him to insider trading, he himself could have been in the same position, being fired instead of promoted. Bud Fox - EQ Competencies: It would appear that Bud created his own opportunities and then fell victim to them because he had not yet developed his other leadership competencies. However the ability to both create and seize opportunities is in itself a leadership quality. Thus, Bud did have some developed competencies in Self-Management and Social-Awareness components of EQ; which allowed him to go as far as he did.

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Bud is very adept with the organizational awareness component of Social Awareness: he is able to detect crucial social networks and read key power relationships, which according to Goleman et al. (2002) are key components of social awareness (p. 255), even though he eventually succumbs to the corrupt corporate culture at such a high level of competition. He also builds buy-in from key players by finding the right appeal for his listener: which Goleman et al. (2002) state is a crucial aspect of influence (p. 256). Gordon Gekko - EQ Competencies: Gordon Gekko is very charismatic with huge competencies in several aspects of EQ, including efficiency in the Self-Awareness and Relationship Management. Though he conducts business in an unethical way, Gekko is still the master of his profession, and has an accurate picture of these strengths. Gekko is also easily able to manipulate those around him by abusing his authority and expertise, which is an abuse of his EQ competencies. Gekko is a very charismatic orator: his brutally honest, gut-wrenching monologues often end in a unified round of applause. This natural charisma stems from Gekkos strength in self confidence, a component of Goleman et al. (2002) SelfAwareness. In his infamous speech on the importance of greed in corporate America, Gekko is able to turn an entire share-holders meeting in his favour; a feat not easily attained by the ill confidant. Gekkos competency in the influence component of Relationship Management is another culprit of his success. Gekko has tremendous

influence over people; his beautiful dialogues often get to the heart of an issue and immediately build buy-in.

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The influence aspect of Gekkos Relationship Management is enriched through an appeal to authority. Gekko always dresses the part and speaks in a rich vocabulary with the heir of authority. Osland et al. (2007) explain that those touting their experience,

expertise or scientific credentials may be trying to harness the power of authority (p. 566). It is easy for followers to look up to Gekko and strive to meet his high, and often illegal, expectations, due to his apparent superiority. Osland et al. (2007) also note that there is nothing wrong with such claims when they are real, because we usually want the opinions of true authorities (p. needed). Gekko falls short because his claims are

questionable and he manipulates people to further his own success. Gordon Gekko - EQ Deficiencies: Even with his apparent strength in many leadership competencies of EQ, Gekko is unable to maintain his status; and eventually falls just as hard as Bud. Gekkos downfall is in direct correlation to his underdeveloped leadership qualities in his neglected areas of EQ. As Osland et al. (2007) so impeccably explains leaders must be more than

individuals of high character. They must lead others to behave ethically. (p. 207). Gekkos failure to lead rises from his complete ineptitude in Self-Management and Social Awareness. Goleman et al. (2002) illustrates the need to exhibit little to no self-control; often failing to manage disturbing emotions and acting on impulses for greed, which Gekko completely demonstrates (p.254). Though he does illustrate trace amounts of

transparency, when it comes to his desire to accumulate wealth, Gekko conducts almost all of his business with deceit and keeps secrets from his proclaimed protg, Bud. Gekko also demonstrates no empathy when it comes to taking ownership of and

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liquidating companies; however he is still able to sense the felt, but unspoken, emotions in a group, making a cruel irony of Goleman et al. Primal Leadership (2002) empathy component of social awareness. Ethics Today: There is one and only one social responsibility of businessto use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud. Milton Friedman, Economist (New York Times 1970) Has the role of business changed in the last 40 years? Are ethics in business today more important or more relevant than they were in the past? Although the movie Wall Street was a highly fictionalized account of insider trading and corporate raiding, the same basic ethical issues have resurfaced time and time again in business over the past few years. Perhaps the most famous of ethical blunders at this time is Bernie Madoff, who defrauded investors out of over $12 billion which was arguably the largest Ponzi scheme in history. Madoff never actually invested his high-profile investors money; rather, he placed it directly into his personal business bank account at the Chase Manhattan Bank. However, there really is no shortage of such examples in recent history, whether it be insider trading, wire fraud, or general misrepresentation. From Enron to Bre-X, and Tyco International to even Martha Stewart, all were faced with the dilemma of benefiting from unethical business practices. But the issue of ethics extends far beyond the aforementioned individuals to many of their lesser known counterparts. With most major

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scandals involving so many people, how many simply chose to ignore what they were seeing? Wall Street today is a very different place than how it is portrayed in the movie. After the Enron scandal of 2001, the Sarbanes-Oxley Act was introduced, which increased the reporting standards of publicly traded corporations and made executives and corporate board members more accountable to the true financial performance of an organization. Today, many people no longer share Friedmans belief that the only responsibility of business is to generate profit. Rather, there is a growing view that ethical business practices lead to sustainable organizations, and by going beyond just the letter of the law, companies can set themselves up to excel at being good corporate citizens and ensure profit over the long term. Recommendations and Conclusion:

It is clear that level 5 leadership is not evident in either Gekkos or Buds character within the film. A level 5 leaders is defined as an executive who builds enduring greatness through a paradoxical blend of personal humility and professional will (Osland et al., 2007, p. 477). With the analysis completed above, we have developed a list of key recommendations we believe are needed to reach level 5 leadership. These recommendations are as follows: First, it is important for leaders to exude a high level of emotional intelligence. As previously mentioned, emotional intelligence is needed in order for a leader to meet the changing needs of an organization, as well as the needs of the employees working for the organization. Second, self confidence is important for a level 5 leader as outline by Osland et al. (2007), since this

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self confidence is what will help a leader hire the right people, set them, as well as the organization, up for success. The ability to be humble and modest, no matter what your status or position may be, is the third recommendation of how to become a successful leader. As earlier outlined, it is evident that Gekko was neither humble nor modest in his position as Buds mentor. He made it known that his position was of importance and that he had the ability to make or break Bud at any given moment.

The fourth recommendation as outline by Osland et al. (2007) is for a leader to put self-interest aside and to be fanatically driven. This recommendation is important, because in order to be a level 5 leader, leaders need to be infected with an incurable need to produce sustained results. In other words, they will do whatever it takes to make the company go from mediocre or good to great, no matter what it takes (p. 490). The last recommendation is explained by Osland et al. (2007) as being able to attribute success to factors other than themselves. Gekko and Bud both lacked this ability, since they both seemed to give credit to themselves for any success, but would point their finger at the other when things would fail.

If all 5 of these recommendations were applied to Gekko, he would have had a better chance of becoming a level 5 leader, rather than just being a transactional and charismatic leader, as we outlined before.

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References

Ferrell, L. (1999). The Role of Ethical Leadership in Organizational Performance. Retrieved from: http://lindaferrell.com/lead.html. Friedman, Milton. 1970. The Social Responsibility of Business is to Increase its Profits, The New York Times Magazine, September 13, 1970. Copyright @ 1970 by The New York Times Company. Goleman, D., Boyatzis, R., & McKee, A. (2002). Primal Leadership: Realizing the Power of Emotional Intelligence. Boston, MA: Harvard Business School Press. Osland, J.S., Kolb, D.A., Rubin, I.M., & Turner, M.E. (2007). The Organizational Behaviour Reader, (8th ed.). Upper Saddle River, NJ: Prentice Hall. Rezania, D., (2010). ORGA 310: Grant MacEwan College School of Business, Pearson Custom Business Resources. Toronto, ON: Pearson Learning Solutions. Stone, O. (Director). (1987). Wall Street [Motion Picture]. The Holy Bible. (1995). Proverbs 22:6 (New American Standard). Retrieved August 17, 2011, from Bible Study Tools: http://www.biblestudytools.com/nas/proverbs/226.htm