Business Ethics Case Study: Moody's Culture

Moody’s was considered to be extremely conservative analytical culture. It branded itself of integrity, commitment, ethical norms and expertise. "Moody's has rigorous standards in place to protect the integrity of ratings from commercial considerations," said Michael Adler, Moody's vice president for corporate communications. Insiders, however, say that wasn't true before the financial meltdown. Mark Froeba, senior vice president who joined Moody's structured finance group in 1997 said that the story at Moody's started in 2000. It was a systematic and aggressive strategy to replace a culture that was very conservative, an accuracy-and-quality oriented (culture), a getting-the-rating-right kind of culture, with a culture that was supposed to

It has been difficult for an investment firm to attract investors with the credit ratings on their securities. It specially can be highly detrimental for a venture firm to pull in investors for their financial requirements due to the downgrading of credit ratings. On account of AIG, a September 2008 drop in credit rating implied extending budgetary issues when the organization required capital like never before. Moody's dropped AIG's credit rating down two points to A2 in light of AIG's problems, S&P and Fitch additionally minimized AIG. Overnight, AIG's stock fell 43%. As indicated by AIG fillings just a month prior to (August 6) such a drop could have activated more than $13 billion dollars in security calls from investors who purchased swaps from the organization and needed their cash back. This is only one case of how the money markets depend upon high credit ratings. As money related firms and markets request higher evaluations, CRAs are influenced to alter their benchmarks. All the more imperatively, once a coming up small organization has a high credit rating, minimizing that rating can push a falling flat organization over the edge as investors escape. As one ex-overseeing executive at Moody's placed in an opinion piece to the New York Times, "In an emergency, downsizing obligation can resemble shooting a slug into an organization's heart." The government bodies did not have their policy in place and the CRAs could efficiently get their way out without being liable for any destruction. Given that only body that could legitimately impose rules and regulations on the CRAs the government was responsible to an extent. The CRAs knowing the fact that the court could not blame them enjoyed carrying on with the unethical activities in spite of the foreseen losses. Hence, besides being unethical in falsely rating the CDOs the CRAs had the audacity to challenge the laws without the fear of