Ching Him (Ivan) Kwok's Blog

Source:
http://www.bloomberg.com/news/2013-09-10/credit-suisse-is-sued-over-mortgage-securities-losses.html

Phoenix Light SF Ltd. sued Credit Suisse over alleged misrepresentations in the offering of $362 million worth of mortgage-backed securities.
– Credit Suisse is an investment bank which helps other institution or high profile indivduals to make investments. its usually large transaction amount, such as this case of 362 Million. They built their reputation by helping their customer to make profit, while they gian commision each successful transaction. (Regardless if customer make profit or not in the end.)
– Just before the economic crisis, to make breaking record of sales, and simply running out of “investment” opportunities, multiple investment firms has started to publish some lower quality (high risk) investment in a disguise. This comes to an issue about business ethic. Eventhough it was mentioned that there wasn’t really anything known as “business ethics” earlier in this course, however, this move may affects the company’s point of parity – its credibility. The best marketing strategy is simply “the brand is what you tell your friends afterwards”, In this case , it will lose its customer base in longterm, at least, they will lose Phoneix Light as one. (following case shows good business ethics secures customer base:
https://blogs.ubc.ca/caitlinlim/2013/09/12/business-ethics/)

See also for similar case:

The Dark Truth Behind Nike’s Colourful Converse

Link: http://en.ce.cn/National/Local/201309/03/t20130903_1322288.shtml

– “the parent company had assigned annual growth goals as high as 25 percent in recent years, 7 to 8 percentage points more than the average growth rate of the industry.”
– If the parent company was able to make such an assigned goal, then they must have an advantage that the other firms within the industry doesn’t. Apprenently, it was by bribing the doctors to issue their own drugs.
– It is quite obvious that it’s an illegal move in order to compete with-in the industry.
1) It violated tax laws, since the money used to bribe wasn’t being taxed.
2) Doctor’s “income” tax wasn’t taxed either.
3) There are general laws that prohibits this kind of behaviour as government encourage a fair competition environment in order to encourage entreprenuers to start a new business. The ultimate goal is to have more firms entering the market, not only that govennment may earn more tax income, but also for the benefit of the consumers as more firms mean high competition, hence lower price.

– They enforced a salary scheme that forces salesman to reach an assignered amount of sales in-order to recieve their negotiated salary, if under-target, they’d recieved a penalty on their salary.
– The threat acted as an “motive” for people to break the law.