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Citigroup and the 100-Million-Dollar
Bonus BUSI 472-B01
Liberty University
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Introduction
There are many decisions in business that are black and white. Unfortunately, not all
decisions are this way. For Mr. Hall, Citigroup, and the U.S. treasury, a more complex
discussion must be made that will affect all parties for all scenarios. The purpose of this paper is
to convince the board that Mr. Hall has the moral, ethical, legal, and economic obligation to his
$100- million-dollar bonus. This paper will paper will go on to discuss in detail the moral
standards, moral impacts, moral problem, economic outcomes, legal requirements, ethical duties,
and moral solution for this case.
Moral Standards
Moral standards are the foundation of all human behavior; however, every individual life
by different moral standards due to the simple fact what individuals consider right and wrong
vary amongst others. The definition of moral is “of or relating to principles of right and wrong
in behavior” (Merriam Webster’s Dictionary, 2017). Standards are “things established by
authority, custom or general consent as a model for example” (Merriam Webster Dictionary,
2017). Thus moral standards are guidelines or models of right and wrong behavior. In the
business world one could equally compare moral standards to business ethics. “Corporate
executives and business owners need to realize that there can be no compromise when it comes
to ethics and that there are no easy shortcuts to success. Their companies need ethics carefully
sewn into their fabric” (Guey, 2013).
Morals are established from four sources. The first source is religion. The second source
is science. The third source is culture and the forth source is law. The universal moral code
comes from the religion source; meaning the ten commandments. The Bible talks about the
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“golden rule” and how Christians should follow it for all situations. Just as we abide by the
golden rule for life, businesses should as well. The golden rule is mentioned in the Christian text
as well as Jewish, Islamic, Buddhist and Confucian text. “Do not do unto others as you would
not have done unto you” instead “do unto others as you would have done unto you” (Keith,
2017). Science comes into play because “as a species of social primates, we have evolved a deep
sense of right and wrong to accentuate and reward reciprocity and cooperation and to attenuate
and punish excessive selfishness and free riding” (Shermer, 2011). Morals and culture go hand
in hand because “people believe that social conventions create morality and that culture
determines what is permissible and impermissible by a sort of unspoken consenus.” (Matteson &
Metivier, 2017) Last moral standards and law. We live in a society with laws and the laws
cannot be broken. Therefore, I consider laws the part of moral standards in which the
government tells us must be obeyed and everybody lives and if one fails to obey the law the
government punishes them.
In conclusion, moral standards are the framework of how people and company should
live by. The standards are created through the religion we worship, the culture we live in and the
laws the government creates.
Moral Impacts
Moral impacts values that we attribute to a system of beliefs, be they religious, political
or philosophical, for example. Ethics are how business owners apply those beliefs in their short
and long-term business decisions. Thus, these concepts inevitably are intertwined and must be
applied carefully to maintain an image of professionalism and accountability.
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In addition, Securities of equal rights are also rights to all and gives them confidence that
the law will tend to follow standard principles and analyses to arrive at a legal conclusion about
all matters. The rights exercised under the law are those that allow persons to bring their legal
claims to an impartial judge and jury to determine what remedy the law provides for the
disagreement before them. The rights denied are that not all claims or disagreements can be
brought to court, only those the law says can be filed can be filed. A legal system based on
respect for the rule of law also needs strong, independent and impartial prosecutors willing
resolutely to investigate and prosecute suspected crimes committed against human beings even if
these crimes have been committed by persons acting in an official capacity.
Unless judges and prosecutors play their respective key roles to the full in maintaining
justice in society, there is a serious risk that a culture of impunity will take root, thereby
widening the gap between the population in general and the authorities. If people encounter
problems in securing justice for themselves, they may be driven to take the law into their own
hands, resulting in a further deterioration in the administration of justice. The terms of reference
of these committees should require a timely review of significant internal incidents, operational
risk, and of industry developments with high potential to impact on Citigroup reputation.
Moral Problem
When it comes to Moral problems we realize Mr. Hall has a valid contract and earned a
large profit for the company that he works for. The problem arises when deciding of who should
pay Mr. Hall the money he is entitled to. There are many variables to consider when defining the
moral problem at hand. This section of the paper will define the complete moral problem by
assessing the harms, benefits, and the involvement of ethics.
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Firstly, a moral problem is a “choice from among alternative courses of action, made
unilaterally by an individual or group of individuals, where at least one of the proposed actions
resulting from the decision involves modifying the life plan of another individual or a group”
(Morris, 2004). The choices are either to pay Mr. Hall or not.
The problem with paying Mr. Hall is that the money is essentially coming from the U.S
taxpayers. The taxpayers would most likely be upset if their money was going to someone who
makes millions of dollars a year because the average taxpayer earns only $50,000. On the other
hand, the benefits to Mr. Hall receiving his bonus is twofold. First, Mr. Hall receives the money
that was promised to him. Second, the company cannot be sued for violating the contract. This
involves ethics because taxpayers are forced to pay a 100-million-dollar bonus for someone that
works for a failing company and it seems wrong that almost half of all the taxpayers have never
earned more than $50,000 and are paying for this multi-million-dollar paycheck.
The moral problem comes down to this: Why should the average taxpayer bear the
burden of recovering the company while the company is paying a 100-million-dollar bonus to
one of its employees? How is it fair for the taxpayer and how is it fair to Mr. Hall?
Economic Outcomes
The economic outcomes are in favor of paying Mr. Hall his bonus. There are several
variable to consider when assess the economic outcomes for this situation. Firstly, if Mr. Hall
was paid the bonus, he would have to pay federal income tax, which would give back a portion
of the money. On the other hand, If Mr. Hall was not rewarded the money, the expenses for
lawyers and other law suit expenses would increase the amount of capital used for a different
purpose than reviving Citigroup. Also, it is important to consider how small the 100-Million-
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Dollar bonus is relative to the total amount subsidized. The bonus would only cost .02% of the
total amount that Citigroup received.
Legal Requirements
In considering the legal requirements of bonuses one must take into account which type
of bonus it is: discretionary or contractual. Discretionary bonuses are dependent on the company
objectives and individual performance objectives (Haney & Soohoo, 1998). These are usually
not in writing, and are usually associated with holidays or end of year reports. They are given at
the discretion of the employer, if the employee or the company reaches certain goals. Since they
are not written in a contract they are much harder to base a claim of non-payment on. Contractual
bonuses are stated in one’s employment contract, and as such are enforceable by law. It is
considered as part of the total payment agreement (Indjejikan, Matejka, Merchant, & Stede,
2014).
Since it is uncertain if Mr. Hall’s bonus was discretionary or contractual, both will be
discussed. His position was a commodities-trader and he earned a substantial profit for his
company, even netting about $40 million dollars on just one of his trades. Mr. Hall’s
performance at Citigroup made him one of their top traders, which meant he could ask for more
commission than the other traders. He was actually getting about 20% commission, while the
other traders only got about 10% commission (Gandel, 2009). It would be safe to assume that he
met, and probably surpassed his individual goals. If his bonus was contractual then legally
Citigroup would have to pay him the bonus just like they would have to pay him his commission
(Giuntoli v. Garvin Guybutler Corp, 1989). In the absence of wording in his employment
contract that says specifically that the annual bonus is discretionary, it is presumed by the courts
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to be contractual (Walsh, 2010), which means then he should get as it is part of his employment
agreement.
Ethical Duties
Ethically speaking, Citigroup is obligated to hand over the money to Mr. Hall as a bonus.
Given the profit that Mr. Hall has made Citigroup, and the valid contract that Mr. Hall has with
Citigroup, it is only fair for Mr. Hall to receive this bonus.
Citigroup has an ethical duty to give Mr. Hall his bonus from the company. An ethical
duty is defined by the two words that make up the phrase. Ethics is defined as “The basic
concepts and fundamental principles of decent human conduct.” (Business Dictionary)
Likewise, a duty is defined as “Ethical, legal, or moral accountability, owed always or for a
certain period, specially to someone who has a corresponding right to demand satisfaction of an
obligation. (Business Dictionary)
Citigroup’s code of conduct states the following:
“We strive to earn and maintain the public’s trust by constantly adhering to the highest
ethical standards. We ask our colleagues to ensure that their decisions pass three tests:
they are in our clients’ interests, create economic value, and are always systemically
responsible. When we do these things well, we make a positive financial and social
impact in the communities we serve and show what a global bank can do.” (Citigroup)
Given Citigroup’s code of conduct, stating that they aim to be a company that is
“constantly adhering to the highest ethical standards” (Citigroup), and the very definition
of what an ethical duty is, it is clear to see that Citigroup has an ethical duty to give this
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bonus to Mr. Hall, per his contract with Citigroup, and the mass profit that citigroup has
received through his work with them. The bonus is absolutely justified, as it would be
justified with any high ranking employee that has brought major profits to the company.
Moral Solution
It has been established that Andrew Hall was entitled to the bonus because he fulfilled all of
the duties that were listed in the contract. This is supported by Forbes’ journalist, Courtney
Cornstock’s “Will Citi Pay the $100 Mill?” by the following statement, “He can, of course, sue
Citigroup. He can take his team to the bank with a strong commodities trading desk like
Deutsche Bank or Goldman Sachs or he can set up his own hedge fund” (2009). In other words,
Citigroup was obligated to follow the terms of their contract with Hall, especially since he made
significant amounts of money for the company and earned his position as the president of Phibro.
In spite of money being taken out of the taxpayers' pockets, every individual deserves to
receive the right amount of money in exchange for his or her services for any company. That is
why it was important for Hall to speak out against Citigroup's immoral attempts to cancel out his
written deal with them.
Conclusion
In conclusion, there are many facets to the ethical problem of whether Mr. Hall should or
should not get his $100-million-dollar bonus when Citigroup was failing and needed to be
supported by subsidies from the government. The moral standards that Citigroup had to abide by
was the payment of what was legally owed to Mr. Hall. One can recognize that the moral impact
of paying Mr. Hall his bonus is a benefit in the long run, because it is in step with the legal
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contract that he had with Citigroup, and ultimately rules are stronger when they aren’t broken
because people feel that they may be unfair. The moral problem was how to balance what Mr.
Hall gets with what people think or feel is right, but the choice of paying or not paying Mr. Hall
were already made when his contract was signed. The economic outcome of paying him his
bonus, sizable as it was, was figuratively a drop in the bucket as his bonus was only 0.2% of the
amount subsidized by the government. Legally it was the right thing to do, as it was enforceable
by law as either a contractual bonus or a discretionary bonus based on his performance.
Citigroup had an ethical duty to fulfil its contractual obligation of paying Mr. Hall his bonus.
The moral solution of paying the bonus to one who is entitled to it because of his hard work is
the right thing to do even though it may not have been popular. Situations like these are common
in the business world today, and that is why it is important to take each situation case-by-case.
The Hosmer Model is just one of several ethical models that help professional find ethical
solutions. A final thought about this case assignment to ask how a discretionary contract would
alter the entire case?
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