JPMorgan Chase and its predecessor institutions have long had a significant impa
ID: 399271 • Letter: J
Question
JPMorgan Chase and its predecessor institutions have long had a significant impact on the lives of Americans and others throughout the world. For example, the company took on the responsibility for financing large-scale risky large projects such as the Erie Canal, the Panama Canal, and the railroad expansion that opened the door to commerce and economic development throughout the United States. The company has also been at the forefront of important innovations such as credit cards, automatic teller machines, and online banking. In fact, it’s not too far of a stretch to suggest that both creativity and the willingness to take bold risks for high returns have been hallmarks of effective employees at JPMorgan Chase, and this has been true throughout its long history. Less we not forget that the genesis of the company rests with the creative language inserted into the charter of a fledgling water company by one of its principals so that excess capital could be invested in opportunities to make money in a risky environment.
Unfortunately, bold and creative behavior of employees at JPMorgan Chase has not always resulted in positive consequences. In fact, the company has recently paid tens of billions of dollars in fines, settlements, and legal fees due to highly questionable employee behavior. As an example, the company paid $13 billion in a settlement for allegedly selling fraudulent mortgage backed securities to Fannie Mae and Freddie Mac in the years leading up to the financial crisis of 2008. Other highly publicized probes into the company include its involvement in Bernie Madoff’s Ponzi scheme, rigging of currency and energy markets, and the London Whale incident in which a team of employees gambled on complex financial derivatives that resulted in more than $6 billion in trading loses.
As a response to these incidents, which obviously hurt the company’s reputation and bottom line, company executives have taken a number of major steps. For example, CEO Jamie Dimon published a document that acknowledges the company’s role in these incidents and outlines expectations of employees with regard to compliance with legal and ethical standards. The company also set up phone and e-mail lines so employees can anonymously report compliance concerns and related bad behavior. Perhaps the most notable initiative has been the use of a computer algorithm, originally developed for counterterrorism, that monitors and analyzes a large set of employee behaviors to try to catch employees before they actually do anything that results in a costly problem. Employees who miss a compliance class, violate minor rules regarding personal trading, exceed risk limits, or use certain words in e-mails may be flagged as being likely to violate a regulation or policy. Although JPMorgan Chase has not described all the information considered by the system, or what will be done to employees who are identified as likely rule breakers, it hopes that surveillance of employees will help the company police itself better and build a culture where employees understand that bad behavior will not be tolerated.
please answer 3 questions below
1. Which dimensions of job performance do you think JPMorgan Chase emphasized prior to the financial crisis and the costly legal problems that followed? In what ways did this emphasis contribute to both the company’s success and its problems?
2. Which dimensions of job performance do you think JPMorgan Chase is emphasizing now? In what ways will this shift in emphasis help the company? Might there be reasons to believe the shift in emphasis will hurt the company?
3. Which specific dimension of job performance is the company trying to manage with the computer algorithm? How might there be unintended job-performance related consequences of using this system? Explain how the company could manage some of the potential downsides of the system?
Explanation / Answer
1) The dimensions of job performance that JPMorgan Chase emphasized prior to the financial crisis and the costly legal problems that followed are innovativeness, creativity and willingness to take bold risks for high returns. The emphasis on these dimensions contributed to company’s success as it enables creating of credit card, automatic teller machine and online banking. Employees of the company were successful in implementing such technology that we still use today. the problem occurs when company use to take bold risk for high returns ,it could sometimes end up with a big loss.fir example employees gambled on complex financial derivatives that resulted in more than $6 billion in trading loses. This ultimately ruined the company’s reputation.
2) The dimension of job performance that JPMorgan Chase is emphasizing now is employee’s good behavior through compliance with legal and ethical standards. The company has setup a system where the employees can complain about unethical behavior of other employees without revealing their names through emails and phones. A computer algorithm system has also been setup to monitor the behavior of employees before any mishappening takes place. This shift in emphasis will help the company as the employees will now be more conscious of their behavior as they know that they are being monitored all the time. The main problem is there may be conflicts between employees due to the anonymous complaint registering system.
3) The specific dimension of job performance that the company is trying to manage with the computer algorithm is prevention of counterproductive or unethical behavior. As a consequence now there will be fairness in the company as there is more transparency through this sytem.the main problem with this system is that sometimes companies become too strict on some sort of behaviors which are necessary for innovativeness and creativity.
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