A review of Margin Call in the New Yorker from October 2011 called it “easily the best Wall Street movie ever made.” I agree. And while the entire cast is outstanding, Jeremy Irons’s character — John Tuld, the chair of an investment bank in distress on the first days of the 2008 financial meltdown — is one of the most memorable movie performances I’ve ever seen.
Tuld is brilliant and seductive like the Serpent. I’m not sure the reviewers would agree with me but there was something very subtle going on in the pivotal board meeting. Watching with my lawyer eyes, I saw Tuld consciously making a record that would suit him if there was litigation later.
He pretends he knew nothing about the investment bank’s technical insolvency, and that he was only called that night after the discovery by a young math-wiz analyst, masterfully played by Zachary Quinto. But we know that Tuld was given several warnings over at least a year because those conversations are mentioned repeatedly by two other partners trying to save their skins, played convincingly by Simon Baker and Demi Moore.
In fact, all of the bankers were aware of the potential risk and had danced around it because they were making so much money, and because they knew it would be very difficult to pin it legally on any of them unless someone testified. That’s why you see that every person who knew about the risks is neutralized — some by big severance packages and confidentiality agreements and some by promotions and raises.
If there are shareholder or creditor lawsuits later, Tuld will be able to say he took immediate action to save the firm upon discovery of the financial impairment, and that he sold the securities that were the firm’s capital into an existing market at the then existing market price. It’s not in the film, but in real life a person as brilliant and domineering as Tuld would’ve been briefed repeatedly by lawyers on how to handle it if the whole thing comes apart. The scenes in the boardroom seem to be running according to an unseen script prepared well in advance by Tuld and his lawyers.
In an interview at the film’s opening in 2011, the director and writer, J.C. Chandor, who was nominated for an Oscar for the screenplay, said he had grown up with all of the kinds of people in the film. They use exact numbers to describe everything from the cost of prostitutes to the annual salaries of everybody. The film is a culture critique like the book I posted about a year and a half ago called What Money Cannot Buy by Harvard Professor Michael Sandel. Money tends to crowd out all other competing values — that’s what you see in the film. People at the investment bank have no friends, no loyalty that isn’t purchased with money, a risk manager (Kevin Spacey) who doesn’t think about his son who is also a broker, and the use of ridiculous hyperbole — You’re still alive, I survived, You made it — that even Navy SEALs wouldn’t use. In answer to the question “what money cannot buy,” in this film the answer is nothing — including your children, your vocabulary, your marriage and your self-respect.
And thus, I believe this is why the business world is slowly but surely creating a new business solution to an old business problem — lapses in integrity caused by greed. In theory, if there was a chief compliance officer in the investment bank depicted in the movie who was part of the process that led up to the big boardroom scene, perhaps the result would be different. I can’t go much further without spoiling the plot.
But I suspect the compliance officer would likely get fired even today. That’s not the end of the world if the compliance officer can be a whistleblower protected by the SEC, which steps in and saves the national economy. Compliance after all, as I have tried to write about on the FCPA Blog, is not another company program but rather is part of the complex interactive system that includes whistleblowers, stakeholders, the media, and many others.
Massive fines and more criminal enforcement certainly will get the attention of senior executives and directors and cause them to reflect on the best way to build something better in the world: consistent business driven integrity. Like the man who hit the mule in the head with a big stick and said,”Now that I have your attention…”
Unfortunately, when business does something that is socially responsible only because it is reacting to fear of enforcement, that is not “business driven integrity,” an apt phrase I learned from Gemma Alfoni at the Basel Institute on Governance. That’s why many people today, myself included, are putting our hope in a new compliance system of many forces acting together, including new voices at the table by better in-house lawyers working in smooth collaboration with new compliance professionals, who can help produce business driven integrity and a higher level ethical business culture.
Many companies were doing the right thing in 2008, as they are now, often because ethically inclined lawyers in-house and outside and compliance professionals push hard and push back. Neither those companies nor the lawyers or compliance professionals are getting credit for doing the socially responsible thing because it’s not in the headlines and they’re not allowed to talk about it. This is a major and I repeat major problem in the compliance and business ethics field.
How do we prove all of the good things that are happening? No one is going to make a film about that anytime soon.
Michael Scher is a senior editor of the FCPA Blog. He has over three decades of experience as a senior compliance officer and attorney for international transactions. He can be contacted here.