It represents a long-term view of how things should be. Without a strategic vision, a company may achieve short-term tactical success, but is likely to struggle in the long-term (Greenfield, 2000).
Indeed, Salomon had been successful for many years as Gutfreund assumed the role of "senior statesman and public spokesman" for the bank. As such, his focus was constantly changing. He was rarely at headquarters due to his frequent international travel to support the company's growing investment banking business. A more strategic focus would have realized the importance of compliance in the financial services industry that demands strict adherence to the letter of the law and the company would have responded through the creation of a vision that embraced corporate ethics. This vision would have then been reinforced with appropriate policies and organizational structure.
III. Leadership Strengths and Weaknesses
Although Gutfreund had his strengths, weaknesses were plentiful. He had been with the company for many years and surrounded himself with a competent management team. In fact, it was Gutfreund who has sought out the leadership skills of Warren Buffett to get Salomon out of the mess Gutfreund had helped create. He was aggressive and no doubt doing what he thought was in the best interest of his company. He appears to have personal integrity, but he fail short because he did not require the same of his employees. His leadership style created a culture that was too short-term profit oriented and that took on too much risk. He was also indecisive, too secretive and irresponsible.
Eventually, Gutfreund's weaknesses outshined his strengths, causing him to do the wrong thing which had serious implications for the company's executives as well as Salomon. The following sanctions were imposed on the executives:
Gutfreuned was banned for life from serving as a chairman or CEO of a securities firm and fined $100,000.
Strauss was suspended from the securities business and fined $75,000.
Meriwether was suspended from trading for three months and fined $50,000.
Mozer received a four-month prison sentence and a $1.1 million fine. He was barred from the securities business for life.
For Salomon, Gutfreund's decision to do nothing resulted in an expensive $290 million settlement, an estimated $4 billion in lost trades from being barred from bidding, a plummet in shareholder equity of $1.65 billion in thirty trading days, and $400 million in lost business because potential customers driven away by Salomon's poor public image following the scandal.
In hindsight, Gutfreund could have made different choices that would have enhanced his position of leadership. He could have implemented many of the procedures Buffet did to prevent noncompliance such as forming a board compliance committee among Salomon directors, appointing a chief compliance office, moving compliance officers out of their offices onto trading floors, building compliance into the corporate culture, extending risk analysis to regulatory, credit, operational and environmental hazards, segregating trading functions to perpetration and concealment of improper acts and requiring legal staff to review all correspondence with the Treasury and Federal Reserve.
If the above measures had been implemented and still had not been successful, Gutfreund should have pursued a zero tolerance policy for employees who did not abide by Salomon's policies and the law. Mozer should have been immediately terminated Mozer. Gutfreund's next steps would have been to launch an internal investigation to understand any other issues with Mozer's conduct and to pursue full disclosure to Salomon's board and legal staff as well as the Federal Reserve Bank. Gutfreund would also need to promise full cooperation with any Federal investigation, acknowledge responsibility and issue...
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