Seventh Art’s Perspective on Ethical Conduct and Corporate Irresponsibility: Financiers and Accountants 9819925193, 9789819925193

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Accounting, Finance, Sustainability, Governance & Fraud: Theory and Application

Iffet Kesimli

Seventh Art’s Perspective on Ethical Conduct and Corporate Irresponsibility Financiers and Accountants

Accounting, Finance, Sustainability, Governance & Fraud: Theory and Application Series Editor Kıymet Tunca Çalıyurt, Iktisadi ve Idari Bilimler Fakultes, Trakya University Balkan Yerleskesi, Edirne, Türkiye

This Scopus indexed series acts as a forum for book publications on current research arising from debates about key topics that have emerged from global economic crises during the past several years. The importance of governance and the will to deal with corruption, fraud, and bad practice, are themes featured in volumes published in the series. These topics are not only of concern to businesses and their investors, but also to governments and supranational organizations, such as the United Nations and the European Union. Accounting, Finance, Sustainability, Governance & Fraud: Theory and Application takes on a distinctive perspective to explore crucial issues that currently have little or no coverage. Thus the series integrates both theoretical developments and practical experiences to feature themes that are topical, or are deemed to become topical within a short time. The series welcomes interdisciplinary research covering the topics of accounting, auditing, governance, and fraud.

Iffet Kesimli

Seventh Art’s Perspective on Ethical Conduct and Corporate Irresponsibility Financiers and Accountants

Iffet Kesimli Lüleburgaz Vocational School Kırklareli University Kırklareli, Türkiye

ISSN 2509-7873 ISSN 2509-7881 (electronic) Accounting, Finance, Sustainability, Governance & Fraud: Theory and Application ISBN 978-981-99-2519-3 ISBN 978-981-99-2520-9 (eBook) https://doi.org/10.1007/978-981-99-2520-9 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Foreword

While watching films, I realized that it sometimes becomes hard for me to follow the scenes just because an unethical conduct catches me and drives my attention to corporate fraud in case there is one. I feel that my reaction is to be categorized as Déformation Professionnelle, typically translated as professional deformation, which is a French term referring to a tendency to process the world through one’s professional eyes rather than from a more balanced perspective. This is even valid for films shot for entertainment. However, there are a number of films based on true stories of corporate scandals. Watching them sometimes requires financial literacy or you feel that the audience is expected to have business administration background. Film scenarios are mostly based on real-life matters. In turn, movies impact the persons in societies. We may hypothesize that there is a reciprocal effect. Of course sensitivity of the audiences toward unethical behavior on a great extent depends on social values, which are mainly influenced by culture. While some people in some countries sense fraudulent acts promptly, some do not. Huge budgets and long periods of time are needed in order to explore the relations between social values and the Seventh Art. Thus, this book will not cross the border. The aim of this book is demonstrating the influence of corporate scandals on cinema and vice versa. The book also aims answering the question whether the beliefs, attitudes, and conducts of the audience are somehow impacted in the aftermath of watching these kinds of movies. The book will discuss the possibility of corporate professionals’— specifically accountants—mimicking movie characters who act fraudulently, and the probability of businesspeople learning good lessons from plots. In case TV-serials are talked about, there will not be any discrimination between cinema and TV-serials. Kırklareli, Türkiye

Iffet Kesimli

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Acknowledgements

First, my sincere gratitude goes to Kıymet Çalıyurt. She is not only the editor of this book and the book series but also my doctoral thesis advisor, who inspires me to continue in making high-quality research and consequently encourages us to produce. I am also thankful to O˘guz, my dear husband, who always spends considerable time to discuss with me about the issues that may arise in business world. Besides, I would like to acknowledge the help of all the Springer Nature Singapore Pte Ltd. lovely people, involved in this book project to express my opinions and suggestions, and more specifically Anushangi and Srishti who built the bridge for me to accomplish my goal. Furthermore, Bahar Do˘gramacı Yalçın and Bülent Kılıç, my colleagues, who spent considerable time in leading, discussing and assisting the statistical analyses of my research, deserve my sincerest gratitude. Last thing to note, the research for this book is neither financially supported by an institution nor by an individual. Iffet Kesimli

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Introduction

My friends, I’m the modern Robin Hood. Let’s continue to rob the poor and make the rich richer! Marc Tourneuil—Capital (2012) directed by Costa-Gavras

Film scenarios are mostly based on real-life matters. In turn, movies impact the persons in societies. It may be hypothesized that there is a reciprocal effect. The aim of this book is demonstrating the influence of corporate scandals on cinema and vice versa. The book also aims answering the question whether the beliefs, attitudes, and conducts of the audience are impacted in the aftermath of watching movies. It can be argued that having watched just a single film would not make a difference in a person’s life. Change in attitude requires repetition; therefore, such an impact would depend on accumulation. The book will discuss the possibility of corporate professionals—specifically accountants, bankers, and financiers—imitating the movie characters who act fraudulently and the probability of businesspeople learning lessons from plots. The reason why specifically accounting-related professions are focused on is that accounting department is among the departments, which pose great risk regarding occupational fraud. Of course, there are samples, where someone mimics film characters—however, the present author hopes that only good characters inspire such people. At the moment, when i discovered that there are film festivals exclusive for fraud films exist, I felt some kind of relief. The New Zealand International Fraud Film Festival took place in 2019. It is affiliated with another film festival—the Dutch Fraud Film Festival—which was first held in the Netherlands in 2014. Films and documentaries about fraud are delivered. Some live sessions are held for discussions. The aim of the festival will be fulfilled if it inspires awareness and debate around ethics. It is not a surprise that such a festival is launched in New Zealand, because the country is among the least corrupt countries around the world. According to the organizers of the festival, cross-industry collaboration is needed to battle with fraud (https:// fraudfilmfestival.co.nz, 24.11.2019). Fraud perception may differ among countries,

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Introduction

cultures, the era it happens, and age groups. Increasing the awareness of large audiences is very important, because there are countless occasions where people assist fraudulent acts without being aware of it. Chapter 1 introduces definitions and what is expected from corporates regarding responsibility, transparency, and ethics. Chapter 2 summarizes a bundle of movies in an extended way and highlights the role of accountants and/or financiers in ethics-related problems. The irreparable adverse impacts of accountant’s or company owner’s selfish misconduct on several countries’ economy are discussed in Chap. 3. A field study to evaluate the impact of movies on members of business world composes Chap. 4. A questionnaire is designed in order to understand the stance of abovementioned professionals toward business ethics and fraud in relation to movies. There is no limitation for respondents’ nationality or country. Therefore, all responses are evaluated together. Related analyses, tables, graphics, and discussions take place in this chapter. Conclusions follow. A tabulated list of movies and documentaries based on corporate scandals is placed in Appendix. It might be treated as an advice in creating a watch list.

Literature

Literature survey points to a limited number of similar research. Skorin-Kapov (2019) presents issues related to professional and business ethics in her book. The author discusses realworld cases and relevant narrative films. Her philosophical view points to the issue of ethics; her artistic evaluation searches creativity, and her pragmatic scope evaluates films regarding business life. The author groups films under categories: (1) Ethical positions and decision-making, (2) mythical structure of narration, cinematic elements, film genres, (3) financial machinations and ethical perspectives, (4) workplace harassment, violence, inequity, and inequality, (5) professional and business ethical challenges, (6) business, environment, society, and (7) career pressures, responsibility, identity. While Skorin-Kapov’s book neither limits films according to sectors nor to release date, this book has limitations regarding both. Banking sector, finance, and accounting are the areas this book focuses on, and the earliest release date backs to 1987. Another book mentioning movies in relation to fraud is Padgett’s. The chapter titled “Motivation and Opportunity as Key Indicators” gives examples from movies by categorizing them according to the motivation of fraud. As Padgett put forth, given the opportunity usually fortified by rationalization, the fraud committers’ incentives or pressure in some cases are (2015, 85): (1) Need, (2) greed, (3) copying, (4) anger, (5) pleasure, and (6) performance pressure. For example, fraudster Frank Abagnale, inspiring the movie Catch Me If You Can (2002), has spoken of the pleasure that comes from achievement; particularly an achievement involving evasion or subversion of authority. About the incentive, the author concludes that, since most prevention assumes some rationality and a relationship between risk and reward, it poses a problem, where the fraudster is not driven by a particular incentive to steal to buy more toys or pay off the medical fees. Even though this book tries to tell about movies, the characters of which are mainly fraudsters, or the stories of which are about corruption/fraud, the present author did not want to miss the opportunity to quote the story of Steven, who was convicted of value-added tax (VAT) fraud in United Kingdom (UK). Steven was working in the film industry. Steven and his business partners decided to put together a business proposal which was reliant on investor funding. Their business proposal xi

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Literature

was accepted, certified, and 25% fo the budget backed by the UK government. Steven, as the organizer, started to claim tax rebates in advance of the proposed work being completed. They never completed any work and were accused of misleading his backers. They were deliberate to seek to evade paying tax at a higher rate due to their greed. He was able to do this, because he was facilitated by his work. Without any intention to complete the proposed work, they sought to steal £790,000 of a potential £2.5 million from investors (May and Bardhwa 2018, 43). Krambia-Kapardis’s book title very well summarizes the aim of this current research. She also believes that in order to prevent financial and economic crises, it is crucial for us to handle corporate fraud and corruption. It is mostly and wrongly believed that fraud or corruption just bothers the corporate; however, that is not the case. As stated in many books, articles, or columns, fraud and corruption have contagious effect. This loads more importance on the fight against both. Depending on the size of the victim company, the fraud and/or corruption may trigger financial crises, and a whole country may end up with an economic crisis. In her Holistic Corruption and Corporate Fraud Prevention Model (CCFP©), which is in the form of a three-pillar diagram—person, company, and society—preventative measures were provided at each of the three levels of analysis. The three pillars are codependent. At the individual level, the emphasis is on ethics and moral values. The essential components of CCFP© approach at company level are ethical programs, corporate social responsibility, and corporate governance. Ethics in the curriculum, institutional integrity, political accountability, and civil society participation are listed as the core components of the model at the society level. There is not any priority among listed measures; however, the measures depicted in all three pillars at each level are required to be implemented simultaneously (Krambia-Kapardis 2016, 164). The paths of fraud and film industry once more intercept as depicted in Balleisen’s book (2017). He displays how politicians benefited from the power of the seventh art in promoting antifraud programs or just raising awareness. Public education efforts through to short films with the assistance of the New York attorney general’s office; such as The Fine Art of Fraud (1966), which overviews fraud techniques. Radio and television spots and consumerrelated high school and college curricula were the other tools (Balleisen 2017, 305). Another piece of work where the paths of corporate fraud and movies crosses is Well’s. In his book, he points to the growing trend of fraud examiners digging social media for evidence. The continuously growing popularity of the social sites helps fraud examiners in finding information about perpetrators in case they share personal information. Photographs, status updates, locations at certain times, friends, political beliefs, their work history, social schedules, hobbies, music, vacation destinations, typical hangouts, and last but not least their movie tastes compose the relevant social media evidence about perpetrators (2018: 161). The films they like to watch may give some clues about their intentions, which may or may not form the basis for their fraudulent acts. As witnessed, sometimes they become part or the core of a documentary film/serial or a movie, if discovered or caught for committing fraud at a well-known company. How watching films affect

Literature

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human brain and attitudes is not the kind of observation we are able to measure at laboratories. The information to be extracted with the help of interviews or questionnaires is limited. One of the blogs of Platt College discusses this interchanging relation by scattering samples (https://platt.edu/, 09.07.2021): (1) Fight Club (1999) inspired fight clubs in real life like New York’s underground fight circuit; moreover; the Fight Club way of life has spread across the globe, (2) The Thin Blue Line (1988), which is a true crime documentary focusing on corruption in the justice system shook the faith in police, (3) The Day After Tomorrow (2004) helped in raising awareness of global warming, (4) V For Vendetta (2005) inspired hacktivist group Anonymous1 , (5) All the President’s Men (1976) told the story of how two reporters for the Washington Post, investigated the Watergate scandal; thus inspired people to enroll journalism schools across the USA. (6) In his documentary Bowling for Columbine (2002), Michael Moore confronted executives at Kmart because they sold guns and ammunition. In between, Kmart stopped selling these items, (7) Bambi (1942) depicted a mother deer being killed by a hunter before her baby’s eyes. Following the film’s release, deer hunting was cut in half in the US. The Bambi Effect—the psychological effect that comes from anthropomorphizing “cute” animals got its own informal name from this movie, (8) Oliver Stone’s JFK (1991), by presenting a high-level conspiracy theory about the assassination of President John F. Kennedy and a plot to cover it up, prompted more transparency in government, (9) Super Size Me (2004) showed what eating nothing but McDonald’s for one month does to the human body. It did not take two months for McDonald’s to take away the “super-size” option, (10) Jaws (1975) was about a killer great white shark terrorizing a beach community one summer and caused beach tourism to drop off for some time, (11) Blackfish (2013) told the harrowing and depressing story of orcas living in captivity. SeaWorld—a company breeding orcas and letting them perform for the public—ended the program and changed the way that killer whales perform for the public. The Blog argues that these films that have changed people’s lives outside the theater in tangible ways, therefor, are valuable examples of the important role films play in the world at large. In the conclusion of his book, Gottschalk (2018) quotes from The Wolf of Wall Street—Jordan Belfort’s story of greed, power, and excess, which became a movie later on. This film is given in Chap. 2 in detail. Belfort’s book is evidence that he knew what he was doing. In order to enjoy power and wealth, he found it convenient to run his business illegally the way he did it. According to Gottschalk; for top management, financial crime is a convenient solution to problems, and way to explore and exploit opportunities; thus, in order to thoroughly explain the white-collar crime, the theory of convenience has emerged. Time and effort saving actions, and avoiding stress and pain is the choice of convenience oriented people. Seemingly legitimate activities help white-collar fraudsters to commit crime and conceal it as well (2018: 200). 1

Anonymous A decentralized international activist/hacktivist collective/movement widely known for its various cyberattacks against several governments, government institutions and government agencies, corporations, and the Church of Scientology. The group originated in 2003 on the imageboard 4chan representing the concept of many online and offline community users simultaneously existing as an anarchic, digitized global brain (en.wikipedia.org, 09.07.2021).

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Literature

Wells (2017) quotes “Greed is good,” Gekko’s—Michael Douglas—famous line from the movie Wall Street. This film is also handled in Chap. 2. The author argues that there is little debate that greed is certainly a factor in occupational fraud, while some may debate whether that is true. He adds that students of related subjects mostly describe embezzlers and their ilk by that single word “greedy” (Wells 2017: 368). Three basics necessary not to eliminate but to minimize occupational fraud and abuse are (1) hiring the right people, (2) treating them well, and (3) not subjecting them to unreasonable expectations (369). Wells talks about perception of detection. According to him, deterrence of occupational fraud and abuse begins in the employee’s mind. Perception-of-detection axiom is: Employees who perceive that they will be caught engaging in occupational fraud and abuse are less likely to commit it.

According to Wells, the six positive steps organizations can take to increase the perception of detection are (371): (1) Employee education, (2) proactive fraud policies, (3) a higher stance, (4) increased use of analytical review, (5) surprise audits where feasible, and (6) adequate reporting programs. Employee education, in my opinion, is very important. The earlier ethics education start, the better it is. Role models within the child’s family circles are very important. There is a chain reaction. The child hears, sees, observes, and implies. The children are exposed to all kinds of unethical attitude and behavior. Even though these kinds of things at a certain degree depend on the character of the child; being exposed to these acts may lead the child to imitate fraudulent acts in adulthood by just believing it is normal. Of course this kind of analysis requires professional training but may be the proof lies in well-known fact that children are not allowed to watch TV or movie films and/or serials if it is appropriate for them. This is simply because of the copying and imitating capability of the child. In light of literature review, it can be concluded that fraud is almost inevitable; the matter is the way you handle it, proactive actions you take, and careful analyses of data. What the author of this book hypothesizes is that movies, especially the ones, the scripts of which are based on real-life stories, are valuable and helpful in increasing awareness and sensitivity of responsible corporate governance.

References Balleisen E J (2017) Fraud an American History from Barnum to Madoff. Princeton University Press, Princeton, New Jersey Gottschalk P (2018) Fraud Investigation Case Studies of Crime Signal Detection Routledge Abingdon, Oxon ISBN 9781351139069 Krambia-Kapardis M (2016) Corporate Fraud and Corruption: A Holistic Approach to Preventing Financial Crises. Palgrave Macmillan, New York ISBN: 978–1–137–40643–9 May T, Bhardwa B (2018) Crime Prevention and Security Management. Palgrave Macmillan Springer Nature, Cham, Switzerland ISBN 978-3-319-69401-6 Padgett S (2015) Profiling the Fraudster Removing the Mask to Prevent and Detect Fraud. John Wiley & Sons, Inc., Hoboken, New Jersey

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Skorin-Kapov J (2019) Professional and Business Ethics through Film: The Allure of Cinematic Presentation and Critical Thinking. 1. Edition. Palgrave Macmillan - Springer Nature Switzerland AG, Prentice Hall ISBN 978-3-319-89333-4 Wells Dr. J T (2017) Corporate Fraud Handbook. John Wiley & Sons, Inc., Hoboken, New Jersey ISBN 9781119351931 Wells Dr. J T (2018) International Fraud Handbook. John Wiley & Sons, Inc., Hoboken, New Jersey ISBN 9781118728550

Abbreviations and Symbols

CEO COO FBI GDP SEC U.K. U.S. or US USD or US$ USD $

Chief Executive Officer Chief Operating Officer Federal Bureau of Investigation Gross Domestic Product Securities Exchange Commission-US United Kingdom United States of America (USA) US Dollar, American Dollar United States Dollar Dollar (US)

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Contents

1 Expectations from Corporates and Individuals . . . . . . . . . . . . . . . . . . . . .

1

2 Seventh Art: Samples of Business-Related Movies . . . . . . . . . . . . . . . . . .

9

3 Reflections of Misconducts and Interactions . . . . . . . . . . . . . . . . . . . . . . . 31 4 Field Study to Evaluate the Impact of Movies on Members of Business World . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Conclusions and Discussions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

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List of Figures

Fig. 1.1

Fig. 1.2 Fig. 1.3 Fig. 2.1

Three main pillars of CSR. Source United Nations Industrial Development Organization (UNIDO) (2021) What is CSR? https://www.unido.org/our-focus/advancing-economic-com petitiveness/competitive-trade-capacities-and-corporate-res ponsibility/corporate-social-responsibility-market-integration/ what-csr. Accessed 01 Aug 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corruption perception index. Source www.transparency.org/ cpi. Accessed 20 Jan 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ACFE fraud tree. Source Redesigned from www.acfe.com. Accessed 05 Jul 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lehman Brothers Share Price in US$ (05.11.2007–22.09.2008). Source https://www.psdtolive.com/lehman-brothers-shareprice-history/. Accessed 01 Mar 2021 . . . . . . . . . . . . . . . . . . . . . . . .

2 3 6

25

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List of Tables

Table 1.1 Table 3.1 Table 3.2 Table 4.1 Table 4.2 Table 4.3 Table 4.4 Table 4.5 Table 4.6 Table 4.7 Table 4.8 Table 4.9 Table 4.10 Table 4.11 Table 4.12 Table 4.13 Table 4.14 Table 4.15 Table 4.16 Table 4.17

Summary of ACFE findings (2016–2018–2020) . . . . . . . . . . . . . GDP and population of Iceland . . . . . . . . . . . . . . . . . . . . . . . . . . . The level of impact of 2007–2008 economic crisis on the real sectors of the countries . . . . . . . . . . . . . . . . . . . . . . . . CSR dimension and age variable . . . . . . . . . . . . . . . . . . . . . . . . . . CSR dimension and marital status variable . . . . . . . . . . . . . . . . . CSR dimension and profession variable . . . . . . . . . . . . . . . . . . . . CSR dimension and tenure in job variable . . . . . . . . . . . . . . . . . . OPIN dimension and tenure in profession variable . . . . . . . . . . . OPIN dimension and number of films watched variable . . . . . . . OPIN dimension and development level variable . . . . . . . . . . . . . OPIN dimension and country variable . . . . . . . . . . . . . . . . . . . . . COETH dimension and marital status variable . . . . . . . . . . . . . . COETH dimension and education variable . . . . . . . . . . . . . . . . . . COETH dimension and local versus global variable . . . . . . . . . . TEACH dimension and tenure in Profession variable . . . . . . . . . TEACH dimension and tenure in job variable . . . . . . . . . . . . . . . CHANGE dimension and development Level variable . . . . . . . . CHANGE dimension and company size variable . . . . . . . . . . . . . Correlations Kendall’s tau_b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Correlations Spearman’s rho . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 32 34 41 42 43 43 44 45 45 46 47 47 48 49 49 50 51 52 54

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List of Graphs

Graph 4.1 Graph 4.2 Graph 4.3 Graph 4.4 Graph 4.5 Graph 4.6 Graph 4.7 Graph 4.8 Graph 4.9

Gender distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution of age groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Marital status of respondents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Education levels of respondents . . . . . . . . . . . . . . . . . . . . . . . . . . . Profession of respondents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tenure of respondents regarding their profession . . . . . . . . . . . . . Tenure of respondents regarding their last occupation . . . . . . . . . Respondents’ company—local versus global . . . . . . . . . . . . . . . . Size of respondents’ companies . . . . . . . . . . . . . . . . . . . . . . . . . . .

36 37 37 38 38 39 39 39 40

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About the Author

Iffet Kesimli Born in Üsküdar-Istanbul, she attended Babaeski Cumhuriyet Primary Schoo and Istanbul Erkek Lisesi. Following the English Preparation School of Bo˘gaziçi University, with honors degree, she first graduated from Vocational School of Management and got her B.A. from Business Administration. Within the 10 Young Executive Candidates program of Türkiye Tütüncüler Bankası (Turkish Tobacco Producers’ Bank) and Irving Trust Bank, which were partners at the time, she got training at all departments of the Bank in Izmir and assigned as an assistant manager became the assistant to the CEO—Dr. Antonio Puja. Following the break of the partnership of two banks, she worked as an assistant personnel manager until leaving the bank—moved the headquarters to Istanbul—then started working at Raks Holding as an assistant manager of Budgeting and Planning Department. Following the radical management changes at the company, she worked as a freelancer and assisted budgeting processes of BMC OMPAS¸ A.S., ¸ Rapak Ambalaj, etc., until becoming the partner and manager of Bilda Bilgisayar Sistemleri Ltd. Sti., ¸ a software company. She is ownership of a trading company and trade life followed. With two decades private sector experience, she started lecturing at vocational schools. In the meantime, she got her M.B.A. from Business Administration at Trakya University and enrolled with Ph.D. program at the same university—completed successfully in 2015. She is affiliated to Kırklareli University, Lüleburgaz Vocational School, as the head of Accounting and Taxation Program and lectures at Lüleburgaz Vocational School. She speaks German and English and Turkish. ORCID 0000-0002-2082-5515 https://personel.klu.edu.tr/iffet.kesimli/lan/en

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Chapter 1

Expectations from Corporates and Individuals

Under this heading, definitions will be provided. Following the definitions of corporate ethics and corporate social responsibility, highlights from reports of Transparency International and Association of Certified Fraud Examiners (ACFE) will take place.

Corporate Ethics The study of suitable business policies and practices related to corporate governance, insider trading, bribery, discrimination, corporate social responsibility, and fiduciary responsibilities, all of which would be defined as potentially controversial subjects, is called as business ethics (Twin, www.investopedia.com, 31.07.2021). Business ethics is also called corporate ethics, and this book mostly prefers the term corporate ethics. Another definition says that it is a form of applied ethics or professional ethics. Thus, it examines the ethical and moral principles and problems, which naturally arise in every business environment. According to this definition, it applies to all aspects of business conduct on behalf of both individuals and the entire company (https://cou rses.lumenlearning.com, 31.07.2021).

Corporate Social Responsibility Corporate social responsibility (CSR) is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders (www.unido.org, 01.08.2021). Customers, vendors, competitors, shareholders, government, employees, and communities are some and most prominent stakeholders of institutions. As seen from the Fig. 1.1, economic © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 I. Kesimli, Seventh Art’s Perspective on Ethical Conduct and Corporate Irresponsibility, Accounting, Finance, Sustainability, Governance & Fraud: Theory and Application, https://doi.org/10.1007/978-981-99-2520-9_1

1

2

1 Expectations from Corporates and Individuals

Fig. 1.1 Three main pillars of CSR. Source United Nations Industrial Development Organization (UNIDO) (2021) What is CSR? https://www.unido.org/our-focus/advancing-economic-competiti veness/competitive-trade-capacities-and-corporate-responsibility/corporate-social-responsibilitymarket-integration/what-csr. Accessed 01 Aug 2021

performance issues, social performance issues, and environmental performance issues fall in the scope of CSR. The core of the figure displays the stakeholders.

In Light of Transparency International Transparency International is an independent, non-governmental, and not-for-profit global movement working in over 100 countries. The mission of the movement is to stop corruption and promote transparency, accountability, and integrity at all levels and across all sectors of society. A world in which government, politics, business, civil society, and the daily lives of people are free of corruption is their vision. Transparency International prepares and publishes the corruption perception index (CPI). The CPI aggregates data from a number of different sources that provide perceptions among businesspeople and country experts of the level of corruption in the public sector. The index ranks 180 countries and territories by their perceived levels of public sector corruption use a scale of zero to 100. In case a country is

In Light of Transparency International

3

Fig. 1.2 Corruption perception index. Source www.transparency.org/cpi. Accessed 20 Jan 2021

perceived as clean, its score becomes 100. Scoring zero means that regarding the public sector the country is perceived highly corrupt. Based on aggregated data, maps are prepared, where the darker the color, the more corrupt is the country. In my opinion, the impacts of a corrupt country are to be calculated by considering the size of its economy and the number of their foreign trade counterparts due to the fact that corruptness is contagious. CPI Map of 2020 is provided below (Fig. 1.2). In 2020, with a score of 40, Turkey is one of six countries, which share rank 86th, where the average of 180 countries is 46. The average mirrors the fact that twothirds of these countries are below 50. This observation is expected to reflect itself in movies. Movies have a mission to tell several stories upon which public attention should be driven. So, there are lots of prospective fraud and corruption cases upon which film scenarios will be based on.

4

1 Expectations from Corporates and Individuals

In Light of ACFE Reports Report to the nations is the biennial outcome of the global studies of Association of Certified Fraud Examiners (ACFE) on occupational fraud and abuse. A brief summary of findings of the last three reports is displayed in Table 1.1. The interpretation of the summary table helps understand that even controlling just accounting and finance departments makes sense in fighting fraud; because around 20% of perpetrators of fraud cases are from accounting and finance departments. Moreover, the most risky perpetrator’s tenure is one to five years. The likelihood of committing fraud makes a peak—46%—during these years. For tenures longer than five years, it drops by half. Billing with 32% [(29% in 2018); (27% in 2016)]; check and payment tampering with 27% [(30% in 2018); (30.5% in 2016)]; and corruption with 24% [(23% in 2018); (21.6% in 2016)] are the top-most occupational fraud schemes in accounting department. Even though ranks may vary from year to year; corruption with 35% [(37% in 2018); (37.2% in 2016)]; expense reimbursements 14% [(13% in 2018); (14.9% in 2016)] and financial statement fraud 14% [(16% in 2018); (23.4% in 2016)]; cash on hand with 12% [(21% in 2018); (22.3% in 2016)], and billing with 20% [(17% in 2018); (24.5% in 2016)] are top-most seen finance department’s fraud schemes. Except for corruption, these are under Asset Misappropriation category of fraud schemes in the Fraud Tree. According to ACFE, corruption is a scheme in which an employee misuses his/her influence in a business transaction in a way that violates his/her duty to the employer in order to gain a direct or indirect benefit. Examples would be schemes involving bribery or conflicts of interest. Check or payment Table 1.1 Summary of ACFE findings (2016–2018–2020) Percent of cases 2016

Percent of cases 2018

Percent of cases 2020

Perpetrator’s tenure

Median loss USD 2020

Median loss USD 2018

Median loss USD 2016

8.2%

9%

9%

Less than 1 year

50,000

40,000

49,000

42,4%

44%

46%

1–5 years

100,000

100,000

100,000

26.5%

23%

22%

6–10 years

190,000

173,000

210,000

22.9%

24%

23%

More than 10 years

200,000

241,000

250,000

Percent of cases 2016

Percent of cases 2018

Percent of cases 2020

Department

Median loss USD 2020

Median loss USD 2018

Median loss USD 2016

16.6%

14%

14%

Accounting

200,000

212,000

197,000

4.5%

6%

5%

Finance

100,000

156,000

234,000

Source Report to the Nations on Occupational Fraud and Abuse, ACFE 2020–2018 ve 2016 www. acfe

In Light of ACFE Reports

5

tampering scheme is a fraudulent disbursement scheme in which a person steals his/her employer’s funds by intercepting, forging, or altering a check or electronic payment drawn on one of the organization’s bank accounts. Examples would be the employee stealing blank company checks and making them out to himself/herself or an accomplice. Sometimes, the employee reroutes an outgoing electronic payment to a vendor to be deposited into his/her own bank account. Billing scheme is a fraudulent disbursement scheme in which a person causes his/her employer to issue a payment by submitting invoices for fictitious goods or services, inflated invoices, or invoices for personal purchases. Examples would be when an employee creates a shell company and bills his/her employer for services not actually rendered. Another example would be when an employee purchases personal items and submits an invoice to employer for payment (www.acfe.com, 05.07.2021). Sometimes, traditional practices pave the way to corrupt acts. The whole branch employees pretending that working overtime is necessary; staying just for an additional one hour, doing almost nothing, ordering pizza, and letting the company pay the bills of cabs depicts a real example from real life. These kinds of behavior are explained with the help of the Fraud Triangle. Perceived opportunity and rationalization play their parts. The readers may argue that not everybody would commit fraud. Those who believe in this are only ten percent correct; because, according to 10-80-10 rule, only ten percent of the population will never commit fraud (www.aga cgfm.org, 06.07.2021), but ten percent is always after committing fraud. The reader should not get a relief about the rest; given the right combination of opportunity, pressure, and rationalization, 80% of the population might commit fraud. It is just a matter of capability, which had been added to the triangle to form a diamond. This is sad and supports what the present author always hypothesizes—ethics starts at home at early childhood. The Fraud Tree given in Fig. 1.3 displays 65 kinds of fraud types, and it is ironic that at any moment a new kind might be invented by fraudsters. In fact, careful eyes will catch many of these branches of the Fraud Tree in the film scenarios. ACFE findings are supported by the research of the well-known international network Klynveld Peat Marwick Goerdeler (KPMG). KPMG’s 2011 “Analysis of Global Patterns of Fraud” research, which is based on 348 actual fraud investigations conducted by its firms in 69 countries, reveals that the typical fraudster is predominantly male, is 36–45 years old, commits fraud against his own employer, works in the finance function/in a finance-related role, holds a senior management position, has been employed by the company for more than ten years, and works in collusion with another perpetrator (Padgett 2015: 65). This chapter shows why it is crucial to prevent fraudulent act. Not only the economic impact, but also the psychological effects of frauds require us to handle this huge problem; it should concern every human being in every country. If we do not perceive it as our own problem and do not produce a solution, it will be too late when the day comes, and we are already hurt.

Understated

Unrecorded

Sales

Economic Extortion

Unconcealed

Lapping Schemes

Write-Off Schemes

Receivables

Cash Larcency

Theft of Cash Receipts

Skimming

Theft of Cash on Hand

Refunds and Other

Personal Purchases

NonAccomplice Venddor

Shell Company

Billing Schemes

Cash

Commission Schemes

Falsified Wages

Ghost Employee

Payroll Schemes

Multiple Reimburse ment

Fictitious Expenses

Overstated Expenses

Mischaracterized Expenses

Expense Reimbursement Schemes

Authorized Maker

Altered Payee

False Refunds

False Voids

Register Disbursement

Misuse

Unconcealed Larccency

Purchasing and Receeiving

False Sales and Shipping

Asset Requisition and Transfers

Larcency

Inventory and All Other Assets

Forged Endorsement

Forged Maker

Check and Payment Tampering

Fraudulent Disbursements

Asset Misappropriation

Fig. 1.3 ACFE fraud tree. Source Redesigned from www.acfe.com. Accessed 05 Jul 2021

İllegal Gratuities

Bid Rigging

Invoice Kickbacks

Purchasing Schemes

Sales Schemes

Bribery

Conflicts of Interest

Corruption

Improper Disclosures

Improper Asset Valuation

Concealed Liabilities and Expenses

Fictitious Revenues

Timing Differences

Net Worth/Net Income Oversstatements

Improper Disclosures

Improper Asset Valuations

Overstated Libilities and Expenses

Timing Differences

Net Worth/Net Income Underrstatements

Understated Revenues

Financial Statement Fraud

6 1 Expectations from Corporates and Individuals

Individuals’ Ethical Sensitivity

7

Individuals’ Ethical Sensitivity Starting from childhood the environment the child is raised, the people the child is in contact with, the education he/she gets, his/her gender and ethnicity, etc. all shape the ethical stance of a person. Shaub et al. (1993) conducted a study where path analytic approach is used to examine the ethical orientation, commitment, and ethical sensitivity of 207 auditors in a Big61 firm. According to their results, an auditor’s cultural environment and personal experiences that shape one’s ethical orientation— both of which are reflected in ethical orientation—are more significant in influencing ethical sensitivity than either the professional or organizational environment. They concluded that auditor’s recognition of an ethical issue is partly a function of his/ her perspective on right and wrong. However, according to them, there are questions about contribution of accountants’ ability to recognize ethical issues on better ethical judgments (Shaub et al. 1993: 166). As Shaub et al. made important contributions to business ethics literature, so did Hunt, Wood, and Chonko with several studies and also Kaptein did so by developing Corporate Ethical Virtues Model in 2008. The only constant in life is change, the aphorism of Heraclitus, who lived circa 535–475 BC, became the motto of many people. In my opinion, what is changing is just the decor of the scene. Poverty is the same poverty; ethics is the same ethics. The question is how individuals make their decisions and the way they act. A business is nothing else than a non-living object, unless people fill the space work there. While individuals form the corporate, first they mold it and then they start representing it. Therefore, individuals’ ethical stances make the difference. Here are samples: • An accountant keeps books of his/her clients for more than 30 years. Meanwhile collects samples or copies of transactions, which would be proofs of tax evasion or the like. He/she never uses these proofs against the clients during his/her active years. In the aftermath of retirement starts blackmailing the ex-clients. • An administrator has a house for rent. He/she avoids renting it to one of his/her colleagues and/or students. • A financial reporter prepares budgets and/or reports to fulfill some obligations. By trial and error he/she finds the best scenario fitting. Whenever he/she finds out it is not for budget purposes, but helping top management in cooking the books, and deceive lending bank, guess what… • A manager is asked to visit and bribe politicians in order to get some privileges for the company he/she represents or to get the tender. Who would object this? What would that well-paid manager face in family circles in case he/she rejects it and resigns?

1

Big 6 Globally operating audit firms have experienced various mergers since their establishment and their numbers have varied. Significantly, transition from Big Eight to Big Four occurred during 1989–2002 (Kesimli 2015: 58–59).

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1 Expectations from Corporates and Individuals

In light of these examples, the conclusion would be that what matters are the individual’s ethical sensitivity, ethical orientation, and ethical behavior. The foundations of these, the present author believes, lie in the roots of family. Family etiquette, the way the child is raised, and the role models all mold the virtuous human being. Role models may be in both directions. Normally, a role model is expected to act in the desired way. The desired way here means virtuous conduct. The desired way to act changes with time. It becomes a matter of ability to adapt to new conditions. However, there are undesired role models the youngsters may avoid to resemble. By analyzing the adverse effects of being such a persona non grata, the child may consciously avoid these kinds of people’s way of conduct. Sometimes, avoidance becomes inefficient. Witnessing and ignoring would be misconduct. The witness is expected to try to change the fraudulent act, to inform the responsible managers about the misconduct, and to blow the whistle at the right moment. Becoming a whistleblower carries risks embedded in job itself. At the last stage, the employee may find him/herself fired. Thus, braveness may cost expensive.

Chapter 2

Seventh Art: Samples of Business-Related Movies

For de little stealin’ dey gits you in jail soon or late. For de big stelin’ dey makes you Emperor and puts you in de Hall o’ Fame when you croaks. “The Emperor Jones” (1920) Eugene O’Neill (1888-1953)

There are lots of movies inspired by corporate scandals. Their common point is the money stolen. Each scandal is presented as the ‘biggest’ in the history. This chapter will summarize these movies in extended way and highlight the role of accountants and/or financiers. The first film is Le Capital, which inspired me to write this book.

Le Capital—Money is the Master An aggressive takeover attempt from a powerful American hedge fund of French Phenix Bank that is one of the most powerful banks of Europe and its CEO’s negotiations with the hedge fund make the core story of the film. The relatively young executive Marc Tourneuil is appointed as the CEO of the Bank upon the collapse of the antecedent CEO on the golf course. The biggest shareholders discuss Tourneuil’s appointment and alternatives to him. They sense it beforehand that Germans, Americans, and others will attack the bank for hostile takeovers. A bundle of movie lines are as follows: The first one is what Tourneuil learnt from his boss, whose cancer reaches the last stages. ‘Money is not a dog that always wants to be petted, but wants the society to participate more and more so that it can bring it back forever.’ While the senior executives discuss Tourneuil’s appointment case, they assume that he would do anything they want him to do, and based on the ex-CEO’s expected death, implicitly spell out their intentions ‘then we bury the dog with its owner.’ Tourneuil talking with his wife says: ‘I don’t care if they respect me…I want money…in order to getting respected.’ At the board of directors’ meeting, the exCEO introduces Tourneuil by saying ‘He will serve the bank to continue to renew itself, respecting all political and ethical rules in financial and public spheres.’ To the © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 I. Kesimli, Seventh Art’s Perspective on Ethical Conduct and Corporate Irresponsibility, Accounting, Finance, Sustainability, Governance & Fraud: Theory and Application, https://doi.org/10.1007/978-981-99-2520-9_2

9

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2 Seventh Art: Samples of Business-Related Movies

naïve audience, this intro may seem to be perfect; however, the audience would get astonished upon Tourneuil conduct. The fresh CEO very well analyzes the circumstances that he may not have much time in case the ex-CEO dies soon, and he would be replaced by another candidate trained for his current position in the meantime. Main shareholders offer to Tourneuil is e1.8 million—the X gets 2.4—per annum; e2 million bonus in case the banks becomes listed number one at Eurex Exchange— the standard is e1 million, e1 million for becoming runner-up, and e500.000 if it succeeds third, and the bank is the fourth big in Europe. Depending on his performance, next year his share ownership is to be discussed. Though not much pleased, Tourneuil accepts the bargain. His attitude causes the rest to quickly realize that he is unfit for their interests; he pretends to be a real CEO contrary to their plans of playing him like a puppet, and they had to dismiss him immediately, but it was too late. Tourneuil is about to hire a retired detective. He asks the detective about the services he could render, and he replies that he can do everything unless they are not illegitimate. When Tourneuil insists on these kinds of act, he says that only the price changes. On another scene at one of the initial meetings with executive board members, he announces that the bank will no more deal with weapons, chemical pollutants, and money laundering. This is to surprise the naïve audience, too, because normal people do not use a bank’s name along with weapons, chemical pollutants, and money laundering in the same sentence. To me, this was a thrilling story. Bank of Credit and Commerce (BCCI) was heavily involved in money laundering along with several financial crimes. The bank eventually took possession of the controlling interest in a major American bank illegally. BCCI, which once had 400 branches in 78 countries, was forced to liquidate in 1991. Tourneuil’s directives to his team imply that the bank already is involved in these kinds of conduct. The American hedge fund had already purchased stocks of Phenix. They want to refund the money they borrowed for the takeover of the bank, with the help of Tourneuil, by assigning him to keep return-on-equity at 20%; in return, Tourneuil is promised to get high premiums for each big transaction. During discussions about American partner’s attitude toward Phenix, one of his colleagues reminds that they have to take account the rating agencies; Tourneuil replies to let the mafia offscourings aside. This reminds the ugly role of the rating agencies during many crises, especially 2007–2008 crisis. Tourneuil is asked to lay off employees from all over the world branches. He plans to achieve this by being backed by employees from everywhere. At a meeting attended by them via internet, and also with an audience present in France, he talks about despotisms, arbitrary promotions, nepotism, abuses, moral and sexual harassments, suicides, mismanagements of supervisors, injustices, unfair conducts, and many more issues, which are core issues of corporate ethics and social responsibility. These phenomena would be shocking for those who are not involved in academic research about corporate social responsibility and corporate ethics or for those who never worked in such environments. Tourneuil will get premium for these layoffs. His money will travel for 6 min or 6 months. The longer, the better. His money will be laundered. The initials of Bahamas, Russia, Ukraine, Niue, Iceland, Sarawak,

The Shawkhank Redemption

11

Seychelles, Aruba, Guatemala, and Egypt compose the name of his account. He succeeds and gets e2 million. His money gets laundered and following the death of the x-CEO, the veteran account holder Craillon and the detective Jean Rameur empty the accounts of Tourneuil and the former CEO. The two were supposed to be the most reliable in this case. Another problematic takeover American hedge fund wants to be realized by Tourneuil seems an apparent fraud to Tourneuil. The time to force him to do this comes at the moment when the x-CEO passes away. The carrot on the stick this time is Tourneuil being not fired. The film heavily criticizes the system woven with rating agencies, corporate raiders, and non-democratic actors namely market leaders.

The Shawkhank Redemption The film tells the story of a banker, Andy Dufresne, who is sentenced to two consecutive life sentences at the Shawshank State Penitentiary in 1947 Portland, Maine. A famous golf player who had an affair with his wife was murdered. The golf player’s was with Durfesne’s wife. Under the circumstances of 1940s, even though evidence was insufficient, Andy was falsely convicted. An inmate, Red, serving a life sentence becomes his best friend. Two years later, while working on the roof of a building in the prison’s complex, Andy overhears that the captain of the guards inherited from his brother. The guard complains that he was to be taxed on this inheritance. Andy advises the guard how he would shelter the money legally and evade tax. Upon this event, the warden visits Dufresne in his cell and assigns him to the prison library. This assignment was just a maneuver to let him do the paper work related to tax and related financial matters for Shawshank State Penitentiary’s staff and staff of neighboring prisons. His service was most valuable for the warden. In 1963, the warden starts ‘Inside Out Program’ in order to easily exploit prison labor for public works. This enables him to profit from the shady deals, because he undercuts skilled labor costs and receives bribes. The role of Andy is laundering this money. He creates the alias—Randall Stephens—as the holder of all deposit accounts in a dozen number of banks in Portland. After spending almost 19 years in prison, upon the arrival of a young prisoner, Andy accidentally finds out that the real murderer of the couple was in another prison for some other felony and was claiming the responsibility for the murders. However, this information causes the young prisoner to be killed by the warden and his loyal captain of the guards. This urges Andy to escape from Shawshank State Penitentiary through the tunnel, which he dag for 19 years, and prison sewage pipe. He takes the warden’s suit, shoes, and the ledger Andy kept for years, containing proof of the money laundering. Under the alias he created years ago, Andy withdraws the money he laundered, and the warden deposited to several banks. The signature, the birth certificate, the driving license, and the social security number of Andy’s alias have been created one by one and obtained via posts through the years he spent in prison. It sums more than US$370,000—equivalent to US$2934 million

12

2 Seventh Art: Samples of Business-Related Movies

in 2021. Furthermore, he mails the ledger to a local newspaper along with evidence of corruption and murders at Shawshank. Red comments on the money that it was the severance pay for Andy’ 19 years spent unjustly in prison. At a scene, Andy says ‘I send the money to real world. When it comes back, it is more cleaner than Virgin Mary.’ He adds ‘On the outside I was an honest man. I had to come to prison to be a crook.’ According to Red, Andy’s escape with the help of heavy rain and the river resembles laundering the money; he says Andy laundered himself, too. Having had no choice other than assisting the warden in his financial plot, Andy enabled his own escape. Being an accountant saves your life is the lesson.

Rogue Trader The movie tells the story of the Barings Bank’s collapse in 1995. Nick Leeson’s 1996 memoir Rogue Trader: How I Brought Down Barings Bank and Shook the Financial World is the basis. Leeson was a derivatives trader then. He deceived the bank’s auditors, cheated the Singapore International Monetary Exchange (SIMEX), and forged documents. He pleaded guilty for these accounts. Due to fraud, Leeson was sentenced to six and a half years in Changi Prison in Singapore. When Leeson completed two-thirds of his sentence, namely four and a half years in prison, and diagnosed from colon cancer he was released. From the point of inducement it contains, the fraudulent acts of Leeson do not resemble other frauds observed. The day a young and inexperienced local employee transmits a message wrongly, Leeson’s team loses £20,000 pounds in one day. The loss is kept in Back Office Error Account 88,888, with the intention of covering it back. Leeson declines firing the young employee. In fact, in my opinion for the sake of cutting expenses by hiring inexperienced personnel is a big mistake. Without training them appropriately is another mistake. Luckily, Leeson recovers his team’s losses, but loses again. The loss becomes £60,000 and doubles later on. All of his attempts are just to recover losses; he does not benefit personally. His department’s profits soar; London becomes pleased, which in turn causes the top management to overlook the mislead. The error account’s balance exceeded £2 million by the end of 1992. It increased to £23 million in late 1993. Since Leeson bets double the amount he loses, the loss reaches £208 million pounds by the end of 1994. Losses eventually reach £827. Barings becomes insolvent.

Wall Street The film, which is dedicated to a senior stockbroker, Louis Stone (1910–1985), the father of the director of the film, is about a junior stockbroker, who is eager to reach the top. His greed leads him trading on illegal inside information. In fact, he becomes

The Wizard of Lies

13

first by offering insider information about the airway company his father works for. His proclivity for misconduct gives way to Gekko, who is an infamous corporate raider, to lead him the way, and giving him further insider information about several companies and investors. Gekko’s target companies are chosen on the basis either his desire to revenge or pure money. ‘Wall Street: Money Never Sleeps’ released in 2010 would be the sequel to this film. While Wall Street focuses on the junior stockbroker, Bud Fox, the focal point of its sequel is Gekko, the corporate raider.

The Wolf of Wall Street Jordan Belfort, who was a Wall Street stock broker and in 1989 founded Stratton Oakmont, a New York-based brokerage firm, wrote his memoir in 2007. The film is based on this memoir. The film is directed by Martin Scorsese; Leonardo DiCaprio starred. The film deals with the fraud and corruption; Belfort and his firm are engaged in. The fraud and corruption ultimately lead to his arrest by the FBI. The fraudulent acts of Belfort remind Imarbank and Adabank schemes, which span from 1994 to 2003, particular in Turkey. From the date Uzan Group seized Imarbank in 1984, everything happened in front of the eyes of the whole country. Full page ads, TV commercials, where celebrities, actors, and actresses featured were so intense that no one of the authorities would have missed them. So does Belfort. Whatever happened happens in front of the eyes of the public. Forbes Magazine interviews Belfort, resulting in a boom of applicants for unannounced job positions. As the firm’s status grows, so does their abuse and lies. The Wolf of Wall Street also points to Swiss banks acts. The film shows how they assist in laundering the money trafficked, confidentiality obligation being their excuse.

The Wizard of Lies Based on the 2011 non-fiction book of the same name by Diana B. Henriques, the film stars Robert De Niro as businessman and fraudster Bernie Madoff, Michelle Pfeiffer as his wife Ruth Madoff, and Alessandro Nivola as their older son Mark Madoff. As an investment adviser and financier, Madoff was charged with advisor fraud, mail fraud, wire fraud, money laundering, false statements, perjury, making false filings with the SEC, and theft from an employee benefit plan, for all of which he pleaded guilty. A lifetime ban from securities business, sequestration of more than US$17 billion worth of property, and 150 years in federal prison was waiting him. In prison, Henriques, a financial journalist and author, interviews Madoff. Madoff very well knows what he did and circumstances of his acts but also puts blame on investors, as well. According to him, these people have greed in them, which keeps them from looking hard or far enough.

14

2 Seventh Art: Samples of Business-Related Movies They accomplice because you seem so trustfully. These investors have to take their responsibility of their behavior.

A Ponzi scheme may last forever unless there are no financial or economic crises. The fact is that it is the reality of finance world, to live crises. Madoff was not trading, at least for the last fifteen years as of end of 2008. Apparently, his Ponzi scheme had difficulties in surviving 2007–2008 crises, and his pyramid collapsed. On Dec 9, 2008, Bernie shares the disaster with his brother Peter Madoff, the Chief Compliance Officer in Madoff Investment, who had been with the firm for four decades, and who admitted helping Bernie dole out the firm’s last US $300 million to insider after he learned of the fraud. Next day, he confesses to his sons and wife. The following day his sons contacted the US Department of Justice and the SEC immediately after their father told them he had defrauded his investment advisory clients. During investigations of Madoff Fraud Allegations, an independent financial fraud investigator and analyst, Harry Markopolos, who had a nine-year long investigation into the Madoff Ponzischeme, testifies to the House Financial Services Subcommittee (www.c-span.org, 14.04.2021). He explains to Congress and the SEC’s inspector general, what he saw, when he saw it, and what his dealings with the SEC were that led him to this case being repeatedly ignored over an eight-and-a-half year period between May 2000 and December 2008. In May 2000, the Madoff Ponzi scheme was only a US$3–7 billion fraud. Markopolos says his team knew then that they had provided enough red flags and mathematical proof to the SEC for them, so that SEC should have been able to shut Madoff down, right then and there, at under US$7 billion. However, to his opinion, the SEC staff unfortunately lacks the financial expertise and capability of understanding the complex financial instruments of the twenty-first century. In October 2001, when Madoff was still in a US$12–20 billion range, Markopolos’ team felt confident that they had provided even more evidence to the SEC, such that the Ponzi scheme should have been stopped at well under US$20 billion. November 2005 is when Madoff was at US$30 billion, and 29 red flags were handed to the SEC. Again SEC failed to properly investigate and shut down Madoff operations. SEC did not even respond to Markopolos’ written submission in 2000, 2001, 2005, 2007, and 2008. Thus, the fraud has grown to US$50 billion. Markopolos’ team (1) checked every formula, every math calculation, and every modeling technique, obtained key financial statements and marketing documents from Madoff feeder funds, (2) interviewed seniorlevel marketing staff and risk managers at Madoff feeder funds, (3) closely tracked the Madoff feeder funds in USA and abroad, collected their marketing documents and figured out Madoff’s assets under-management in his current cash situation, (4) stepped inside the Madoff operation, and conducted a key interview in April 2001. Since the Madoff Ponzischeme was such a clear and present danger to the nation’s capital markets, and SEC seemed to not going to investigate, the public duty the team felt upon their shoulders kept them continue investigating. Markopolos continues his desperate approaches toward SEC lacking investment professionals, but crowded with lawyers—that turned out to be clumsy. He says “Inexplicably, the SEC never acted upon those repeated and multiple warnings over a nine-year time

The Wizard of Lies

15

span.” Markopolos further blames the SEC for being ignorant and acting cowardly toward big cases, powerful firms are involved. “Clearly, the SEC was afraid of Mr. Madoff” are his words. He also blames SEC officials for not stepping forward to admit personal responsibility. I gift-wrapped and delivered the largest Ponzi scheme in history to them and somehow they couldn’t be bothered to conduct a thorough and proper investigation because they were too busy on matters of higher priority. If a US$50 billion Ponzi scheme doesn’t make the SEC’s priority list, then I want to know who sets their priorities.…When an entire industry that you were supposed to be regulating disappears due to unregulated, unchecked greed, then you are both a captive regulator and a failed regulator. You have no excuses… They ignored the rating agency scandal. They allowed the investment banks to engage and package and sell toxic subprime securities to investors. They ignored auction rate securities and allowed these toxic securities to be sold to investors. They ignored mutual fund market timing until embarrassed by state regulators into acting. And they ignored the Madoff Ponzi scheme. They haven’t earned their paychecks and they need to be replaced (Markopolos 14.05.2021).

In my opinion, this is another chance for me to remind my critics about Turkish setting. Turkey doesn’t have an independent SEC, however, there are organizations expected to regulate and monitor markets. Lack of efficient monitoring of the markets not only by Capital Markets Board, but also by other responsible and authorized public authorities in Turkey caused financial disasters in Turkish finance markets. Uzan group schemes and bankers’ crisis in 1980s are the two events having similarities with Madoff’s story. One of those bankers, Banker Kastelli, founded his company in 1980, and became the exclusive marketing agent for ten different banks. Not later than the end of the year, his business soared and approximately US US$2.5 billion worth of deposits entrusted by about 550,000 people went under his control. His use of these funds for his own investment operations startled the crisis. In the movie, at the scene when Madoff watches Markopolos’ testimony on TV with his wife, he comments that from the first hand he himself knows that government agency is incompetent. In fact SEC visits Madoff’s office in 2005, the SEC guy says that it is a regular visit. When he starts asking questions, Bernie squeezes him for not having adequate relations with Washington DC headquarters. Moreover, he bluffs about Securities DTC number, a number that is issued in connection with Depository Trust Company transactions. It is for sure of course that in case SEC checks the account, they will find out that it is empty. Then, SEC guy packs and leaves. SEC never calls, does not follow-up the case. In all of these financial and economic crises, the stories of which make the content of this book, there is no one single case, where the public authorities are not to blame for negligence.

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2 Seventh Art: Samples of Business-Related Movies

The Big Short Brad Pitt playing Ben Hockett says: Let’s hope that given the choice, the next generation will not screw the world over just for a few more dollars! You just bet against American economy, which means if we are right, people lose homes, people lose jobs, people lose retirement savings, people lose pensions; … if banks reduce people’s numbers….

The Big Short is directed by Adam McKay. It is based on Michael Lewis’ book The Big Short: Inside the Doomsday Machine, published in 2010. The film won the Academy Award for Best Adapted Screenplay in addition to nominations for Best Picture, Best Director, Best Supporting Actor (Bale), and Best Film Editing (www. wikipedia.com, 20.02.2021). When a trader sells a security first with the intention of repurchasing it or covering it later at a lower price, a short, or a short position becomes created. A trader’s motive to short a security would be his/her belief that in the near future there will be a decrease in the price of that security. The scenario of trader selling a security without having possession of it is called naked short. In the US naked short practice is illegal for equities. In case a trader borrows the shares from a stock loan department by paying a borrow-rate during the time the short position is in place, it is called covered short (Chen, Oct 4, 2019). Short positions can be created at any time in the futures or foreign exchange markets. This strategy, called shorting, is used under circumstances when a fall in the price of a security in the short term is anticipated by an investor. Investment banks and/or or other financial institutions lend shares of stock by collecting a fee to lend the shares while the short position is in place (www. investopedia.com). Kulikowski, a financial blogger at TheStreet.com, opens her article about the film by saying that those who accurately foresaw the collapse of Wall Street profited from it. She says that some people came out of the financial crisis with their tails up (www. thestreet.com, 27.02.2016). Michael Burry is a hedge fund investor and founder of Scion Capital. He is the fund manager among few investors, the number of whom is less than a hand’s fingers, in the world to recognize and invest in the upcoming subprime mortgage crisis. He is portrayed by Christian Bale. On the other hand, portrayed by Brad Pitt, Ben Hockett is among founders of Cornwall Capital. Hockett’s investment firm predicted and shorted the mortgage crisis before its collapse. Deutsche Bank trader Greg Lippmann and a hedge fund manager Steve Eisman are the other important characters in the film. The film undertakes the mission of contributing in financial literacy by scattering financial terms on scenes. At a point, Anthony Bourdain, a famous chef, explains Collateralized Debt Obligation (CDO) with an analogy of cooking unsold fish—triple B level of bonds on a garbage—ordered two days ago, by adding them in seafood stew, so that it becomes a whole new thing—CDO. International pop star Selena Gomez and President of American Economic Association and recognized as the father of Behavioral Economics, Richard H. Thaler explain Synthetic CDOs through

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Blackjack. She bets on Blackjack, which represents single mortgage bond. Her odds are good, she has a winning streak, everybody in the place wants to get on this action, how could she lose. People think whatever happens now, is going to continue into the future. People who are watching and think that she would not lose make a side-bet. This is the first synthetic CDO. Someone else makes another bet on this first side-bet; this makes synthetic CDO number two. This goes on and on. This way, bankers transform an original 10 million dollar investment into billions of dollars. At the scene when Charlie Geller and Jamie Shipley, the young investors who manage a 30 million dollar portfolio meet with a banker at the lobby of JPMorgan Chase, the audience gets the chance to learn about International Swaps and Derivatives Association (ISDA) Agreement, which requires minimum 2 billion dollar worth of portfolio. ISDA Agreement lets an investor sit at the “big boy table” as stated in the film, and make high level trades not available to “stupid amateurs”—with wordings of the film again. The narrator continues by saying ‘trying to be a high stakes trader without an ISDA, is like trying to win the Indy 5001 riding a llama. Mark Baum’s statement ‘houses are debt, not asset,’ Credit Default Swap, Housing Spike Peak are samples for other financial and accounting terms mentioned in the film. It is very successful in letting the audience understand how rating agencies work, how banks press them, how SEC and the regulatory bodies alike are unaware of what is going on in the market. The whole world is the victim of this carelessness, but the immediate impact of the housing bubble that burst in 2007 caused very serious consequences specifically in USA. Following it, pension money, real estate value, 401 Savings2 and bonds worth of five trillion dollars disappeared; eight million people lost jobs and six million their homes. Thus, whatever Ben Hockett warns young investors, Charlie Geller and Jamie Shipley, who were in joy with the deal they make, became the inevitable and crucial reality.

1

The Indianapolis 500, formally known as the Indianapolis 500-Mile Race, is an annual automobile race held at Indianapolis Motor Speedway (IMS) in Speedway, Indiana, USA, a district suburb of Indianapolis. Memorial Day weekend is when the event is traditionally held over. It is part of the IndyCar Series, the top level of American Championship Car racing. Since the racing surface was paved in brick in the fall of 1909, the track itself is nicknamed the ‘Brickyard.’ One yard of brick remains exposed at the start/finish line (www.wikipedia.org, 21.02.2021). 2 401(k) Plan. One of the sections of the US Internal Revenue Code is what it is named after. It is a tax-advantaged, defined-contribution retirement account. Workers can make contributions to their 401(k) accounts, and their employers can match some/all of those contributions. The investment earnings in a traditional 401(k) plan are not taxed until the employee withdraws that money, typically after retirement (www.investopedia, 21.02.2021).

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Margin Call Another film focusing on 2007–2008 crisis is Margin Call, which explores and investment fraud, greed, and capitalism. It is an American financial thriller film. J. C. Chandor has written and directed the film, which is his first (en.wikipedia.org, 27.02.2021). Plot author, Chisholm from IMDb, summarizes the film. A prominent financial company is destaffing. The risk management division head, who has been working on a major analysis just when he was fired, was one of them. The company’s financial disaster, the fired manager was about to discover, is figured out by a young colleague by the end of the night to whom he handed a flash memory. A long night, where everyone panics, follows. The senior management prepares to do whatever it takes to mitigate the fiasco to come over. The unethical calamity drags a number of conscientious co-workers into it (www.imdb.com, 27.02.2021). The respected financial company mentioned by Chisholm is a large Wall Street investment bank, moreover, though it is never mentioned explicitly, is rumored to be Goldman Sachs3 . In order to hedge and reduce its position in mortgage-backed securities, at the urging of two employees, Goldman Sachs similarly moved early. These two employees essentially mirror the comment of Tuld—Jeremy Irons as John Tuld, the CEO of the firm, who is flown in to deal with the crisis—about the advantage of moving first. Lehman Brothers4 moved second and went bankrupt. John Tuld’s name is said to be a combination of Merrill Lynch’s ex-CEO John Thain and Lehman Brothers’ ex-CEO Richard Fuld (en.wikipedia.org, 27.02.2021). Though Goldman Sachs has been a leader in investment banking league tables, it has also been the largest bank on Wall Street facing a major FCPA5 violation (www.swf institute.org, 27.02.2021). Goldman Sachs was involved in a major scandal with 1MDB6 in 2015. Former Prime Minister of Malaysia, Najib Razak, was found guilty of the 1MDB scandal on July 28, 2020. A fine of US$49 million and 12 years in prison were awaiting him. He additionally received ten years of jail for each of 3

Goldman Sachs was heavily involved in securitization during the subprime mortgage crisis. This caused the bank to suffer during the financial crisis of 2007–2008. US Department of the Treasury invested $10 billion in November 2008 as part of the Troubled Asset Relief Program, a financial bailout created by the Emergency Economic Stabilization Act of 2008. It was repaid in June 2009 (https://en.wikipedia.org/wiki/Goldman_Sachs, 27.02.2021). 4 Lehman Brothers Holdings Inc. was a global financial services firm founded in 1847. Before filing for bankruptcy in 2008, Lehman was the fourth-largest investment bank in the USA behind Goldman Sachs, Morgan Stanley, and Merrill Lynch, with about 25,000 employees worldwide (https://en.wikipedia.org/wiki/Lehman_Brothers, 27.02.2021). The bank became a symbol of the excesses of the 2007–08 Financial Crisis, engulfed by the subprime meltdown that swept through financial markets and cost an estimated US$10 trillion in lost economic output (Lioudis 30.01.2021). 5 FCPA The Foreign Corrupt Practices Act of 1977 is a US federal law that prohibits US citizens and entities from bribing foreign government officials to benefit their business interests. The FCPA is jointly enforced by the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC), which apply criminal and civil penalties, respectively. 6 1MDB 1Malaysia Development Berhad was established to drive strategic initiatives for long-term economic development for the country by forging global partnerships and promoting foreign direct investment https://en.wikipedia.org/wiki/1Malaysia_Development_Berhad#Scandal, 27.02.2021).

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six charges, including three charges of criminal breach of trust and three charges on money laundering (en.wikipedia.org). The US Federal Bureau of Investigation (FBI) investigated the connection between the executive Tim Leissner, Singapore-based chairman of Goldman’s Southeast Asia operations, a role he took over in 2014, to Razak and the nature of the Leissner’s involvement in multi-billion dollar deals with 1MDB, who was the head of investment banking in Southeast Asia for the investment firm (Maierbrugger, 27.02.2021). Regarding FCPA, on 22.10.2020 Goldman Sachs ended with US$ 1,663,088,000 resolution amount, where the portion of Department of Justice (DOJ) is US$ 1,263,088,000 (www.swfinstitute.org, 27.02.2021). Enforcement authorities in the UK, Singapore, and Hong Kong fined Goldman Sachs. Securities and Exchange Commission (SEC) required Goldman Sachs to pay a US$ 400 million civil penalty and disgorgement of US$ 606.3 million. This amount was paid to the Malaysian government and 1MDB (ibid.). The initial stages, specifically a 24-h period, of the financial crisis of 2007–2008, compose the principal story of Margin Call. Actions taken by a group of employees during the subsequent financial collapse are in focus. The film stars an ensemble cast consisting of Kevin Spacey, Paul Bettany, Jeremy Irons, Zachary Quinto, Penn Badgley, Simon Baker, Mary McDonnell, Demi Moore, and Stanley Tucci. The director and screenwriter, J. C. Chandor, is himself the son of an investment banker. Chandor’s own raid into real estate investments in New York City soon before the financial crash partially influenced the screenplay (en.wikipedia.org, 27.02.2021). As summarized above, human resources team conducts mass layoffs on the trading floor. Eric Dale—Stanley Tucci—who works in risk management was one of the fired ones. While leaving, Dale gives to a junior employee, Peter Sullivan, a USB drive with a project he had been working on. He warns Peter to be careful. Peter, finishing the project that night, discovers that trading will soon exceed the historical volatility levels used by the firm to calculate risk. Due to overleverage, in case the firm’s assets in mortgage-backed securities (MBS) decrease by 25%, it is highly probable that the firm will owe more than its market capitalization. Analysts, senior executives and CEO John Tuld—Jeremy Irons—meet urgently. At that urgent midnight-meeting, Tuld asks Peter Sullivan—Zachary Quinto—, one of Eric’s risk analysts, who first uncovers the crisis to tell about his findings. He encourages him to speak as he might to a young child or a Golden Retriever, by saying that it was not brains that got him to the position he occupies. Peter explains that due to enormously profits, the firm started packaging new MBS products 36–40 months ago, which combine several different tranches of rating classifications in one tradable security. One month was needed for the firm to layer these products correctly. This posed a challenge from a risk management standpoint. These assets needed to be kept on bank’s books longer than the bank ideally would like to. These were essentially mortgages. So that allowed the bank to push the leverage considerably beyond what it might have done or would be willing or was allowed to do in any other circumstances. Thus, the risk profile was pushed without raising any red flags.

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All of the toxic assets need to be sold before the market could react to the news of their worthlessness; thereby, the firm’s exposure would be limited. This comes out to be Tuld’s plan. Having flown in to deal with the crisis, Tuld makes these words: …the music is about to stop, and we are going to be left holding the biggest bag of odorous excrement ever assembled in the history of capitalism.

Head of sales knows Tuld’s plan will cause to spread the risk throughout the financial sector. This move apparently will destroy the firm’s relationships with its counterparties. In turn, they will never trust them again. Meanwhile, it is revealed that senior executives were somewhat aware of the risks. As a sacrificial lamb, the resignation of chief risk management officer is offered to the board and employees. Next day, prior the opening of markets, senior manager on the trading floor, Rogers tells his traders that they will receive seven figure bonuses if they achieve a 93% reduction in certain MBS asset classes. He very well knows that the traders are effectively ruining their own jobs and careers, cutting relationships with their clients. Head of credit trading, Emerson manages to sell off his assets, but his counterparties become increasingly agitated and suspicious, and the day passes. Roger’s team successfully reaches the 93% benchmark. The previous cold blood human resources team starts another round of layoffs on trade floor. He encounters Tuld, who believes that the current crisis is not different than any other one; sharp gains and losses are a natural part of the game. Tuld offers Rogers to stay at the firm for two more years. He states that the coming crisis will bring a lot of money to be extracted from. Sullivan gets promotion (www.imdb.com, 27.02.2021). Was Lehman Brothers too big to fail and did it turn out to be that it was too big to save? This question gets an answer from former Lehman Brothers chief risk officer Madelyn Antoncic—an economist, Antoncic later worked at the World Bank as vice president and treasurer, and is currently on the board of governors at Weill Cornell Medicine. While US government allowed Lehman Brothers to fail, it bailed out AIG7 . Both of the financial services companies were large and traced their financial woes to excesses in subprime housing mortgage financing. Antoncic opines: “To add insult to Lehman’s injury, AIG’s US$182 billion bailout began the same week when the former folded, and a week prior the government had taken over the financially embattled mortgage guarantee companies Fannie Mae and Freddie Mac8 .” As she states, in March of that year, the Federal Reserve had helped bail out Bear Stearns, another struggling Wall Street firm, by loaning US$30 billion to its buyer, JPMorgan 7

AIG American International Group, Inc., is an American multinational finance and insurance corporation with operations in more than 80 countries. During the financial crisis of 2008, the Federal Reserve bailed the company out for $180 billion and assumed control, with the Financial Crisis Inquiry Commission correlating AIG’s failure with the mass sales of unhedged insurance (Angelides 352). 8 Fannie Mae and Freddie Mac are federally backed home mortgage companies created by the US Congress. Neither institution originates or services its own mortgages. Instead, they buy and guarantee mortgages issued through lenders in the secondary mortgage market. By September 6, 2008, they were in financial trouble, and the Federal Housing Finance Agency (FHFA) put the companies into conservatorship. They received $190 billion in bailout funding and have since paid it back, but are still in conservatorship (Folger 2021).

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Chase. She argues that at its peak, AIG had a market capitalization four times the size of Lehman at the latter’s highest. However, AIG was bailed out not purely because of its size but because of interconnectedness. The failure of AIG would trigger a domino effect globally as the insurance giant had provided protections worth more than half a trillion dollars, including US $300 billion to banks in the USA and in Europe. All of these banks would have had enormous regulatory capital problems. It would have been an extremely systemic macro event (ibid.). She also comments on the issue that has arisen since the crisis—the lack of criminal prosecutions against Lehman Brothers: it was poor judgment; [they were] not very smart, but there’s no law against not being smart.

Additionally she answers why she did not blow the whistle on Lehman’s practices (ibid.): Blowing the whistle means that there’s something illegal going on, and in my view this was not illegal. There was no whistle to blow. … It was just exceedingly poor judgment, poor decisions being made, certainly poor governance, and certainly poor leadership and management. But that doesn’t stand up to criminality.

Wall Street: Money Never Sleeps Contrary to aforementioned films, starring Michael Douglas, the sequel of Wall Street (1987) directed by Oliver Stone, the son of a broker, is not directly about 2007–2008 crisis. It is apparent that the director wanted to benefit from the current events of that time, which are definitely caused by corporate greed, speculation, and fraud. Though greediness is real, the investment banks in the film are fictitious, and characters are fictitious as well. Gordon Gekko is the fictional character who is a ruthless and wildly wealthy investor and a corporate raider9 , who has become a cultural symbol for greed, as epitomized by the famous Wall Street quote ‘Greed is good.’ It was claimed that Gekko was partially based on corporate raider Carl Icahn, disgraced stock trader Ivan Boesky, investor Michael Ovitz, and ‘Junk Bond King’ of 1980s Michael Milken (www.investopedia.com, 05.04.2021). Carl Icahn was a prominent American businessman in 1980s. He performed a hostile takeover of Trans World Airlines (TWA) in 1985 and sold its assets in order to generate a substantial return on his investment (https://corporatefinanceinstitute. com, 05.04.2021). As one of Wall Street’s leading arbitrageurs, Ivan Boesky was in good position to extract profits from the 1980s takeover boom through corruption and collusion, by using insider information to time trades and by working with 9 Corporate Raider is an investor who buys a large number of shares in a corporation whose assets appear to be undervalued. This purchase would give the corporate raider significant voting rights, which in turn is to be used to force changes leadership and top-management (www.investopedia. com, 05.04.2021).

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investors to manipulate the market with the help of US$3 billion in financial leverage from Michael Milken. Together, they committed infractions ranging from violations of SEC legislation to conspiracy and market manipulation (http://www.sechistorica l.org, 05.04.2021). Describing himself as an angel, Michael Ovitz is an American businessman and investor, who had been accused for ruling Hollywood like a mob boss. In the aftermath of the release of ‘Wall Street: Money Never Sleeps,’ in 2010, Ovitz launched Venture Capital fund Broad Beach Ventures. Once he served as the president of Walt Disney from where he had been ousted in December 1996. For just 14 months of service, he got US$140 million severance package, which was taken to the court by Disney investors. Due to airing some embarrassing testimony about the Machiavellian atmosphere inside the Magic Kingdom, the case did not much help to improve the company’s reputation. Even though Ovitz claimed, he had been ‘cut out like a cancer’ by the rest of the executive team; the departing Disney chief executive called him a psychopath and a liar in an infamous memo (Teather, 10.08.2005). Last but not least, Michael Milken, the name of whom is mentioned above along with Carl Icahn, gained a reputation as the Junk Bond King in the 1980s but was arrested in 1989 and convicted of multiple counts of fraud and racketeering. With the help of brief information about Icahn, Boesky, Ovitz, and Milken, now the reader becomes enabled to freely imagine Gekko, the quote ‘Greed is good’ of whom, reminds a speech Boesky gave in 1985 at the University of California Berkeley School of Business Administration, when he said, ‘I think greed is healthy. You can be greedy and still feel good about yourself.’ The art collector Asher Edelman inspired the film team in modeling Gekko’s penthouse office and elegant suits (www.inv estopedia.com, 05.04.2021). In the film, following his release from prison, Gekko makes speeches at universities and appears in TV. At one of his speeches to the audience, Gekko utters the following words: “Greed got greedier,” “The mother of all evil is speculation—leveraged debt. It is systemic, benignant and global.” This way Gekko criticizes the system and points the real problem. In Gekko’s penthouse, there is a gravure related to Tulipmania, which had been lived through 1636–1637. Like all bubbles, the Dutch tulip bulb bubble continued to inflate beyond people’s wildest expectations until it abruptly popped. The main bubble-popping catalyst, which caused the tulip bulb market, where sellers overwhelmed the market and buyers virtually disappeared altogether, to violently implode was the default on a tulip bulb contract by a buyer in Haarlem. Even though some traders attempted to support prices, they did not succeed, and tulip bulbs were worth only a hundredth of their former prices, resulting in a full-blown panic throughout Holland. Dealers having refused honoring contracts, further damaged confidence in the tulip bulb market. The government’s attempts to stem the tulip market meltdown by offering to honor contracts at 10% of their face value only caused the market to plunge even further. The tulip bulb bubble ended the Dutch Golden Age, hurled the country into a mild economic depression, which lasted for several years, and resulted in a suspicion toward speculative investments in Dutch culture (Altmarius.ning.com, 20.04.2021).

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The Dutch government’s attempts resemble the US government’s futile attempts to save the financial system in 2008. It has not yet been forgotten that there were countless voices objecting bailouts. The story takes the start at Keller Zabel Investment (KZI). Louis Zabel is the senior partner. The London office is overleveraged in toxic mortgage loans. The insurance company Sereneco headed by Bernie Jacobs fails to pay claims on Zabel’s credit default swaps. KZI stuck with sub-prime debt off balance sheet, cannot find a bid for it. Hedge funds begin shorting KZI on rumors of insolvency. Zabel and KZI are crushed at FED meeting and bought at a nominal price by Bretton James and Chuchill, Schwartz (CS). Bretton James is the managing partner at CS; furthermore, he is protégé of Secretary of Treasury Bill Clark, who is the person who placed Bretton James at CS. One of the funds shorting KZI is Locust Fund, established in Cayman Islands, Bretton James has relations with. Furthermore, KZI’s collapse started when Bretton spread rumors of KZI having toxic debt. As Gekko says at the university speech, greed got greedier and now is envy escorting greed. This is best observed at Bretton James’ behavior. As Gekko explains to his would be son-in-law, Jacob Moore, KZI had refused to help CS during the dot-com bubble in 2000. CS’s retaliative act causes Louis Zabel to commit suicide. Since Zabel was the protégé of Jacob Moore, he also wants to retaliate. In order to help Jacob, Gekko promises to gather information to destroy Bretton for his actions against KZI and for providing evidence against himself years ago. Jacob starts to illegally manipulating the market by spreading rumors about the nationalization of an Equatorial Guinea oil field, which CS has invested in. The company loses US$120 million. Later on, he accuses Bretton James of illegal trades and causing suicide of Louis Zabel. SEC investigates James for his conduct. CS refuses supporting James by saying ‘this bank is bigger than you Bretton’; Bretton in turn shamelessly asks Julius Steinhardt to step up for what Bretton did, reasoning that Julius Steinhardt was old enough and was about to retire.

Too Big to Fail The next film focusing on 2007–2008 crisis is Too Big to Fail. Directed by Curtis Hanson, Too Big to Fail chronicles the 2008 financial meltdown, focusing on the actions of US Treasury Secretary Henry Paulson—William Hurt and Ben Bernanke— Paul Giamatti, Chairman of the Federal Reserve System, to contain the problems during the period of August 2008 to October 13, 2008. Released on May 23, 2011, the film stars William Hurt, Edward Asner, Billy Crudup, Paul Giamatti, Topher Grace, Cynthia Nixon, Bill Pullman, Tony Shalhoub, James Woods (en.wikipe dia.org, 28.02.2021). Too Big to Fail is a docudrama that follows the catastrophic events of the 2008 Wall Street financial crisis, and is an adaptation of Andrew Ross Sorkin’s book. The movie starts with Treasury Secretary Henry Paulson—William Hurt, scrambling to find investors to save the collapsing Lehman Brothers bank. However, the decision

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to file Lehman for bankruptcy had already been taken. The effect of this decision was shattering to the markets all over the world. The film shows the agonizing work of the Treasury Secretary to find support from the biggest players on Wall Street and Washington D.C. Although it seems that every solution comes with an even bigger downfall, they try everything to crawl themselves back from the quickly approaching repeat of the Great Depression10 (Whitehouse 2020). On May 24, 2008, Henry Paulson—Treasury Secretary and former Chairman and CEO of Goldman Sachs—meets with Jim Wilkinson—Chief of Staff, Treasury—, Neel Kashkari—Assistant Secretary, International Affairs—, and Michele Davis— Assistant Secretary, Public Affairs. What they discuss on that Saturday becomes the inevitable reality in October. That day while discussing who shall call Warren Buffet—World’s Richest Man—to ask him to advise and help in saving Lehman Brothers, Paulson says: …we are late; we are late in every subject.

Davis contributes to discussions by saying: Congress won’t take action until it hits the iceberg.

After all Paulson calls Buffet. Buffet explains: Since they started buying and selling themselves, risk managers have lost control. I had a very unpleasant experience with the Solomon Brothers.

Just before Lehman Brothers issue, Bear Stearns—a New York-based global investment bank, securities trading, and brokerage firm—had recently failed and was sold to JPMorgan Chase. Therefore, it seems to be that now it is Lehman Brothers’ turn. These kinds of failures have domino effect. One fails, the others follow. In fact, if not Bear Stearns, Lehman Brothers seems to be the big iceberg of the outcomes of the 2007–2008 crisis. Before the crash, the philosophy ‘we are big, nothing will happen to us’ prevails in the finance market. The ego the CEOs bear is so obvious, and those smart guys sometimes become so blind that they lack the wisdom to smell the chaos. Even though Lehman Brothers is desperate and has to be thankful for every penny, Richard Fuld—Chairman and CEO first—comments on the housing crisis: You know, people act like we’re crack dealers. Nobody put a gun to anybody’s head and said, ‘Hey, nimrod, buy a house you can’t afford, and you know what? While you’re at it, put a line of credit on that baby and buy yourself a boat.’

Ahead of the crisis, Lehman Brothers were 66; it was at 36 right then. In the meanwhile, Buffett has been asking for preferred shares at 40, with a dividend of nine percent. Fuld, Erin Callan—CFO of Lehman Brothers and Joe Gregory—President and Chief Operating Officer (COO)—comment on Buffets offer as it be an opening gambit. Fuld perceives this as an insult, while Callan argues that markets like Buffet 10

The Great Depression was the worst economic downturn in the history of the industrialized world, lasting from the stock market crash of 1929–1939 (www.history.com, 28.02.2021).

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Fig. 2.1 Lehman Brothers Share Price in US$ (05.11.2007–22.09.2008). Source https://www.psd tolive.com/lehman-brothers-share-price-history/. Accessed 01 Mar 2021

and even his name would push the price up overnight. However, Fuld tends to reject Buffet’s offer and believes real estate would come back. Gregory informs them that Koreans have been sniffing around. Fuld speaks (Fig. 2.1): There you go. And they won’t steal us blind. I’ve seen this before: CEOs panic and they sell out cheap. Right now, the Street’s running around with its hair on fire, but the storm always passes. We stand strong, and on the other side, we’ll eat Goldman’s lunch.

Lehman Brothers Share Price History based on Fig. 1.1 2007–Jan 2008: Lehman Brothers scales back mortgage business, cutting thousands of mortgage-related jobs and closing mortgage origination units. Jan 29 2008: Lehman Brothers announces increase in dividends and plans to repurchase up to 100 million shares of common stock. Q1 2008: Lehman Brothers increases holding of Alt-A mortgages despite the prevailing troubles in the real estate market. Mar 14 2008: Federal Reserve and JPMorgan Chase begin to put together deal to bail out Bear Stearns. Mar 14 2008: Lehman Brothers obtains US$ 2 billion 3 year credit line from consortium of 40 banks including JPMorgan Chase and Citigroup. Mar 16 2008: JPMorgan Chase announces offer to purchase Bear Stearns for US$2 per share.

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Mar 18 2008: Lehman Brothers shares surge up almost 50% after Federal Reserve gives investment banks access to the discount window. Apr 01 2008: Lehman Brothers looks raise US$ 4 billion in new capital via an offering of perpetual convertible preferred stock. Q2 2008: Lehman Brothers shows a US$ 2.8 billion loss—the first loss in the firm’s history as a public firm; admits losses came not only from mortgagerelated positions but also from hedges against those positions. Jun 09 2008: Lehman Brothers announces plan to raise additional US$ 6 billion in new capital—US$ 4 billion in common stock, US$ 2 billion in mandatory convertible preferred stock. Jul 07–Jul 11 2008: Lehman Brothers shares plunge more than 30% for the week amid rumors that the firm’s assets have not been prices appropriately reflect the true value. Paulson and Bernanke have weekly breakfast meetings, where they find the opportunity to discuss American Economy. Paulson says: I talked to Greenspan11 . He says there are too many houses; that was the problem. So we should have taken the empty houses and burned them down.

This point is argued many times by many experts. However, it seems that banks didn’t want the wheels of gain to break down. This greediness must have carried American economy to the 2007–2008 crisis. Due to globalization, almost every economy in the world had also been badly affected. If we go back to Paulson and Bernanke breakfast scene, we hear Bernanke warning Paulson by saying “we have to do this quietly,” and Paulson confirms by saying “if this is heard, Lehman Brothers dies in an hour.” These take place in May 2008. Time moves and in July Lehman Brothers senior bankers held an emergency strategy meeting with Fuld. There senior bankers suggest that they have to prove the markets that they understood their mistake. Scapegoats would be Joe Gregory, Lehman Brothers’ President and COO, and Erin Callan the CFO of Lehman Brothers. In fact, proven or not, based on a report from a court-appointed examiner, Trumbull (2010) claims that Lehman Brothers was playing loose with its accounting even before the financial crisis put the investment bank under intense pressure to reassure its investors. According to that report, Lehman regularly used an unusual accounting gimmick at the end of each quarter to make its finances appear less shaky than they really were. The practice was called Repo 105, a type of repurchase agreement that temporarily removed securities from Lehman’s balance sheet. Unlike typical agreements for a repurchase, a Repo 105 deal would be characterized by Lehman as an outright sale of securities. This, according to the examiner’s report, created a materially misleading picture of the firm’s financial condition in late 2007 and 2008 (Trumbull, csmonitor.com, 12.03.2010). 11

Alan Greenspan 13th Chair of the Federal Reserve. In office August 11, 1987–January 31, 2006.

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27

Key problems referring to ethics and corporate management of Lehman Brothers are (Mermod and Idowu 2013: 124): • Poor risk management, extensive involvement in credit derivatives based on subprime mortgages, • Insufficient board work, lack of derivatives experts on board, • Excessive executive compensation not tied to corporate performance, • Executives lacking responsibility for the company and its shareholders, over selfconfidence, • Fraud and misrepresentation. The above listed deficiencies of Lehman Brothers are very well exposed in Too Big to Fail such that even financial illiterate people can easily observe them. It was obvious that troubled banks need some relief for their capital needs; and it is thought that letting them raise their debt to capital ratios would help them get a bank that will go bankrupt because of that ratio is too high. Following this, Fannie Mae and Freddie Mac went under government conservatorship. In September in his office with his team, Paulson grumbles: They think I’ll give Dick Fuld a bailout package; like I’m the guy cleaning up dirt with a shovel behind the elephant.

Even though as treasury, they want to help to those huge investment banks; ahead of the meeting on September 12, with their CEOs, he warns his team that they need to make it clear that this is the banks’ problem, that they—treasury and FED are only allies and advisors, not banks’ insurance. CEOs of JPMorgan Chase, Goldman Sachs, Morgan Stanley, Merril Lynch, and Citigroup are attendees of this meeting held at FED. Paulson summarizes Lehman Brothers story and compose three groups of them. The first group should evaluate Lehman Brothers’ toxic assets, the second one is to work on a structure where each of them invests in Lehman Brothers, and the third group is asked to work on the lights went out plan. Paulson stresses that Lehman Brothers is their brother, where CEOs object by saying that Lehman Brothers is their competitor. Since government already made whatever is needed, now it is the turn of the other investment banks. Paulson says: You must correct it and pay for it.… we will never forget those who are not helpful.

While all work on that weekend, Paulson make phone calls. By saying that they do not want to import their cancer, his English counterpart rejects allowing Barclays Bank to buy Lehman Brothers, even if CEOs that Paulson meet, agree to finance this purchase. FED, SEC, and Treasury decide to urge Lehman Brothers to announce bankruptcy before Asian markets open. In the meanwhile, Dan Jenster12 informs Paulson about AIG problem. 12

Dan Jester Columnist Cohen writes that during his time at Treasury, Jenster had his finger in every pie: the rescue of Fannie Mae and Freddie Mac, the bankruptcy of Lehman Brothers, the AIG calamity, the decisions to bailout Citigroup, GM and Chrysler, and the creation of the Troubled Asset Relief Program. For Fannie and Freddie, Paulson credits Jenster with the “inspired idea”

28

2 Seventh Art: Samples of Business-Related Movies

Saving AIG seems to be necessary, whereas saving Lehman Brothers is not. Paulson puts the argument that FED can lend to non-bank entities under unusual and exigent circumstances. Even though Wilkinson objects by reminding that they talked about moral hazard at the press meeting, Paulson insists. AIG has collateral and assets, whereas Lehman Brothers does not The Treasury Secretary angrily speaks these words: AIG has collateral, they have assets, Lehman didn’t, we couldn’t lend into a hole, it’s not the same story!

He further adds: The plane we flew in on this morning leased from AIG, construction downtown AIG, life insurance 81 million policies with a face value of US$1.9 trillion. Billions of dollars in teachers’ pensions. It’s everywhere, you want ‘too big to fail’ here it is!

At this moment, Wilkinson reminds that whether it is a bailout or not, legislation is required in order not to cause public disturbance. Michele Davis is going to tell the story to the press. This is how she is going to explain the case: Wall Street started bundling home loans together—mortgage-backed securities—and selling slices of those bundles to investors, and they were making big money. So they started pushing the lenders to lend them more loans. In fact, lenders had already given loans to borrowers with good credit, so banks went bottom, and lowered their criteria. Before, a credit score of 620 and a down payment of 20% were necessary; now banks settle for 500, with no down payment. Since regular people have faith in banks and assume that they know what they are doing, by being able to borrow make them think that they have the credibility, and they can afford such a loan—a house in fact. Neel Kashkari adds that banks already knew that securities based on these kinds of mortgages were highly risky. So, to control their downside, banks started buying a kind of insurance. If mortgages default, insurance company pays. Default swap. The banks insure their potential losses to move the risk off their books, so they can invest more and make more money in turn. Due to hundreds of million dollars in fees, a lot of companies insured these mortgages; however, figuring the housing market would keep going up, AIG took an almost unbelievable amount of risk. However, housing prices went down; the teaser rate on mortgages ran out, payments went up, and borrowers defaulted. Mortgage-backed securities tanked. AIG has to pay off all swaps all over the world at the same time. Every bank AIG insured, books massive losses on the same day, which makes it impossible for AIG to pay them at once; thus, AIG is about to bankrupt. It is discussed in the film at this scene; since everybody was making huge amounts of money, during this period, nobody wanted any regulation to put red flags. The lack of regulations was about to cause the whole finance system to went down. Even six months ahead, the moment Lehman Brothers went bankrupt; there were precautions of creating a “keep-well” agreement that allowed the Treasury to continually provide financing to those companies “no matter how much they lost long into the future.” During that fateful weekend of Sept. 13 and 14 of 2008, Jenster tried to negotiate deals for Lehman with both Bank of America and Barclays — to no avail — before the 158-year old securities firm collapsed into bankruptcy (Cohan 04.02.2010).

In the Aftermath of 2007–2008 Crisis

29

to be taken. Upon these discussions, the senate takes its turn to make the required legislation. The first attempt does not succeed. In between, treasury, SEC, and FED call investment banks once more. Goldman Sachs, JPMorgan Chase, Merril Lynch, Morgan Stanley, State Street, Wells Fargo, Citibank, Bank of America, and Bank of New York Mellon take their seats at the meeting, where chairwoman of Federal Deposit Insurance Corporation (FDIC) and Ben Bernanke attend as well. These banks are offered to take US$ 125 billion and relieve the financial markets. This meeting once more shows the greediness and selfishness of bankers. Some have myopia keeping them from reading the markets, some question their bonuses. I run a company. If the central bank says I can’t give incentives to talented people; you will witness the biggest brain drain this country has ever seen.

The Assistant Secretary of the Treasury for Public Affairs, Michele Davis, upon hearing that the nine bank CEOs may refuse to take free money from the federal government if they had to be held accountable for how they spent it cries out against by saying: They almost bring down the US economy as we know but we can’t put restrictions on how they spend the US$125 billion we’re giving them because... they might not take it!

Ben Bernanke intervenes and says the country is facing the worst economy since the Great Depression. He reminds them that if the financial system collapses, it would take every one of them down. Upon this serious warning, they start signing the agreement. Almost with similar wordings, Bernanke talk at the congress: I spent my entire academic career studying the Great Depression. The depression may have started because of a stock market crash, but what hit the general economy was a disruption of credit. Average citizens [were] unable to borrow money. To do anything to buy a home, start a business, stock their shelves. Credit has the ability to build a modern economy, but lack of credit has the ability to destroy it, swiftly and absolutely. If we do not act, boldly and immediately, we will replay the depression of the 1930s, only this time it will be far, far worse. We don’t do this now; we won’t have an economy on Monday.

In the second attempt Congress passes and on October 3, 2008, President George W. Bush signs into law the Troubled Asset Relief Program (TARP), which is the program of the government to purchase toxic assets and equity from financial institutions to strengthen the US financial sector.

In the Aftermath of 2007–2008 Crisis According to Huwart and Verdier, the 2007–2008 crisis should not overshadow the positive effects of opening national borders to capital flows. Without the free movement of capital gradually introduced in the 1970s, foreign investments, corporate loans, and international finance would not have fertilized industry and new economic

30

2 Seventh Art: Samples of Business-Related Movies

activities in a growing number of countries. Global liquidity allowed the most ambitious projects to emerge, increased cross-border capital flows which in turn resulted in a lower cost of capital, higher investment growth, and considerable productivity gains (2013: 132). Regarding the countries depicted in Chap. 3, it can be concluded that the consequences of the crisis are the cost of the global liquidity.

Chapter 3

Reflections of Misconducts and Interactions

Targeting huge profits, appetite for seizing the markets, political interruptions, lack of regulation, weak monitoring of regulatory bodies, or just an accountant’s or company owner’s selfish misconduct have irreparable adverse impacts on economy; thus, this way or the other affect lives of each human being on earth. This chapter summarizes these effects on selected countries and points to numerical facts.

Countries Severely Affected by the 2007–2008 Crisis On September 15, 2008, America’s fourth-largest investment bank Lehman Brothers filed bankruptcy. With total debts of US$613 billion against total assets of US$639 billion and 25,000 employees worldwide, Lehman’s bankruptcy was said to be the largest in the history, surpassing that of WorldCom1 ’s and Enron2 ’s. Lehman Brothers’ crisis further led to global financial crisis that year with several economies hit hard as global markets plummeted immediately. The company’s collapse pulled down confidence in banks across the world. Ukraine, Russia, and Mexico were hit severely, as per a report by the Carnegie Endowment for International Peace, a foreign-policy think tank (www.cnbctv18.com, 14.09.2018). The graphics 1

WorldCom was not just the biggest accounting scandal in the history of the USA—it was also one of the biggest bankruptcies of all time. The revelation that telecommunications giant WorldCom had cooked its books came on the heels of the Enron and Tyco frauds, which had rocked the financial markets. However, the scale of the WorldCom fraud put even them in the shade (Hayes 2020). 2 Enron, a corporation headquartered in Houston, operated one of the largest natural gas transmission networks in North America, totaling over 36,000 miles, in addition to being the largest marketer of natural gas and electricity in the USA. Enron managed the world’s largest portfolio of natural gas risk management contracts and pioneered innovative trading products. Its bankruptcy in December 2001 was the largest such filing in US history. The name Enron became synonymous with corporate greed and corruption, and its demise cost investors and employees over $70 billion in lost capitalization and retirement benefits (Frontain 2021). © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 I. Kesimli, Seventh Art’s Perspective on Ethical Conduct and Corporate Irresponsibility, Accounting, Finance, Sustainability, Governance & Fraud: Theory and Application, https://doi.org/10.1007/978-981-99-2520-9_3

31

32

3 Reflections of Misconducts and Interactions

in this news list Ukraine, Argentina, Hungary, Poland, Jamaica, Ghana, Kazakhstan, Bulgaria, and Mexico as top ten countries that are most affected between 2008 and 2009. Currency depreciation, equity market, and bond spreads are the indicators. Regarding the same indicators, China, Japan, USA, South Africa, Peru, Philippines, Malaysia, Germany, Colombia, and France are the least affected countries (ibid.). Here are some of the countries severely affected by the 2007–2008 crisis. Along with Iceland, Sweden, Spain, and Greece who are severely affected, some other countries like Canada also find place in the list because they are somehow affected, too. Every country involved in this crisis deserves a close look, had this research aimed so. Within the boundaries of this book, they are left aside. One of the countries paid attention here is Iceland. The case of Iceland is interesting. Iceland is a small but an effluent European country. Table 3.1 displays the dimension of the damage regarding Iceland. Gross domestic product (GDP), which is e13,966.70 million in 2006 and e15,827.4 million in 2007, drastically drops to e11,052.10 million in 2008. The change between the last consequent years is 30%. Next year, an additional 15% decrease follows. Rise in population worsen per capita GDP; it shrinks by 32% in 2008. The development of Icelandic finance sector seems to have followed the course Huwart and Verdier describe. Iceland benefited from the free movement of capital and paid back in 2008. By the mid-1990s and 2000s, foreign investment boomed due to nearly full liberalization of capital movements between Iceland and other countries. However, the reverse flow of currency during crisis resulted in the collapse of a number of banks. Devaluation of króna—Iceland’s currency and inflation accompanied. Interest rates increased by 20% (www.brittanica.com, 21.02.2021). In fact, by offering 15% interest rates—the value of króna was high—Icelandic banks lured deposits from Netherlands and UK. Króna had become a major trading currency. This was why its value went up between 1994 and 2008. This way inflation Table 3.1 GDP and population of Iceland 2020

2009

2008

2007

2006

Population

364.134

319.368

315.459

307.672

299.891

GDP (million e)

19,022.2

9,419.1

11,052.1

15,827.4

13,966.7

111

GDP per capita Rank (World 2020)

8

GDP Rank (World 2020) GDP per capita in e

52,170

29,510

34,600

50,830

45,900

Persons per km2

3.6

3.2

3.2

3.2

3.2

Land

103,000 km2

Source Based on data compiled from Eurostat. Accessed Mar 13, 2021 https://ec.europa.eu/eur ostat/databrowser/view/demo_pjangroup/default/table?lang=en https://ec.europa.eu/eurostat/databrowser/view/NAMA_10_GDP_custom_679977/default/table? lang=en

Countries Severely Affected by the 2007–2008 Crisis

33

was pushed; which in turn caused housing prices to rise; stock market skyrocketed between 2003 and 2004. By 2007, the average Icelander was 45.35% wealthier than in 2003. It was not until 2015, the Icelanders’ level of wealth came close to 2007 level. Beating 2007’s per capita income would take eight years for the citizens of Iceland. Many Icelanders added second mortgages using cheap foreign currencies. Banks used US$100 billion in deposits to invest in foreign companies, real estate, and even soccer teams. When the 2008 global financial crisis shut down bank lending, banks went bankrupt. Bailing banks out was not even a choice, since the government did not have funds. These banks were too big, in proportion to economic wealth of Iceland, to save. Icelandic banks’ financial collapse brought down the country’s economy. While the government negotiated a US$2.1 billion bailout from the International Monetary Fund (IMF) to keep the government afloat, it also asked Luxembourg, Belgium, and the UK to insure bank deposits of its branches in their countries. The turmoil ended up in October 2008—parallel to the fall of Lehman Brothers and introduction of TARP—Iceland nationalizing its three largest banks—Kaupthing Bank, Landsbanki, and Glitnir Bank—which defaulted on US$62 billion of foreign debt. The banks’ collapse sent foreign investors out of Iceland. Króna went down 50% in one week. The stock market fell 95%. Almost every business in Iceland went bankrupt. Housing prices fell; mortgage costs doubled. Icelandic banks having expanded their retail services in Europe and having invested in foreign companies caused its economic collapse to impact the rest of Europe (Amadeo, 04.01.2021). Another economy that was hardly hit by the 2007–2008 crisis is the Swedish economy. With no GDP growth in 2008, in 2009, the Swedish economy lived its most difficult year since World War II, when unemployment rose to more than eight percent. This was an unheard level for Sweden, where full employment was a source of national pride. Partly as a result of government stimulus-spending efforts, the economy healed quickly. GDP grew by more than 4% in 2010 (www.brittanica.com, 21.02.2021). Not all countries accumulated unpleasant experiences during 2007–2008 financial crisis. Most probably closely regulated banking system helped Canada to survive the crisis better than most of its partners in the Group of Eight (G8) (www.britannica. com, 21.02.2021). Personally, the present author sensed the 2007–2008 crisis before it burst and while making research on American economy in the summer of 2007 found out data supported by the news that a financial crisis had already started. Later, the 2007–2008 crisis became the present author’s research area. Even though this book is not based on my master thesis, one table is summarized here, due to its relevancy. Based on data available until mid-2010, Table 3.2 shows collectively and briefly the level of the impact of the 2007–2008 crisis on the real sectors of the countries mentioned above (Kesimli 2010: 136).

34

3 Reflections of Misconducts and Interactions

Table 3.2 The level of impact of 2007–2008 economic crisis on the real sectors of the countries External debt stock

Foreign trade structure

Production index

Capacity utilization rates

USA

Negative

Negative

Negative

Negative

Germany

Negative

Negative

Some sectors negatively, some positively affected

Negative

Czech Republic

Besides negative consequences, there are also partial positive consequences

Negative

Some sectors negatively, some positively affected

Cannot be attributed to the crisis

Japan

No impact

Negative

Negative

Negative

Hungary

Insufficient data

Some sectors negatively, some positively affected

Negative

Negative

Romania

Insufficient data

Some sectors negatively, some positively affected

Some sectors negatively, some positively affected

Cannot be attributed to the crisis

Russia

There have been fluctuations but no increases

Data of 2009 and With some later should be exceptions most examined sectors were adversely affected

Insufficient data

Turkey

Profits may decrease depending on currency rates. No problem regarding obligations

Some sectors negatively, some positively affected

Some sectors negatively, some positively affected

Some sectors negatively, some positively affected

Source Kesimli (2010). Redesigned and translated from p. 136

Chapter 4

Field Study to Evaluate the Impact of Movies on Members of Business World

A field study to evaluate the impact of movies on members of business world composes this chapter. Here, the field study conducted exclusively for this research book will be introduced. Related analyses, tables, graphics, and discussions take place in this chapter.

Introduction In order to explore the possible impact of movies on members of business world, a field study is conducted. For this purpose, a questionnaire is designed. There is no limitation for respondents’ nationality or country. Snowball sampling along with other techniques is employed for collecting answers. Both Turkish and English versions of the questionnaire are prepared, and both received answers from all over the world. Demographic information is collected at first. Five questions follow this group. Respondents are asked (1) whether they define their affiliated company as a corporate responsible one or not—this question is coded as CSR, which stands for corporate social responsibility; (2) about the existence of Code of ethics referenced by their affiliated institution—coded as COETH; and (3) whether they believe that ethics can be taught—coded as TEACH. At that point of the questionnaire, ten films personally selected based on advices of film critics are listed along with movie posters. Respondents are asked to tick the relevant box for the films they watched. Afterward, two more questions followed; (4) whether they lived any change in sensitivity of their perception of ethics—coded as CHANGE—after watching any of the listed films; and (5) the existence of any impact of these films on their opinion about their profession—coded as OPIN.

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 I. Kesimli, Seventh Art’s Perspective on Ethical Conduct and Corporate Irresponsibility, Accounting, Finance, Sustainability, Governance & Fraud: Theory and Application, https://doi.org/10.1007/978-981-99-2520-9_4

35

36

4 Field Study to Evaluate the Impact of Movies on Members of Business …

Limitations of the Survey Of course, the main limitation of this research is the list of the films, which is a personal select. The films on the list are not older than 1987. A list composed of more films from an era, or films not limited to a specific era would be alternatives. Another critic to the research would be, having not employed any formerly tested and popularized scale. However, it is well known that using any scale which had been tested in a country or language context, or even designed exclusive for a group of respondents would mislead the interpretations of analyses. Nevertheless, the questionnaire designed specifically for this research is sent to e-mail addresses collected from Public Disclosure Platform (PDP), from Union of Chambers of Certified Public Accountants of Turkey (UCCPAs), distributed through social media, and sent to e-mail addresses of personal connections. The questionnaire is designed in such a way that no single question is let unanswered. Thus, 106 responses are collected and analyzed statistically. At the first hand, demographic factors will be displayed via graphics.

Demographic Analyses Regarding gender, out of 106 samples 33% is female, and 67% is male. None of the statistical analyses revealed any relation related to gender. This is in concordance with research questions. Gender distribution is displayed in Graph 4.1. Birth year, starting with 1920 and former, has 12 groups with intervals of 10 years at first, followed by five year intervals. The most crowded group is 1951–1960 and composes 30% of the sample. The age groups are displayed in Graph 4.2. Age is an affecting factor for one of the research questions. Even though it will be discussed in detail in the following paragraphs, Marital Status has relations with more than one research questions. As seen from Graph 4.3, 61% of respondents are married and has children. With or without a child, single people compose 34% of respondents. Education affects one of the research questions. Graph 4.4 displays the distribution of education levels or respondents. According to the graph, while respondents having Graph 4.1 Gender distribution

Female 33% Male 67%

Demographic Analyses

37

1971 - 1975 12% 1976 - 1980 11%

1966 - 1970 14%

1961 - 1965 12%

Other 16%

1981 - 1985 6%

1986 - 1990 7%

1941 - 1950 5%

1951 - 1960 30%

1991+ 3%

Graph 4.2 Distribution of age groups

Single, no child 15% Married with children 61%

Single with children 19%

Married, no child 5% Graph 4.3 Marital status of respondents

bachelor’s degree make up 58% of the sample, respondents with master’s degree compose 26% of the sample. Profession is a factor affecting three of the research questions, and details are given in Graph 4.5. Accountants make up 37% of the sample. Engineers compose the second crowded group. Revenue officers, CPA’s, accountants, tax inspectors, and auditors are counted as accountant. Business administrators and retired or currently working managers compose the group of managers. Financial advisors, financiers, and bankers make up financier group. Engineers and industrialists are counted as engineers. The rest who defined themselves in several professions are collected in the group of others. Respondents are asked to choose their tenure in their profession, as well as their tenure in their current or recent job. The two may differ sometime. On the other hand, sometimes they overlap. As seen from Graph 4.6, most of respondents have been performing their profession for more than 25 years. They make 58% of the

38

4 Field Study to Evaluate the Impact of Movies on Members of Business …

Bachelor degree 58%

College (2-3 years) 8%

PhD 6%

Master's degree 26%

Highschool or less 2% Graph 4.4 Education levels of respondents

Other 19%

Accountant 37%

Engineer 22%

Manager 14%

Financier 8%

Graph 4.5 Profession of respondents

population. Another 25% comes from respondents, who are in this profession for more than 15 years. When the last occupation of respondents is questioned, those who have been working for more than 25 years at the same company compose 37% of the population. Some of the respondents are concentrated in 5–9 years of tenure regarding their current/recent occupation. Its percentage is 24 and is followed by those who have 20 24 years of tenure for the same. These are shown in Graph 4.7. None of the respondents has tenure less than one year in their current/recent job or tenure in profession less than one year. Graph 4.8 gives details of affiliated company’s situation regarding it being locality, nationality, the level of foreign trade it has or it being global. It is seen from Graph 4.8 that 29% of the affiliated companies are local; 15% are national; 21% of them have foreign trade and are national companies. While 28% of

Demographic Analyses

39

Graph 4.6 Tenure of respondents regarding their profession

1-4 years 3%

5-9 years 10% 10-14 years 4% 15-19 years 13%

25 years and more 58%

20-24 years 12% Graph 4.7 Tenure of respondents regarding their last occupation

1-4 years 8% 5-9 years 24%

25 years and more 37%

20-24 years 12%

Graph 4.8 Respondents’ company—local versus global

International

Global 7%

10-14 years 10% 15-19 years 9% Local 29%

28%

National 15% National does have foreign trade 21%

40

4 Field Study to Evaluate the Impact of Movies on Members of Business …

Micro - 1 to 9 employees including owner 39%

Small - 10 to 49 employees including owner 17%

Medium Scale - 50 to 249 employees including owner 22%

Large Scale more than 250 employees including owner 22% Graph 4.9 Size of respondents’ companies

companies are international ones, 7% of them are global companies. Another measure to gauge affiliated companies’ size is the number of their employees. Graph 4.9 is a Pie Graph that has four slices. These are almost evenly distributed except for micro businesses, which are described as companies having employees less than ten. Medium Scale companies having 50–249 employees including the owner make 22%; so does Large Scale companies, which have more than 250 employees including the owner. Based on demographic factors and information about the affiliated companies justifies to assume that the available dataset has the representation ability. Nonetheless, the findings of this survey cannot be generalized to the universe. Nonparametric statistics are conducted because the data is collected from a sample that does not follow normal distribution.

Statistical Analyses Statistical analyses are conducted to explore whether there are relations among factors. Nonparametric statistics are conducted because the data is collected from a sample that does not follow normal distribution. Following normality tests, Kruskal– Wallis H tests are conducted. Test results that have a chance to display a significant and meaningful difference are included here. Five dimensions are as follows: (1) CSR showing whether respondents define their affiliated company as a corporate responsible one or not—CSR stands for corporate social responsibility; (2) COETH giving information about the existence of Code of Ethics referenced by the affiliated institution of respondents; (3) TEACH shoving whether the respondents believe that ethics can be taught; (4) CHANGE giving information whether respondents lived

Statistical Analyses

41

any change in sensitivity of their perception of ethics after watching any of the listed films or the like; and (5) OPIN giving hints about the existence of any impact of the watched films on respondents’ opinions about their profession.

CSR Dimension First, CSR dimension is tested against variables.

CSR Dimension and Age Variable According to Kruskal–Wallis H tests in CSR dimension, the participants show a significant difference according to the Age variable. After Kruskal–Wallis H tests, as post hoc test Dunnett’s Multiple Comparison Test (Dunn Test) is run. According to Dunn Test, on CSR 1986–1990 age group exhibited stochastic dominance over 1966–1970 age group. The adjusted significance level is 0.033 (Table 4.1). Table 4.1 CSR dimension and age variable

Ranks

AgeMean CSR_Mean

N

Mean rank

1941–1950

5

55.70

1951–1960

32

57.84

1961–1965

13

54.19

1966–1970

15

66.27

1971–1975

13

57.54

1976–1980

12

50.42

1981–1985

6

36.00

1986–1990

7

24.50

3

34.17

1991+ Total

106

Sösösl Test statisticsa,b

CSR_Mean

Kruskal–Wallis H

16.172

df

8

Asymp.Sig

0.040

a Kruskal–Wallis b Grouping

Test Variable: AgeMean

42

4 Field Study to Evaluate the Impact of Movies on Members of Business …

Table 4.2 CSR dimension and marital status variable

MrtStatusMean

Ranks

CSR_Mean

Single, no child

N 16

48.31

Single with children

20

39.88

Married, no child Married with children Total

Mean rank

5

44.60

65

59.65

106

Sösösl Test statisticsa,b

CSR_Mean

Kruskal–Wallis H

9.241

df

3

Asymp.Sig

0.026

a Kruskal–Wallis

Test b Grouping Variable: MrtStatusMean

CSR Dimension and Marital Status Variable According to Kruskal–Wallis H tests in CSR dimension, the participants show a significant difference according to the Marital Status variable. After Kruskal– Wallis H tests, Dunn Test is run. According to Dunn Test, on CSR single with children group exhibited stochastic dominance over married with children group. The adjusted significance level is 0.030 (Table 4.2).

CSR Dimension and Profession Variable According to Kruskal–Wallis H tests in CSR dimension, the participants show a significant difference according to the Profession variable. After Kruskal–Wallis H tests, Dunn Test is run. According to Dunn Test, no group is exhibiting stochastic dominance on the dependent variable (Table 4.3).

CSR Dimension and Tenure in Job Variable According to Kruskal–Wallis H tests in CSR dimension, the participants show a significant difference according to the tenure in Job variable. After Kruskal–Wallis H tests, Dunn Test is run. According to Dunn Test, on CSR 5–9 years group exhibited stochastic dominance over 20–24 years group, 25 years and more, and 15–19 years group. The adjusted significance levels are 0.026, 0.000, and 0.014, respectively (Table 4.4).

Statistical Analyses Table 4.3 CSR dimension and profession variable

43

Profession_Mean

Ranks

CSR_Mean

Accountant

N

Mean rank

39

50.50

9

53.94

Financier Manager

15

73.60

Engineer

23

48.91

Other

20

49.35

Total

106

Sösösl Test statisticsa,b

CSR_Mean

Kruskal–Wallis H

9.559

df

4

Asymp.Sig

0.049

a Kruskal–Wallis b Grouping

Table 4.4 CSR dimension and tenure in job variable

Test Variable: Profession_Mean

Tenure_JobMean

Ranks

N

Mean rank

CSR_Mean

1–4 years

8

52.44

5–9 years

23

27.63

10–14 years

10

42.20

15–19 years

9

61.11

20–24 years

12

56.58

25 years and more

36

59.58

Total

98

Sösösl Test statisticsa,b

CSR_Mean

Kruskal–Wallis H

26.752

df

5

Asymp.Sig

0.000

a Kruskal–Wallis b Grouping

Test Variable: Tenure_JobMean

CSR Dimension and Tenure in Profession Variable According to Kruskal–Wallis H tests in OPIN dimension, the participants show a significant difference according to the tenure in Profession variable. After Kruskal– Wallis H tests, Dunn Test is run. According to Dunn Test, on CSR 5–9 years group exhibited stochastic dominance over 25 years and more group with adjusted significance level 0.001 (Table 4.5).

44

4 Field Study to Evaluate the Impact of Movies on Members of Business …

Table 4.5 OPIN dimension and tenure in profession variable

TenureProfMean

Ranks

CSR_Mean

1–4 years

N 3

54.33

5–9 years

11

23.95

10–14 years

4

41.75

15–19 years

14

48.36

20–24 years

13

51.12

61

61.25

25 years and more Total

Mean rank

106

Sösösl Test statisticsa,b

CSR_Mean

Kruskal–Wallis H

18.825

df

5

Asymp.Sig

0.002

a Kruskal–Wallis b Grouping

Test Variable: TenureProfMean

OPIN Dimension Secondly OPIN dimension is tested against variables.

OPIN Dimension and Number of Films Watched Variable According to Kruskal–Wallis H tests in OPIN dimension, the participants show a significant difference according to the Number of Films Watched variable. According to Dunn Test run after Kruskal–Wallis H tests, no group is exhibiting stochastic dominance on the dependent variable (Table 4.6).

OPIN Dimension and Development Level Variable According to Kruskal–Wallis H tests in OPIN dimension, the participants show a significant difference according to the Development Level variable. After Kruskal– Wallis H tests, Dunn Test is run. According to Dunn Test, on OPIN very highly developed countries group exhibited stochastic dominance over highly developed countries group. The adjusted significance level is 0.024 (Table 4.7).

Statistical Analyses Table 4.6 OPIN dimension and number of films watched variable

45

Number_of_Films_Mean

Ranks

OPIN_Mean

0.00

N 1

Mean rank 12.50

1.00

26

53.63

2.00

19

46.11

3.00

17

66.47

4.00

15

39.27

5.00

8

47.63

6.00

8

56.56

7.00

6

72.42

8.00

3

41.67

10.00

3

92.00

Total

106

Sösösl Test statisticsa,b

OPIN_Mean

Kruskal–Wallis H

17.986

df

9

Asymp.Sig

0.035

a Kruskal–Wallis

Test b Grouping Variable: Number_of_Films_Mean Table 4.7 OPIN dimension and development level variable

Development_Mean

Ranks

N

OPIN_Mean

Medium developed

2

12.50

Highly developed

56

61.47

Very highly developed

48

45.91

Total

Mean rank

106

Sösösl Test statisticsa,b

OPIN_Mean

Kruskal–Wallis H

10.904

df

2

Asymp.Sig

0.004

a Kruskal–Wallis b Grouping

Test Variable: Development_Mean

46

4 Field Study to Evaluate the Impact of Movies on Members of Business …

Table 4.8 OPIN dimension and country variable

Country_Mean Ranks OPIN_Mean

N

Mean rank

TUR

52 61.45

ANGLOSAXON

30 48.80

EU

13 37.42

ARAB-NORTH AFRICA

2 76.00

OTHER

9 41.44

Total

106

Sösösl Test statisticsa,b

OPIN_Mean

Kruskal–Wallis H

10.838

df

4

Asymp.Sig

0.028

a Kruskal–Wallis b Grouping

Test Variable: Country_Mean

OPIN Dimension and Country Variable According to Kruskal–Wallis H tests in OPIN dimension, the participants show a significant difference according to the Country variable. After Kruskal–Wallis H tests, Dunn Test is run. According to Dunn Test, no group is exhibiting stochastic dominance on the dependent variable (Table 4.8).

COETH Dimension In the third place OPIN dimension is tested against variables.

COETH Dimension and Marital Status Variable According to Kruskal–Wallis H tests in COETH dimension, the participants show a significant difference according to the Marital Status variable. After Kruskal– Wallis H tests, Dunn Test is run. According to Dunn Test, no group is exhibiting stochastic dominance on the dependent variable (Table 4.9).

COETH Dimension and Education Variable According to Kruskal–Wallis H tests in COETH dimension, the participants show a significant difference according to Education variable. After Kruskal–Wallis H

Statistical Analyses Table 4.9 COETH dimension and marital status variable

47

MrtStatusMean

Ranks

COETH_Mean

Single, no child

N 2

4.25

Single with children

6

9.33

Married, no child

Mean rank

2

13.00

Married with children

13

14.27

Total

23

Sösösl Test statisticsa,b

COETH_Mean

Kruskal–Wallis H

6.482

df

3

Asymp.Sig

0.090

a Kruskal–Wallis

Test b Grouping Variable: MrtStatusMean

Table 4.10 COETH dimension and education variable

Education_EMean COETH_Mean

Ranks

N

Mean rank

Highschool or less

1

1.00

College (2–3 years)

4

7.50

Bachelor degree

9

9.94

Master’s degree

5

16.30

PhD

4

18.50

Total

23

Sösösl Test statisticsa,b

COETH_Mean

Kruskal–Wallis H

14.027

df

4

Asymp.Sig

0.007

a Kruskal–Wallis b Grouping

Test Variable: Education_EMean

tests, Dunn Test is run. According to Dunn Test, no group is exhibiting stochastic dominance on the dependent variable (Table 4.10).

COETH Dimension and Local versus Global Variable According to Kruskal–Wallis H tests in COETH dimension, the participants show a significant difference according to Local versus Global variable. Dunn Test run after Kruskal–Wallis H tests revealed that no group is exhibiting stochastic dominance on the dependent variable (Table 4.11).

48

4 Field Study to Evaluate the Impact of Movies on Members of Business …

Table 4.11 COETH dimension and local versus global variable Local_GlobalMean

Ranks

N

COETH_Mean

Local

4

7.50

National

1

7.50

National—does have foreign trade

4

8.63

12

15.75

2

7.50

International Global Total

Mean rank

23

Sösösl Test statisticsa,b

COETH_Mean

Kruskal–Wallis H

9.960

df

4

Asymp.Sig

0.041

a Kruskal–Wallis b Grouping

Test Variable: Local_GlobalMean

TEACH Dimension In the fourth place, TEACH dimension is tested against variables.

TEACH Dimension and Tenure in Profession Variable According to Kruskal–Wallis H tests in TEACH dimension, the participants show a significant difference according to tenure in Profession variable. After Kruskal– Wallis H tests, Dunn Test is run. According to Dunn Test, on TEACH 5–9 years group exhibited stochastic dominance over 25 years and more group, 20–24 years group, and 10–14 years group. The adjusted significance levels are 0.000, 0.002, and 0.003, respectively (Table 4.12).

TEACH Dimension and Tenure in Job Variable According to Kruskal–Wallis H tests in TEACH dimension, the participants show a significant difference according to tenure in Job variable. After Kruskal–Wallis H tests, Dunn Test is run. According to Dunn Test, on TEACH 10–14 years group exhibited stochastic dominance over 20–24 years group. The adjusted significance level is 0.034 (Table 4.13).

Statistical Analyses Table 4.12 TEACH dimension and tenure in Profession variable

49

TenureProfMean

Ranks

TEACH_Mean

1–4 years

N 3

25.33

5–9 years

11

19.23

10–14 years

4

80.50

15–19 years

14

52.07

20–24 years

13

62.62

61

57.68

25 years and more Total

Mean rank

106

Sösösl Test statisticsa,b

TEACH_Mean

Kruskal–Wallis H

26.189

df

5

Asymp.Sig

0.000

a Kruskal–Wallis b Grouping

Table 4.13 TEACH dimension and tenure in job variable

Test Variable: TenureProfMean

Tenure_JobMean

Ranks

TEACH_Mean

Less than a year

N

Mean rank 8

44.94

1–4 years

8

63.06

5–9 years

23

44.48

10–14 years

10

31.25

15–19 years

9

52.28

20–24 years

12

68.88

25 years and more

36

60.40

Total

106

Sösösl Test statisticsa,b

TEACH_Mean

Kruskal–Wallis H

16.319

df

6

Asymp.Sig

0.012

a Kruskal–Wallis b Grouping

Test Variable: Tenure_JobMean

50

4 Field Study to Evaluate the Impact of Movies on Members of Business …

Table 4.14 CHANGE dimension and development Level variable

Development_Mean

Ranks

CHANGE_Mean

Medium developed

N 2

7.00

Highly developed

56

58.69

Very highly developed

48

49.39

Total

Mean rank

106

Sösösl Test statisticsa,b

CHANGE_Mean

Kruskal–Wallis H

7.698

df

2

Asymp.Sig

0.021

a Kruskal–Wallis

Test b Grouping Variable: Development_Mean

CHANGE Dimension In the fifth place, CHANGE dimension is tested against variables.

CHANGE Dimension and Development Level Variable According to Kruskal–Wallis H tests in CHANGE dimension, the participants show a significant difference according to Development Level variable. After Kruskal– Wallis H tests, Dunn Test is run. According to Dunn Test, on CHANGE medium developed countries group exhibited stochastic dominance over highly developed countries group. The adjusted significance level is 0.043 (Table 4.14).

CHANGE Dimension and Company Size Variable According to Kruskal–Wallis H tests in CHANGE dimension, the participants show a significant difference according to Company Size variable. After Kruskal–Wallis H tests, Dunn Test is run. According to Dunn Test, on CHANGE Small companies group exhibited stochastic dominance over Large Scale companies group. The adjusted significance level is 0.037 (Table 4.15). Even though Correlations Kendall’s tau_b are given through Table 4.16, Correlations Spearman’s rho, which is displayed in Table 4.17 are interpreted. The reason is that except gender all variables have groups more than four.

Statistical Analyses

51

Table 4.15 CHANGE dimension and company size variable SizeMean

Ranks

N

CHANGE_Mean Micro—1 to 9 employees including owner

Mean rank

41 52.02

Small—10 to 49 employees including owner

18 36.89

Medium Scale—50 to 249 employees including owner

24 60.10

Large Scale—more than 250 employees including owner

23 62.24

Total

106

Sösösl Test statisticsa,b

CHANGE_Mean

Kruskal–Wallis H

9.106

df

3

Asymp.Sig

0.028

a Kruskal–Wallis

Test b Grouping Variable: SizeMean

Summarizing Statistical Analyses As well known, the main objective of statistical tests is to find out relations among variables. Findings are summarized here: • • • • • • • • • • •

•

Gender is not a factor affecting CSR, OPIN, COETH, TEACH, and CHANGE. Marital Status is a factor affecting CSR and COETH. Profession affects CSR, but does not have effects on other dimensions. Position at the affiliated company is not an affecting factor on any of dimensions. The kind of the affiliated company, whether it is a local versus global one, affects COETH. The respondent’s department at affiliated company is not an affecting factor on any of the dimensions. There isn’t any relationship between age and CHANGE. Both tenure in profession and tenure in job have relations with CSR and TEACH. However, this couple does not have any relation with the other dimensions. The size of the affiliated company is an affecting factor on CHANGE, but not on other dimensions. Level of education only affects COETH among all dimensions. The answers of respondents to the question about the location of the affiliated company helped to categorize the location from two aspects. The first is the name of the country. The second aspect is the level of development of the country. The two aspects have differing relations with dimensions. The country variable only affects OPIN. Development Level affects both OPIN and CHANGE. There is relationship between the number of the kinds of films described in the questionnaire watched and OPIN.

Number_of_ Films_Mean

COETH_Mean

OPIN_Mean

CHANGE_ Mean

TEACH_Mean

Sig. (2-tailed)

Correlation Coefficient

Sig. (2-tailed)

Correlation Coefficient

Sig. (2-tailed)

Correlation Coefficient

Sig. (2-tailed)

Correlation Coefficient

Sig. (2-tailed)

Correlation Coefficient

Sig. (2-tailed)

106

23

106

106

106

106

CSR_Mean

Correlation Coefficient

Sample N

Kendall’s tau_b

Table 4.16 Correlations Kendall’s tau_b

0.497

−0.055

−0.143

0.074

0.502

0.131

0.599**

0.003

0.025

0.188*

0.151

0.122

1

TEACH_ Mean

0.592

0.044

0.638

0.039

0.000

0.351**

1

CSR_ Mean

0.368

0.070

0.125

0.295

0.000

0.670**

1

CHANGE_ Mean

0.295

0.081

0.070

0.345

1

OPIN_ Mean

0.199

−0.235

1

COETH_ Mean

1

Number_of_ Films_Mean

Development_ Mean

(continued)

Country_ Mean

52 4 Field Study to Evaluate the Impact of Movies on Members of Business …

Sig. (2-tailed)

Correlation Coefficient

106

0.478

0.061

0.544

0.055

CSR_ Mean

*Correlation is significant at the 0.05 level (2-tailed) **Correlation is significant at the 0.01 level (2-tailed)

Country_Mean

Sig. (2-tailed)

106

Development_ Mean

Correlation Coefficient

Sample N

Kendall’s tau_b

Table 4.16 (continued)

0.015

−0.201*

−0.018 0.837

0.329

−0.086

−0.114 0.216

CHANGE_ Mean

TEACH_ Mean

0.005

−0.230**

0.040

−0.179*

OPIN_ Mean

0.442

−0.161

0.442

0.161

COETH_ Mean

0.569

−0.045

0.098

0.140

Number_of_ Films_Mean

0.000

0.652**

1

Development_ Mean

1

Country_ Mean

Statistical Analyses 53

Number_of_ Films_Mean

COETH_Mean

OPIN_Mean

CHANGE_ Mean

TEACH_Mean

Sig. (2-tailed)

Correlation Coefficient

Sig. (2-tailed)

Correlation Coefficient

Sig. (2-tailed)

Correlation Coefficient

Sig. (2-tailed)

Correlation Coefficient

Sig. (2-tailed)

Correlation Coefficient

Sig. (2-tailed)

106

23

106

106

106

106

CSR_Mean

Correlation Coefficient

Sample N

Spearman’s rho

Table 4.17 Correlations Spearman’s rho

0.459

−0.073

−0.176

0.072

0.520

0.141

0.629**

0.001

0.024

0.220*

0.167

0.135

1

TEACH_ Mean

0.589

0.053

0.628

0.048

0.000

0.389**

1

CSR_ Mean

0.383

0.086

0.150

0.310

0.000

0.734**

1

CHANGE_ Mean

0.297

0.102

0.068

0.387

1

OPIN_ Mean

0.194

−0.281

1

COETH_ Mean

1

Number_of_ Films_Mean

Development_ Mean

(continued)

Country_ Mean

54 4 Field Study to Evaluate the Impact of Movies on Members of Business …

Sig. (2-tailed)

Correlation Coefficient

106

0.498

0.066

0.546

0.059

CSR_ Mean

0.017

−0.232*

−0.023 0.815

0.350

−0.092

−0.121 0.216

CHANGE_ Mean

TEACH_ Mean

0.005

−0.268**

0.042

−0.198*

OPIN_ Mean

0.454

−0.164

0.454

0.164

COETH_ Mean

TEACH is weakly correlated with CSR; Value of coefficient Rs is 0.389. OPIN has a weak correlation with TEACH; the Value of coefficient Rs is 0.220. OPIN has a strong correlation with CHANGE; the Value of coefficient Rs is 0.734. COETH is moderately correlated with CSR; Value of coefficient Rs is 0.629. Development is weakly correlated with OPIN; Value of coefficient Rs is 0.198. Country is weakly correlated with CHANGE with a Value of coefficient Rs 0.232. Country is also weakly correlated with OPIN with a Value of coefficient Rs 0.268. As expected logically, Country is moderately correlated to Development; Value of coefficient Rs is 0.691. *Correlation is significant at the 0.05 level (2-tailed) **Correlation is significant at the 0.01 level (2-tailed)

Country_Mean

Sig. (2-tailed)

106

Development_ Mean

Correlation Coefficient

Sample N

Spearman’s rho

Table 4.17 (continued)

0.581

−0.054

0.093

0.164

Number_of_ Films_Mean

0.000

0.691**

1

Development_ Mean

1

Country_ Mean

Statistical Analyses 55

56

4 Field Study to Evaluate the Impact of Movies on Members of Business …

Only the English version of the questionnaire has a question directed to measure the Existence of Code of Ethics referenced by the affiliated institution. Due to technical issues, the question was omitted in the Turkish version. Thus, COETH has a sample of 23 instead of 106. This needs to be taken into consideration while assessing the statistical analyses. As mentioned before and displayed in Table 4.17, correlation analyses help in understanding the relations among dimensions and variables. Below are these relations briefed: • • • • • • • •

TEACH is weakly correlated with CSR; value of coefficient Rs is 0.389. OPIN has a weak correlation with TEACH; value of coefficient Rs is 0.220. OPIN has a strong correlation with CHANGE; value of coefficient Rs is 0.734. COETH is moderately correlated with CSR; value of coefficient Rs is 0.629. Development is weakly correlated with OPIN; value of coefficient Rs is 0.198. Country is weakly correlated with CHANGE with a value of coefficient Rs 0.232. Country is also weakly correlated with OPIN with a value of coefficient Rs 0.268. As expected logically, Country is moderately correlated to Development; value of coefficient Rs is 0.691.

Conclusions and Discussions

As to start with most recent topic, the relations among dimensions is to be discussed first. CSR stands for corporate social responsibility, which is a huge topic and comprises various issues. Each one would be the topic of an academic or popular study. A search on EBSCO, which provides free research databases covering a variety of subjects, results in 136,882 publications. Out of this, 77,028 are from academic journals; 16,828 from magazines; 16,187 are in news; trade publications make up 6836 of it; conference materials are 3091 in numbers; 1461 reviews, 769 books and 518 eBooks are the most prominent ones. Dissertations and thesis count 434. The longevity of the subject brings an answer to highness of publications, but probably the wideness of the subject is a better explanation. As mentioned formerly, there had been scales that could be employed in measuring CSR in respondents’ affiliated companies. Technical reservations in assessing those scales lead the research to be designed in free style. Thus, the measurement is left to the evaluation capacity of the respondents. One of the hypotheses would be that the higher the respondent defines his/her affiliated company as a corporate responsible one; he/she would also believe that ethics can be taught. Another dimension is COETH, meaning that the affiliated company has Code of Ethics well known by employees. The existence of Code of Ethics urges the formation of the second hypothesis. A person from a company with Code of Ethics would believe that ethics can be taught. A respondent from a highly or very highly developed country is expected to believe that ethics can be taught. Another criterion would be that the country the respondent lives should not be an Anglo-Saxon country. Of course there would be exceptions to this, e.g., Canada is not always counted as an Anglo-Saxon country due to its French affiliation. The companies of respondents living in non-Anglo-Saxon countries are also expected to have positive CSR applications. Expecting these respondents to live any change in sensitivity of their perception of ethics—CHANGE—after watching any of the listed films or the like may not seem logical. A decent employee of a

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 I. Kesimli, Seventh Art’s Perspective on Ethical Conduct and Corporate Irresponsibility, Accounting, Finance, Sustainability, Governance & Fraud: Theory and Application, https://doi.org/10.1007/978-981-99-2520-9

57

58

Conclusions and Discussions

decent company most probably does not live such a change. It seems to be that the question is prepared especially for respondents from other type of countries. As formerly explained, the existence of any impact of the watched films on respondents’ opinions about their profession is coded as OPIN. With a slight difference, CHANGE and OPIN would be explained in the same manner. Honest people may react to these films with reproachful feelings. On the contrary, by handling this topic, the present author hopes to positively impact accountants preferably. Showing the side of rotten business world may create a difference both in lay people and professionals. In fact, a thorough analysis requires evaluation in combination with cultural values and individual values. The context is at utmost importance. Education follows. Possibilities and opportunities matter.

Appendix Appendix 1: Movies and Documentaries Based on Corporate Scandals 2019 There Are No Fakes In this feature-length documentary, a painting—thought to be the work of an iconic Indigenous artist—leads the rock star who buys it into the tragic, brutal (and sometimes darkly comical) world of a Canadian art forgery ring 2018 Inside Lehman Brothers The corporate culture of Lehman Brothers is examined through the stories of staff who tried to sound an alarm about suspicious transactions and subprime mortgage abuses. Instead of examining these practices, these staff found themselves fired or harassed, and Lehman Brothers eventually filed for the largest ever US bankruptcy 2018 The Panama Papers Documentary on the massive data leak (and journalists’ investigation that followed) into a global corruption scandal exposing New Zealand as a desired destination for foreign trusts suspected of potentially hiding funds from tax and other agencies. Directed by Alex Winter (Deep Web, star of Bill & Ted’s Excellent Adventure) 2018 The Kleptocrats Documentary on the world’s biggest white-collar heist, Malaysia’s US$3.5 billion 1MDB scandal. It involved government corruption at the highest level, abuse of power, international money laundering—not to mention lavish parties, Hollywood A-listers, and even the ironic financing of The Wolf of Wall Street (continued)

Conclusions and Discussions

59

(continued) 2017 The Wizard of Lies 133 Based on the 2011 non-fiction book of the same name by Diana B. Henriques, min the film stars Robert De Niro as businessman and fraudster Bernie Madoff, Michelle Pfeiffer as his wife Ruth Madoff, and Alessandro Nivola as their older son Mark Madoff 2017 The Defenders The Defenders is a cyber-security film shifting the focus away from the hacker to the security professionals who protect us 24/7. This behind-the-scenes look at four famous cyber-attacks spotlights the incredible people tasked with keeping institutions safe 2015 The Big Short Released in December, The Big Short is five-time Oscar-nominated movie based on the subprime mortgage crisis that took down the financial markets in 2008, including one for Best Picture. The movie, directed by Adam McKay, is based on the best-selling Michael Lewis’ book The Big Short: Inside the Doomsday Machine, published in 2010. It stars Christian Bale, Brad Pitt, Ryan Gosling, and Steve Carell

130 min

2013 The Wolf of Wall Street 180 min The Leonardo DiCaprio-starrer is based on a 2007 memoir of Jordan Belfort by the same name. Belfort was a Wall Street stock broker, who founded Stratton Oakmont in 1989, a New York-based brokerage firm. The film, directed by Martin Scorsese, deals with the fraud and corruption Belfort and his firm engage in, which ultimately leads to his arrest by the FBI 2012 Le Capital—Money is the Master The film is about the CEO of a French bank having operations worldwide. The young CEO’s ruthless ambition changes his family life as well. A hostile takeover attempt from a large American hedge fund and CEO’s negotiations with the hedge fund are the core stories of the film

114 min

2011 Margin Call 102 min The film deals with the early stages of the 2007–2008 financial crisis at a Wall Street bank—loosely based on Lehman Brothers, depicts specifically two initial rush days of the crisis 2011 Unraveled Bernie Madoff may have grabbed most of the headlines for his giant Ponzi scheme, but Marc Dreier’s massive fraud—netting US$380 million from the hedge funds of New York’s most prominent investors—makes quite an entertaining film. Through interviews with Dreier in his Manhattan penthouse, while he was under house arrest, we learn about his elaborate scheme in great detail. Dreier headed a 250-person law firm, yet he was the only person with knowledge of the financial details of the company’s deals. Through forgeries and impersonations, Dreier swindled some of Manhattan’s most experienced investors, but he was done in by a savvy receptionist who blew the whistle on him (continued)

60

Conclusions and Discussions

(continued) 2011 Too Big to Fail 99 min Directed by Curtis Hanson, Too Big to Fail chronicles the 2008 financial meltdown, focusing on the actions of US Treasury Secretary Henry Paulson (William Hurt) and Ben Bernanke (Paul Giamatti), Chairman of the Federal Reserve System, to contain the problems during the period of August 2008 to October 13, 2008. Released on May 23, 2011, the film stars William Hurt, Edward Asner, Billy Crudup, Paul Giamatti, Topher Grace, Cynthia Nixon, Bill Pullman, Tony Shalhoub, and James Woods 2010 Wall Street: Money Never Sleeps (also known as Wall Street 2 or Wall Street 2: Money Never Sleeps) is a 2010 American drama film directed by Oliver Stone, a sequel to Wall Street (1987). It stars Michael Douglas, Shia LaBeouf, Josh Brolin, Carey Mulligan, Frank Langella, Susan Sarandon and Eli Wallach in his final movie role The film takes place in New York City, 23 years after the original, and revolves around the 2008 financial crisis. Its plot centers on a supposedly reformed Gordon Gekko, played by Douglas, and follows his attempts to repair his relationship with his daughter Winnie (Mulligan), with the help of her fiancé, Jacob Moore (LaBeouf)

97 min

2006 In Debt We Trust: America Before the Bubble Bursts Debt has become a way of life for Americans, and this documentary is a wake-up call to a younger generation that cannot stop living life in the red. The film digs deep into the economic and political policies responsible for transforming the US economy from relying on manufacturing into one dependent on consumerism and debt. At the time of the film’s release in 2006, it was estimated that Americans owed over US$10 trillion of consumer debt. In Debt We Trust exposes and explains a system operating on borrowed money and borrowed time and tells us that it is only a matter of time before the system completely collapses. The film takes a critical look at the long-term effects of abusing debt, such as a larger portion of the nation’s wealth shifting to the mega-rich 2006 Gafla Closer home, a director by the name of Sameer Hanchate made Gafla, a movie based on the stock market scam of 1992, involving Harshad Mehta. The film, released in 2006, stars Vinod Sharawat, Shruti Ulfat and Vikram Gokhale 2005 Enron: The smartest guys in the room This is a 2005 American documentary film based on the best-selling 2003 book of the same name by Fortune reporters Bethany McLean and Peter Elkind, a study of one of the largest business scandals in American history. McLean and Elkind are credited as writers of the film alongside the director, Alex Gibney The film examines the 2001 collapse of the Enron Corporation, which resulted in criminal trials for several of the company’s top executives during the ensuing Enron scandal; it also shows the involvement of the Enron traders in the California electricity crisis. The film features interviews with McLean and Elkind, as well as former Enron executives and employees, stock analysts, reporters and the former Governor of California Gray Davis (continued)

Conclusions and Discussions

61

(continued) 2000 Erin Brockovich The Julia Roberts-starrer, Erin Brockovich is based on the real-life story of an environmental activist, who played an important role in a litigation against Pacific Gas and Electric Company in 1993. The case was about alleged contamination of drinking water in the Southern California town of Hinkley. Three years later, the case was settled for US$333 million, which is the largest settlement in a direct-action lawsuit in US history 1999 Rogue Trader 97 min A movie about the collapse of the Barings Bank, it is based on former derivatives trader Nick Leeson’s 1996 memoir ‘Rogue Trader: How I Brought Down Barings Bank and Shook the Financial World.’ Leeson served four years in prison for fraud, following charges of bankrupting Barings Bank in 1995. The collapse of Barings Bank also featured in a 1996 documentary, titled 25 million pounds 1999 The Insider Directed by Michael Mann, The Insider is a drama based on a 1995 segment about a tobacco industry whistleblower Jeffrey Wigand. The segment aired on popular American news show, 60 min. Subsequently, Wigand was also the subject of a Vanity Fair profile by Marie Brennan, titled The Man Who Knew Too Much. In The Insider, Russel Crowe portrays Wigand. It also stars Al Pacino as Lowell Bergman, the legendary investigative reporter, who as CBS producer, broke Wigand’s story 1994 The Shawkhank Redemption 142 min The movie’s hero, Andy Dufresne, is an accountant in prison. His knowledge of obscure tax loopholes saves his life and helps him escape from prison 1994 Quiz Show The 1994-film, based on Richard Goodwin’s Remembering America: A Voice From the Sixties, deals with the 21 prime-time quiz show scandals of the 1950s, where contestants and producers of quiz shows colluded to rig the competitions. The film, starring John Turturro and Ralph Fienness, was nominated for several Academy Awards, including Best Picture, Best Director and Best Supporting Actor 1993 Barbarians at the Gate The 1993 HBO television movie is based on the book by Bryan Burrough and John Heylar, titled Barbarians at the Gate: The fall of RJR Nabisco. RJR Nabisco, an American tobacco and food conglomerate, was a result of a merger between RJ Reynolds Tobacco Company and the National Business Company. The film deals with the leveraged buyout of RJR Nabisco by Kohlberg Kravis Roberts and Co. (KKR) for US$25 billion, then the biggest in history. Directed by Glenn Jordan, it stars James Garner and Jonathan Pryce 1991 Class Action Class Action is a drama thriller centered around a lawsuit, where Jedediah Tucker Ward, played by Gene Hackman is an attorney who sues an auto company over a safety defect, that has a major impact on his client’s life after an accident. The story takes a turn when Ward discovers that the attorney representing the automobile manufacturer, Maggie Ward (played by Mary Elizabeth Mastrantonio), is his estranged daughter. The film is loosely based on the Grimshaw versus Ford Motor Co. case (1981) (continued)

62

Conclusions and Discussions

(continued) 1987 Wall Street 126 min The film tells about a junior stockbroker, who is eager to reach the top. His greed leads him trading on illegal inside information. ‘Wall Street: Money Never Sleeps’ released in 2010 follows. Wall Street focuses on the junior stockbroker, whereas the focal point of its sequel is Gekko, the corporate raider Source (1) Livemint1 “9 movies based on corporate scandals.” 13 Oct 2015 https://www.liv emint.com. Accessed 24 Nov 2019; (2) Kulikowski, L. (Feb 27, 2016) ‘The Big Short’ and 10 Other Movies Inspired by Juicy Corporate Scandals. https://www.thestreet.com/story/13335463/1/ 11-movies-inspired-by-juicy-corporate-scandals.html#11. Accessed 24 Nov 2019; (3) Wikipedia. https://en.wikipedia.org/wiki/Too_Big_to_Fail_(film) Accessed 28 Feb 2021. (4) Walton J (Oct 16, 2018) https://www.investopedia.com/articles/professionals/112515/4-must-watch-films-anddocumentaries-accountants.asp Accessed Nov 24, 2019. (5) NZ International Fraud Film Festival 2019 https://fraudfilmfestival.co.nz Accessed Nov 24, 2019.

1

Mint is one of India’s premium business news publications. www.livemint.com is Mint’s online portal.

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Index

A Abagnale, Frank, xi Amadeo, K., 33 American International Group (AIG), 20 Antoncic, Madelyn, 20 Association of Certified Fraud Examiners (ACFE), 1, 4

B Bale, Christian, 16, 59 Balleisen, E.J., xii Barbarians at the Gate, 61 Baum, Mark, 17 Bear Stearns, 20 Bernanke, Ben, 23, 29, 60 Bhardwa, B., xii Big Short, The, 16, 59, 62 Brockovich, Erin, 61

C Chandor, J. C., 18, 19 Chen, J., 16 Chisholm, 18 Chonko, L. B., 7 Citigroup, 25, 27 Class Action, 61 Cohan, W.D., 28 Collateralized Debt Obligation (CDO), 16 Cornwall Capital, 16 Corporate Ethical Virtues Model, 7 Corporate raider, 21 Corruption and Corporate Fraud Prevention Mode, xii

Corruption perception index, 2, 3 Costa-Gavras, ix Credit default swap, 17

D Defenders, The, 59 Department of Justice (DOJ), 18 Dunnett’s Multiple Comparison Test (Dunn Test), 41 Dutch Fraud Film Festival, ix

E Enron, 31 Enron: The smartest guys in the room, 60 Eurostat, 32

F Federal Bureau of Investigation (FBI), 19 Finn, D. W., 7 Folger, 20 Foreign Corrupt Practices Act (FCPA), 18 Fraud Film Festival, 62 Frontain, 31

G Gafla, 60 Gekko, Gordon, 13, 21–23, 60, 62 Geller, Charlie, 17 Gomez, Selena, 16 Gottschalk, P., xiii Great Depression, 24

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 I. Kesimli, Seventh Art’s Perspective on Ethical Conduct and Corporate Irresponsibility, Accounting, Finance, Sustainability, Governance & Fraud: Theory and Application, https://doi.org/10.1007/978-981-99-2520-9

67

68 Gross Domestic Product (GDP), 32, 33

H Hockett, Ben, 16, 17 Housing Spike Peak, 17 Hunt, S.D., 7 Huwart, J-Y., 29

Index Mermod, A. Y., 27 Mortgage Backed Securities (MBS), 19 Munter, P., 7 N New Zealand International Fraud Film Festival, The, ix

I Idowu, S. O., 27 In Debt We Trust: America Before the Bubble Bursts, 60 Indianapoli, 500, 17 Insider, The, 61 International Swaps and Derivatives Association (ISDA) Agreement, 17

O 1MDB, 18

J Jenster, Dan, 27 JPMorgan Chase, 17, 21, 24, 25, 27, 29

Q Quiz show, 61

K Kaptein, M., 7 Kastelli, Banker, 15 Kesimli, I, 33 Kleptocrats, The, 58 Króna, 32, 33 Kulikowski, L., 16, 62

L Le Capital --- Money is the Master, 59 Leeson, 12, 61 Lehman Brothers, 18, 20, 23–28, 31, 33, 58, 59 Leissner, The, 19 Lewis, Michael, 16, 59 Lioudis, 18 Livemint, 62 Lynch, Merril, 27, 29

M Madoff, Bernie, 13, 59 Mac, Freddie, 20 Mae, Fannie, 20 Maierbrugger, A., 19 Margin Call, 59, 60 Markopolos, Harry, 14, 15 May, T., xii

P Padgett, 5 Panama Papers, The, 58 Pitt, Brad, 16, 59 Ponzi scheme, 14, 15, 59

R Razak, Najib, 18 Rogue Trader, 61 S Sachs, Goldman, 18, 24, 27, 29 Scion Capital, 16 Securities and Exchange Commission (SEC), 18 Shaub, M. K., 7 Shawkhank Redemption, 61 Shipley, Jamie, 17 Short position, 16 Singapore International Monetary Exchange (SIMEX), 12 Skorin-Kapov, J., xi Sorkin, Andrew Ross, 23 Synthetic CDOs, 16 T Thaler, Richard H., 16 There Are No Fakes, 58 Tourneuil, Marc, 9 Toxic assets, 20 Troubled Asset Relief Program (TARP), 29 Trumbull, M., 26 Tulipmania, 22 Twin, A., 1

Index U Union of Chambers of Certified Public Accountants of Turkey (UCCPAs), 36 Unraveled, 59 Uzan group, 15

V Verdier, L., 29

69 W Wall Street, 13, 59, 62 Wall Street: Money Never Sleeps, 60 Walt Disney, 22 Walton, J., 62 Wells, J.T., xiv Whitehouse, 24 Wizard of Lies, The, 59 Wolf of Wall Street, The, 13, 59 Wood, V. R., 7 WorldCom, 31