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McBride Financial Services Governance Evaluation

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McBride Financial Services Governance Evaluation

EvaLynn H Green

MMBPL/570

June 6, 2012

Michael Meeusen

The economic crisis that is happening today is a major topic regarding corporate governance. What should be looked at is how much focus should be designed in developing procedures and processes for corporate governance. These decisions should have directions that will be focused toward areas or individuals like investors and governing agencies like Securities Exchange Commission (SEC) or corporate auditor. In the scenario, McBride Financial Services is a mortgage company that provides services to their customers at a lower price. McBride has services in profession purchasing's, primary or secondary mortgages, and retiree's mortgages. McBride will assist their customers with approved credit, inexpensive service fee of $1500 for home inspections, appraisal, and credit reports, while at the same time offer lower interest rates.

Various issues have been identified with Countrywide financial. One issues is how the roles of ethics in Compliance with Mr. Angelo R. Moziol, former chief executive officer (CEO). "Mr. Moziol and two other dependents, the Countrywide's previous president and chief financial officer, contacted the United states District Court of Los Angeles to dismiss a case to see if the SEC has enough evidence that demonstrates that investors were mislead about the company" (Henning, 2010, p. 3). Countrywide advised the investors that had high quality mortgage loans, however the truth was that Countrywide was permitting the loans to be underwritten that developed high-risk mortgage loans. The SEC disputed that documentations were filed with the court that there was a "disclosure sleight of hand" when Countrywide presented itself to investors as making high-quality loans, when in fact, it was increasingly allowing exceptions to underwriting procedures, leading to a significant deterioration in the quality of its mortgages" (Henning, 2010, p. 4). Countrywide advised the investors that they were making high quality mortgage loans, however, the truth was they were permitting the loans to be underwritten that developed risk.

Mr. Moziol went to trial because of unethical behavior that caused him to permit deficiencies with compliance and procedures with risky loans. Mr. Moziol is facing other charges for special treatment and playing favorites to members of congress and restricted friends. "The S.E.C. also accused Mr. Moziol of insider trading for selling blocks of Countrywide stock in late 2006 and early 2007 that gave him gross profits of more than $140 million while not revealing the deterioration in the company's mortgage operation" (Henning, 2010, p. 3).

The unprincipled behavior that Mr. Moziol showed that he could not exhibit ethical support or most important leadership within the corporate culture and thorough character.

Countrywide decided to react by closing businesses. Countrywide attempted to develop a failed bank, however, Bank of America took over in 2008. Countrywide will not be charged as a company, however the CEO, Mr. Moziol is being questioned, because of his unethical behavior, unethical audits, false mortgage bank that had an unethical culture.

Countrywide settled the fraud case and agreed to pay $67.5 million, which caused them to pay $20 million of Mr. Mozilo's $67.5 million payment for an indemnification agreement between Mr. Mozilo and Countrywide. Countrywide was considered to be one of the most courageous and colorful financiers throughout the country.

Mr. Mozilo was one of the highest paid CEO in America. Because of the SEC fine charged to Mr. Mozilo, it is defined to be only a fraction or portions of what Countrywide is valued at. According to Equilar, a compensation research firm, Mr. Mozilo's compensations were approximately $521.5 million. The CEO, Mr. Moziol was the leader of the unethical and passed that behavior throughout the company and to the corporate culture. Countrywide's mission and codes were broken to have more growth for the company. "Rising competition beings with it added pressure to cut corners" (Hartman, 2004, p. 3).

McBride is establishing anew board of directors and prior to assigning those members; they will need to look over the ethical leadership and corporate culture. Beltway will invest in McBride and during the recruiting process, they will review potential candidate. Developing new board of directors, the members will need to be trustworthy and accountable, while allowing the CEO to make proper decisions for the company, with little to no input from the BOD. By implementing this, it will give McBride a atmosphere that causes the board of directors to be obedient to the CEO and the company as a whole.

Chew and Gillan (2004) states that, "Wealth creation demands a constructive and harmonious relationship among three key elements: the business portfolio, the approach to value creation, and the internal governance system." Steve Jobs developed an effective way interlink those three important facets and was able to attain success. During the last few years, Apple's stock has quintupled and has become one of the most valuable companies. Steve Jobs, brought $100 billion revenues to Apple due to innovative products such as the iPhone. The iPhone has broken records for over exceeding many new products that were launched global (Steinbock, 2010).

Steve Jobs had a excellent leadership that can be described into three features:

1. Successful Portfolio Choices. Steve Jobs continually develops innovative products and then outsources those products.

2. Successful Formulation of the Value Creation Logic. Apple remains a non-stop to leave all competitors in the wind. Apple has matched their products with other products launched products like iTunes and AppExchange allows for the iPod and iPhone being extremely strong.

3. Good Corporate Governance. Steve Jobs usually had mock block turtlenecks, with faded jeans and rubber shoes showed the employees, that he was a powerful CEO, while yet had humble characteristics. Steve Jobs was known to be charismatic to help with global influence.

In 2009 President Obama stated "culture of irresponsibility" was a important reason of the crisis. President Obama reviewed

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