"Be first, be smarter, or cheat"
Margin Call is focussed around an investment bank and their impending financial meltdown. It is interesting to see how the different characters respond the news of the crisis, both those in senior positions and junior positions.
The film begins with the HR department conducting a mass layoff on their trading floor. Of those being laid off is Eric Dale, the head of risk management. Upon his departure he warns Peter Sullivan, a senior risk analyst, to "be careful" and to look at the project he is working on. This moment is referred back to numerous times throughout the film and is a pretty fundamental point of the film. What stood out for me about this moment was how Eric had tried to raise his point to his employer and senior members of staff; however they only seem concerned about getting him out of the building. In contrast, Peter immediately looked at Eric's project and realised what a dire situation the company is about to find itself in. That being that if the firm's assets decrease in value by 25%, the loss for the firm would be greater than its market capitalisation.
The film begins with the HR department conducting a mass layoff on their trading floor. Of those being laid off is Eric Dale, the head of risk management. Upon his departure he warns Peter Sullivan, a senior risk analyst, to "be careful" and to look at the project he is working on. This moment is referred back to numerous times throughout the film and is a pretty fundamental point of the film. What stood out for me about this moment was how Eric had tried to raise his point to his employer and senior members of staff; however they only seem concerned about getting him out of the building. In contrast, Peter immediately looked at Eric's project and realised what a dire situation the company is about to find itself in. That being that if the firm's assets decrease in value by 25%, the loss for the firm would be greater than its market capitalisation.
Was Peter's decision to look into Eric's project as a sign of loyalty to his manger and to see the project through? Or was it based more on the warning given, would that be to him or the firm as a whole? Either way, I'm pretty sure Peter just saved the firm! If the reason for his quick response was out of loyalty, this really highlights the importance of building good relationships between employees, especially managers and their subordinates. Without a strong relationship between the two, Peter may too have ignored Eric's request, then who knows what would have happened to the firm when it all fell apart!
Another point is would like to look into is the aspect of human nature in the decision making throughout the film. How big a role do emotions play in these? It is interesting again to see how each of the senior manager act under the immense pressure of the decision they are having to make. Ultimately, are they trying to do what is best for the company, looking after their own personal interest, or just wanting to get out of the situation as fast as possible? Personally, I do not think that the decisions made were anything to be made lightly. There would be no set right or wrong solution, you would end up upsetting someone, whichever choice was made. The best thing the firm could do was to limit their losses and try to save what they could of the company.
Something I found rather unrealistic was the speed and ease that the firm was able to sell of the toxic assets; then again this did have to fit into a 2 hour film. Looking at Fama (1970), in a semi-strong market, surely regulators would have spotted the flaw in the formula and stopped the assets being sold. Then again, this appears to be a reputable Wall Street firm, so who would suspect them of trying to pull a scam? Look at what Bernie Madoff pulled off!
Was the company wrong to sell of all their worthless assets? I would argue that from a business perspective not. They realised the flaw in the system and came up with a plan to save the company before it all went under. Sam Rogers is seen to be questioning this, stating that they are "selling something they know has no value". However, as John Tuld, arguably, correctly points out, they are still "selling to willing buyers at the current fair market price". Again, linking back to the Madoff scandal, if you have willing buyers, why not sell the assets? All the employees wanted to do was survive, be that the company survives and or they survive still with a job. This is human instinct, and relates largely back to the emotions at the foundations of these decisions.
Towards the end of the film, John Tuld is seen telling Sam Rogers that he plans to promote Peter Sullivan. Hardly surprising, given he just saved the entire company! However, I do have to question quite what position he is being promoted too. By the end of the film I wasn't too convinced how much longer the company would really be around!
The ultimate solution given in the film for the banks survival was to motivate everyone with a 7 figure bonus. It was simple, you get a 93% sale on your assets, you get a $1.4 million bonus. The question is, would you do something you knew was unethical to get a 7 figure bonus?
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