WRITING – ESSAY (120 minutes)
UNIcert IV English Exam – Friday, July 6th 2012
Essay questions
Extra reading texts:
"Banksters" (Economist July 7 2012)
"A tissue of lies" (Economist June 9 2012)
Answer ONE of the questions below only. You must write at least 450 words, though not more than 550 words.
Use the answer paper provided. When you have finished, count the number of words written and write the
total at the end of your essay.
Dictionaries (Eng-Eng and Eng-Other) are allowed.
Notes:
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This essay needs to be written in an objective academic style and organised accordingly, with a proper
introduction, paragraph structure and conclusion. There is no need to give numbers or titles to
sections.
Arguments should always be backed up with logical reasoning and/or facts, quotations and statistics
from the source materials.
You should use these materials as sources to help you answer the question. Your essay should contain
a roughly equal balance of your own arguments and comments on materials from the articles, which
should be clearly signposted. Use line numbers when referring to the articles.
You should avoid lengthy direct quotations from the articles. It is preferable to use indirect quotations
or to build short direct quotations into your answers.
You should also aim to smoothly integrate the views of the article(s) with your own, for example
through link phrases such as: As the author of the article observes, …
Even better, it is possible to include elements of contrast, doubt, concession or agreement in these
link phrases, e.g. Although Saddam claims that …; Despite Zaphod Beeblebrox’s assertion that...
Make it clear AT ALL TIMES WHAT YOU ARE TALKING ABOUT. Repeat names, institutions,
corporations, etc, as often as necessary so that the reader knows what it is you wish to say (about
what).
Titles:
1. “The banker must at all times conduct himself so as to justify the confidence of his clients in
him,” said J.P. Morgan Jr. in 1933.1 The banking industry’s credibility is everywhere under
fire, and without trust neither the business nor the clients it serves can prosper. Discuss, with
reference to the text “Banksters”, considering the role of banks and banking in the financial
crisis.
2. The line between succeeding by cheating and succeeding by serving customers is not always
clear: the industrial giants of the 19th century were not called “robber barons” for nothing.
Great entrepreneurs often succeed by breaking the old rules and pursuing crazy visions.
Great salesmen invariably stretch the truth. Read the text “A tissue of lies” and discuss its
implications for success in business and the tasks of management.
3. Can companies succeed where governments have failed to protect the environment? While
CSR seemed only a few years ago to be merely an exercise in Public Relations and hype, it
seems now to be coming of age. Discuss.
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Poor Mr Morgan Jr. was, alas, evidently unaware of the possibilities of gender-neutral language.
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Additional Text 1
The LIBOR affair: Banksters
How Britain’s rate-fixing scandal might spread—and what to do about it
Jul 7th 2012 | from the print edition
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“SINCE we have not more power of knowing the future than any other men, we have made
many mistakes (who has not during the past five years?), but our mistakes have been errors
of judgment and not of principle.” So reflected J.P. Morgan junior in 1933, in the middle of a
financial crisis. Today’s bankers can draw no such comfort from their behaviour. The
attempts to rig LIBOR (the London inter-bank offered rate), a benchmark interest rate, not
only betray a culture of casual dishonesty; they set the stage for lawsuits and more
regulation right the way round the globe.
The dangers of this are obvious. Popular fury and class-action suits are seldom a good
starting point for new rules. Yet despite the risks of banker-bashing, a clean-up is in order,
for the banking industry’s credibility is shot, and without trust neither the business nor the
clients it serves can prosper. At present, the scandal rages in one country and around one
bank. Barclays has been fined $450m by American and British regulators for its attempts to
manipulate LIBOR. But this story stretches far beyond Britain. Investigations into the fixing of
LIBOR and other rates are also under way in America, Canada and the EU. Between them,
these probes cover many of the biggest names in finance: the likes of Citigroup, JPMorgan
Chase, UBS, Deutsche Bank and HSBC. Employees, from New York to Tokyo, are implicated.
The bank and the Bank
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The evidence that has emerged from the Barclays investigation reveals two types of bad
behaviour. The first was designed to manipulate LIBOR to bolster traders’ profits. Barclays
traders pushed their own money-market desks to doctor submissions for LIBOR (and for
EURIBOR, a euro-based interest rate put together in Brussels). They were also colluding with
counterparts at other banks, making and receiving requests to pass on to their respective
submitters. A similar picture of widespread collusion emerges from documents related to
the Canadian investigation. This bit of the LIBOR scandal looks less like rogue trading, more
like a cartel.
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That could end up costing the banks a lot of money. LIBOR is used to set an estimated $800
trillion-worth of financial instruments, affecting the price of everything from simple
mortgages to interest-rate derivatives. If attempts to manipulate LIBOR were successful—
and the regulators think that Barclays did manage it, on occasion—then this would be the
biggest securities fraud in history, affecting investors and borrowers around the world.
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The second type of LIBOR-rigging, which started in 2007 with the onset of the credit crunch,
could also lead to litigation, but is ethically more complicated, because there was a “public
good” of sorts involved. During the crisis, a high LIBOR submission was widely seen as a sign
of financial weakness. Barclays lowered its submissions so that it could drop back into the
pack of panel banks; it has released evidence that can be interpreted as an implicit nod from
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the Bank of England (and Whitehall mandarins2) to do so. The central bank denies this, but at
the time governments were rightly desperate to bolster confidence in banks and keep credit
flowing. The suspicion is that at least some banks were submitting low LIBOR estimates with
tacit permission from their regulators.
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When trust is bust
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From a public-interest perspective, two tasks lie ahead. The first is to find out exactly what
happened and to punish those involved. Where the only motive was greed, the individuals
directly involved in fraud should face jail. If the rate was lowered to keep the bank afloat,
and regulators were involved, both the bankers and their rule-setters should explain why
they took it upon themselves to endanger the City’s reputation in this way.
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The second task is to change the way finance is run—and the culture of banking. This after
all is not the first price-fixing scandal: Wall Street has had several. A witch hunt would be
disastrous, but culture flows from structure. The case for splitting retail and investment
banks on “moral” grounds is weak, but individual banks could do more: drawing fines from
the bonus pool is one example. And some rules must change. LIBOR is set under the aegis
not of the regulator but of a trade body, the British Bankers’ Association. That may have
worked in the gentlemanly days when “the governor’s eyebrows” were enough to keep
bankers in order. These days the City is the world’s biggest centre of international finance.
“The banker must at all times conduct himself so as to justify the confidence of his clients in
him,” said J.P. Morgan junior. That trust has been forfeited: it must be regained.
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Whitehall Mandarins“ are officials in high position in the British Civil Service serving the government
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Additional Text 2
Schumpeter: A tissue of lies
A social psychologist looks at why people lie and cheat and what it means for
business
Jun 9th 2012 | from the print edition
People have always lied and cheated. And businesspeople may have lied and cheated more than most: in a
survey of American graduate students, 56% of those pursuing an MBA admitted to having cheated in the
previous year, compared with 47% of other students. Plenty of executives have overstated their
educational qualifications: Scott Thompson recently lost his job as boss of Yahoo! for it.
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However, the punishment for dishonesty is growing harsher. America’s 2002 Sarbanes-Oxley law makes
chief executives and chief financial officers criminally liable for misstating financial results. The number of
groups that seek to hold companies liable for their misdemeanours, from shareholder activists to NGOs, is
multiplying. The internet makes a permanent record of people’s peccadilloes (try ungoogling yourself). And
more and more people distrust business thanks to scandals and broken promises. Even small acts of
dishonesty can cost a firm dearly.
Yet businesspeople have given little serious thought to managing dishonesty. Managers tend to make two
hoary contradictory assumptions. First, that there is a sharp line between good and bad apples, and that a
manager’s job is to toss out the bad. Second, that everybody cheats if they have the right incentives and
the wrong oversight, so managers must ensure that punishment is sure and swift.
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A new book by Dan Ariely, “The (Honest) Truth about Dishonesty”, may reinvigorate the discussion. Mr
Ariely is a social psychologist who has spent years studying cheating. He contends that the vast majority of
people are prone to cheating. He also thinks they are more willing to cheat on other people’s behalf than
their own. People routinely struggle with two opposing emotions. They view themselves as honourable. But
they also want to enjoy the benefits of a little cheating, especially if it reinforces their belief that they are a
bit more intelligent or popular than they really are. They reconcile these two emotions by fudging—adding
a few points to a self-administered IQ test, for example, or forgetting to put a few coins in an honesty box.
The amount of fudging that goes on depends on the circumstances. People are more likely to lie or cheat if
others are lying or cheating. They are more likely to lie and cheat if they are in a foreign country rather than
at home. Or if they are using digital rather than real money. Or even if they are knowingly wearing fake
rather than real Gucci sunglasses. And people are more likely to break their own rules if they have spent
the day resisting temptation: dieters often slip after a day of self-denial, for example.
Mr Ariely observes that good sales reps understand a lot of this without attending his lectures. Customers
like to think well of themselves; but they also like small bribes. The key is to convince them that an
inducement is not really a bribe.
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What can be done about dishonesty? Harsh punishments are ineffective, since the cheat must first be
caught. The trick is to nudge people to police themselves, by making it harder for them to rationalise their
sins. For example, Mr Ariely finds that people are less likely to cheat if they have to sign a declaration of
honesty before submitting their tax return, for example. Another technique is to encourage customers to
police suppliers: eBay, an online marketplace, hugely reduced cheating by getting buyers to rank sellers.
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Human beings have a remarkable talent for getting around rules—including the rules they try to impose
upon themselves. And new technologies introduce new opportunities for cheating, e.g. spam mail.
Moreover, the line between succeeding by cheating and succeeding by serving customers is not always
clear: the industrial giants of the 19th century were not called “robber barons” for nothing. Great
entrepreneurs succeed by breaking the old rules and pursuing crazy visions. Great salesmen invariably
stretch the truth. Mr Ariely and his students will have no shortage of material for follow-up books.
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