Assume that you are a portfolio manager for a large insurance company. The majority of the money you manage is from retired school teachers who depend on the income you earn on their investments. You have invested a significant amount of money in the bonds of a large corporation and have just received news released by the companys president explaining that it is unable to meet its current interest obligations because of deteriorating business operations related to increased international competition.

The president has a recover play that will take at least two years. During that time, the company will not be able to pay interest on the bonds and, she admits, if the plan does not work, bondholders will probably lose more than half of their money. As a creditor, you can force the company into immediate bankruptcy and probably get back at least 90% of the bondholders money. You also know that your decision will cause at least 10,000 people to lose their jobs if the company ceases operations.