Ethics chapter 10

Jennifer Moore

Three arguments against insider trading 1. Unfair - investors do not have equal information 2. Property rights argument - non public information is the property of the individual 3. Harmful to ordinary investors, erodes confidence of the market

Bribe

To pay someone to violate his/her official duties.

Kickback

Percentage payment to a person able to influence or control a source of income

SOX - Sarbanes - Oxley Act

Provides employers protection for whistleblowers, deals with criminal intent and fraud (few are actually protected by SOX)

Difference in whistleblowing theories

Richard - protect corporation - more precise than bowie Richard - Have to be 100% sure you will succeed, only whistle blow on something causing physical harm or death in order for it to be moral Bowie - Whistle-blow with some chance of success, whistle blow on things based on motives or immoral actions

Norman Bowie theory of whistleblowing

1. Done from appropriate motive morally 2. go through every stage of corporation 3. collect facts and evidence 4. check how serious situation is, more harm then more justified 5. have some chance for success

Seven factors a businessperson should take into account in regards to giving and receiving gifts

1. What is the value of the gift? 2. What is the purpose of the gift? 3. What are the circumstances under which the gift was given or received? 4. What is the position or decision making authority of the person receiving the gift? 5. What is the accepted business practice in the industry? 6. What is the company's policy? 7. What is the law?

Richard De'george theory of whistleblowing

1. serious problem that threatens harm or likely harm 2. supervisor must be made aware 3. collect facts and evidence 4. contact appropriate agencies to solve problem, first within company, and if all agencies within corporation yield no result, then go outside company. 5. 100% sure you will succeed whistle blowing becomes morally obligatory when - 1. the whistleblower has documented evidence that would convince a non partial observer that harm is going to occur 2. The whistleblower has good reason to believe that by going public necessary changes will be brought about and that achieveable good consequences outweigh bad consequences.

Henry Manne

Good for market 1. Accelerates flow of information to investors, moves share prices in right direction, allows prices to rise gradually, reduces chance factor in trades, and actual economic status of companies is better reflected in the market. 2. Information is privately owned, therefore the owner should be free to use such information as owner sees fit. 3. Use of insider information should be governed by private contract, not regulation.

Types of whistleblowing

Internal vs external Personal vs impersonal Current vs alumni Open vs anonymous

U.S. v. O'Hagan

Landmark case in which Lawyer James O'Hagan reaped a 4.3 million dollar profit after learning that a company represented by his lawfirm was planning a hostile takeover. The court ruled that even though O'Hagan had not worked on the case himself, he had misappropriated confidential information belonging to his firm and its client. Justice Ruth Bader Ginsberg stressed that the courts decision reflected the "animating purpose" of the securities exchange act, namely to insure honest securities markets and thereby promote investor confidence.

Insider trading

the buying or selling of stocks by business "insiders" on the basis of information that not yet been made public and is likely to affect the price of the stock