Assessment 2-Case synthesis: Morgan Stanley 1.Basic empirical facts of the problem Financial industry, the most scrutinized sector owing to the oceans of information involved and dynamic trades conducted, has generated a heated debate regarding ethical and legal issues where loopholes can be utilized by self-interest driven individuals to achieve illicit gain. As a result of the characteristic that large amounts of material and nonpublic information is contained in daily trade, it is not rare that interest-motivated insiders may make use of the access to the formation to conduct insider trading. Insider trading is defined as trading of securities in possession of relevant material, nonpublic information, in breach of fiduciary duty (U.S.
According to the FBI web page, insider threat is harder to detect compare with outsider or non-employee, so the one that can cause most damage is the insider, which is because employee will have the legitimate access to the organization’s system. Insider may steal the organization’s confidential data for personal gain, by being a ‘spy’ and selling organization’s confidential data and sell it to competitor and gain benefits. Insider threat can be a negligence employee who accidentally spread confidential data to public, and also can be the one who is not satisfying the management decision of the organization, and cause the damage
This resulted the advantage that the individual firms had relative to the potential customer to disappear, thus causing prices to fall a large amount. (Levitt and Dubner 59) 6. Short of outright lying, how can an ordinary person abuse information? Give an example. An ordinary person can abuse information by either retaining some or all of the information or by editing the information.
However, the content of the investment club’s code of conduct is entirely dependent on the investment club themselves as they can create their own rules and regulations. (How to Start and Manage An Investor Club / Stokvel, 2017). When it comes to insider trading, it can be said that by abiding to any laws concerning this matter, any actions will be considered ethical and is highly unlikely to be contravening any clauses within a code of conduct. The treatment of members which do choose to go against policies and rules of the investment club is different in each investment club and has no set procedure which is used by all
There are cases in which the investor (shareholder, customer, etc.) selects a consultant who has not the ability to understand his needs and he is not deliver his requirements, this could be happen because of the investor has lack of information or disinformation, hence, insiders have private information about exogenous variables which is not well known to all interrelated business partners, this asymmetric information category is known as adverse selection. There are also cases in which company's insiders deliberately mislead their clients-investors for their own interest. In that case the interests of both sides are conflicted and eventually the one with better information wins, this case is called moral hazard. (Baker W. 2010) These two aforementioned concepts of the moral hazard and adverse selection, cause the asymmetric information and agency gap.
This is beneficial to the competing businesses involved in price fixing as they no longer need to compete. However, stakeholder’s such as consumers are disadvantaged as they now have to pay a higher price for goods and services. Another unethical behaviour carried out in the film is by Mark Whitacre, who participated unauthorised payments whereby he forged signatures and collected five hundred thousand dollars via cheques. This is an illegal act and therefore is seen as
7. Sometime employee leak commercially sensitive information to other company who engage in that same trade or business. This is called as insider trading. It not effect public directly but sometime it effect market which directly affect public. 8.
The false accounting records were unethical because it means management was enriching themselves. They were getting earnings based on the false availability of funds. They also did this to keep their jobs. When a company is not performing financially well the top positions are the ones usually at risk of being retrenched, as a result of implying the company was financially stable they were protecting their jobs. False accounting also results in duping investors that trust the financial records of the company.
Stakeholders affected Bribery has negative effects on various stakeholders. It can be said that consequences arising from bribery are destructive for businesses and economy as a whole. It affects the company itself. Unlawful activities can severely damage the company’s reputation. Other firms that care about ethics do not want to do business with firm perceived as corrupted and unethical.
The Impact of Political Instability on International Trade: The rise in the level of political risk decreases international trade flows. Oh & Reuveny (2009) claims that as political risk rises due to uncertainty, bilateral trade may decline because of the fear of the traders from the government changes to policies. As the government may issue some decisions for prohibiting trade in some goods and limiting trade in other goods. Moreover, violent conflicts that stemmed from political risk may harm trade, as it may cause damage of goods, delay in the distribution, and destroy also transportation infrastructure. These damages in return mean higher costs to traders, due to higher insurance premiums, in addition to costs beard as a result of longer trade routes or may be as a result of the need of increasing personnel to guard shipments.