Use our essay title generator to get ideas and recommendations instantly
However, it would be safer to follow general policies that are being followed even now. This means that one should pass on published information to shareholders on the Internet as it would be simpler and less expensive to send. This may include information about quarterly results, monthly turnover, changes of directors, appointment of new sales agents, general trends of markets at certain times, etc. The question would still remain as to how many shareholders would be competent enough to use this information and the passing on of information may result for the clients as an exercise of garbage in, garbage out.
5. Discuss the legal boundaries, including privacy issues. What exceptions if any exist to allow for the use of such data? If they do not exist, how would you counter the privacy advocates concerns?
Some experts believe that privacy concerns will ultimately reduce the growth of the Internet generally…
Insider Trading" U.S. Securities and Exchange Commission. Retrieved at http://www.sec.gov/answers/insider.htm . Accessed 15 October, 2005
Is Government needed to watch online markets?" (11 November, 2002) Harvard Business
School. Retrieved at http://searchcio.techtarget.com/originalContent/0,289142,sid19_gci864459,00.html . Accessed 15 October, 2005
Ivancevich, Susan; Jones, Lucian. C; Keaveney, Thomas. (December, 2002) "Don't Run the Risk" Journal of Accountancy. Retrieved at http://www.aicpa.org/pubs/jofa/dec2002/ivance.htm . Accessed 15 October, 2005
Further complicating the issue is that the definition of insider trading differs from one jurisdiction to the next. Given the increasing globalization of business, it seems unreasonable that we can continue to exist in a world with a poorly-defined and highly variable definition of insider trading.
The everyday investor, certainly, cannot invest with any confidence under the present circumstance. Efficient market theory demands that information be perfect, but it is difficult to guarantee that given the vast number of stocks trading on our stock exchanges today.
Whatever the solution, it should be tailored with specific objectives in mind. These objectives should take into consideration what stock markets should be. The original intent was to provide a means for companies to raise capital, and that is still a critical function today. However, they are also the places where people, everyday citizens, have their life savings stored. That makes stock markets a…
And the ability to know when to sell shares made the executives careless in their management, as they would know when they could "cut their losses."
Critics of insider trading laws would contend that the problem with Enron and WorldCom was insufficient oversight of these corporation's accounting procedures, not insider trading. The criminal behavior was not the fact that key executives knew when to buy and sell their shares, but their manipulation of company profits. Even many sophisticated investors were duped. And finally, the credit crisis of 2007 shows how no human being can perfectly predict market behavior, and is often duped by misleading indicators. Inside information is no guarantee of financial largess.
Legally, insider trading can be difficult to prove -- it must be demonstrated that the person sold their stock in an irregular fashion based upon non-public information he or she demonstrably possessed prior to the "fire sale"…
Boatright, John. (2009).Ethics and the conduct of business. 6th edition. Prentice Hall.
Even if he hints around in a non-direct way that his friends should sell their stock without coming out and saying it, he may be guilty of insider trading because the information on the merger has not yet been made known to the public.
This is unethical and what the corporate officer should steer the conversation in a different direction and if his friends insist on continuing to ask questions he should firmly, but politely tell them he is not allowed to discuss personal company information with them.
Likewise, an employee has a certain amount of fiduciary responsibility if he knows that there are fraudulent practices happening at the corporation. If the employee knows that there is insider trading or if he knows that the accounting practices the corporation is using are dishonest, then he has an obligation to report what he knows. Some employees, especially if they do not…
Hoffman, Drew, "Martha Stewart's Insider Trading Case: A Practical Application Rule of 2.1," The Georgetown Journal of Legal Ethics 20, no. 3, (2007): 707-717.
James, Randy, "A Brief History of Insider Trading," Time, November 9, 2009. http://www.time.com/time/business/article/0,8599,1936562,00.html (accessed August 9, 2010).
Jennings, Marianne, "The Lessons from Galleon Hedge Fund and the Insider Trading Ring," Corporate Finance Review 14, no. 5, (2010): 43-46.
Khan, Walayet A. And Asjeet S. Lamba, "The Effectiveness of Legal Sanctions in Curtailing
Although permitting access to key corporate information by all employees could generate an insider trading nightmare (Fishman & Hagerty 110).
Possible solutions to the conflict
One question that everyone is asking is; how can this conflict be resolved? A palpable, simple, and stout approach would be returning the choice of insider trading regulation to individual firms. It is difficult to make out an externality that would validate putting this decision into the hand of a regulator. The most reasonable story that can be imagined is that board directors might disregard what is excellent for stakeholders and do just what fits the insiders. If this story was not found to be reasonable then firms could just be allowed to decide how to weigh any costs from daunting investment through unfavourable selection alongside any gains of using prediction markets to advance corporate information and coordination efficiency. This resolution, however coercing, seems politically…
Brandenburger, a. & B. Polak. "When managers cover their posteriors: Making the Hanson, R. "Decision markets." IEEE Intelligent Systems 14(3) (1999):16 -- 19.
Hatter, a. And E. Trapasso. Managers say the majority of information obtained for their work is useless, Accenture survey finds. 2007. 11 March, 2010. .
Huddart, S.J., et al. Pre-announcement of insiders' trades. 28 June, 2004. 11 March, 2010.
On June 4, 2003, the Securities Exchange Commission announced that it was pursuing charges against investor Martha Stewart and stock broker Peter Bacanovic for securities fraud. The fraud occurred on December 27, 2001 when Stewart sold stock in ImClone Systems, after receiving an unlawful tip from Bacanovic, who at the time was working for Merrill Lynch. The SEC also accused the two of attempting to cover up the insider actions, and of making false statements regarding the ImClone trades to SEC investigators (SEC, 2003). Stephen Cutler, the SEC director of enforcement said in the SEC's press release about the charges that "It is fundamentally unfair for someone to have an edge on the market just because she has a stockbroker who is willing to break the rules and give her an illegal tip. It's worse still when the individual engaging in the insider trading is the Chairman and…
AP. (2004). Martha Stewart convicted on all four counts. Fox News. Retrieved April 13, 2013 from http://www.foxnews.com/story/0,2933,113417,00.html
Heminway, J. (2003). Save Martha Stewart? Observations about equal justice in U.S. insider trading regulations. Texas Journal of Women and the Law. Vol. 12 (247).
Moohr, G. (2006). What the Martha Stewart case tells us about the white collar crime. Houston Law Review. Vol. 43 (2006).
Podgor, E. (2005). Jose Padilla and Martha Stewart: Who should be charged with criminal conduct? Penn State Law Review. Vol. 109 (Spring 2005).
The rules as they are presently enforced only require elected Members and "…about 2,900 of the highest-paid congressional aides to disclose information once a year on their finances" (including gains from trading stocks), Mullins and colleagues point out. hat is wrong with that fact is that all aides, not just top aides, should be held accountable for investments they make, in particular those investments made by companies that are in any way connected to legislation that the aides' bosses are working with.
Taking it one step farther, all Members of Congress and all their aides -- top legislative assistants and the underlings of those top echelon staffers -- should be not only be required to disclose their personal finances, but they all should be banned from using any insider information in order to profit. hen they get back into private life, there still could be restrictions on what investments they…
Mullins, Brody, McGinty, Tom, and Zweig, Jason. "Congressional Staffers Gain From Trading
In Stocks." The Wall Street Journal. (2010).
The Wall Street Journal. "Capitol Hill's Stock Trading: What the Academic Research
In other words, trading based on private information might benefit investors, as it stimulates a quicker absorption of new information into the markets, making them more efficient.
It is clear that insider trading continues despite vigorous enforcement of the existing regulations. This is because of the difficulties in detecting and prosecuting it. Further regulations will only add unnecessary complexity to market participants and eventually bind the already limited resources of enforcement agencies, which could be used more usefully. (Letters to the editor, 2007)
This novel (and presumably accurate) information will be beneficial because, these economists argue, markets are most efficient when there is the highest possible amount of information in circulation. The majority of economists, however, believe that insider trading is detrimental to the most efficient functioning of the marketplace -- as well as being detrimental to the most ethical functioning of the market.
Analysis and Discussion
Money, we are…
Fishe, R. & . Robe, M. (2004). The Impact of Illegal Insider Trading in Dealer and Specialist Markets: Evidence from a Natural Experiment. Journal of Financial Economics 71(3): 461-88.
Harris, L. (2003). Trading and exchanges. Oxford: Oxford University Press.
Henning, P. (2011). Why insider trading is wrong. http://dealbook.nytimes.com/2011/04/11/why-is-insider-trading-wrong/ .
Jones, T. (1991). Ethical Decision Making by Individuals in Organizations: An Issue-Contingent Model. Academy of Management Review 16(2): 231-248.
All of the individuals were engaged in insider trading. They all obtained their knowledge by way of an insider, in this case a member of the Board of Directors. Any trading based on knowledge acquired by an insider, regardless of the degrees of separation is considered to be insider trading. Thus, the ex-husband clearly knew of his ex-wife's position. He passed the information along to his dentist, who may or may not have known the source of the information. Certainly, the dentist's broker would have had pretty good reason to question what the source of the information was, knowing that this sort of information is not just randomly acquired.
All of the parties are culpable, though the degree might vary. The broker, Green, has a high level of culpability as an industry professional. Green would have known that such knowledge is not easy to come by and there…
No author (2009) Raj Rajaratnam and insider trading. Seven Pillars Institute. Retrieved April 29, 2016 from http://sevenpillarsinstitute.org/case-studies/raj-rajaratnam-and-insider-trading-2
SEC.gov (2004). SEC charges Martha Stewart, broker Peter Bacanovic, with illegal insider trading. SEC.gov. Retrieved April 29, 2016 from https://www.sec.gov/news/press/2003-69.htm
Wealth, Power and Insider Trading on Wall Street
In today's increasingly internationalized worldwide economic system, defined by the expansion of multinational corporate conglomerates into foreign shores, the necessity for effective and efficient financial regulation to prevent criminal conduct covered by the catchall term "insider trading" has never been greater. Whereas autonomous countries once maintained clear authority over businesses which were built on their shores, through levying taxes, enforcing fiscal regulations, and instituting a lawful system of commerce, today the most successful companies are those with the wherewithal to transfer their operations abroad. Global financial management requires a comprehensive comprehension of foreign exchange and currency markets, derivatives securities, international financial debt and equity markets, international portfolio investments and the global market for real assets. Due to the fact that "financial markets and intermediaries today are globally linked through a vast international telecommunications network," with this continual process resulting in "the trading…
Domhoff, G.W., (2010). Who rules America? Challenges to corporate dominance (6th ed.). New
York, NY: McGraw-Hill
Harrison, B.C., & Dye, T.R., (2011) Power and society: An introduction to the social sciences
(12 th ed.). Boston MA: Wadsworth
Speculating has become such a common practice in the stock market that it is an essential element of a proper stock market. It is doubtful that the stock market values would be anywhere near its current value if not for speculation.
Goldman Sachs Investigation
The Goldman Sachs investigation inquires into whether traders at a number of hedge funds and trading firms, improperly gained nonpublic information from Goldman Sachs (who gained the information from industry informants) about pending health-care, technology and other merger deals.
In the Goldman Sachs situation, certain traders benefited from privileged information of impending mergers by buying stock on those mergers before the merger was officially announced.
Thus, they were able to acquire a promising stock at a lower price than they would have otherwise. They profit by selling the stock after the merger announcement induces other traders to buy the stock and push the stock price up.…
James B. Stewart, Why Practice Insider Trading? Just Watch Warren Buffet Instead. Wall Street Journal Online. May 5, 2011.
Susan Pulliam, Michael Rothfeld, Jenny Strasburg and Gregory Zuckerman, U.S. In Vast Insider Trading Probe. Wall Street Journal Online. November 20, 2010. http://online.wsj.com/article/SB10001424052748704170404575624831742191288.html?mod=googlenews_wsj
Patricia Werhane, the Ethics of Insider Trading.
Ashby Jones, Galleon Insider Trading Probe Fingers Former McKinsey Head. Wall Street Journal. March 1, 2011. http://blogs.wsj.com/law/2011/03/01/galleon-insider-trading-probe-fingers-former-mckinsey-head/
They are definitely a group that is picked for their passion for government affairs and who keep abreast of economic trends that affect the country.
Also, it is not necessarily the case that one who has insider knowledge will necessarily use it. One legislative aide remarked that he bought his shares at 12:50 P.M. On a date well after it was widely reported in the media.
It is extremely important that the Government create regulations to address insider trading. However, it may prove futile to prevent insider trading only, as the real danger of insider knowledge is that it might be passed on to larger groups of investors associated with congressional staff. Considering this, it may be necessary to create a new non-partisan agency to investigate the dealings and associations of congressional staff.
Partly because of the recent financial meltdown and the Government's self-interested response to it, citizen anger and…
Capitol Hill's Stock Trading: What the Academic Research Concludes, OCTOBER 11, 2010. Wall Street Journal.
BRODY MULLINS, TOM MCGINTY and JASON ZWEIG, Congressional Staffers Gain From Trading in Stocks, OCTOBER 11, 2010. Wall Street Journal.
BRODY MULLINS, TOM MCGINTY and JASON ZWEIG, Congressional Staffers Gain From Trading in Stocks, OCTOBER 11, 2010. Wall Street Journal.
Capitol Hill's Stock Trading: What the Academic Research Concludes, OCTOBER 11, 2010. Wall Street Journal.
Goffer made over $300,000 from the illegal deal. As the case expanded, 13 others were also charged. Altogether, they had acquired approximately $40 million or more in profit during the years 2006-2009 (Krantz). And the list could go on and on.
Conclusion - How Does Illegal Insider Trading Affect the Market and Economy?
Unfair advantage. Violation of transparency. Disruptive of a properly functioning market. Investors no longer invest. It begins with the first one and ends with the last. Trading in the market, whether by a professional or an amateur is based on skill and luck. One investor can perform better in the market because he or she learns how to acquire more skill in analyzing equities. But, if one person has an advantage such as inside corporate information no one else has, and he uses it to trade, he now has an unfair advantage (Heakal).
Transparency is now violated…
Heakal, R. "Defining Illegal Insider Trading." n.d. Forbes Investopedia . 18 December 2009 .
Hoffman, D. "Martha Stewart's Insider Trading Case." 1 July 2007. allbusiness.com. 18 December 2009 .
Krantz, M. "On warpath, SEC charges 11 with illegal insider trading." 15 July 2009. usatoday.com. 18 December 2009 .
ProCon.org. "Should Insider Trading by Congress be Allowed?" 11 August 2009. ProCon.org. 18 December 2009 .
(Johnson, "Impact of Day Trading," 2000) and the effects on the irresponsible individual could be devastating if he or she didn't "jump" at the right time. After losing everything while day trading, one unstable man "shot and killed nine people in Atlanta in a two-day spree. Just two weeks after the shooting, the North American Securities Administrators Association released a report stating that seven out of ten" of all day traders lost everything."
But what about the overall effect markets? Some analysts concede that while day traders added volatility, a small dose of volatility in a sluggish market environment can prove a positive ingredient. Volatility might be difficult to stomach, but "volatility is the lifeblood of the markets. If prices don't change, trades don't happen. If trades don't happen, stocks are superfluous. ithout stocks, new business would not get funded, new fortunes would not be made, and new technologies would…
Finance / Program Trading. (2004) Excerpt from the New York Times, Dec. 15, 1987. Also excerpted from the Association for Computing Machinery (ACM) Risks Forum, Forum on Risks to the Public in Computers and Related Systems. Retrieved 3 Dec 2004. http://mt.sopris.net/mpc/finance/program.trading.html
Forex. (January 19, 2004) Forum, Forum on Risks to the Public in Computers and Related Systems. Retrieved www.forex.com
Stock trading: The ultimate handbook. (2004) Daytrader.com. Retrieved 3 Dec 2004. http://day-trader-coach.com/
Johnson, Cory. (2000) "Trillion Dollar Bet." NOVA. PBS. Retrieved 3 Dec 2004. http://www.pbs.org/wgbh/nova/stockmarket/online2.html
UK's Membership of EU and its Impact on Insider Trading
The European Union has recently introduced criminal sanctions in all its member countries in cases of market manipulation and insider trading. The new regulations are quite strict and are essential in reforming the financial markets. There are two directives Market Abuse and Criminal Sanctions [footnoteRef:1]and MFID [footnoteRef:2] have been introduced recently by EU in their pursuit to eliminate market manipulation and insider trading. [1: Criminal sanctions include fines up to £5million with a limit of the minimum amount of all the profits that are made through insider trading. ] [2: MFID stands for Markets in Financial Instruments Directive, this directive was introduced to protect insider trading dealings]
The criminal sanctions already exist in UK laws, however these sanctions are meant to have a greater impact on those member countries where leniency have been obtained in cases o insider trading and…
moral hazard in mergers, acquisitions and takeovers. The essay discusses the definition of moral hazard as well as related agency theory and the role of asymmetrical information in transactions. The essay also reviews insider trading from the perspective of insider trading.
In the context of economic theory, moral hazard describes the tendency of a party to take excessive risks because the costs associated with the unreasonable risk are not incurred by the party taking the risks. That is, when the behavior of one party to a transaction may result in detriment to another party after the transaction has taken place, moral hazard may be said to be present. Moral hazard occurs because an institution or individual does not bear the full responsibility or consequences of its actions, and as a result, there is a tendency to act less carefully than otherwise would be the case; this irresponsible behavior leaves the…
Carlton, Dennis W. And Daniel R. Fischel. "The Regulation of Insider Trading." Stanford Law Review. (1983) 35: 857 -- 895. Web. .
Heakal, Reem. "Defining Illegal Insider Trading." (September 25, 2010) n. pag. Web. .
Kleiman, Robert T. "Agency Theory." (2012): n. pag. Web. .
Stein, Jeremy C. "Takeover Threats and Managerial Myopia." Journal of Political Economy. (1988) 96.1: 61- 80. Web. .
Acquainted With the Law
Various Law Terms-3
This is either legal or illegal (Priebe, 2012). It is legal and legitimate when corporate officers, directors and shareholders of at least 10% of the outstanding stock of the business. They file the required information with the Securities and Exchange Commission at regular periods (Priebe).
Illegal Insider Trading
This is conducted by trusted person but violates that company's trust (Priebe, 2012). The person is usually someone who enjoys fiduciary trust in working for and keeping the best interest of the company or its shareholders. He may be an officer, a director or an outsider who has access to confidential information about the company. That outsider may be the company's banker, auditor, or lawyer. In general, he is an insider who gives or receives inside information or tips (Priebe).
Characteristics of the Inside Information
It must be important and private (Priebe, 2012).…
Daniels, R. (2012). First property domain laws. eHow: Demand Media, Inc. Retrieved on June 19, 2012 from http://www.ehow.com/facts_8009319_first-property-domain-laws.html
Menamos, J. (2012). Why are hate crimes difficult to prosecute? eHow: Demand Media,
Inc. Retrieved on June 19, 2012 from http://www.ehow.com/info_8769064_hate-crimes-difficult-prosecute.html
Montoya, D. (2012). How has the exclusionary rule impacted criminal cases? eHow:
ole of Technology in Corporate and Social esponsibility
Insider trading. The insider trading case that has become most prominent is that against aj ajaratnam who ran the hedgefund Galleon Group, and was charged along with his co-defendant, Danielle Chiesi, a former consultant with New Castle Funds, LLC ("Insider Trading," 2010). ajaratnam was convicted of 14 counts of insider trading, which makes this case the largest scheme concocted by a hedge fund ("Insider Trading," 2010). ajaratnam's sentence was 11 years in prison accompanied by a $10 million fine ("Insider Trading," 2010). ajaratnam was part of a "triangle of trust" that functioned as a deliberately corrupt business model in which inside information is fed through networks of experts to traders within various companies ("Insider Trading," 2010). Along with five others, ajaratnam worked with a network of consultants and insiders to net in excess of $20 million between the years 2006 to 2009…
Angwin, J. (2010, July 30). The new gold mine: Your secrets. The Wall Street Journal. Retrieved http://online.wsj.com/article/SB10001424052748703940904575395073512989404.html A web of insider trading charges. (2010, April 1). The New York Times. Retrieved http://www.nytimes.com/interactive/
Insider Trading, Times Topics, (2011, December 6). The New York Times. Retrieved http://topics.nytimes.com/topics/reference/timestopics/subjects/i/insider_trading/index.html
Representative Stearns introduces consumer privacy protection act. (2011, April 15). Privacy and information Security Law Blog. Hunton & Williams LLP. Retrieved http://www.huntonprivacyblog.com/2011/04/articles/representative-stearns-introduces-consumer-privacy-protection
Chick does not have a legal basis for a case, neither does the injured Per L. Eyzed. This is because Chick was on lunch when she hit someone. She was technically not on duty. She "stopped" for lunch and then hit Per with her bike. Also another thing to note is if the bike is owned by the company? Additionally, Chick was not paid under her internship with the security firm, proving anything owned and done by Chick was through her choice and money.
The bike is in fact owned by Chick. This also further helps prove that the case is unfounded. If per chance the bike was a company owned bike, perhaps the injured Per could sue, but because at the beginning, Chick stated she chose to bike to work with her bicycle, proving she is in direct possession of her bike. Since she does not have any money,…
partnership allows some of the inestors to limit their liability. In modern organizations, a limited partnership may allow some of the partners or investors (stakeholders) to limit their liability. Under this arrangement, one of more stakeholders are given designated titles as General Partners and have unlimited liability for the organization (debts, assets, etc.). The other stakeholders are titled limited partners and have an overall liability that equals only their initial contribution. This makes different stakeholders liable for different amounts. Limited partners, however, are typically prohibited from being active within the firm. By-laws of the partnership and state law of incorporation also influence the legal maximum liability of stakeholders (Unifom Partnership Act, 1997).
When does insider trading occur? What government agency is responsible for protecting against the unethical practices of insider trading? Insider trading occurs when an individual trades a stock or security and has access to non-public information about that…
Uniform Partnership Act. (1997). University of Pennsylvania Library. Retreived from:
Baker, K. And Powell, G. (2005). Understanding Financial Management. New York: Wiley.
Eisen, P. (2007). Accounting. New York: Barron's.
For the law firms, a multi-point ethical program can address some of the shortcomings of their employees.
Fraud is a unique ethical case, since there is no ethical dilemma, only outright criminality. To an extent, fraud is a situation where it is garbage in, garbage out. Thus, hiring becomes the first step in building a strong ethical program. This is especially true in an M&A division, where workers will be exposed to insider trading opportunities on a near-daily basis. The firms must incorporate ethics testing and other techniques to improve the ethical quality of their new hires.
New hires should be subjected to an intensive ethical training program. Company standards must be made clear, along with the consequences of breach of those standards. The ethics training program should be reinforced with follow-up programs, to make sure that the high ethical standards become part of the corporate culture. The program should…
Glovin, D.; van Voris, B. & Gallu, J. (2009). Hedge fund managers, traders charged in Galleon trading probe. Bloomberg. Retrieved November 6, 2009, from http://www.bloomberg.com/apps/news?pid=20601087&sid=aJH6VTdbln4A&Pos=1
Gleeson, W. (2003). Designing an effective corporate ethics program. LexisNexis. Retrieved November 17, 2009 from http://www.martindale.com/pdf/c2c/magazine/2003_September/c2c9_03_BP_CorpEthics.pdf
Business Society and Corporate Values
There has indeed been a great deal of discussion regarding CEO compensation, which is rightly viewed as being completely out of line. The core problem and cause of inflated CEO salaries cannot be attributed to a single reason, but is rather the result of a range of inter-connected factors. What is definitive is the fact that these salaries have inflated over time; this is in part due to the fact that greed is a progressive, boundless factor. "According to the Economic Policy Institute, in the late 1970s, total compensation of chief executives in large American corporations was 35 times that of the average American worker. In 2007, it was 275 times that" (Borger, 2007). These facts alone demonstrate that there is good reason to be in a state of alarm. The reasons for such severely inflated and remarkably unjust salaries are a result of the…
Ball, P. (2012, July 4). GlaxoSmithKline's bribes are evidence that Big Pharma isn't working. Retrieved from Guardian.co.uk: http://www.guardian.co.uk/commentisfree/2012/jul/04/glaxosmithkline-big-pharma-not-working
Borger, J. (2008, September 5). Why do CEOs make so much? Retrieved from Minnpost.com: http://www.minnpost.com/politics-policy/2008/09/why-do-ceos-make-so-much
Boselovic, L. (2011, May 15). Rajaratnam case puts big chill on insider trading. Retrieved from post-gazaette.com: http://www.post-gazette.com/stories/business/news/rajaratnam-case-puts-big-chill-on-insider-trading-297777/
Choudhury, U. (2011, October 14). Rajaratnam becomes a 'whipping boy' for Wall Street misdeeds. Retrieved from firstpost.com: http://www.firstpost.com/business/rajaratnam-becomes-a-%E2%80%98whipping-boy%E2%80%99-for-wall-street-misdeeds-107346.html
f this group thinks that these laws are needed for all the rest of the businesses in the America then they should ethically think that these laws should apply to everyone including them. The fact that Congress is not held to the same standards as everyone else makes them appear untrustworthy and unethical, which undermines the government process as a whole.
4) in your opinion is it necessary to create laws to prevent unethical behavior?
There should be laws put into place in order to stop this type of unethical behavior from going on. There should not be a group of people that have an advantage over others just because of the job that they hold. There was a rule passed in the Senate in 1968 that requires lawmakers and aides to reveal information about their assets. The House of Representatives forced similar necessities at about the same time. The…
It is necessary to create laws to prevent insider trading within Congress because it is not fair to the public in general for the body of legislature that creates the laws in this country to then be exempt from those same laws. If this group thinks that these laws are needed for all the rest of the businesses in the America then they should ethically think that these laws should apply to everyone including them. The fact that Congress is not held to the same standards as everyone else makes them appear untrustworthy and unethical, which undermines the government process as a whole.
4) in your opinion is it necessary to create laws to prevent unethical behavior?
There should be laws put into place in order to stop this type of unethical behavior from going on. There should not be a group of people that have an advantage over others just because of the job that they hold. There was a rule passed in the Senate in 1968 that requires lawmakers and aides to reveal information about their assets. The House of Representatives forced similar necessities at about the same time. The regulations necessitate all members of Congress and several of the highest-paid congressional aides to reveal information yearly in regards to their finances. This includes their assets, debts, spouse's employment and other supplies of profits they earn, including capital gains from trading stocks. Not like many Executive Branch employees, lawmakers and aides don't have limitations on their stock holdings and possession interests in businesses that they supervise. Congressional rules state that necessitating employees to do so could protect a legislator from the individual and monetary benefits that their electorate, or society in general, has in governmental choices and strategy (Mullins, McGinty, and Zwig, 2010). These laws and regulations that have been put into place are a good start but they don't go far enough in order to prevent unethical behavior from taking place. There needs to be stronger, more specific laws enacted in order to make this unethical behavior illegal so that just like with other companies the people who work there cannot take advantage of inside information for their own personal gain.
In the long run, Machan & Chesher's argument makes sense -- care for the health and safety of company employees and see the company grow more profitable! Care for one's own health and one will be a better employee! However, management does not always take the long-term vision that, 'if I allow my employee to take a day off for the flu, he or she will be more productive upon his or her return, and not infect other employees.' Employees may be told to come in to the office when they are sick or else they will be fired. Thus, they risk their own health or the health of others, to make a quick return on the corporation's investment in an employee. Also, an adolescent or even a twenty-year-old on his or her first job may have a sense of invincibility, and do imprudent things, like speed to deliver pizzas,…
The Campaign Finance Legislation H3463 was introduced on November 17, 2011. The proposal is to reduce spending and the deficit by terminating taxpayer financing for presidential campaigns and party conventions, as well as, by terminating the Election Assistance Commission. The bill was passed by the House of Representatives on December 1, 2011 and is waiting for the Senate. (HR-3463-Repeals Taxpayer Financing of Presidential Election Campaigns-Key Vote) Once the bill is passed by the Senate, it would still need the President's approval to be enacted into law.
The ill is to repeal taxpayer financing of presidential election campaigns and party conventions for all taxable years beginning after December 2010. It would repeal the Presidential Election Campaign fund, requiring all remaining money to be used only for reducing the deficit, and repeal the Election Assistance Commission, affected 60 days after enactment. It would also require the Federal Election Commission to…
HR-3463-Repeals Taxpayer Financing of Presidential Election Campaigns-Key Vote. (n.d.). Retrieved from Project Vote Smart: http://votesmart.org/bill/14190/repeals-taxpayer-financing-of-presidential-election-campaigns
S2038-Prohibits Insider Trading by Government Officials-Key Vote. (n.d.). Retrieved from Project Vote Smart: http://votesmart.org/bill/14568/38133/prohibits-insider-trading-by-government-officials
Subprime loans are said to be among the biggest reasons for the most recent financial crisis which hit the world economy at the end of year 2008. Had the lenders considered the level of income and repaying abilities of the borrowers before lending them money, the World's financial sector would not have seen such critical circumstances. The consequences of subprime loans have not ended yet; economists and researchers in the field of International Finance are of the view that they may further get worsen in the coming five to ten years period. Beside the criticism regarding the approval of subprime loans to low income borrowers, the lenders have also been strongly criticized for using unethical business practices in their customer dealings and transactions (Mandal, 2010).
This paper investigates the consequences and risks that were caused by subprime loans in the World's financial sector and their impact on the lenders, borrowers,…
Donath, L.E., & Cismas, L.M. (2009). The Current Financial Crisis Revisited -- Causes and Remedies, the Romanian Economic Journal, 31 (1): 85-92.
Goldmann, P. (2010). Financial Services Anti-Fraud Risk and Control Workbook, 1st Edition. Hoboken, N.J.: Wiley.
Jennings, M. (2012). Business Ethics: Case Studies and Selected Readings, 7th Edition. South-Western Legal Studies in Business. Australia; Mason, OH: South-Western.
Magdoff, F., & Foster, J.B. (2009). The Great Financial Crisis: Causes and Consequences. N.Y: Monthly Review Press
Explain the Securities and Exchange Commission's rationale to charge Cardillo executives with each of the following violations:
Making false representations to outside auditors
Without a doubt, executives of Cardillo Travel Systems made incorrect accounting transactions. As a result, this gave rise to false representations to external auditors. The rational for the SEC to charge these executives with this particular violation is linked to Management's Report on Internal Control Over Financial Reporting Under Section 13(a) or 15(d) of the Securities Exchange Act of 1934. In accordance to this guideline, the SEC expects the company's management to be accountable for maintaining an internal control system over financial report. This is so as to offer sensible guarantee with respect to the reliability of preparing and reporting of financial statements for external users of such statements, comprising of the external auditors (SEC, 2007).
Failing to maintain accurate financial records
Management of a company is…
Her comments on her show do not even detract or defame the company directly, and could have led to a stock increase (something that would have hurt her short-sale position on the stock), and thus it would be difficult if not impossible to prove any malicious or profiteering intent in her actions. Furthermore, the major recall of men's clothing that JOSB underwent during the same period and which is being cited as the major reason for the drop in the company's stock price would seem to exonerate DeGeneres for this drop in share price regardless of what her intent (if indeed she had any) was when she made her comments regarding the company. Her frequent trading and her overall loss combined with the lack of direct effect on the share price all indicate that Ellen DeGeneres is not engaging in insider trading activities, and if so she is very bad…
Edwards, L., Edrwads, J. & Wells, P. (2012). Tort Law. Clifton Park, NY: Delmar.
Shepherd, H. & Cole, M. (2008). The Complete Guide to Patents, Copyrights, and Trademarks. Ocala, FL: Atlantic Publishing.
fictional firm (RMD) can be able to offer pre-IPO's to investors. This is accomplished by looking at the way various policies can be implemented that is in compliance with the Securities Act of 1933 along with the Securities and Exchange Act 1934. Once this occurs, is when we can be able to see how they can create a unique market that will address this demand from retail and institutional investors.
Over the last several decades, demand for pre-IPOs (initial public offerings) has been increasing exponentially. Part of the reason for this, is because there has been a shift in the focus of investors. As a large number are realizing that they can make significant returns by investing in these companies before they are going public. Evidence of this can be seen by looking at the below table which is highlighting how high investor demand for pre-IPO's had an impact on…
Chinese Wall, (2011), SEC, (available at http://www.investopedia.com/terms/c/chinesewall.asp ) (accessed 22 Dec. 2011)
Dutch Auctions, (2011), Investopedia (available at http://www.investopedia.com/terms/d/dutchauction.asp#axzz1hH90hbx8 ) (accessed 22 Dec. 2011)
Front Running, (2011), Investopedia (available at http://www.investopedia.com/terms/f/frontrunning.asp#axzz1hH90hbx8 ) (accessed Dec. 2011)
The Laws that Govern the Securities Industry, (2011) SEC, (available at http://www.sec.gov/about/laws.shtml#secact1933 ) (accessed 21 Dec. 2011)
(Dow Jones and Company, 2009). The DJIA can be used in three principal ways: as a yardstick, as a barometer, or as an investment.
When the DJIA is used as a yardstick, the goal is to measure performance from one period of time to another:
The most common use of an index by investors is to evaluate the performance of their own portfolios on a monthly or quarterly basis. This is the "benchmark" function of an index, and it constitutes the bogey that many investors try to beat with individual stock picks or with mutual funds. There is no official benchmark for the stock market. Each investor chooses his or her own. The only logical requirement is that the benchmark chosen should represent the part of the stock market that is targeted by the investor's portfolio. For example, if the investor dabbles in large stocks from a variety of industries,…
H.J. Heinz Co. 2009. Shareholder Information. H.J. Heinz Company. Available from:
http://heinz.com/our-company/investor-relations/shareholder-information.aspx [August 28, 2009].
Dow Jones and Company. 2009. About the Averages: Overview. New York: Dow Jones and Company. Available from: http://www.djaverages.com/?view=about&page=overview [August 28, 2009].
E*Trade Financial Corp. 2009. Pricing. E*Trade Financial Corp. Available from:
The developments of credit derivatives began in 1980s as a new financial innovation after the swap market started. Swap market provided derivative organizations with profit due to their intermediary position while the credit margins for borrowers were reduced. As the swap market developed there was the development of new interest derivatives so that there were additions to the list of products. Credit derivatives are relatively recent introductions and these are mechanisms for the credit institutions to separate the credit risk from their loans and treat market risk as a separate category so that their pricing efficiency could be more competitive and the concerned organizations could be more competitive in the market. (Credit Derivatives Move Beyond Plain Vanilla)
Thus one can say that credit derivatives are a recent form that can be used by bankers to reduce risk, or increase risks and thus meet their corporate objectives. The general…
Aggrawal, Sunil K. Credit Derivatives Move Beyond Plain Vanilla. Retrieved at http://pages.stern.nyu.edu/~sjournal/articles_00/credit_derivatives.htm. accessed 27 July, 2005
Black Scholes Model. Retrieved at http://www.cs.sunysb.edu/~mverma/blackscholes.htm . accessed 27 July, 2005
Cox, Daniel. FAS 123(R): Lattice vs. Black-Scholes. Retrieved at http://www.fmnonline.com/publishing/article.cfm?article_id=836accessed 27 July, 2005
Credit Derivatives. Retrieved at http://www.finpipe.com/crederiv.htm . accessed 27 July, 2005
Enron could engage in their derivative trading strategy with no fear of government intervention because derivative trading was specifically exempted from government regulation. Due in part to a ruling by the Commodity Futures Trading Commission's (CFTC) chairwoman, Wendy Graham, derivatives remained free of regulatory oversight. Ms. Graham, wife of Texas senator Phil Graham, made this ruling 5 weeks before resigning as chairwoman of the CFTC and joining the Enron oard of Directors in 1993.
Derivative accounting is further complicated because there is no consistent way to fairly report their value and risk in a company's financial report. In 1998 Rule No. 133, "Accounting for Derivative Instruments and Hedging Activities" was developed by the Financial Accounting Standards oard (FAS), an independent agency that sets guidelines for corporate auditors. Rule 133 contains more than 800 pages, which further complicates its adoption and consistent interpretation by various companies. SFAS No. 133 was subsequently…
Dettmer, Jamie, and John Berlau. "Requiem for Enron: There's Enough Blame to Go around for the Collapse of the Energy Giant From Executives to Auditors to Financial Analysts to Congress." Insight on the News 7 Jan. 2002: 12+. Questia. 10 Mar. 2005 .
Folbre, Nancy. "Blowing the Whistle on Poverty Policy." Review of Social Economy 61.4 (2003): 479+. Questia. 10 Mar. 2005 .
Gup, Benton E., ed. Too Big to Fail: Policies and Practices in Government Bailouts / . Westport, CT: Praeger, 2003.
Hartgraves, Ai L., and George J. Benston. "The Evolving Accounting Standards for Special Purpose Entities and Consolidations." Accounting Horizons 16.3 (2002): 245+..
ehavioral Finance and Human Interaction a Study of the Decision-Making
Processes Impacting Financial Markets
Understanding the Stock Market
Contrasting Financial Theories
Flaws of the Efficient Market Hypothesis
Financial ubbles and Chaos
The stock market's dominant theory, the efficient market hypothesis (EMH) has been greatly criticized recently for its failure to account for human errors, heuristic bias, use of misinformation, psychological tendencies, in determining future expected performance and obtainable profits.
Existing evidence indicates that past confidence in the EMH may have been misdirected, as the theory's models do not show a thorough understanding of trading operations in a realistic light.
Researchers have suggested that a variety of anomalies and inconsistent historical results demand that traditional financial theories, namely the EMH, be reconstructed to include human interaction as a key decision-making process that directly affects the performance of financial markets.
This research paper aims to determine whether or not there is a…
Barrett, Larry. (January, 2001). Emotional investing a recipe for disaster. CNET News.com.
Bernstein, Peter. (1998). Against the Gods: The Remarkable Story of Risk. New York, NY: John Wiley & Sons.
Brennan, Phil. (March 12, 2002) The Great Stock Market Scam. NewsMax.com.
Business Week. (September 29, 1997) The Perils of Investing Too Close to Home.
A favorite target for conspiracists today as well as in the past, a group of European intellectuals created the Order of the Illuminati in May 1776, in Bavaria, Germany, under the leadership of Adam Weishaupt (Atkins, 2002). In this regard, Stewart (2002) reports that, "The 'great' conspiracy organized in the last half of the eighteenth century through the efforts of a number of secret societies that were striving for a 'new order' of civilization to be governed by a small group of 'all-powerful rulers.' The most important of these societies, and the one to which all subsequent conspiracies could be traced, is the Illuminati founded in Bavaria on May 1, 1776 by Adam Weishaupt" (p. 424). According to Atkins, it was Weishaupt's fundamental and overriding goal to form a secret organization of elite members of Europe's leading citizens who could then strive to achieve the Enlightenment version of revolutionary social…
American Psychological Association. (2002). Publication manual of the American Psychological
Association (5th ed.). Washington, DC: Author.
Anderson, J. (1981, 1723). The charges of a Free-Mason extracted from the ancient records of lodges beyond the sea, and of those in England, Scotland, and Ireland, for the use of the lodges in London: To be read at the making of new brethren, or when the master shall order it. Reprinted in The Radical Enlightenment: Pantheists, Freemasons, and Republicans, by M.C. Jacob, 279-285. London and Boston: Allen & Unwin in Harland-
Jacobs at p. 237.
Moreover, a prosecution of the core leadership of an organization under RICO charges is likely to produce revelations concerning the relationship between leadership and other members who are either guilty of racketeering or some lesser scope of individual crime. This is to say that RICO was essentially designed to push the door open on the activities of such typically obscured enterprises in order to systematically disrupt its initiatives and priorities.
Still, as this investigation finds as a recurrent theme in considered research materials, even when armed with RICO's expansive authorities, there remains a fundamental difficulty in overcoming the effectively obfuscating structure of the modern organized crime enterprise. In the case of the long-ingrained style of activity instituted by La Cosa Nostra, the protective degree to which structure is designed to insulate the activities, connections and implications relating to real decisions-makers and bosses tends to effect the ability of RICO statutes…
ACLU. (2003). How 'Patriot Act 2' Would Further Erode the Basic Checks on Government Power that Keeps America Safe and Free. American Civil Liberties Union. Online at http://www.aclu.org/SafeandFree/SafeandFree.cfm?ID=12161&c=206
Arshadi, N. (1998). Insider Trading Liability and Enforcement Strategy. Financial Management, 27(2), 70-84.
Cornell University Law School (CULS). (1970). Chapter 96-Racketeer Influences and Corrupt Organizations. U.S. Code Collection. Online at http://www.law.cornell.edu/uscode/html/uscode18/usc_sup_01_18_10_I_20_96.html
FBI. (2004). Investigative Programs: Organized Crime. Department of Justice: Federal Bureau of Investigation. Online at http://www.fbi.gov/hq/cid/orgcrime/aboutocs.htm
court, it will be a state court. Each state has different laws with respect to how they treat LLCs in such situations. Without knowing the state, it is impossible to know which statute a state might apply. There can be significant differences between state law on this matter (Garon, 2008).
In most states, it will be difficult to adjudicate such disputes, insomuch as there is likely to be limited precedence (Garon, 2008). If the court uses the Uniform Limited Liability Company Act, it would turn to the language in Section 112, particularly subsection D. The relevant text is as follows: "Absent any contrary provision in the operating agreement, language in an LLC's certificate of organization might be evidence of the members' agreement and might thereby constitute or at least imply a term of the operating agreement." If there is nothing written down at all, the court is likely to find…
17 CFR 240.10b5-1 - Trading "on the basis of" material nonpublic information in insider trading cases. Retrieved October 17, 2015 from https://www.law.cornell.edu/cfr/text/17/240.10b5-
Garon, J. (2008). The limited liability company (LLC) operating agreement. Gallagher, Callahan and Cartrell. Retrieved October 17, 2015 from http://www.gcglaw.com/resources/business/llc.html
Investopedia (2015). Complete guide to corporate finance. Investopedia. Retrieved October 15, 2015 from http://www.investopedia.com/walkthrough/corporate-finance/1/forms-business-organizations.aspx
Revised Uniform Limited Liability Company Act. Retrieved October 17, 2015 from http://www.uniformlaws.org/shared/docs/limited%20liability%20company/ullca_final_06rev.pdf
The political pressure of the past several years following the dot.com bubble and the collapse of several major companies created a need for new securities legislation, which culminated last year in the Sarbanes-Oxley Investor Protection Act, which establishes new guidelines for the securities industry. Initially a Democratic brainchild, the act became favored by epublicans in the House when it was realized that such adjustments would be of great benefit to shareholder value in that they enhanced general financial stability. This is the most prominent piece of financial legislation since the establishment of the Securities and Exchange Commission in the early 1930's. The most widely recognized feature of the new legislation, which was introduced in 1992, is that board members are held personally and criminally liable for the accounting practices that the company employees. This act also establishes guidelines as to the coverage of securities by sell-side analysts who face…
Resources and Authority
Studies and Reports
Corporate and Criminal Fraud Accountability
White Collar Crime Penalty Enhancements
Corporate Tax Returns
illegal to buy and sell securities, in breach of a fiduciary duty or other relationship of trust or confidence, while in possession of material, nonpublic information about the security (Insider Trading). This includes tipping such information, securities trading by the person tipped, and securities trading by those who misappropriate such information. The ethical issue that could include legalities is some practices in assisting and serving senior investors and include: communicating effectively with senior investors and ensuring appropriateness of investments (Protecting senior Investors: Compliance, Supervisory and Other Practices Use y Financial Firms in Serving Senior Investors, 2010).
Albert using his uncle to include the uncle's friends as clients helped him build his client load and helped them build portfolios, but when things go sour and the clients start losing value, it can cause resentments, and where some of them are elderly, it could set up investigations into elderly exploitation. Taking arry…
Protecting senior Investors: Compliance, Supervisory and Other Practices Use By Financial Firms in Serving Senior Investors. (2010, Aug 12). Retrieved from SEC: http://www.sec.gov/spotlight/seniors/seniorspracticesreport081210.pdf
Everything You Need to Know About Spills: Chemical Spills, Oil Spills and More. (n.d.). Retrieved from Environment, Health and Safety Online: http://www.ehso.com/Spills.htm
Insider Trading. (n.d.). Retrieved from SEC: http://www.sec.gov/answers/insider.htm
finance and financial entrepreneurship. The basis of the article is on a discussion that was held on this subject among four leading lights of financial entrepreneurship in the United States - Michael Milken, Lewis Ranieri, Richard Sandor and Myron Scholes. These people are famous in their own right and have had a sizeable role in financial entrepreneurship in the U.S. over the last 20 years. We have first discussed their achievements to get a clear idea about their personal achievements. This would certainly give a clear idea of what is possible in the U.S. today. They are of course interesting characters and one has to remember that the ideal entrepreneur of the 21st century cannot be thought of as an updated version of Henry Ford. After the discussion of the people, the meeting and the discussions held there are summarized. ased on the total information collected, we have come to…
Altman, E.I., ed. The High-Yield Debt Market: Investment Performance and Economic Impact, 41-57. 1990.
Atkinson, T.R. Trends in Corporate Bond Quality. Hardingson, 1967.
Goodfriend, Marvin; Parthemos; James, Summers, Bruce J. Recent financial innovations: courses, consequences for the payments system, and implications for monetary control, Economic Review, March 14-27, 1980
Schneider, S.H. Laboratory Earth: The Planetary Gamble We Can't Afford to Lose. Basic Books New York, NY. 1997.
However, he must pass the information along in a public manner. If he tells them in the same way he told his father and uncles, this would still be unethical. If he makes a public statement regarding the upcoming profit, however, this would not be ethical because every investor would be on equal footing.
3. Carmine should publicly announce the profit expectations. As of right now, he has behaved unethically, but no real damage has been done. No crime has been committed. If a public announcement is made, then this would remove the possibility for insider trading. Carmine should make special point to ensure his other relatives are aware of the upcoming profit. But by giving guidance to the market with regards to the profit, he ensures that all savvy investors will have equal opportunity to take advantage of the opportunity. As a side benefit, he can probably increase the…
In the late 1990s, this was not a problem as the stock was continuing to climb to all-time highs. However, once the economy began to slow, is when this strategy backfired by forcing them to issues more stock to cover these losses. As shares were declining, many investors became weary of continuing to participate in these activities. (Healy, 2003)
In late 2001, these activities were brought to the attention of regulators and investors (which resulted in the eventual bankruptcy of the firm). This is illustrating how forensic accounts overlooked or ignored key areas that could have uncovered fraudulent activities. As a result, one could argue that the lack of ethics and the close relationship with company executives helped to perpetuate these abuses. (Healy, 2003)
Another type of fraud that is most prevalent is insider trading. This is when executives will have specific knowledge of the financial situation surrounding…
Albrecht, S. (2006). The Ethics Development Model. Australian Accounting Review, 16 (38), 30 -- 40.
Bettis, J. (2000). Corporate Policies. Journal of Financial Economics, 57 (2), 191 -- 220.
Golden, T. (2011). A Guide to Forensic Accounting. Hoboken, NJ: Wiley.
Gray, D. (2008). Forensic Accounting and Auditing. American Journal of Business Education, 1 (2), 1 -- 12.
Clone case came to the attention of the SEC because it involved the CEO of ImClone, Sam Waksal, who had the same stockbroker as Martha Stewart, and the two were friends. Waksal found out at about an FDA ruling that was going to negatively affect the value of ImClone shares, and sold his shares on the basis of this information. That alone is insider trading, because Waksal was in a privileged position within the company, and traded on information that had yet to be released publicly. The relationship between Waksal and Stewart, along with the broker, brought the case to the attention of the SEC. Undoubtedly, the high profiles of the individuals involved was a factor.
The specific issue here was insider trading, yet ultimately Stewart was never convicted on that. Waksal was, because he was the insider. Stewart was in a position to receive this privileged information, but she…
Recently, there have been a multitude of high-profile corporate scandals involving companies that were once well-respected. Generally, these corporate scandals related to corporate loans to insiders as well as to insider trading and accounting scandals (i.e., over-inflating income in order to please Wall Street analysts and shareholders). Examples of companies involved in such scandals include Arthur Andersen LLP, Enron, Global Crossing, and WorldCom. Not only do these corporate scandals hurt a company's profitability and reputation, but such scandals also de-moralize society and result in financial difficulties for employees who are laid off.
This paper analyzes and examines high-profile corporate unethical and criminal conduct. Part outlines Enron's corporate and individual unethical and criminal conduct. Finally, this paper concludes with recommendations for avoiding ethical dilemmas and criminal conduct.
ENRON'S CORPORATE AND NDVDUAL UNETHCAL AND CRMNAL CONDUCT
Perhaps the most recent high-profile corporate scandal involving unethical and criminal conduct is Enron,…
Corporations provide numerous invaluable functions, both on an individual and societal level. First, corporations offer individuals a source of income in the form of employment, stimulating economic growth both on a macro and micro level. Next, corporations offer individuals the chance to enhance their income by owning a portion of the corporation in the form of stock. Third, corporations develop products and services that are innovative, either because they improve on past products and services or because they invent a totally new product or service. Assuming everything is on the up and up, nearly everyone may reap the profits of a corporation.
In recent years, there have been numerous high-profile corporate scandals involving companies that were once well-respected. Generally, these corporate scandals related to corporate loans to insiders as well as to insider trading and accounting scandals (i.e., over-inflating income in order to please Wall Street analysts and shareholders). Examples of companies involved in such scandals include Arthur Andersen LLP, Enron, Global Crossing, and WorldCom. Not only do these corporate scandals hurt a company's profitability and reputation, but such scandals also de-moralize society and result in financial difficulties for employees who are laid off. In order to eliminate or minimize corporate scandals, there need to be refinements to existing laws (such as the July, 2002 refinement banning corporate loans to insiders) as well as greater oversight by neutral entities and individuals (i.e. compliance departments).
conflict of interest is at the core of nearly every ethical dilemma. A conflict of interest, simply put, is a situation in which the decision maker has two or more competing interests. Market timing, late trading, insider trading, illegal trading, fraud, partial disclosure, non-disclosure...the manifestation of conflicts of interest is seemingly endless. The business landscape today is a minefield of ethical disasters, some of which have already occurred, some of which wait quietly in the shadows to erupt into scandal.
In the summer of 2002, when Congress was attempting to decide how to clean up the shady financial practices of Corporate America, mutual fund company lobbyists convinced lawmakers to exempt their area of the financial services industry. As of September 2003, when the Attorney General for New York State, Eliot Spitzer, revealed his "stunning" charges of illegal trading in mutual funds, this industry has occupied center stage in the spotlight…
Anand, V. (May 2003). Mutual Funds Face Soft-Dollar Disclosure Rule. Pensions & Investments, 31 (10), 1-2.
Anand, V. (Dec 2003). Spitzer: 'I Spy DC Fees'. Pensions & Investments, 31 (25), 2-3.
Borrus, A. & Dwyer, P. (Dec 2003). The Critical Battle For Reform. Business Week, 3860, 30- 32.
Coffin, B. (Feb 2004). Mutual Fund Industry Under Scrutiny. Risk Management, 51(2), 37.
healthcare services, many people could encounter some form of discrimination on the basis of their race, gender, or even sexual orientation. Discrimination in healthcare may seem like it is not something that is a major issue. However, it absolutely does come up in many situations, states and environments. hether based on gender, religion, race or sexuality, discrimination happens at overt or implied levels all of the time. In other situations, there are huge disparities in healthcare outcomes from one group to another and many experts say that this can only come from systemic or sporadic instance of racism from the healthcare sphere, from society in general or a combination of the two. hile most people get very good care, there are situations where the healthcare and/or government sectors fall short. It is important to note that although people are not always aware of this; there are various laws that seek…
Cornell Law School. (n.d.). 11 U.S. Code Section 507 - Priorities. Retrieved from www.law.cornell.edu: https://www.law.cornell.edu/uscode/text/11/507
Cornell Law School. (n.d.). 18 U.S. Code Section 152 - Concealment of assets; false oaths and claims; bribery. Retrieved from www.law.cornell.edu: https://www.law.cornell.edu/uscode/text/18/152
lawschoolcasebriefs.net. (2002). Access Now, Inc. v. Southwest Airlines Co. Retrieved from www.lawschoolcasebriefs.net: http://www.lawschoolcasebriefs.net/2013/12/access-now-inc-v-southwest-airlines-co.html
State of California. (n.d.). California Corporations Code. Retrieved from www.leginfo.ca.gov: http://www.leginfo.ca.gov/.html/corp_table_of_contents.html
Sarbanes-Oxley Act of 2002
administration as also a majority of other western administration witnessed the collapse of corporate giants like Enron & Worldcom in the aftermath of noticeably fraudulent executive actions of these companies. This led to shareholders losing confidence and stringent laws was felt necessary in the form of new legislation to avoid repetition of Enron and Worldcom like incidents. The then President George W. Bush entrusted Senator Paul Sarbanes and Congressman Mike Oxley to come up with stringent new laws which would arrest or at least diminish probability of corporate scandals from repeating which came to be known as the Sarbanes-Oxley Act, of 1992. (Holt, 2008)
Key components of SOX Act covered under major Sections of the Act:
Sec 406 of the Act mandates every senior Financial Executive to be signatories of a Code of Ethics. Sec 409 mandates that companies make adequate disclosure regarding material financial alterations…
Coates, John C. (2007) "The Goals and Promise of the Sarbanes-Oxley Act" Journal of Economic Perspectives, vol. 21, no. 1, pp: 91-116.
Holt, Michael F. (2008) "The Sarbanes-Oxyley Act: Costs, Benefits and Business Impact"
Mehera, Madhav. (n. d.) "Sarbanes-Oxley Three Years On" Retrieved 9 May, 2012 from www.wcfcg.net/Sarbanes-Oxley%20Three%20Years%20On.pdf
KKR and the Art of the Steal Shareholder Theory and Buyback Programs
Kohlberg Kravis Roberts (KKR) is an investment firm that acquires influence in a company by purchasing a controlling amount of shares or else a significant amount of shares that enable it to put pressure on the company’s board. KKR has made a number of large-scale investments and leveraged buyouts (LBOs) over the years, including the LBO of RJR Nabisco by KKR in the 1990s. In that instance, the firm anticipated a higher return on investment (ROI) than it ended up receiving, and KKR went back on its promise to keep RJR Nabisco’s assets intact, liquidating them so as to be able to move on to other investment projects (Leveraged Buyouts, n.d.). By using its capital to influence the way a company is managed, KKR has been able to influence outcomes for various firms in which it heavily…
Brunsman, B. (2019). P&G CEO Taylor, activist investor Peltz laugh off proxy battle as stock soars. Retrieved from https://www.bizjournals.com/cincinnati/news/2019/09/20/p-g-ceo-taylor-activist-investor-peltz-laugh-off.html
Ewmi, P. F. (2005). Three models of Corporate Governance from developed capital markets. Lectures on Corporate Governance, December, 1-14.
Guinto, J. (2013). Who wrecked j.c. penney? D Magazine. Retrieved from http://www.dmagazine.com/publications/d-ceo/2013/november/who-wrecked-jc-penney
Huddleston, T. (2014). A look at how some of the top investors, hedge funds spent the second quarter. Retrieved from https://fortune.com/2014/08/14/hedge-funds-quarterly-disclosure/
Leveraged Buyouts. (n.d.). RJR Nabisco—Case Study.
Light, L. (2019). More than Half of All Stock Buybacks are Now Financed by Debt. Here’s Why That’s a Problem. Retrieved from https://fortune.com/2019/08/20/stock-buybacks-debt-financed/
Neuman, E. J. (2005). The Impact of The Enron Accounting Scandal On Impressions Of Managerial Control. Academy Of Management Annual Meeting Proceedings, S1-S6.
Seyhun, H. N. (2008). Insider trading and the effectiveness of Chinese Walls in securities firms. JL Econ. & Pol\\\\'y, 4, 369.
Industries that face stiff competition may favor and encourage an aggressive approach from employees that produces rapid results, rather than thoughtful, strategic action. When the gains cannot be realized in the desired time frame, there is a temptation to implement short cuts; resulting in fraud." (Price; Norris, 2009) That however is not a justification, although it prompts some regulations on the way industries operate.
The Law Catches Up
Today the criminal justice system responds to corporate crime much better than before. This is because earlier the scams were an unknown commodity in Australia and it was a U.S. phenomenon. Globalization changed that and now, according to the National Crime Prevention office in Australia the fraudster type of activities in firms were classified as fake billing and invoicing, investments and money chain scams, advance fee frauds, borrowing from the public as in ponzi type scams, the pyramid and money chain, insolvency…
Braithwaite, John. (1992) "Penalties for White-Collar Crime"
Retrieved 28 July, 2012 from http://www.anu.edu.au/fellows/jbraithwaite/_documents/Articles/Penalties_White_1992.pdf
Braithwaite, John. (1985) "White Collar Crime" Annual Review of Sociology vol. 11, no. 1, pp: 1-25.
"Definition of white collar crime" (from the scanned reference mailed by client -- book title not clear) Please insert book title here
U.S. v. O'Hagan case
In the U.S. v. O'Hagan case, the defendant, James Herman O'Hagan, was a partner in a major Minneapolis firm, and was involved in a corporate acquisition as a representative of the acquiring corporation (Corley, et al., 2002). D allegedly used insider information to purchase stock before the details of the acquisition were made public.
History discovered in 1988 that Grand Met PLC, one of his clients, planned to acquire Pillsbury Company (Corley, et al.). D purchased Pillsbury stock and options to acquire Pillsbury stock. D made four million dollars when the acquisition was announced.
D's actions caught the attention of the plaintiff, the Securities Exchange Commission (SEC) and the local U.S. attorney. D was convicted of 57 counts of securities fraud, mail fraud and money laundering, and received a 41-month prison term.
This decision was based mainly on the "misappropriation theory," which prohibits using any…
Corley, R.N., Reed, O.L., Shedd, P.P., Morehead, J.W., The Legal & Regulatory Environment of Business, (2002) Irwin/McGraw-Hill.
SOC 205 – Society Law and Government 1
The Enron (Kenneth Lay and Jeffrey Skilling) Trial
Summary of the Trial
The Enron Trial dates as one of high profile case of corporate fraud in the US. Enron was founded in 1985 by Kenneth Lee Lay and was reported as the largest seller of Natural gas in North America by 2000. The American energy company recorded a spectacular rise with revenues increasing to over $100 billion in 2000 from $9 billion in 1995 and an increase of Enron’s stock prices recording a high of US$90.75 per share. Enron Corporation was ranked consistently as America's Most Innovative Company" between 1996 and 2001 by Fortune Magazine. The end of 2001 saw an unprecedented collapse of Enron’s stock price from US$90.75 per share to less than a dollar following an announced of $1billon loss in the first quarter of 2001 and resulting to declaration…
Unethical/Criminal Conduct following the Equities Market Crash 2000 to 2002
This paper is a discussion of the identification and analysis of unethical and criminal conduct following the equities market crash from 2000 to 2002. The paper begins with an Introduction to the problem in Chapter One that also contains the hypothesis for the paper, the definition of terms section, and other valuable information. This information sets up the rest of the paper and gives rise to the belief that there was a great deal of unethical and criminal conduct in this country following this event.
A review of the literature follows in Chapter Two where information available about the issue will be presented and discussed. At least 60 sources will be analyzed in order to receive a complete picture of the issue. Chapter Three will then set up the methodology for analyzing this literature and determining what, if any, decision…
Arkes, R. 1991. Costs and Benefits of Judgment Errors." Implications for Debiasing, 110 PSYCHOL. BULL. 486, 486-87
Arlen, J. 1998. The Future of Behavioral Economic Analysis of Law, 51 VAND. L. REV. 1765, 1769
Arlen, J., Spitzer, M. & Talley, E. (2002). Endowment Effects Within Corporate Agency Relationships, 31 J. LEG. STUD. 1, 31
Bainbridge, SM. (2000)Mandatory Disclosure: A Behavioral Analysis, 68 U. CINN. L. REV. 1023, 1027
Sarbanes-Oxley Act of 2002 in reducing fraudulent financial reporting
Introduction to Fraudulent Financial eporting
Available research on financial statement fraud relies mostly on anecdotal evidence (for example, Wells, 2001, 2002, 2004a, and 2004b; ezaee, 2003). This evidence offers advice on how mechanisms related to the fraud triangle can be curtailed. It leads to theoretical sense to reduce factors which lead to more instances of fraud. However, deterrence and established deterrence methods in place within organizations have not been examined in proper detail. Neither have the secondary issues which can influence a person's chance of committing financial statement fraud. But there are multiple researches where deterrence models have been tested on other types of fraud e.g. tax fraud, fraudulent reports of environmental violations etc. Generally speaking, a clear consensus regarding the level of effectiveness of prevention mechanisms, such as those stated in GDT, is not present. There are two key parts…
Abbott, L.J., S. Parker, and G.F. Peters. 2004. Audit committee characteristics and restatements. Auditing: A Journal of Practice & Theory 23 (1): 69-88.
AICPA: 2002, Statement on Auditing Standards (SAS) No. 99: Consideration of Fraud in a Financial Statement Audit (American Institute of Certi-ed Public Accountants, Durham).
Albrecht, W. And Albrecht, C. (2004). Fraud examination and prevention. South- Western, Mason Ohio.
Albrecht, W.S. And M.B. Romney. 1986. Red flagging management fraud: A validation. Advances in Accounting 3: 323-333.
STAIN THEOY AND HOW IT EXPLAINS CIME AbstractStrain theory proposes that pressure from social factors like a lack of income or education drives a person to commit a crime. The focus of most strain theories is disadvantaged groups where they struggle to attain common aspirations like realizing the American dream. The inability of these individuals to achieve common goals is considered the driving factor behind the crime. Some stressors increase the likelihood of crime. According to strain theory, crime will only occur when there are not enough legitimate opportunities for individuals to achieve normal success in society. A strain occurs when the goals and the means of achieving those goals are not in line leading the individual to crime. The American dream encourages people to work hard to achieve financial success. However, the means used by the individuals to achieve success are rarely in focus. The result is that people…
ReferencesAgnew, R. (2017). Building on the foundation of general strain theory: Specifying the types of strain most likely to lead to crime and delinquency. Recent Developments in Criminological Theory, 311-354. Agnew, R., & Brezina, T. (2019). General strain theory Handbook on crime and deviance (pp. 145-160): Springer.Lee, Y., & Kim, J. (2018). Examining the gendered effect of experienced and vicarious victimization: A general strain theory perspective. American Journal of Criminal Justice, 43(2), 181-196. Lianos, H., & McGrath, A. (2018). Can the general theory of crime and general strain theory explain cyberbullying perpetration? Crime & Delinquency, 64(5), 674-700. Pedalono, J., & Frailing, K. (2018). General Strain Theory and Prescription Drug Misuse among Honors Students. Journal of the National Collegiate Honors Council, 19(1), 85-103. Robinson, M., & Rogers, J. (2018). Applying Contextual Anomie and Strain Theory to Recent Acts of Corporate Deviance. Journal of Theoretical & Philosophical Criminology, 10(2). Teijn-Alcal, M., & Birkbeck, C. (2019). Victimization, crime propensity, and deviance: A multinational test of general strain theory. Journal of contemporary criminal justice, 35(4), 410-430. Thaxton, S., & Agnew, R. (2018). When criminal coping is likely: An examination of conditioning effects in general strain theory. Journal of quantitative criminology, 34(4), 887-920.
These blackouts were orchestrated as away to drive up the prices of energy. Tapes of conversations were released to the public and the employee's are on tape mocking the people of California after they were at the root cause of the problem for consumers (Johnston, 2004).
Buchholtz, a. & Carroll, a, (2008) Business and Society, 7th ed. Cengage Learning
Harvard Law eview, (2003), the good, the bad, and their corporate codes of ethics:
Enron, Sarbanes-Oxley and the problems with legislating morality, the Harvard
Law eview Association, 116(7) 2123-2141
Johnston, L. (2004, June 2). Enron tapes anger lawmakers - CBS Evening News
etrieved November 15, 2010, from http://www.cbsnews.com/stories/2004/06/02/eveningnews/main620795.shtml
Sims, ., & Brinkmann (2003) Enron ethics (or culture matters more than codes), Journal of business ethics 45(3)
Thomas, W., (2002) the rise and fall of Enron: when a company looks to good to be true, it usually is. New York: andom…
Barret, M., (2004), Enron and Andersen-what went wrong and why similar audit failures can happen again, Foundation press
Barrionuevo, a. (2006, May 25). Enron chiefs guilty of fraud and conspiracy, New
York Times. Retrieved November 15, 2010, from http://www.nytimes.com/2006/05/25/business/25cnd-enron.html
Hasnas, J. (2004/2005), the significant meaninglessness of Arthur Andersen LLP v.
ise and Fall of Enron
Enron grew to become one of United State's largest firms within a relatively short period of time. Having a global reach and employing approximately 25,000 employees at one time, the company was largely considered successful. However, this was not the case. In this text, I concern myself with the rise and fall of Enron. In so doing, I will explain amongst other things the history of Enron, the business it was involved in and the unethical behavior that led to its fall. Further, I will also take into consideration people implicated in the scandal and the legal actions that were taken against them.
Enron: An Overview
In basic terms, the 1985 merger between InterNorth and Huston Natural Gas informed the formation of Enron as we know it (Fernando, 2009). The merger which took place in Omaha, Nebraska was headed by Kenneth Lay who at the…
Fernando, A.C. (2009). Corporate Governance: Principles, Policies and Practices. Delhi: Pearson Education.
Sims, R.R. (2003). Ethics and Corporate Social Responsibility: Why Giants Fall. Westport, CT: Greenwood Publishing.
("Gates, Bill," 2007) the company is in fact considered a regional financial backbone, in the Seattle-edmond area where its world headquarters are. The whole region and to some extent the whole world takes notice when Microsoft announces financial strategies and changes or when stocks rise or fall.
The software maker said it would buy back $20 billion through a tender offer set to be completed on Aug. 17. The company said that its board of directors has also authorized the company to buy back up to $20 billion worth of stock through June 2011. The company said it has completed the $30 billion stock buyback announced two years ago. "With our share repurchase programs announcement today, we reaffirm our confidence and optimism in the long-term future of the company and continue to execute on our strategy of returning capital to shareholders," Microsoft Chief Financial Officer Chris Liddell said in a…
One can not begin to trace the various lines and connections of the myriad of relationships, but the chart does fulfill the purpose of showing how much of a web this situation involved.
In the wake of the Enron scandal many questions have arisen centering on the strength of the U.S. Economy. Investors have questioned the accounting practices of many other firms; there has been significant fallout on the financial market; and considerable negative consequences in the market, the economy, the investment paradigm, and public confidence. All this contributed to a decline in the strength of the American economy, and certainly also had global repercussions.
The increased skepticism about accounting practices has forced many multi-national corporations all over the world to defend their financial statements. This loss of investor confidence has lead to significant changes in accounting standards and auditing practices. Corporate executives are now being required to be…
Bryce, Robert, (2002), Pipe Dreams: Greed, Ego, and the Death of Enron,
Public Affair Press.
Conroy, S. And T. Emerson. (2006). "Changing Ethical Attitudes: The Case of the Enron and ImClone Scandals." Social Science Quarterly.
Market Efficient espect Set Information Impossible Makes Abnormal Profits
In his work, Fama argued that given the massive use of resources by the brokerage firm to conduct studies on trends in the industry, the effects of changes in interest rates on corporate balance sheets and expectations of managers and/or political analysts of the companies should be able to systematically beat a generic portfolio with the same risk characteristics.
Since, according to Fama, professional in every situation, the analyst has a fifty percent chance of beating the market; although its specific capabilities did not exist he would beat a lot of the market. The analyst did "help" the market to be efficient if all the investors, in fact, would hold portfolios composed of stock indices, would open up significant opportunities for professional traders to take advantage of the situation. But the movement of traders to that "new market" would…
Arrow, K.J., 1959. 'Toward a theory of price adjustment', in M. Abramovitz (ed.), The Allocation of Economic Resources, and Stanford: Stanford University Press, pp. 41 -- 51.
Aumann, R.J., 1964. "Markets with a Continuum of Traders," Econometrica, Vol. 32, No. 1/2, Jan. - Apr., pp. 39 -- 50.
Clifton, J.A., 1977. "Competition and the evolution of the capitalist mode of production," Cambridge Journal of Economics, vol. 1, no. 2, pp. 137 -- 151.
Frank, R., 2008. Microeconomics and Behavior 7th ed. (McGraw-Hill) ISBN 978-007-126349-8.
Perkins - who had retired at the age of 70 but was coming back on the board - had by this time muscled his way into a powerful position within the HP community; he and his powerful board ally, George Keyworth, held special "technology committee" meetings with key HP people the day before each board meeting. Stewart writes that Perkins' little group actually became a "board within a board," and Perkins' power grew. His disenchantment with Fiorina also grew. Fiorina was apparently losing the confidence of the board, and Perkins was the central figure in that movement away from Fiorina. Prior to the retreat, which was alluded to earlier in this paper, there was a board meeting scheduled, and before that meeting, Keyworth and Dunn approached Fiorina and urged her to "express concerns about Hewlett-Packard's performance, stock price, unfavorable press, and need to reorganize," Stewart continues.
Although Fiorina showed resistance…
Bloomberg. "HP chief opposes board vote plan." Retrieved 12 March 2007 from Australian it
Broache, Anne. "HP execs: Spy scandal was ethical wake-up call." CNET News.com. Retrieved 13 March 2007 at http://www.news.com .
Fried, Ina. "HP denies pretexting former employee." CNET News.com (2007) Retrieved 13 March 2007 at
Enron Virtue Ethics
The author of this report is to pick three virtues from a list and describe how they were or were not applied in a certain instances. The virtues that can be picked from are justice, fairness, integrity, courage, honor and truthfulness. For the three virtues that are chosen, there will be a definition of each one. After defining each virtue, there will be an application to the Enron case. Indeed, there was not a lot of virtue when it came to the Enron case. It started at the top with Lay, Skilling and Fastow and there were a lot of other people that were actively involved in the fraud and depravity that was under way. At the same time, the ethical malfeasance on the part of those three men and the others led to a lot of people being victimized before and after it all blew up…
BARRIONUEVO, A. (2006). Fastow Leaves Stand Insisting Lay and Skilling Knew - New York Times. Nytimes.com. Retrieved 26 October 2015, from http://www.nytimes.com/2006/03/14/business/businessspecial3/14enron.html
Business Insider. (2011). 10 YEARS LATER: What Happened To The Former Employees Of Enron? Business Insider. Retrieved 26 October 2015, from http://www.businessinsider.com/10-years-later-what-happened-to-the-former-employees-of-enron-2011-12
CNN. (2015). Enron Fast Facts - CNN.com. CNN. Retrieved 26 October 2015, from http://www.cnn.com/2013/07/02/us/enron-fast-facts/
Erb, M. (2011). Four Ways to Foster Fairness in the Workplace. Entrepreneur. Retrieved 26 October 2015, from http://www.entrepreneur.com/article/219505