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Business Ethics: Insider Trading

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Imagine for a moment that you are an accountant for a large software company located in the Silicon Valley. You and your colleagues have been working diligently to prepare the annual report for the stockholder's meeting. You have concluded that profits will be down 30% from your projections and most likely management will be faced with a major layoff and downsizing. The outlook for the next year is not good. Upon returning home you listen to your phone messages. Your parents, who are retired and living on a limited fixed income, have left a message telling you that they have just invested a substantial portion of their assets in your company hoping to increase their monthly income from stock dividends. You know that after the annual meeting the stock will plummet. The dilemma you face is obvious.

b. What is the ethical thing to do? Will you conceal or disclose the information you are privy too?

c. Suggest 2-3 creative solutions.

Thank you!

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Interesting ethical dilemma! Let's take a closer look.

b. What is the ethical thing to do? Will you conceal or disclose the information you are privy too?

This is a similar case as the Martha Stewart case that was informed by her broker to sell her shares and she did. They both got charged. So, legally, to disclose this information would be considered illegal, by the definition of inside trading (see ...

Solution Summary

Given the ethical dilemma in the case scenario, this solution discuses insider trading and which decision would be the most ethical e.g. conceal or disclose the information you are privy too. Creative solutions are then explored.

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Business Ethics Problem: Insider Trading

Please help answer the following question. Provide at least 100 words in the solution.

Martha Mart owned stock in Napkin Inc., a company that she is also a director of. During a board meeting, she was informed that a new product that was to be launched by Napkin was not approved by the FDA. Knowing that once this information became public knowledge the stock would tank, she instructed her stockbroker to sell all her Napkin shares. At the time of her sale, Napkin was trading at $60. After the information about the denial of approval for the new product was reported by CNN, the share price fell to $1.50. Was Martha's action legal? Was it ethical? Why or why not? Who did her actions affect and how?

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