Ethical behaviour in business/companies

- ethical problems: fair treatment for employees, corporate espionage, fair prac
tice, etc.
- definition of ethics/business ethics;
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#business wall street insider scandal example#
*****2001: Martha Stewart and ImClone*****
When: December 27, 2001
The facts: Martha sells $228,000 worth of stock in the biotechnology company ImC
lone. The day before Sam Waksal, a friend of Stewart's and founder of ImClone, s
ells stock and encourages family members to sell, after learning that ImClone's
application for its top cancer drug prospect would be rejected. On June 12, 2002
, Waksal is arrested on charges of insider trading and perjury. He pleads guilty
. The Justice Department, SEC, and Congress investigate Stewart, who is under su
spicion for insider trading. Did Martha know about the rejection before she sold
? Martha and broker Peter Bacanovic claim she did not. Doug Faneuil, Bacanovic's
assistant, claims they did.
Who knew: "When the Waksal sell orders came in, [Martha's broker Peter] Bacanovi
c either called Stewart's office himself or had [his assistant] Faneuil call he
himself never spoke to her until after her trade was complete, say those with a
knowledge of the matter and warned that the stock would soon sink. When Stewart
called in, she spoke with Faneuil. In the excitement of the moment, Faneuil coul
d very well have said to Stewart that the Waksals were selling an unethical reve
lation, perhaps, but not a classic case of insider dealing. He also could have r
eported that fact in the context of following orders: Peter thinks you should se
ll because the Waksals are disgorging." from the July 08, 2002 issue of New York
Magazine
#EXPLANATION: In 2001, Martha Stewart sold $228,000 worth of ImClone biotech sto
ck a day after her friend and cofounder of ImClone sold his shares and his famil
y doing the same, after learning that ImClone's application for its top cancer d
rug prospect would be rejected - based on insider information. M. Stewart was fo
und guilty of conspiracy, making false statements and a few other charges, being
sentenced to 5 months of prison.
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###Enron situation:
- Ken Lay & Jeff Skilling, guilty of hiding the financial situation of the compa
ny;
- Enron shareholders filed a $40 billion lawsuit after the company's stock price
, which achieved a high of US$90.75 per share in mid-2000, plummeted to less tha
n $1 by the end of November 2001.
- The U.S. Securities and Exchange Commission (SEC) began an investigation, and
rival Houston competitor Dynegy offered to purchase the company at a very low pr
ice.
- The deal failed, and on December 2, 2001, Enron filed for bankruptcy under Cha
pter 11 of the United States Bankruptcy Code.
- Enron's $63.4 billion in assets made it the largest corporate bankruptcy in U.
S. history until WorldCom's bankruptcy the next year.
- As a consequence of the scandal, new regulations and legislation were enacted
to expand the accuracy of financial reporting for public companies, such as incr
eased penalties for destroying, altering, or fabricating records in federal inve
stigations or for attempting to defraud shareholders.
HOMEWORK: saptamana viitoare prezentarea unui scandal (business) fie pe tema pol
itica, mediul inconjurator, economic, etc.
*Ethical Issues*
*bullying*
*conflicts of interest*
#EXAMPLE: J.P. Morgan Questioned for Conflicts of Interest (July 2014)
- Firm Has Responded by Changing Its Disclosures
- Regulators questioned J.P. Morgan Chase executives about whether the firm "hel
ps" private-banking clients to its own investment products, and funds, but not t
o third parties.
- In reply, JPMC spelled out more clearly to private-banking clients the differe
nces between its own products and outside offerings, and how much of clients' as
sets were invested in each.
*bribes*
*fairness and honesty* - core of business ethics
*false advertising*
EXAMPLE: Hyundai and KIA vehicles' horsepower
Hundreds of car owners were extremely disappointed to find out that Hyundai and
Kia overstated the horsepower in some of their vehicles. In 2001, the Korean Min
istry of Construction and Transportation uncovered the misrepresentation, which
for some models was as much as 9.6 percent more horsepower than the cars actuall
y had. A class action lawsuit in southern California claimed the companies were
able to sell more cars and charge more per vehicle because of the false claims.
In the end, the auto powerhouses had to pay customers -- the settlement was esti
mated to be between $75 million and $125 million.
*business relationships*
*code of ethics*
*pressures influencing ethical decision making*