Assignment Title

The provided content discusses the issue of insider trading, its implications, and the need for more guidance and fuller disclosure to prevent it. The articles and studies presented highlight the ethical dilemmas involved in insider trading and the importance of adhering to ethical standards in business decision-making.

Comparative Business Ethics and Social Responsibility
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Contents
Comparative Business Ethics and Social Responsibility.......................................................................................1
Introduction...........................................................................................................................................................3
Overview of the insider trading and unethical activities related to it.....................................................................3
1.) Are information gathering techniques like Rajaratnam's common on Wall Street? If so, what could
regulators, investors, and executives do to reduce the practice?............................................................................5
3.) Do you think the secret investigation and conviction of Rajaratnam and other people in the Galleon network
will deter other fund managers and investors from sharing non-public information?............................................8
Conclusion............................................................................................................................................................9
Bibliography.......................................................................................................................................................10
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Introduction
The business process of the 21st century has been considered very complex. Irrespective of the
sizes, the business organisations face ethical issues. The need of the ethics and code of conduct has
been a vital need for all the organisations. The major studies highlight that the complex ethical
issues are witnessed by the business companies with relation to the decision-making, compliance,
and governance and mostly in the diverse cultures.
The ethical dilemmas have been the major concern of the companies. The course of action based on
the ethical principles is required to be framed by the organisation. The most important work of the
organisation is to find out the ethical issues related to the organisation, finding the facts, assessing
the facts and to take an alternative course of action. The activities will contribute to the proper
decision-making activities of the management and it will focus on the reliability of it. The
appropriate ethical decision-making process will take care of the workers of the company & will
ensure that code of conduct is properly maintained in the organisation (Behnke, 2007). The focus of
the ethical activities is on the protection of the values and the belief of the employee in the
organisation.
The assignment makes an attempt to study the unethical behaviour of Rajaratnam & other
conspirators who have been involved in the wrong practices. The focus is to study the issues related
to the unethical behaviour of Insider Trading CEO. The allegation against Rajaratnam was that he
was engaged in the conspiracy with an employee of Intel Corporation gathering the insider
information about the leading and global organisations that follow the ethical code of conduct. The
organisations that are affected by the conspiracy were Hilton Hotel Group, Google Inc., IBM etc.
The immoral conducts of the conspiracy brought huge loss to the credential (Bhala, et al., 2016).
The unethical activities were related to the scandals that breached the trust of the consumers, the
trust of the employees & the shareholders of the company. The unethical activities brought a very
unpredictable culture in the organisation.
Overview of the insider trading and unethical activities related to it
The traders of Rajaratnam were allowed to remain in charge of the capitals in large quantity and
this was contrary to the standards of business. The actual practice is that managers of portfolio &
analysts remain in charge of the money & the traders’ responsibility is to execute the orders. The
information gathering can be expected by a company but making the formation public is not legal.
This can uncover a trader to the accusation of inside trader. The allegation against Rajaratnam is
that he expected his traders to make a demand for the sensitive information from his client.
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(Boicova & Wynants, 2016) The expose of the insider information was related to the biggest
stocks, selling, future acquisitions and the products.
The illegal activities were reported to the SEC by a junior trader in the year 1998 and Galleon
ignored the report. The stock was directed by the company if it had taken it seriously and the
company could have earned millions of dollars as the additional profits.
The incident shows that the company does not find out the individual’s morality and the decisions
taken by the company was based on the ethical standards of the company and the decisions were
guided by them. The moral reasoning was lacked by Rajaratnam and his behaviour was completely
unethical. The issue related to the financial disclosures of the institutional investors became a major
concern (Ferrell, et al., 2016). The need of internal controls was there to be set up with the SEC so
that it can regulate the transparency & the disclosure and in the future, the hedge funds will be
operated successfully.
The release of the confidential information without the consent of the involved parties is unethical.
The confidentiality in the business refers to the secrets & techniques that are kept under custody
and this fosters self-beliefs among the partners of the organisation. The information has great
values for the organisation. The release of the information will bring harm to the public and the
people those who are involved. The monetary issue is also involved and many people may lose and
much time is wasted in the judicial process (Fowler, 2015). The agreement of keeping the personal
information confidential is broken and it becomes illegal to share the information to the public. The
people who are involved in doing the unethical work are prosecuted & punished and asked to pay
fines. It is illegal to share the information of the customers that will lead to the companies to take
the decision that is beyond the business ethics. This brings huge loss to the company.
Raj Rajaratnam was a successful person and he had tremendous ability to lead his company to
motivate the shareholders. The Galleon Group was very successful under his dynamism. The
analytical background of Rajaratnam brought huge success to his company. Unfortunately,
Rajaratnam was involved in many illegal acts related to the inside trading (Jennings, 2016). The
popularity of Rajaratnam and his large & strong network and moreover his wide contacts with the
officials of the financial institutions provided him leverage to get confidential data of the
companies. The most affected companies that suffered in the financial scandal are Intel, Google,
and IBM & McKinsey. The unethical activities of Rajaratnam brought him a raise of $ 64 million
and he was charged with fourteen counts of security fraud & conspiracy. Rajaratnam was found
guilty in 2011 in the month of May (sevenpillarsinstitute.org, 2017).
The unethical activity of Inside Trading is that it violated the shareholders’ rights, those who owned
the information and this information contributes to the success of the company. The unjust
activities are unfair to the persons those who are involved in the stock trading industries. The
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insider traders got the advantage of gaining information that is actually not meant to make public.
The insider trading brought disadvantages to the investors and the investors left the market
(Jennings, 2015). The downsizes of the market due to the insider traders brought harmful effects on
the business organisations.
The incident shows that it is an illegal act of doing inside trading. The inside training affects
adversely to all the other equal business organisations in the markets. The party that fell in this
unethical situation should identify the violation of the business standards and norms of the trading.
The trading should be stopped in the very beginning of the identification of the inside training. The
authority is required to be communicated and they need to remain aware of the financial impact of
inside trading in the future (Kappeler & Potter, 2017). The people should not be given
opportunities to pass the information. The companies should avoid inside trading and do not allow
people to involve in the unethical practices.
Rajaratnam was involved in developing a very hostile research on networking when he was
working in an investment banking of Needham & Co in the year 1985. He worked as an analyst in
the investment bank. The research aptitude brought Rajaratnam an ability to predict the financial
situation of the company (Kaye, 2009). Rajaratnam owned a company named Galleon. He could
obtain the inside information on the financial transactions of the other business organisations and
his collection of the information of the companies was considered as the illegal trading. This
consists of securities & wire fraud and the amount of income is $64 million. The amount was
collected by Rajaratnam as tips from the inside training practices. These unethical activities of
Rajaratnam took him to the court of law and the investigation convicted him. In this illegal
activities, 26 people were found in guilty for the act of fraud & conspiracy.
1.) Are information gathering techniques like Rajaratnam's common on Wall
Street? If so, what could regulators, investors, and executives do to reduce the
practice?
The information gathering is an important activity for the business organisation. The companies use
various techniques to gather information of the investors. Rajaratnam used different techniques to
gather information. These techniques are generally based on phone calls, organising meeting with
the investors & through the texts (tlfirst.com, 2017). These techniques are also used and it is a
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common practice on Wall Street. These techniques are considered risky as the leakage of
information is possible in this method. The information can be easily tracked and it can be misused
by the persons. Thus the illegal practitioners remain involved in the illegal activities (Lawrence &
Wells, 2007). The responsibility of the executives is to give more attention to the communication
of the business and should avoid involving the friends and family in the process of the business
activities.
The regulators require seeing that the persons involved in the process of the collection of the
information of the investors should not get involved in the illegal practices. The regulators
should see that the companies are following the code of conduct and there are no unethical
practices (Mann & Roberts, 2016). The regulators should see that the companies are employing
people with high profile and they are skilled and experienced in the activities and they have no
unethical record of activities.
The investors also play an important role to avoid corruption related to the gathering of the
information and the inside trading. The investor should raise their concerns when they come to
know the inside trading practice and when they face the problems related to the inside trading
(Lawrence & Wells, 2007). The investors should withdraw themselves from the illegal activities
and should report the competent authorities for the immediate action so that the illegal trading
will be stopped.
Executives should not violate the code of conduct and involvement in the illegal practice. The
executive gathers information and the information is only required to be used for the analysis
and for the growth of the company (usnews.com, 2011). The unethical activities should be
avoided by the executive as it will have the impact on the growth of the business organisation
and the investors will withdraw from their investments when they find that officials are engaged
in the unethical activities (Melroe, 2017).
The involvement of Rajaratnam in conducting a wrong approach of market research for his
company is an illegal practice. The man exploited his experience working at Needham & Co.
The experience of the benefits of the inside trading encouraged him to do wrong activities
(venable.com, 2011). The information that should not be disclosed was used by him for his
personal benefits. The information collected through different sources was utilized for financial
gain (Ross, 2012). Thus Rajaratnam used the wrong method to gain financial benefits for the
company.
These unethical activities of Rajaratnam took him to the court of law and the investigation
convicted him. In this illegal activities, 26 people were found in guilty for the act of fraud &
conspiracy.
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2.) What are the implications of sharing confidential material information? Is
it something that would affect your decision about how to trade a stock if you
knew about it?
The sharing of the confidential information of the investors is considered as unethical and it is
treated as a kind of crime. The sharing of the information is risky. The implication is that it will
put the person in trouble. The regulators will also face difficulty in monitoring the illegal
practices. The information will change the decision of the individual regarding the trade of a
stock (Steinberg, 2009). The legal procedures do not allow the companies to involve in the
illegal practices. The legal procedures go against the inside trading and give punishment to the
people those who are involved in this process.
Rajaratnam committed a blunder by taking the inside information of the companies. He acquired
a huge amount of money by using the insider tips of the companies. This act was unethical.
Rajaratnam needed to maintain an ethical norm and he could plan to employ experienced
analysts those could help him examining the financial states of the companies. This act cannot be
called as unethical and illegal (Steinberg, 2009). The income of the company could have been
more and Rajaratnam could have earned more in a very professional manner. The ethics of the
business could have been maintained properly. The previous experience of Rajaratnam working
in Needham & Co would have helped him to utilise in his financial development of the
company. But the use of the information of Needham & Co by Rajaratnam is also an illegal act.
The access to the information by the insiders cannot be given to the public. The possession of the
information of the investor is an advantage for the companies but this advantage cannot be used
as a source of information. This act would be considered as the unlawful privilege and the access
of the information by the outsiders cannot be accepted by law (prezi.com, 2016).
The unethical activities cannot bring success to the individual and the organisation in the long
run. The advantage of the inside trading can bring benefits and increase the efficiency of the
market in a very short period of time. But the efficiency of the company is decreased in the long
term due to the effects of the inside trading (Verschoor, 2011). The unfair activities of the
people offend the sensibilities of the human being. The people those who are involved in these
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illegal works should be punished as the unfair activities bring ruin to the companies. The inside
trading will not motivate the investors to invest in the market. These investors will stay away
and will not invest due to more inside trading. The investors will remain away from the market
(mays.tamu.edu, 2011). There will be more damage to the trading when the investors will remain
away from the market or they will only focus on buying the bonds of the government. The
efficiency of the market will be hampered. Thus we find that the results of the inside trading are
very negative for the investors and the markets as well (blogs.cfainstitute.org, 2012). Thus it is
very important to make an analysis of the unfair activities of Rajaratnam in order to understand
the negative results of inside trading.
3.) Do you think the secret investigation and conviction of Rajaratnam and other
people in the Galleon network will deter other fund managers and investors from
sharing non-public information?
The secret investigation & the conviction of Rajaratnam will not affect the other fund managers &
also to the investors. This is an example of the threat to all the policymakers and regulators to
remain alert and not to allow the people to involve in the illegal practices of trading. The fund
managers & investors may continue sharing the non-profit information (i-sight.com, 2011).
Rajaratnam and Galleon Group will be an example to everybody. We can take the example of
Rajaratnam. Rajaratnam could earn around $ 64 million due to the inside trading. The huge amount
of personal loss and the credibility of the company were so huge that the benefits of the company
went in vain. Rajaratnam could understand the risks & benefits of the illegal trading. The risk for
Rajaratnam was more than the earnings and the benefits he got through inside trading. In some
cases, the companies use the inside trading practice for the advantage in the competitive market.
The companies believe that sharing of the non-public information will give them a type of edge on
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the competitors in the market. But this practice cannot help the company always. It is required to
have the everyday analysis of the market and the stock market and the investors attitude to the
investment. The companies should focus more on the analyst. The skilled and experienced people
can help the organisation to perform well in the market instead of involving in the inside trading.
The illegal practice will ruin the reputation of the company and the personnel those who are
involved in the illegal practices (i-sight.com, 2011).
The other managers and the investors will further make no wrong in their activities and they will be
more concerned with the activities conducted as per the law. The credibility of the company cannot
be kept under threat for the inside trading. The investor will also not be interested to involve in the
wrong practices and they will be more serious to the fair trading.
Conclusion
It is evident that inside trading is an illegal practice. It has the negative impact on the company and
its employees. The investors get affected due to the inside trading. The company will be closed due
to the illegal and unethical practice for illegal trading. The executives involved in the inside trading
should know that it is illegal and this will harm the reputation of the company. The illegal activities
of insider trading should be avoided and the common practice required to be avoided. The
obligation of the inside man or the seller is to disclose only certain information about the trading
that the customers are buying. The discloser of the information is only allowed if it does not hold
any risk and there should not be any harm to the customers. The inside man should not involve in
this illegal act of disclosing non-public information gets some financial benefits. But this practice
should be avoided and the regulators should have vigilant eyes in the process of trading activities.
The case study shows that Rajaratnam has brought huge loss to the company for the illegal practice.
The involvement of his company in the inside trading has got no benefits in the long term.
Rajaratnam’s conviction states that unethical practice harms the company and it cannot protect the
interest of the customers or the company. Thus it is evident that Rajaratnam has done a blunder in
getting involved in the inside trading. He has lost the reputation of self and the company as well.
The rich experience he had earned vanished with his illegal practices along with his fraud team
members.
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