Analyzing Ethical Issues in Corporate Governance: TESCO

This report delves into the ethical issues within corporate governance, focusing on a case study of TESCO. It begins with an introduction defining corporate governance and its significance in the business environment, highlighting the importance of ethical practices. The report then explores the background of TESCO, a major multinational retailer, and identifies insider trading as a primary ethical concern. The objectives include analyzing insider trading, its impact on TESCO's growth, and the role of corporate governance in addressing it. The literature review covers corporate governance concepts, insider trading definitions, and its drawbacks. It examines the misappropriation theory, the role of corporate governance in preventing insider trading, and the relationship between insider trading and business growth. The report emphasizes the importance of transparency, accountability, and ethical behavior in corporate strategy, concluding with recommendations to mitigate risks associated with insider trading and promote sustainable business practices.

Corporate Strategy and
Governance

Table of Contents
Title..................................................................................................................................................1
Introduction......................................................................................................................................1
Literature Review.............................................................................................................................5
Research Methodology....................................................................................................................8
METHODOLOGY..........................................................................................................................1
CRITICAL REVIEW ......................................................................................................................8
RECOMMENDATION AND ACTION PLAN ...........................................................................18
CONCLUSION..............................................................................................................................19
REFERENCES..............................................................................................................................21

Title
“To analyse ethical issues in corporate governance and strategy. A case study on
TESCO”
Introduction
Overview
In the words of Abor, Corporate governance is defined as the system by which companies
are directed and controlled. It is also considered as the way in which corporations are handled by
the boards and officers. It helps in defining the relation between the company and its
environment, the social and legal systems in which it is working. This research project is based
on analysis of ethical issues that arise in corporate governance of the company (Amran and et.
al., 2014). As in the case of companies they have the directors that are working for development
of the policies that will help them to achieve the organisational goals. It has now become a buzz
in the global business environment to check over the ethics which are followed or not by the
organisation. Business of all sizes are nowadays employing the concept of corporate governance
so that they are able to enhance their work culture and an ethical working will be ensure within
firm. If the company is following all the legal requirements and corporate ethics than it will be
easy for them to work efficiently and smoothly. Management should work in a way that it would
create an ethical working condition for both the employees at the lower level as well as
employees at the higher level.
Background
Organisations in 21st century are facing exciting and dynamic challenges. For the
company to be globally successful they have to make strategic policies so that they can become
strategically competitive. In the present scenario, it is very important for the business
organisations to build and create a policy to sustain in the market and to gain the competitive
advantage in the global business (Bender, 2013). Management while involved in operating
activities of the company, they should also create a level of ethics that should be bind all the
employees to follow rules and regulations and work in ethical manner.
TESCO is British Multinational Groceries and retail store. This is third largest
organisation in world in terms of their revenues. This organisation is established in 1919 and
have head quarter in London, England UK. This association served in different parts of world
1

such as Czech Republic, Malaysia, Thailand, Ireland, etc. The aim of the corporate strategic
governance is to enhance the ethical structure so that the company is able to operate its business
smoothly.
Review of problem faced
Insider trading has become one of the main ethical issue for the management. Trading on
the basis of insider information is one of the main problem as it impacts the main duty of
management to protect the interest of shareholders. Various strategies should be formed by the
companies to protect that unethical issue of insider trading and restrict it. For analysing the
effectiveness of ethical issues in corporate governance, TESCO has been taken into
consideration which is a UK based company that operates its business in retail industry. It was
founded in the year 1919.
Significance
In this research module the learner of the research would be able to identify the level of
understanding that will help them to know the ethical issues that arise in corporate governance
and impact of it if not followed by employees. Insider trading is selling and buying of stocks,
bonds and securities from a company with the implication of non public confidential information
which would impact on its price (Castañer and Kavadis, 2013). It is unethical action done by the
insider because its is unfair for stockholders and investors as a whole. As ethic in corporate
governance is one the main issue for every organisation in today's world and without this the
organisation cannot survive. It is the system of rules and practices that helps the organisation to
direct the operations of the employees and control them.
Aims
To analyse ethical issue of Insider trading that arise in corporate governance and
various ways to deal with this issue – A case study on TESCO.
Objectives
The objectives of this research proposal are:
 To study the concept of insider trading and its drawbacks.
 To determine the impact of insider trading on growth and sustainability of TESCO.
 To assess how corporate governance helps in dealing with insider trading. To determine the relationship between the issue of insider trading and growth of TESCO
Questions
2

The question that the reader of the researcher would be able to answer are:
 What is insider trading and what are its drawbacks?
 How does insider trading impact on the growth and sustainability of TESCO?
 How corporate governance helps in dealing with insider trading?
 What is the relationship between insider trading and growth of TESCO?
Literature Review
Corporate governance is a set of customs, policies, laws and processes affecting the way
a corporation is directed and controlled (Donaldson, 2012.). It is a system of rules and practices
by which a company directs and control the employees and different department of the
organisation. It involves making the balance between the interest of companies shareholders and
its stakeholders. It provides the company framework to attain the overall objectives of the
organisation. It encourages the trustworthy model in the ethical environment of the organisation.
In this context there are some factors that unfavourable in identifying sources of a relation
between corporate governance and insider trading. However some challenges in analysing the
effects of corporate governance on insider trading enables organisation to short out potential
insider transactions from trades which were not based on personal information. But in practical
terms corporate governance it is hard to find potential insider transactions and trading in
corporate stock by corporate insiders is unavoidable, particularly at organisation that employ
equity as major source.
Insider trading and its drawbacks:
As per the point of view of Filatotchev and Nakajima, (2014), Insider trading is the word
which can be defined in various ways and has illegal implications. It is defined as the buying and
selling of a security by someone who has access to material non public information about the
contracts that are to be made in future which would impact the performance of the company as a
whole. This action of the insider is considered to be ethically immoral since they affects other
unfairly. Its drawback is, by having the information which other people don't have will impact
negatively on company and its brand loyalty as well. It is analysed that ownership structure is a
significant determinant in firms objectives, increasing the wealth of shareholders and
opportunistic behaviour. The board of directors is the first and foremost body responsible for
governing the affairs of a corporation as directors has a running duty to look after the interest of
3

the shareholders. The culture of all the companies should consist the reflection of the objectives
which should be a part of the mission statement.
Although some theories have argued that company's existing control structure including
corporate governance, is not effect for preventing managers from enjoying self- interest at a cost
to stockholders. A single case of insider trading causes negative and dangerous situations for
concerned activities. In insider trading process at a certain point when the prices reach at
satisfactory level then insiders along with his small group of people sells the stocks and make
profits, such act resulting in huge losses for the public investors and company. Illegal insider
trading is considered unfavourable for both investors and market. Illegal insider trading shows
that there is no positive factors and there is no positive demand and supply of stocks, all other
factors have negative effects on a healthy capital market.
Impact of insider trading on growth and sustainability:
According to the Formentini and Taticchi, (2016) insider trading is considered as the
main issue and the person who have information about the decisions that are made for the future
sustainability of the business can impact its growth in destructive way.
Misappropriation theory of Insider trading:
According to the Goel et. al., (2012) misappropriation theory mainly concerned with
factors that arise due to fraud done by using insider information or vital sensitive information in
trading to gain undue advantages. In countries all across the world, person who is guilty
according to the misappropriation theory will likely be convicted of insider trading.
Misappropriation theory is different from the classical theory of insider trading as In case of
classical theory, a person who is not involved in insider trading but knowledge of material non-
public information and used this information in trading, is not deemed to be guilty of insider
trading. The classical theory emphasises on the person accused of insider trading be an actual
insider, such as an officer or employee of the company whose securities is traded. However in
misappropriation theory, the outsider or insider who is directly or indirectly engaged in activities
of insider trading or providing access to non public price sensitive information is deemed to be
guilty of offence under insider trading. Misappropriation theory is proposed with intends to
safeguard securities markets from outsiders who have access to non public and price sensitive
information but who do not owe a financial duty to the organisation or stakeholders. This theory
states that individual who misappropriates information from employer and use this information
4

in trading of shares would be guilty of insider trading. In particle life, in the context of this
theory most of the convicted persons of insider trading are lawyers and accountants (Iatridis,
2013). Misappropriation theory applies to certain no business relationships because as per this
theory an individual collects confidential information in duty of trusts or confidence would be
liable. Insider trading under this theory creates negative growth and affects is sustainability in
share market but it also increased scope of insider trading to capture people engaged in insider
trading.
Role of corporate governance in dealing with insider trading:
According to the Jacoby, (2018) corporate governance has major impacts to listed
companies because it is basically related with improving transparency and accountability in
existing system. Now days Corporate governance is benchmark for corporate, used to describe
governance and accountability of company. For instance, in the work of Elder and Kim it was
analysed that corporate governance improves financial and operational transparency that
decreases insider trading associated with informational asymmetries. It also concluded that firms
with better governance structure helps to reduce leaking of information to the outsider. Corporate
governance has major impacts to listed companies because it is basically related with improving
transparency and accountability in existing system. The shareholders’ role in corporate
governance is to appoint directors and auditors, and to ensure that proper steps taken by them for
preventing insider trading. Under corporate governance responsibilities of the board in relation to
insider trading combines determining the company’s strategic goals, providing directions to
secure price sensitive information, supervising the management of the business and reporting to
shareholders to ensure that proper strategy is followed to prevent activities of insider
trading .Corporate governance is therefore plays a major role in preventing insider trading and
enhancing the confidence of investors. The importance of corporate governance can be analysed
as it helps the organisation to
 Keep the working in the ethical manner so that material information is not leaked to
outsider.
 It helps in knowing the relationship between the boards and the executive management. Keeping in control the insider trading practises.
Relationship between issue of insider trading and growth of business:
5

Insider trading and growth of the company has vice-versa relationship, as if there is no
insider trading there would be increase in growth potential and management would look into
other matters relating to the production and achieving its target growth. Under insider trading,
individual related or interested in company purchase the stock, shares price-sensitive information
along with small investors who purchase the securities of company and promote others to
purchase shares of company to create huge artificial demand for the particular stock resulting in
higher prices. Which shows favourable growth of company and other people who are not aware
of these facts buys these share (Kathy Rao et. al., 2012). All such thing creates high demand for
shares for a short period but when share price increased to a peak level with high unexpected
price then such insider along with small group of investors sell all the shares acquired to create
fake demand which results in heavy losses for other investors and company.
An insider organised a process to sell stock but hold back from doing on the basis of
internal information thereby slightly stops a potential investor from entering in great deal.
Insider’s self controlled transfers opportunities from the potential investors to himself, however
such type of act does not happen frequently. Some time it seems that insider trading helps
securities markets to become more profitable and productive by moving the current market price
closer to potential future price. Insider trading is beneficial for an organisation in achieving
individual profit motives only, does not directly creates long term growth for company. There is
positive as well as negative relationship between insider trading and business growth. This can
be understood as when internal parties of TESCO has knowledge about different aspects such as
information related to CSR activities, percentage of contribution towards CSR, etc. helps to
perform operations in positive way through which revenues can be enhanced and income can be
exempt from tax. While there are chances that employees may reveal confidential information
which affects business growth in negative manner because of more competition in retail sector.
Primary and secondary research undertaken:
Research methodology defined as the method that is required for development of the
research project (Khan et. al., 2013). The data is based on 25 employees which are working in
TESCO and the assessment is done on the corporate governance strategies which they are aware
of. For collection of data, different types of data analysis, various research designs have been
used which includes the descriptive, explanatory and experimental design types. This research
has been done with descriptive design as by using descriptive design in depth study of the issue
6

would be possible. In this research qualitative method has been applied so as to collect the data
and prove the results so obtained. In making the report relevant the investigator has to follow
certain issues such as they have to invest a good amount of money while conducting the
research. Lastly the researcher has to make the research look valid and reliable so that they are
able to produce a good result. In this project, it is necessary and crucial to do brief understanding
of both primary and secondary research to know the exact and relevant sources for gathering the
most suitable and reliable information for arriving at the valid and common conclusion.
Marketing research generally involves two basic types of research namely primary and
secondary research. The brief discussion of both the research methods is as follow:
Primary research: Primary research is generally undertaken when one person conduct
any project with self-reliable efforts and potential or someone other to do so. It basically involves
going directly to the source usually the customers and prospective customers in the target market
with the purpose to ask the question and gather the relevant and suitable information. This type
of research method involves interview(telephonic or face to face), surveys(online or using mail),
questionnaires, focus groups or visits to competitors location. When conducting the primary
research, there are basic tow kind of information to be gather namely specific and explanatory.
Along with this, primary research is considered as most costly and takes more period than
secondary research. In this project work, Questionnaire will be used to collect the suitable and
relevant information for the further analysis and conclusion purpose.
Questionnaire:
Q1) Are you aware about the concept of insider trading?
a) Yes
b) No
Q2) What are the drawbacks of insider trading?
a) Enhance the risk for stock market crash
b) Leads to a reduces in the overall trust in the market.
c) Spread out rumour about a insider transaction.
Q3) Is insider trading impact on the growth and sustainability of TESCO?
a) Yes
b) No
Q4) Does Corporate governance play vital role in dealing with insider trading?
7

a) Yes
b) No
Q5) Which kind of relationship is exist between insider trading and growth of TESCO?
a) Positive
b) Negative
Q6) Which is the main step used by TESCO to stop insider trading issue?
a) Keep a close eye on external parties
b) Corporate code prohibiting insider trading
c) Phone tapping and surveillance
Q7) Which is the major step that need to be consider by business managers in order to deal
with issue of insider trading ?
a) Proper communication
b) Education and Training
Q8) Which is the most effective or useful strategy that can be implement to overcome insider
trading?
a) Restrict risky trading
b) Act quickly to investigate insider trading
c) Other
Q9) Provide recommendation to TESCO in order to achieve sustainability and growth.
Secondary research: This is the type of research that already compiled and published by
others. It also includes the reports and studies by the different government agencies, trade
association or other businesses. Doing the secondary research involves information collecting
through Internet, magazines, journals etc. to arrange the suitable and relevant informations. This
research methods is considered as most cheap and less time consuming technique for gathering
the data/information. In this project work, data collection through newspaper, Journals, Internet
etc., will be used to arrive at the actual and valid conclusion. The main source of data collection
used for this project is internet and journal articles.
Research methodology is the specific procedures or techniques used to identify, select,
process and analyse information over the topic. In any research project, the methodology section
allows the reader to critically evaluate a study's overall validity and reliability. Apart from this, it
8

also cover historical and actual data both to arrive at the valid conclusion. In addition to this, it is
considered as detailed and theoretical analysis of various methods which is useful to the different
fields of the research (Klettner, Clarke and Boersma, 2014). In this project work, methodology
will be taken into consideration for quality over the quantity.
Research Onion: It is referred to as most appropriate model that is based on different
philosophies such as axiology, epistemology and ontology. It basically illustrates the stages that
must be covered in order to develop the proper research (Litov et. al., 2012). When viewed from
he outside, each layer of the onion describes the more detailed stages of the research process.
Also, the research onion has provided an effective progression through which the research
methodology can be designed. In this project work, framework of an entire research is based on
different layers such as data collection, cross-sectional, mixed methods and surveys including the
deductive approach.
Illustration 1: Research Onion Digram
(Source: Research Onion Digram, 2018)
9

Research Philosophies: Research philosophies is the outermost layer of the research
onion model which is taken for this investigation and necessary to arrive at the valid & common
conclusion. Research philosophies are of two different types such as Interpretivisim and on the
other hand positivism (Marquis and Lee, 2013). For an effective relationship establishment,
Interpretivisim philosophies will be adopted here, because it has been initiated to evaluate an
information correctly and effectively. In other side, positivism philosophies will not be suitable
here for executing research, because it will not be suitable to arrive at the valid conclusion and
results.
Research approach: This step comes under the next layer of research onion cycle which
has been divided into two parts: inductive and deductive. In this project, deductive approach is
suitable and relevant, this is why because it will give the comprehensive of different
understanding of the relationship between staff turnover and leadership. Inductive approach will
not be used here because it is limited in scope and consist of limited information. Deductive is
comparatively necessary and useful that inductive approach.
Research Strategy: It refers to as the different strategies which is used to get appropriate
method for collecting the relevant information through survey and interview, which has more
quantity so as to arrive at the common results and conclusion (Mason and Simmons, 2014). In
this case study, questionnaire is the best suitable technique to get the right information at right
time with an accurate purpose. This type of strategy is suitable to identifying the issues regarding
to the dissertation topic.
Research Method: It is the another layer just after the research philosophies. It is the
foremost layer of the research onion which is applied with an application for quantitative and
qualitative. In case of qualitative research, it is considered as exploratory research which is
applied to achieve to gain better purpose of reasons, opinions and motivations. This approach
will be used here, because it will give insight to complete issues and problems and also helpful in
creating the idea or solution of this dissertation problems (McCahery, Sautner and Starks, 2016).
Whereas, Quantitative research is referred to as complete systematic empirical study of the
phenomena through the statistical or technical tools. This methods will not be used here for this
research topic, because, it requires the bulk sample size.
Research instruments and techniques: It is the last layer which is completely related to
procedures and tools & techniques. In the research project, both primary and secondary method
10

will be used. In the primary research, questionnaire would be used, which consists of collecting
an appropriate amount of an information (Michelon and Parbonetti, 2012). In context with
secondary research, journals, magazines and internet will be used to get data information/data
related to relationship between leadership and staff turnover. Such instruments consists of:
Data sources: Both primary and secondary sources are analysed as the main source of
data collecting method, which is used by an investigator to gather the right information as per the
importance of the topic of effective leadership to overcome high staff turnover issues (O’Connor
and Rafferty, 2012). In this dissertation project, primary source will be used because, it will
provide the real and feasible data from the participants.
Research sampling: Convenient sampling will be used which will help researcher for the
complete selection of sample size. In this research project, sample size of 25 respondents will
taken from which the data will be collected to arrive at the valid and suitable conclusion.
Research reliability: It is mainly based on the development of of data collecting tools
which is known as survey questionnaire. It is crucial for the research to overcome various
problems into the questions that were not understood by the participants easily (San Martin-
Reyna and Duran-Encalada, 2012). On other side, research validity is essential to minimise the
problems which is related to test the feasibility and validity of an information. In this research
project, questionnaire will be suitable to ask the close ended questions which will help the
researcher to collect the relevant and suitable information from the different participants.
Research budget: It is necessary to execute the budget which is pre-planned tool to get
the right an suitable information for expenses to be bear during the entire dissertation project
along with complete and proper time management (Sethi, 2012). The research budget is
necessary to execute the planning for money and funds allocation for an entire project. For this
research approximately 50,000 £ is needed by the researcher to complete each activities of
research systematically.
CRITICAL REVIEW
This is introduce as an important part of the research which is based on analytical tool.
For this, data analysis is refer one of the main and essential tool for the researcher to collect
appropriate amount of information about the research topic (Tricker and Tricker, 2015). Data
analysis will be done with the help of different themes which is made on each questions. For this
researcher selected respondent is employees and chosen sample size is 25. Apart from this, in
11

this section of research, respondents are provide their opinion about the research topic which are
explain as under:
Q1) Are you aware about the concept of insider trading? Frequency
Yes 15
No 10
Q2) What are the drawbacks of insider trading? Frequency
Enhance the risk for stock market crash 10
Leads to a reduces in the overall trust in the market. 10
Spread out rumour about a insider transaction 5
Q3) Is insider trading impact on the growth and sustainability of
TESCO?
Frequency
Yes 15
No 10
Q4) Does Corporate governance play vital role in dealing with
insider trading?
Frequency
Yes 12
No 13
Q5) Which kind of relationship is exist between insider trading
and growth of TESCO?
Frequency
Positive 7
Negative 18
Q6) Which is the main step used by TESCO to stop insider
trading issue?
Frequency
Keep a close eye on external parties 10
Corporate code prohibiting insider trading 7
Phone tapping and surveillance 8
12

Q7) Which is the major step that need to be consider by business
managers in order to deal with issue of insider trading?
Frequency
Proper communication 13
Education and Training 12
Q8) Which is the most effective or useful strategy that can be
implement to overcome insider trading?
Frequency
Restrict risky trading Act 10
Quickly to investigate insider trading 10
Other 5
Theme 1:
Q1) Are you aware about the concept of insider trading? Frequency
Yes 15
No 10
Yes No
0
2
4
6
8
10
12
14
16
15
10
Frequency
13

Implementation: It is defined as the buying and selling of a security by someone who has
access to material non public information about the contracts that are to be made in future which
would impact the performance of the company as a whole. Insider trading is considered as an
activity of buying and selling of security which is illegal and unethical. Thus, while conducting
research, it has been identified that majority of selected respondents are aware about such
concept. Among 25 respondents, there are 15 respondents who have proper knowledge about the
concept of insider training whereas the remaining 10 respondents doesn't aware about such
concept.
Theme 2:
Q2) What are the drawbacks of insider trading? Frequency
Enhance the risk for stock market crash 10
Leads to a reduces in the overall trust in the market. 10
Spread out rumour about a insider transaction 5
Enhance the risk for stock market crash
Spread out rumour about a insider transaction
0
1
2
3
4
5
6
7
8
9
10
10 10
5
Frequency
Implementation: There are various drawbacks which can be faced by Tesco due to insider
trading such as increases risk for stock market crash, spoil market image, lowering
competitiveness among rivals etc. Out of the 25 respondents, there are 10 respondents who
14

considered increment in stock market cash as major risk due to insider trading whereas other 10
respondents clearly said that the Tesco has facing risk in terms of loosing trust in the market
which makes huge negative impact on their sales and profitability. The remaining 5 respondents
have a clear view that it brings out the confidential information of company which brings threats
to Tesco Plc in loosing their competitiveness among their rivals in the market.
Theme 3:
Q3) Is insider trading impact on the growth and sustainability of
TESCO?
Frequency
Yes 15
No 10
Yes No
0
2
4
6
8
10
12
14
16
15
10
Frequency
Implementation: The majority of the selected respondents thinks that insider trading makes huge
impact on the growth and profitability of Tesco Plc. Among 25 respondents, 15 respondents
thinks the same whereas the remaining 10 respondents doesn't agree with them as they have
clearly said that no effect can be observed on their growth and sustainability of Tesco Plc due to
insider trading.
Theme 4:
15

Q4) Does Corporate governance play vital role in dealing with
insider trading?
Frequency
Yes 12
No 13
Yes No
11.4
11.6
11.8
12
12.2
12.4
12.6
12.8
13
12
13
Frequency
Implementation: During collection of data under research, mixed response are collected from
the selected respondents on the role of Corporate Governance while dealing with insider trading.
Out of 25 respondents, 12 respondents are agree with the same statement as they have clearly
said that Corporate governance play an important role in dealing with insider trading as it directs
the employees to follow company's rules and regulations and avoid to execute any illegal
activities. The remaining 13 respondents doesn't agree with such statement.
Theme 5:
Q5) Which kind of relationship is exist between issue of insider
trading and growth of TESCO?
Frequency
Positive 7
Negative 18
16

Implementation: Out of the 25 respondents, majority of the respondents thinks that the
relationship between the issues of insider trading and growth of Tesco become more negative.
There are 18 respondents who thinks the same whereas the remaining 7 respondents has opposite
opinion regarding the same statement.
Theme 6:
Q6) Which is the main step used by TESCO to stopping insider
trading issue?
Frequency
Keep a close eye on external parties 10
Corporate code prohibiting insider trading 7
Phone tapping and surveillance 8
17
Positive Negative
0
2
4
6
8
10
12
14
16
18
7
18
Frequency

Keep a close eye on external parties
Phone tapping and surveillance
0
1
2
3
4
5
6
7
8
9
10
10
7
8
Frequency
Implementation: From the above mentioned information, it has been concluded that,
there are some steps used by the company in order to overcome issue related to the insider
trading. For this, 10 out of 25 respondents suggest an organisation to keep a close eye on external
parties, other 7 out of 25 respondents recommend company should follow Corporate code
prohibiting insider trading. As rest of the population are suggest Phone tapping and surveillance
is one of the best step for the company to reduce insider trading issue systematically.
Theme 7:
Q7)Which is the major way that need to be consider by business
managers in order to deal with issue of insider trading ?
Frequency
Proper communication 13
Education and Training 12
18

Proper communication Education and Training
11.4
11.6
11.8
12
12.2
12.4
12.6
12.8
13
13
12 Frequency
Implementation: It has been clearly said from the above information, that there are some
ways required to be consider by business manager in order to deal with issue of insider trading.
Out of 25 respondents, there are 13 respondents who are in favour of proper communication
whereas remaining 12 respondents are in favour of education and training. Thus, both ways are
highly essential and important for the company to reduce insider trading issue and accomplish
better results within predetermined time of period.
Theme 8:
Q8) Which is the most effective or useful strategy that can be
implement to overcome insider trading?
Frequency
Restrict risky trading Act 10
Quickly to investigate insider trading 10
Other 5
19

Restrict risky trading Act
Quickly to investigate insider trading
Other
0
1
2
3
4
5
6
7
8
9
10
10 10
5
Frequency
Implementation: From the above given information, it has been clearly said that there are
some useful and effective strategy for the company to implement and overcome insider trading
issue in systematic manner. For this, 10 out of 25 respondents are in favour of to follow Restrict
risky trading Act whereas out of 25, there are 10 respondents are agree as Quickly to investigate
insider trading is best options for the company to reduce such issue easily. As remaining
population are follow other strategies to overcome insider trading issue easily.
Results:
This part of the research is identify as an essential and main part which is based on results
of primary and secondary data. Results related to the primary information are discussed in
questionnaire. On the other side, secondary data is collected with the help of literature review.
Insider trading is unfair for stakeholders who do not have vital sensitive information about a
certain company. Insider trading is a huge issue among people (Turner, 2014). It is unethical
action done by the insider to gain undue advantages. In corporate governance process insider
trading is main issue for every organisation in present scenario and without addressing this issue
survival of company is difficult. In different nations, trading by corporate insiders including
officers, directors, key employees and large stakeholder may be legal. Several studies have
revealed that corporate governance affects insider trading. If the corporate strategies are not
properly enacted in the organisation then it will lead to impact the organisational goals in
20

negative way so the company should use a consistent feedback. Some people are agreeing with
an perspective that insider trading can be advantageous for markets and should be allowed, But
they also accept that the overall impact of such trading is not positive for investors. Insider
trading shows growth for some time but after a certain period share of company would be
dropped and causing heavy losses for small investors. Insider trading has damaging effect on the
market’s structure, and throw outs the negative flows.
Now days Corporate governance is benchmark for corporate, used to describe
governance and accountability of company (Jacoby, 2018). Framework for Corporate
Governance is developed and build by regulatory time to time for solving issues related with the
governance of listed company entities but not designed to cover all organisational types that may
have different accountability structures. Boards of directors are also responsible for the
governance of their companies and identifying the issues related with insider trading.
Insiders’ activities related to securities, even if they are undisclosed, exhibits future price
trends to others and make the current stock price reverse to the relevant information. Correctly
regulated price of stocks give favourable indicators to investors and assures more effective
allocation of capital.
RECOMMENDATION AND ACTION PLAN
Recommendation: From the above mentioned information, it has been recommended to
the illegal insider trading is a main issue in the organisation. It is a concept of buying and selling
of security by someone who has right to material non-public data about the security. It can be
legal or illegal relaying on when the inside employees makes the trade. On the other side, it is not
legal when the material data is still non-public. According to the above stated information in
literature review and questionnaire, there are some issue related to the insider trading which
impact on business performance and profitability in a direct manner. In order to overcome such
issue, TESCO should provide training to their employee in related to insider trading. Tracing the
main source of insider trading is difficult and important task for an organisation's management.
Insider trading can be legal or illegal relaying on when the employees of an organisation makes
the trade. In order to overcome such issue an organisation should make legal policies and
strategies which will further help in overcoming such problem easily and give better results for
the company. There are some recommendation to the company such as company should provide
training program to their workforce related to the insider trading issue. Another main
21

recommendation to the TESCO to should identify when someone giving data to them is violating
a breach of duty. Another suggestion to the company as they should follow all rules and
regulations in proper manner which will further assist in reducing insider trading issue in the
organisation. They should bring transparency in their policies and practices so that ethical
working will be ensure within firm.
Action Plan: It is introduce as a document that includes some steps in order to enhance
specific objectives or goals (Visser and Tolhurst, 2017). The main reason behind implementing
action plan is to depict the useful resources that are needed to accomplish pre-specified
objectives and developing a time scale for step by step execution of an effective plan.
Steps Description
Step 1: Identify the
reason
First stage is to analyse the reason behind the issue of insider trading.
TESCO can analysis these problem by conducting communicational
program, employees survey or via conducting interview process.
This support in analysing the areas business needed to make
enhancement for reducing insider trading problem.
Step 2: Formulate the
strategies
After analysing the main reason of insider trading issue, the next step
is to formulate an essential strategies and policies that assist toward
motivating workers. Such motivated employees do not trade
information in outside of the company. Thus, it is essential for the
success and growth of company in given time period. This includes
proper training, education etc. Further TESCO can also implement
strategies about improving communication within an enterprise that
supports in reducing the chances of insider trading issue.
Step 3: Offer employees
options
Next step is to give many other different options to workers so that
they can modify their intention of insider trading. These options
covers providing accurate training program, motivating employees
etc. All these actions will assist in modifying the thought of workers
toward administration as it support in showing the perfect value that
they have for company (Westphal and Zajac, 2013).
Step 4: Improve This is identified to be one of the main action that TESCO must take
22

organisational culture
and environment
in order to overcome insider trading issue. As it is view to be the
foremost factor behind increase in insider trading issue in the
organisation. A better organisational culture give workers rights and
power to share their opinion, work as team, share duties, etc. These
all factors support in enhancing the morale as well as in encouraging
workers.
Step 5: Implementation
and employee
engagement
After developing entire strategies and improvement plans within
actual situation, next step is to apply those strategies or policies.
Implication of this will support in enhancing the actual situation as
well as working condition of organisation that boost a message of
workers importance. Thus, it support in making confidence of
employees toward their job duty and business that assist in processing
a feel of job gratification which in turn will overcome insider trading
issue. Apart from this TESCO must also concern their workers in
process of managerial decision making and many other activities
which assist in maximising their morale that support in enhancing
their performance. Company should apply different communication
channels which will help in providing accurate flow of data related to
the insider trading issue.
Time scale
Gantt chart:
Gantt chart is formed for determining the time frames of the assigned project. The
horizontal lines shows the total time period of project and can be further breakdown in week or
days. The vertical axis shows the segmented task (Coates IV, 2012). The varying length of
horizontal bars shows the timing, sequences, and time span for each segmented task. The
vertical line is used for representing the reporting date. Through the Gantt chart, employees can
control or regulate their work with the necessary efficiency for achieving the predetermined
goals and objectives of the project. In addition, after the research methods, time horizon is
comes under the next layer wherein cross-sectional time has been applied with the complete
23

search organised over the different period of time. Also, the time horizon is essential for the
suitable researcher to find the actual completion of research activities.
24

25

REFERENCES
Books and Journals
Amran, A., et. al., 2014. The influence of governance structure and strategic corporate social
responsibility toward sustainability reporting quality. Business Strategy and the
Environment. 23(4). pp.217-235.
Bender, R., 2013. Corporate financial strategy. Routledge.
Castañer, X. and Kavadis, N., 2013. Does good governance prevent bad strategy? A study of
corporate governance, financial diversification, and value creation by French
corporations, 2000–2006.Strategic Management Journal. 34(7). pp.863-876.
Coates IV, J. C., 2012. Corporate Politics, Governance, and Value Before and After Citizens
United. Journal of Empirical Legal Studies. 9(4). pp.657-696.
Donaldson, T., 2012. The epistemic fault line in corporate governance. Academy of
Management Review. 37(2). pp.256-271.
Filatotchev, I. and Nakajima, C., 2014. Corporate governance, responsible managerial
behaviour, and corporate social responsibility: Organizational efficiency versus
organizational legitimacy?.Academy of Management Perspectives. 28(3). pp.289-306.
Formentini, M. and Taticchi, P., 2016. Corporate sustainability approaches and governance
mechanisms in sustainable supply chain management. Journal of Cleaner Production.
112. pp.1920-1933.
Goel, S., et. al., 2012. Strategy, ownership, governance, and socio-psychological perspectives
on family businesses from around the world. Journal of Family Business Strategy. 3(2).
pp.54-65.
Iatridis, G. E., 2013. Environmental disclosure quality: Evidence on environmental performance,
corporate governance and value relevance. Emerging Markets Review. 14. pp.55-75.
Jacoby, S. M., 2018. The embedded corporation: Corporate governance and employment
relations in Japan and the United States. Princeton University Press.
Kathy Rao, K., et. al., 2012. Corporate governance and environmental reporting: an Australian
study. Corporate Governance: The international journal of business in society. 12(2).
pp.143-163.
Khan, A., et. al., 2013. Corporate governance and corporate social responsibility disclosures:
Evidence from an emerging economy. Journal of business ethics. 114(2). pp.207-223.
Klettner, A., Clarke, T. and Boersma, M., 2014. The governance of corporate sustainability:
Empirical insights into the development, leadership and implementation of responsible
business strategy. Journal of Business Ethics. 122(1). pp.145-165.
Litov, L. P., et. al., 2012. Corporate strategy, analyst coverage, and the uniqueness paradox.
Management Science.58(10). pp.1797-1815.
Marquis, C. and Lee, M., 2013. Who is governing whom? Executives, governance, and the
structure of generosity in large US firms. Strategic Management Journal. 34(4). pp.483-
497.
Mason, C. and Simmons, J., 2014. Embedding corporate social responsibility in corporate
governance: A stakeholder systems approach. Journal of Business Ethics. 119(1).
pp.77-86.
McCahery, J. A., Sautner, Z. and Starks, L. T., 2016. Behind the scenes: The corporate
governance preferences of institutional investors. The Journal of Finance. 71(6).
pp.2905-2932.
26

Michelon, G. and Parbonetti, A., 2012. The effect of corporate governance on sustainability
disclosure. Journal of Management & Governance. 16(3). pp.477-509.
O’Connor, M. and Rafferty, M., 2012. Corporate governance and innovation. Journal of
Financial and Quantitative Analysis. 47(2). pp.397-413.
San Martin-Reyna, J. M. and Duran-Encalada, J. A., 2012. The relationship among family
business, corporate governance and firm performance: Evidence from the Mexican
stock exchange. Journal of Family Business Strategy. 3(2). pp.106-117.
Sethi, S. P., 2012. Multinational corporations and the impact of public advocacy on corporate
strategy: Nestle and the infant formula controversy (Vol. 6). Springer Science &
Business Media.
Tricker, R. B. and Tricker, R. I., 2015. Corporate governance: Principles, policies, and practices.
Oxford University Press, USA.
Turner, J. R., 2014. Handbook of project-based management(Vol. 92). New York, NY:
McGraw-hill.
Visser, W. and Tolhurst, N., 2017.The world guide to CSR: A country-by-country analysis of
corporate sustainability and responsibility. Routledge.
Westphal, J. D. and Zajac, E. J., 2013. A behavioural theory of corporate governance:
Explicating the mechanisms of socially situated and socially constituted agency. The
Academy of Management Annals. 7(1). pp.607-661.
Online
Research Onion. 2018. [Online]. Available through:
<https://nairaproject.com/blog/understanding-the-research-onion-methodology.html>./
What is Insider Trading?. 2019. [Online]. Available through:
<https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/what-is-
insider-trading/>.
What is corporate governance?. 2019. [Online]. Available through:
<https://www.icaew.com/technical/corporate-governance/principles/principles-articles/
does-corporate-governance-matter>.
27