An event or decision that could be judged as clearly unethical could be any situation where information discovered in a private business environment could be used for a personal financial gain by the person finding the information. A scenario such as the following is a good example of an ethical issue that may occur frequently in business. The scenario is as follows: a strategic management consultant is hired by a firm to analyze and improve the company’s performance and help amend the procedure for evaluating employee performance.
During the course of this analysis they interview several supervisors and employees individually to gather information about the current evaluation process, and understand how employee performance can be improved, as well as investigate whether there are any issues that staff feel they cannot convey to management. During the corporate analysis, the employees mention that they feel they have not been given sufficient credit for developing a new product that the company expects will double its profits when it is introduced in the near future.
The level of dissatisfaction amongst the staff is at a high level, and they disclose some corporate information to the strategic consultant about potential future earnings and profitability. The general discontent with this situation, and the fact that the employees all feel that the share price will rise, and the profitability of the company will increase, through the sales of this new product, the consultant is left to wonder whether he should buy some of the company’s stock to take advantage of the anticipated boost in earnings.
This situation is an example of insider trading, where an individual may be able to make money on a stock transaction by using information gained through some illicit means. This situation has ethical issues due to the fact that the consultant has been hired by the company to perform a duty, and during this process has found some information which may enable them to make extra money.
There are not many circumstances where this kind of situation would be ethical, and if this was a situation I found myself in, then I would try to be ethical and to not use the information gained for my personal financial benefit. This scenario does not just have ethical issues to consider, it has legal issues as well, because the act of insider trading is a criminal act of fraud therefore people caught doing this ethically unsound business practice are liable for prosecution for fraud.
2. This situation is ethically dubious, due to some of the reasons outlined in part one of this paper, the similarities between the two situations mean that it is not appropriate to act on this information, due to the extra knowledge about whether or not the company is financially and fundamentally strong. However because of a couple of issues in this scenario it may be ethical to purchase stock or to have a conversation about buying stock with friends and family members.
The information has come through conversations in the hallways, not from primary sources, and therefore nothing is confirmed as being true, it is mere speculation. The second issue is whether it is ethically sound to discuss business operations with friends and family. Again, because the information has come from a secondary source, which may be classed as gossip, and not hard business facts, mean that a speculative conversation about the business, with friends and family may be ethical. It does not matter if one hundred or one thousand shares are purchased, because the ethical situation is the same.
However looking at the facts and the differences between the first scenario and the second, it is possible to say that under the first scenario it is definitely unethical for a third party contractor to discuss or use information for their own personal benefit, but the second scenario may be ethical, due to the issues of reliability of information and the fact that it is an employee of the company acting on speculation and not business facts. However the one crucial element in these two scenarios, is that of human morality, and there are clearly some people in the world who would act on both scenarios, and there are some who wouldn’t.