A. Basic Empirical Facts of the Problem
Societe Generale (SG), a French famous investment bank, has suffered an unprecedented loss of 4.9 billion Euros in 2008 due to a trader, Jérôme Kerviel (JK). He was accused of making unauthorized trade and using the fake portfolio to hedge the risks of securities. This provoked a heated debate concerning the ethical issues in this scandal.
Before proceeding to the investigation of ethical problems, the definition of business ethics will be reviewed in advance. According to Chris MacDonald (2010), a professor at Ryerson University in Toronto, business ethics is defined as a critical assessment of how people and organizations should act in the commercial world, especially when the profit-hunting actions of them affect others.
There are generally two ethical issues that should be concerned.
1. Individual level – Breach of fiduciary duty
JK breached the fiduciary duty that he should bear as a trader. Being a moral trader, JK should endeavor to pursue the best interests of clients. The act of cheating clients using the counterfeit portfolio allowed JK to pursue huge bonus while posing great harm to customers. This move violated the aforementioned business ethics.
2. Firm level – Blind pursuit of profit
It is also unethical for SG to ignore the abnormally high trading volume of JK until it became a serious problem. SG is also one of the fiduciaries in handling the clients’ resources for their best interests. However, Kerviel revealed in his book that his practice was common among traders in SG but the senior management did not carry out actions to prohibit it (Kerviel, 2010). This shows that SG probably aimed at earning the largest profits for the shareholders by ignoring the potential risks ...
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...e for promotion. Hence, companies may consider avoiding the transition of employees from compliance staffs to traders.
3. Firm level – Compulsory vacations for traders
The third measure is to adopt a compulsory vacation system for traders. Traders are required to take a few days for vacations at least once a year (Goldfarb, Cass & Sanati, 2008). Other staffs will take up the trader’s jobs temporarily. This provides chances to discover fraud since Kerviel refused to take holidays in the scandal (Goldfarb, Cass & Sanati, 2008). By taking compulsory vacations, fraud can be discovered more easily even if traders can deceive the regulatory system. However, this may lower the efficiency of firms as it takes time for others to catch up the progress. Despite this, it is worth to do so since the consequences of loose internal control could cost as large as 5 billion Euros.
Jordan Belfort is famous for his crooked way of earning his millions as a stockbroker on Wall Street. Even Belfort started at the bottom, on his first day in Wall Street he was told he was “lower than pond scum”(Belfort 1). After writing a book about his happenings on Wall Street, we’ve seen the
Dennis Kozlowski was living his dream as a multimillionaire and if anyone got in the way of his dream to create his empire then they would be stepped on like a bug. This is what happened to Jeanne Terrile at Merrill Lynch. Terrile smelled something funny coming from Tyco and when she acknowledged that something was wrong, she was shut down quickly. Nobody knows for sure if Kozlowski paid off the CEO of Merrill Lynch, David Komansky, or not and nobody knows what they talked about. The fact is that Jeanne Terrile was replaced and the stock recommendation for Tyco soon changed after their talk. Terrile decided to do what she thought was right and make sure to notify people of what she thought of the company. Because of Terrile’s ethical decision
But, it is still uncertain of when the full restitution amount will be paid off (Con Artists Hall of Infamy). Policy Securities Fraud: Securities fraud, also known as investor fraud or investment fraud, is a deceiving way of manipulation in the stock markets, which persuades potential investors to purchase or sale due to false information, usually resulting in loss of investments. Securities fraud may also involve direct theft from those investing through embezzlement, the theft or misuse of funds placed in one’s trust (Google), or stock manipulation, which is a premeditated attempt to meddle with... ... middle of paper ... ... they lost, and much less their stress and hardship they might have endured due to their unfortunate loss.
Mark Cuban the owner of the Dallas Mavericks was born and raised in Pittsburgh, PA. From his early age you could tell Mark was a determined well rounded individual and when there was an opportunity he would not hesitate to act upon it. After he graduated with a business degree from Indiana University in 1981 he started a computer company which he then sold making him a millionaire. He was the co-founder of another major business and played a role in a few other major corporations. In 2008, the SEC accused him of insider trading. In general, insider trading laws forbid the trading of securities by individuals in the possession of material, nonpublic information who have a duty to an issuer, the issuer’s shareholders, or the source of the information. There are various theories of insider trading; the most common being the classical theory, the tipper/tippee theory, and the misappropriation theory. Mark Cuban was accused of misappropriation insider trading. The SEC purported that Cuban sold his 6.3% stake in the online company Mamma.com after learning from the Chief Executive Officer (CEO) that the company was going dilute the worth of its shares by offering stock. By trading his stock on this material information Mr. Cuban averted $750,000 in losses. After a five year battle between the SEC and Mr. Cuban and an initial reversal in the SEC’s favor the case went to trial and the verdict came out in favor of Mark Cuban. This paper will analyze and answer specific questions regarding this case.
Jordan Belfort is the notorious 1990’s stockbroker who saw himself earning fifty million dollars a year operating a penny stock boiler room from his Stratton Oakmont, Inc. brokerage firm. Corrupted by drugs, money, and sex he went from being an innocent twenty – two year old on the fringe of a new life to manipulating the system in his infamous “pump and dump” scheme. As a stock swindler, he would motivate his young brokers through insane presentations to rile them up as they defrauded investors with duplicitous stock sales. Toward the end of this debauchery tale he was convicted for securities fraud and money laundering for which he was sentenced to twenty – two months in prison as well as recompensing two – hundred million in restitution to any swindled stock buyers of his brokerage firm (A&E Networks Television). Though his lavish spending and berserk party lifestyle was consumed by excessive greed, he displayed both positive and negative aspects of business communications.
(Mallor, Barnes, Bowers, & Langvardt, 2010) Business ethics is when ethical behavior is applied in a business environment, or by a business. There are many situations that can arise in which a person is experiencing an ethical dilemma. They have to choose between standing by their own personal ethical standards or complying with their companies ethical standards. In some instances, some have to choose whether to serve their own personal interests, or the interests of the company.
The task of business ethics is to make sure business decisions encompass an ethical element, and to make sure that managers take ethical implications of strategic decisions into account before choosing a line of action.
Business ethics simply can be defined as the application of business values in the business practice of a company (Seawell 2010, p. 2). For a multinational company, business ethics is one of the critical aspects need to be taken into account in business decision-making processes. Failure to give attention on ethics may bring consequences on company’s reputation (Meyer & Jebe 2010, p. 159). The company is expected not only to pursue its own profits but also contributing to the environmental and social welfare of the community where it operates (Svensson & Wood 2008, p. 308).
In this movie, Gordon Gekko was finished his term of penalty. Jacob Moore is Gekko’s daughter’s husband. But Gekko’s daughter Winnie would not want to talk to her father anymore. Then Jacob makes a trade with Gekko. Gekko teach Jacob how to revenge for Jacob’s respected advisor and Jacob need create the chance for Gekko in order to fix the relationship with Winnie. It seems a happy ending of this movie. But movie always wants to give you a surprise. Gekko start to defraud on this couple for one hundred million dollar after getting their trust. In this movie, Jacob’s first opponent is Bretton James who has a great and grand reputation in Wall Street. Bretton use several unusual ways to let Jacob’s advisor suicide. Jacob’s Boss & Advisor’s investing institution was killed by Bretton. From this case, Bretton has committed very criminal moral hazard. But there’s a famous word in this movie “You give money to others, but don't know whether the person will be responsible for your money”. This work is very unethical. Bretton in order to reach his goal, he tried to set a goal. Then use many ways to make to goa...
The stock market is an enigma to the average individual, as they cannot fathom or predict what the stock market will do. Due to this lack of knowledge, investors typically rely on a knowledgeable individual who inspires the confidence that they can turn their investments into a profit. This trust allowed Jordan Belfort to convince individuals to buy inferior stocks with the belief that they were going to make a fortune, all while he became wealthy instead. Jordan Belfort, the self-titled “Wolf of Wall Street”, at the helm of Stratton Oakmont was investigated and subsequently indicted with twenty-two counts of securities fraud, stock manipulation, money laundering and obstruction of justice. He went to prison at the age of 36 for defrauding an estimated 100 million dollars from investors through his company (Belfort, 2009). Analyzing his history of offences, how individual and environmental factors influenced his decision-making, and why he desisted from crime following his prison sentence can be explained through rational choice theory.
Without Boeskey’s help, catching other insider-trading criminals would have been almost impossible. Ivan Boesky even wrote a book about his involvement in the world of insider trading; he called it Merger Mania. This case illustrates that there are real consequences to white collar crime. In addition to paying the fifty million dollar fine, he relinquished another fifty million dollars of his illegal trading profits. He still had millions remaining, however, from his illegal gains.
By definition, ethics refers to "a set of principles of right conduct." It is also defined as "the rules or standards governing the conduct of a person or the members of a profession," (www.thefreedictionary.com) and in business may be considered the standards governing the conduct of people in the business environment. Business ethics is the behavior that a business adheres to in its daily dealings with the world. It relies on values as a way of guiding behaviour in business.
The most controversial case of fraud in history left more questions than answers. Bernard Madoff, with his company "Investment Securities LLC", chose the easy way to give him greater gains scamming people. Using the prestige he had and giant Ponzi scheme. That was how he was creating his fraud. Madoff did not steal the money immediately but was paid the promised returns with money paid by the entry of new customers paying its customers their profits and not realize and would not take legal action, this intelligent man or charlatan achievement out this scam film for over 20 years. Madoff achieving the greatest fraud in history with losses of more than 50,000 million alone was compared with the Enron case. In June 29, 2009, he was sentenced to 150 years in prison.
The stockbrokers have no remorse for selling customers bad products/stocks. Here lies the flaws of lack of empathy and hunger for wealth. They are seen as tools used to make profit. Along with Stratton Oakmont’s customers, the government, police officers, etc. are seen as legal authorities who are out to get Jordan instead of doing their job. Unlike their customers, these legal authorities are an obstacle Stratton Oakmont and more importantly Jordan must overcome in order to pursue/continue to pursue the “American
Jordan Belfort is the notorious 1990’s stockbroker who saw himself earning fifty million dollars a year operating a penny stock boiler room from his Stratton Oakmont, Inc. brokerage firm. Corrupted by drugs, money, and sex, he went from being an innocent twenty – two year old on the fringe of a new life to manipulating the system in his infamous “pump and dump” scheme. As a stock swindler, he would motivate his young brokers through insane presentations to rile them up as they defrauded investors with duplicitous stock sales. Toward the end of this debauchery tale he was convicted for securities fraud and money laundering for which he was sentenced to twenty – two months in prison as well as recompensing two – hundred million in restitution to any swindled stock buyers of his brokerage firm. Though his lavish spending and berserk party lifestyle was consumed by excessive greed, he displayed both positive and negative aspects of business communications.