In order for a company to be deemed ethical the hierarchy of management needs to be ethical. Every company has their own moral responsibility codes what they follow. Each corporation has a different purpose for the policy. A definition of ethical behavior can be describe as what the director’s duty is, what their perception on conflict of interest are, outlines post service restrictions, the responsible way of using authority, what is acceptable compensation and reimbursement, acceptable circumstances of giving and receiving a gift, keeping financial information in the company, and possible punishment for not upholding the ethical policy. SAC Capitals is a hedge fund group founded by Steven A. Cohenin 1992. SAC Capitals has been investigated for insider trading since 2008. The people in charge of these investment companies need to respect the private information and not use it to their own advantage. Common courtesy is called in which is an example of ethical practices. However asking people to play the rules aren’t the most realistic thing to do, but harsher punishment can make up for that.
Business Ethics are business society’s ideas about what actions are right and what actions are wrong. With that being said every business have different ethical standard. And these standards should not be confused with rules and regulation, because if rules are broken then consequences can be faced from a monitoring agency. If an ethical standard is broken then depending on what was done, one of the few consequences faced can be severe. One great example of an universal ethical standard is ‘Do to others as you would have done to you’ (Parrino, Kidwell, & Bates, 2012). In the text it states that there are three main ethical problems that arise in business dealing. Those problems are Agency Cost, Conflicts of Interest, and Information Asymmetry. Agency Cost is an internal cost that arises from having to pay an agent who is acting on behalf of a principal. Agency costs take place because conflicts of interest between shareholders and management. This directly relates to the next ethical problem, conflicts of interest. Conflict of interest is when two or more parties do not agree on something that can benefit to one party but can hurt the other parties. Finally there is information asymmetry which is when one party has information in a business transaction and has information that is unavailable to the other parties in the transaction. A common example of this is insider trading.
Throughout the company from top to bottom, no one should use exclusive trading information to their advantage. If a policy in place was either voted for or agreed upon, all of these employees need to have morality and choose to do the right thing. There should be a page dedicated in the contract stating if caught in an act of unethical practice the company is allowed to sue, and collect all the money earned and gained by the unethical practice. Now for some companies there should be a person in charge who sees ethical practices. HR is usually the one responsible for this, however there needs to be someone tailored in overseeing all levels of ethical practices in management, and also monitor who is communicating with who in a daily basis. This may sound like an unnecessary investment for the company, but they may consider this to be just like insurance. It is better to have it and not need it than need it and not have it. Having someone in payroll to specifically monitor ethics could avoid all kinds of potential lawsuits that could save millions of dollars for the company.
Periodically reports may sound interesting but just like anything that deals with sensitive information there needs to be necessary precautions to avoid possible leaks in the system. The team who are responsible for the reporting should be an external agency, very much like an external auditing would operate. And to even further more limit possible cover ups or collusions the company...
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