Engleza - Curs 2

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  • 8/11/2019 Engleza - Curs 2

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    Ethical behaviour in business/companies

    - ethical problems: fair treatment for employees, corporate espionage, fair practice, etc.- definition of ethics/business ethics;

    _______________________________________________________________#business wall street insider scandal example#*****2001: Martha Stewart and ImClone*****When: December 27, 2001The facts: Martha sells $228,000 worth of stock in the biotechnology company ImClone. The day before Sam Waksal, a friend of Stewart's and founder of ImClone, sells stock and encourages family members to sell, after learning that ImClone'sapplication for its top cancer drug prospect would be rejected. On June 12, 2002, Waksal is arrested on charges of insider trading and perjury. He pleads guilty. The Justice Department, SEC, and Congress investigate Stewart, who is under suspicion for insider trading. Did Martha know about the rejection before she sold? Martha and broker Peter Bacanovic claim she did not. Doug Faneuil, Bacanovic'sassistant, claims they did.Who knew: "When the Waksal sell orders came in, [Martha's broker Peter] Bacanovic either called Stewart's office himself or had [his assistant] Faneuil call hehimself never spoke to her until after her trade was complete, say those with aknowledge of the matter and warned that the stock would soon sink. When Stewartcalled in, she spoke with Faneuil. In the excitement of the moment, Faneuil coul

    d very well have said to Stewart that the Waksals were selling an unethical revelation, perhaps, but not a classic case of insider dealing. He also could have reported that fact in the context of following orders: Peter thinks you should sell because the Waksals are disgorging." from the July 08, 2002 issue of New YorkMagazine

    #EXPLANATION: In 2001, Martha Stewart sold $228,000 worth of ImClone biotech stock a day after her friend and cofounder of ImClone sold his shares and his family doing the same, after learning that ImClone's application for its top cancer drug prospect would be rejected - based on insider information. M. Stewart was found guilty of conspiracy, making false statements and a few other charges, beingsentenced to 5 months of prison.

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    ###Enron situation:- Ken Lay & Jeff Skilling, guilty of hiding the financial situation of the company;- Enron shareholders filed a $40 billion lawsuit after the company's stock price, which achieved a high of US$90.75 per share in mid-2000, plummeted to less than $1 by the end of November 2001.- The U.S. Securities and Exchange Commission (SEC) began an investigation, andrival Houston competitor Dynegy offered to purchase the company at a very low price.- The deal failed, and on December 2, 2001, Enron filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code.

    - Enron's $63.4 billion in assets made it the largest corporate bankruptcy in U.S. history until WorldCom's bankruptcy the next year.- As a consequence of the scandal, new regulations and legislation were enactedto expand the accuracy of financial reporting for public companies, such as increased penalties for destroying, altering, or fabricating records in federal investigations or for attempting to defraud shareholders.

    HOMEWORK: saptamana viitoare prezentarea unui scandal (business) fie pe tema politica, mediul inconjurator, economic, etc.

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    *Ethical Issues**bullying*

    *conflicts of interest*#EXAMPLE: J.P. Morgan Questioned for Conflicts of Interest (July 2014)- Firm Has Responded by Changing Its Disclosures- Regulators questioned J.P. Morgan Chase executives about whether the firm "helps" private-banking clients to its own investment products, and funds, but not to third parties.- In reply, JPMC spelled out more clearly to private-banking clients the differences between its own products and outside offerings, and how much of clients' assets were invested in each.

    *bribes**fairness and honesty* - core of business ethics

    *false advertising*EXAMPLE: Hyundai and KIA vehicles' horsepowerHundreds of car owners were extremely disappointed to find out that Hyundai andKia overstated the horsepower in some of their vehicles. In 2001, the Korean Ministry of Construction and Transportation uncovered the misrepresentation, which

    for some models was as much as 9.6 percent more horsepower than the cars actually had. A class action lawsuit in southern California claimed the companies wereable to sell more cars and charge more per vehicle because of the false claims.In the end, the auto powerhouses had to pay customers -- the settlement was estimated to be between $75 million and $125 million.

    *business relationships**code of ethics**pressures influencing ethical decision making*