Insider trading has become a hotly contested issue in corporate North America. Not only the legality of such practices but the ethical and moral considerations of insider trading are the topic of discussion by many academics. Applying both teleological and deontological theories of ethics and by discussing the article on insider trading by Jennifer Moore, I will show that insider trading in all its forms is unethical.
The Issue.
Insider trading can be defined as the trading of material non-public information or the trading of securities while in the possession of material non-public information relating to the company that issues the securities. This is done predominantly for personal financial gain. Though not central to the discussion of this paper, it is important to understand that insider trading is prohibited by law by the Securities Exchange Commission in America and various provincial boards in Canada. The issue has been brought to light in recent years by popular media like the movie Wall Street and by the public legal processes of celebrities like Martha Stuart. Insider trading can happen with both negative and positive information. Not just talk of mergers, new acquisitions, higher than expected profits and innovative products can be used for potential personal gain. An impending lawsuit, faulty products or lower sales can also be traded on to either minimize potential damages as was the case with the Martha Stuart situation, but it is argued that this provides an incentive for employees to cause harm to the corporation.(Moore p 414).
Act Utilitarianism.
It is unclear whether or not the good consequences out weigh the bad without investigating each individual case of insider trading. However, I think it is possible to make some generalizations about the circumstances of people likely to engage in insider trading. To be an insider you must inherently be employed by a corporation.