In general, ethics is a system of moral principles. They affect the way people make decisions and lead their lives.
Every year, as shown by the figure, fraud of corporate costs billions of dollars, which resulted in the collapse of the companies in Italy, the US and Australia. According to Dr. Rushworth Kidder, this can be stopped if code of ethics is followed by all the companies. The ethical position or obligations of Rob can be described with the following characteristics of ethics as given by.
Being Honest and Showing Integrity: Rob should show his honesty and go against the company about the false data. He should report the real financial position about the information and the information about the drugs. By doing this, he is showing his integrity.
Loyalty: Rob should be loyal to the patients and also to himself. Though management have been manipulating the data, he should show the real position of the company and the real fact about the drugs.
Being Fair: Rob should highlight the fair financial position of the company. He should be fair to the patients no matter what the management have been doing.
Accountability: Rob should also consider his future actions if he tries to hide the information and should be accountable to his own actions. He should be ready to face any actions because of his faulty behaviour.
Responsibility: Rob should also comply with the laws of the accounting and also be responsible to the community and the patients as a whole.
Respect: In terms of this, Rob should show some respect to everyone. In our case, Rob should be respectful for the patients and the society. He should tell about the fact of the drug.
But Rob might show unethical behaviour due to some reasons as mentioned by Josephson:
1. Protection of Self: Rob might show unreal financial condition of the company to save his job. In fear of losing the job, he might hide the real information.
2. Faulty Reasoning: Rob might not estimate the costs correctly due to fear of losing the job and he might show the fake information and success to the patients.
3. Self Indulgence: Rob might also think that he is working for the company and show fake information whereas when he does that, it will be for his own benefit.
Not only this, there arise the question of ethics and accounting. If Rob is seeking for short term profitability, he may not seek to show the ethical behaviour. Also as mentioned by agency theory, Rob might try to align the interests of managers and shareholders. Looking at this as well, for the sake for management’s best interest, Rob will be willing to engage in the unethical behaviour and misinterpret the success of the drug to other patients. Though he knows that he is involving in unethical behaviour, for the sake of management he will be forced to do that.
Insider Trading isn’t about who is on the inside, it is about what comes from the inside and how it is used.
Australian insider trading law prohibits any person or corporation from trading in securities while in possession of sensitive and non public information. There is strict law in Australia for insider trading where the maximum penalty is 10 years and or fine upto $450000.
Regarding the legal implications, this can be discussed in two sections. One about the legal actions to the company for the unethical practices and another legal actions for insider trading.
The Big Pharma has been conducting the faulty and unethical business misleading the patients with supplying the CR45 drugs as good measure but now it has resulted in loss of lives of many patients. The authorities are conducting the investigation in the company for its bad practices. After detail findings by the authorities, the company might be charged with hefty fine and the business might also have to be shut down. Not only that, the information given by Rob to his parents, this involves the insider trading which results in Rob being penalised.
There are lots of examples where these types of unethical business practices are being conducted and the legal actions are taken against them as well.
We can take example of BHP and its company OTML, which operates in mining business, conducted the operation near Mount Fuliban for copper and gold mining even though the geographical situation was unstable and in result the construction of dam was collapsed resulting in loss of millions. The landowners filed a $4billion action against them in the Supreme Court of Victoria for damages and compensation. Even in Brazil, due to negligence of the company, the dam erupted resulting in huge loss of property and loss of lives of the people.
Another example can also be highlighted where car manufacturer, Ford hid the information about the gas tank fire and tried to solve it by using various temporary measures and kept on selling its product ‘Pinto’. Despite poor product safety and to save the brand image, ‘Pinto’ were sold in the market. But ultimately there were many deaths occurred due to use of that car. The company was charged with millions of dollars fine by the court.
In case of Rob, his parents have got the inside information about the negative impact the company might face due to the investigation, which will lead to decrease in share price of the company. The information was not made public yet. Hence their decision to sell the shares owned before the announcement is called insider trading where the parties use the non-public information solely for the personal profit.
We can also discuss lots of example where there are legal actions against the insider trader. Recently, the partner of Ex KPMG has been accused of leaking information and involved in insider trading and has been fines $125000 and also banned him from practising as an accountant or auditor. Hence, Rob will also consequently face the same result. Also, recently in Australia, there is another example where the Sydney IT consultant has faced the three years sentencing for insider trading.
Hence, with so many strict rules against insider trading, Rob will definitely be facing the charges for leaking the information to his parents and acting as an insider trader. Furthermore, he will lose his license to work as an accountant in the upcoming future as well.