Question

You are an assistant controller for a public company C. During the emergency meeting of upper management, you have learned that a major multi-year contract bid, which would account for approximately 20% of next year’s profits, was awarded to a competitor. This will drastically lower the anticipated earnings per share.

As your parents have purchased a large amount of shares of the corporation to fund their retirement, you wonder if you should tell them about the share price - it will drop in the next few days as news of this lost contract becomes public.

** Write down at least five ethical issues you are facing, and What is the appropriate procedure to deal with? What action should you take?

Answer 1

Solution:

Five ethical issues that are being faced along with the appropriate procedure to deal with are:-

• Material Non Public Information
  • Procedure: The information provided is very material and non public and should not be ever utilized in any manner.
• Loyalty, Prudence and Care.
  • Procedure: Care must be taken not to take any undue advantage of the material non public information at confidential meetings.
• Fair dealing
  • Procedure: Parents are not a client and should not be given any favors such as these.
• Preservation of confidentiality.
  • Procedure: The information about the company should be preserved i.e. though not disclosed to anyone but any action in the shares would signal a significant action and may lead others to react accordingly.
• Loyalty towards an employer.
  • Procedure: In order to ensure complete loyalty towards the employer any confidential information should not be taken benefit of either for any monetary compensation or for any decisions that would lead to any unrealized gains.