Question

1. What responsibility does a corporation have to its customers? To the general public? to society in general?

2. How are insider trading and misappropriation related?

3. What are the benefits and potential pitfalls (including the ethical ramifications) to downsizing?

Answer 1

1. An organistion is responsible for whatever service / product it provides to the customers. It means, that the product /service should be competitively priced and should have reasonable level of quality in all those products /services. Moreover, the products / services should be of value for the customers and should comply to the applicable laws of the land. They should be safe to use and fit for the purpose they are intended. For general public, the company's products should be safe for all, offensive to none, and should be aimed for greter common good. For society, the products / services should be value enhancing, environmentally friendly, should consume lesser resources and promote sustainaibility. The production / distribution system of such products / services should be ethical in nature, and conflict free.

2.Misappropriation theory suggests that anyone who has inside information of the company, uses such information ( which so far is not available to the public, and the person has access to it owing to his /her insider status) to trade in securities in such a way so as to cause potential harm to the company for personal gains, commits fraud by breaching the fiduciary duty he /she owes to the owner of the information, and is likely to be liable for it.

3. Benefits of downsizing are greater utilisation of resources, lowering of employee cost, which might help the company to improve its productivity and cost effectiveness, and optimisation of resources. all these initiatives help to improve competitive advantage for the company.

The disadvantage is the lowering of employee morale, violation of ethical obligation of ensuring of well being of employees, deteriortation of public image of the company and lowering of overall ranking of the business among the peer companies.