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Mains Daily Question
Nov. 17, 2023

Q2.   

You are a commerce graduate and have prepared for government exams for years. On being unable to crack a government job, you have given up and taken a job in a private company. The job comes as a relief after years of struggle and thus is of utmost importance to you and your family. The company offers financial advice to its investors/customers and enjoys a good reputation in the market.  

The company seems to be generating very good returns for its investors/customers. Lately, you’ve been asked to study the profile of certain stocks and analyse their performance. This report could very well become the criteria for your promotions. On analysing these stocks, you found that the stocks are of good companies which have sound fundamentals. Before you submit your final report, you’ve been approached by a person who happens to be working in one of the companies you analysed.    

 

He offered you some confidential information. You are stunned but this information could be used by your company to generate profits for your investors. However, this information could be detrimental to the company if it comes out in public. The person, in return for information, asks for a job in your company and a meeting with the top executive. You asked for some time before arriving at a decision.   

 

On enquiring further, you came across certain facts which makes you uncomfortable. Your company is performing good because it has good connections with top executives of some companies which passes insider information to it. This helps them to beat competition and generate a good return on investment. Neither the company nor the its privy group finds any wrong in this.     

 

  1. What are the ethical dilemmas present here? 
  1. What are the options available to you under the given situation? Critically examine all the options listed by you. 
  2. What course of action will you choose and why? 

(250 words, 20 marks)

Model Answer

Approach:

Introduction 

You need to introduce the answer by giving a short description of the case in hand and briefly mentioning the core theme of the case study. You can also mention facts like (w.r.t. core theme) like the famous cases dealing with insider trading such as Rakesh Agarwal v/s SEBI, Hindustan Unilever v/s SEBI etc. Mention all the stakeholders involved, alongside facts w.r.t. case and aims/objectives assigned to you.  

  

Body 

The body section should be divided in the following sections i.e.,  

Section 1: You must enlist various ethical dilemmas concerning the case study.  

Section 2: Talk about all possible options available to you (along with merits and demerits). The options available here would be – avoiding the advice, acting on the advice and making professional or personal profit or taking measures to address the problem holistically. 

Section 3: This must be followed by your chosen option and Course of Action (CoA). Justify your CoA.  

Conclusion  

Here we can conclude either by summarizing the arguments of the body section or by stating the ill impact of insider trading, ethical dilemma arises and skills a bureaucrat must possess to counter them.   

 

  

Answer: 

Here I am working with a financial company which offers financial advice to investors. The unethical practices adopted by the company amounting to insider trading is presenting a dilemma in front of me of whether to choose the organization’s practice and see personal/professional growth or uphold righteousness and suffer. The practice of using illegal means to generate profit has been witnessed in India in corporate scams like Harshad Mehta Scam, Rakesh Agarwal scam etc.  

  

Stakeholders Involved 

Facts of the Case 

Aim/Objectives 
  • Me as a commerce graduate working for a financial advisor company. 
  • Financial advisor company, engaged in insider trading. 
  • The person approaching me for personal gains in lieu of confidential information. 
  • The employees working in the company and the investors associated with the company. 
  • Society at large. 
  • Government exam failures and finally getting a job. 
  • Financial advisor company generating great returns for their investors. 
  • A person approaching me for personal gains in exchange for sharing confidential information of his former company. 
  • The revelation that the company’s primary mode of operation is based on insider trading.  
  • Listing ethical issues present in the case. 
  • Resolving the dilemma between personal gains and personal conscience.  

 

  

  1. Ethical Dilemmas Present
  • Personal Interest v/s Personal Conscience: After years of struggle finally getting a stable job v/s personal conscience which debars from continuing in the job.  
  • Personal Gains v/s Legal Validity: Getting promotion by submitting report and facilitating person’s meeting with superiors against reporting the insider trading matter (which is legally punishable) to regulators. 
  • Family’s interest v/s Personal Ethics: Family’s expectations w.r.t. job and stable life against personal ethics preventing me to support this insider trading. 
  • Good Corporate Governance v/s Illegitimate means of generating profit: The strong companies, who earn by following good corporate governance against a company indulging in insider trading and earning profits causes harm to the good companies. 
  • Transparency v/s Organizational Ethics: Going on to reporting the matter to regulators against following organizational norms of hierarchy and reporting the matter to superiors. 

  

 

  1. Options Available to Me –

Option 1 

Avoid the Advice and Resign: Here I would be avoiding the advice of the person i.e., not passing it to superiors and resigning from the job.  

  • Merits 

 
  • Demerits 

 
  • Personal Integrity: By upholding righteousness, I would be upholding personal integrity.   
  • Not Being Accomplice to Unlawful Activity: The matter discussed above is ‘insider trading’, which is an illegal act and thus by resigning I would be upholding law. 
  • Organization’s Interest: By avoiding advice I would not be harming the company which has good fundamentals and thereby upholding healthy competition practice.  
  • Against Organizational Norms: In private organizations, morality comes after profit and by acting against the organization’s interest I will be violating organizational norms.  
  • Personal Loss: After years of struggle, I finally got a job. Then giving up everything due to morality might disappoint my family and I might face financial and stability problems. 
  • Veracity of Information: The lack of authenticity w.r.t. information might have a negative impact on the retail investors of my company. 
  • Professional Repercussions: I might be negatively projected by the company and thus I might lose job opportunity elsewhere. 

 

Option 2
Acting on the Advice and Informing Superiors: Here I would be passing on the information to my superiors.   

  • Merits 

 
  • Demerits 

 
  • Organizational Norms: I will be acting in my organization’s interest and pass on the information which will help it perform better economically.   
  • Personal Growth: I might get promoted for helping the company gain financially and thus, it may lead to economic prosperity and stability in my life.   

 
  • Against Personal Integrity: Personal conscience might not permit indulging in an unlawful activity and thus I would be violating personal integrity.  
  • Veracity of Information: The lack of authenticity w.r.t. information might have a negative impact on the retail investors of my company. 
  • Unlawful Activity: Working for the organization and benefiting from an unlawful activity might give me short term rewards but in the long term I might get apprehended by law.  

 

Option 3 

Approaching superiors to get clarity regarding the situation and then act accordingly. If the information regarding the use of unethical means is true, I will resign and if not, I would avoid the matter altogether. 

  • Merits 
  • Demerits 

 
  • Personal Integrity: Without conscience approval, I cannot prosper and thus, by resigning and reporting the matter, I would be upholding personal integrity.    
  • Clarification: Instead of jumping to conclusions without proper knowledge, confronting superiors on the same would help me get clarity and decide rationally.    
  • Lawful Action: The law of the land is supreme and any act that hurts innocent civilians should be reported. 
  • Acting Holistically: Instead of merely resigning, I would be reporting the matter which will address the problem holistically.      
  • Personal and Professional Loss: Financial issues, lack of stability in career, unemployment, family disappointment etc. are some problems that I might face. 
  • Organizational Norms: I have violated official secrecy and confidential functioning of the organization. This might prevent other organizations from employing me. 

 

 

  1. I would be choosing option 3 and following would be my course of action–
  • First, I will approach my superiors and tell them about the incident without disclosing the necessary information. 
  • I would clarify with them if indeed what I came to know from my sources is true or not. If not true then I will forget the incident but if it is true, then I would resign. 
  • I would report the matter to SEBI as indulging in insider trading is illegal and the innocent investors (not aware of confidential information) suffer. This would also protect me from getting reprimanded in future.  
  • On the personal front, since I have subjective knowledge and little experience, I would apply for other suitable private jobs.  

 

The above-mentioned measures would help in resolving the dilemma and tackling the problem of insider trading. Insider trading impacts not only innocent investors but also impacts society on a wider scale by killing healthy competition. 

Subjects : Ethics
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