Ethical Implication of Financial Decisions - Essay Example

Insider trading is trading of a company’s stock and other securities such as bonds and stock options by individuals who are related to a business (Vataliya, 2009). The individuals are assumed to have the means of accessing information that is not public that is directly related to the company. One of the most well-known insider cases today is that involving a TV tycoon Martha Stewart. She was accused of receiving inside information. Using the information Martha sold the shares of ImClone drugs a day before the United States Food and Drug Administration (FDA) denied the approval of the drug.

In some countries, trading by corporate insiders such as managers, large shareholders, and directors can be legal if the trading is done in ways that do not take advantage of information that is not meant for the public that would eventually be harmful to the confidence of the investors. However, insider trading presents unethical issues in most cases. First, insider trading is an unfair practice to honest traders. The method ensures that the information is only available to some shareholders, thus depriving others the opportunity to use the information to make the right investment decision.

Insider trading is also a breach of fiduciary and other relationship of confidence and trust. The practice goes against the property rights in any information and dealing in such information can be considered to be an abuse of property rights. Arguably, insiders have an ethical duty to act in the interests of the shareholders (Lussier, 2012).