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Anheuser Busch And Campbell Taggart Case Solution
Anheuser-Busch – a leading brewery – acquired a food company, Campbell Taggart, during the early 1980s. The acquisition deal led to accusations of insider trading. Insider trading is unethical and illegal because it gives an unfair advantage to some investors. The Security and Exchange Commission formulates rules for fair trade of securities and investigates cases of insider trading. The four deals were based on the non-public information shared by Thayer with his acquaintances. Also, they had not submitted a declaration form to the Security and Exchange Commission before the trade.
The ethical course of action for Paul Thayer is to admit to the charges of insider trading and file for a consent decree. By filing for the consent decree, Thayer will avoid a criminal sentence and will get away with a warning. Walter Su should file a case against the four insider traders. He is morally responsible for reporting a crime and for acting on behalf of Campbell Taggart’s shareholders.
Following questions are answered in this case study solution
Ethics & Insider Trading
Role of Security and Exchange Commission
Case Analysis for Anheuser Busch And Campbell Taggart
2. Ethics & Insider Trading
Insider trading poses a very strict ethical dilemma for the stakeholders of a business. There are numerous boundaries of business ethics that are blurred when insider trading takes place (Ali & Gregoriou, 2009). The regulations of insider trading have evolved dramatically during the last three decades (Macey, 2001). Anheuser-Busch acquired Campbell Taggart during the early 1980s (Sirri & Shakes, 1990). Anheuser-Busch was among the market leaders in the beer industry, while Campbell Taggart was a promising food company (Sirri & Shakes, 1990). The acquisition deal led to the emergence of accusations of insider trading. This case study analysis addresses the vital ethical dilemmas presented in the case.
3. Insider Trading
Insider trading refers to the act of buying or selling of a public company’s security based on non-public information. The security is generally a share of stock; however, it may also be a bond or a stock option (Austin, 2017). Insider trading is considered unethical and illegal because it gives an unfair advantage to some investors at the cost of others (Ali & Gregoriou, 2009). The sources of non-public information are the top management or the employees of the company (Macey, 2001). They may tip-off the information which has not become public yet. The data is expected to change the share price of the company giving the insiders an edge over other investors (Ali & Gregoriou, 2009). Insider trading is detrimental to the economy because it increases the cost of the capital to raise business (Klein, Dalko, & Wang, 2016).
4. Role of Security and Exchange Commission
The Security and Exchange Commission is an independent federal entity. The objective of this organization is to promote fair trade in the corporate sector (Macey, 2001). Security and Exchange Commission meets this objective by formulating rules for fair trade of corporate securities. Thus, this autonomous body plays a vital role in the economic growth of the country by developing the financial markets (Klein, Dalko, & Wang, 2016).
An essential element of SECP’s regulation is insider trading. If insider trading is proven, both the investor and the person who tipped the information are found to be guilty (Klein, Dalko, & Wang, 2016). A significant percentage of inside trading is challenging to prove. If the management, the employees, or their close associates trades the stock of a company, they need to submit a declaration form to the Security and Exchange Commission (Austin, 2017). The objective of this requirement is to promote transparency in the financial markets (Ali & Gregoriou, 2009).
5. Ethical Opinion
The ethical opinion of the two key stakeholders is evaluated in this section:
Paul Thayer – The ethical course of action for Paul Thayer is to admit to the charges of insider trading and resort to a plea bargain. Insider trading laws are in nascent stages in the 1980s (Klein, Dalko, & Wang, 2016). Even if a person admits to the charges of insider trading, the person does not receive a sentence for the first instance. Indeed, Thayer himself has not made any profit from the insider trading carried out by four of his acquaintances. Nevertheless, Thayer did tip off the information about the acquisition (Sirri & Shakes, 1990).
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