Reference no: EM133033544

Critical Thinking Questions

Rajat Gupta and Insider Trading

1. Research suggests that different countries have different perspectives on insider trading. Gupta and his friend, Kumar, were originally from India; Rajaratnam was from Sri Lanka. An aspect of their willingness to engage in insider trading might be rooted in their culture of origin. Does this information alter your perspective on the conduct of the three? Would it make them somehow less guilty of the crime? Explain.

2. When Gupta's case went to trial, over 400 people wrote letters to the judge attesting to his good character-among them Bill Gates and former UN Secretary Kofi Annan. That said, Gupta's business partners in his New Silk Route private equity venture had received penalties from the SEC before their involvement with him for dubious business dealings. Is this simply a case of poor selection of friends, or was something else going on with Gupta that, though undetected for years,culminated in his shady business dealings in the later years of his life? Explain. If it is true that bad company corrupts good character, how might you effectively use this information as you select friends and associates in the business arena?

3. Illegal insider trading is considered an ethical issue, in part, because it involves fair play and justice. Some research indicates that there is no one particular profile for those willing to engage in illegal insider trading, but other research using simulation testing suggests that individuals with lower ethics scores are more likely to engage in illegal insider trading. If both studies are true, what does this suggest about building an ethical organization? With these studies in mind, what workplace practices might you consider endorsing?

4. If it is true that the use of insider trade tips from friends is difficult to detect and that those who get charged with insider trading seem to bounce back in society fairly well (e.g., Michael Milken, Mark Cuban, Martha Stewart), is it worth it, in your opinion, for our regulatory agencies to seek out illegal trading activity and to prosecute violators of these laws? How do you rationalize the great expense involved in these search and prosecution efforts if the criminals seem to suffer no lasting ramifications from these crimes?