Critically Analyse Insider Trading Using Kant’s Universal

PLS 3701

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Critically analyse insider trading using Kant’s universal

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principles/value-based approach to ethics to exemplify your views.

Table of Contents:

Page

1 Introduction 2

2 What is insider trading? 2

3 Ethical issues surrounding insider trading 3

4 Kant’s Universal Principles 3

6 Conclusion 5

7 Bibliography 6

Introduction:

In recent years we have seen many high profile scandals regarding insider trading. Movies have been made surrounding this glamorised white collar crime and while the lives of many others have been changed due to the greed of a few people who were entrusted to act in the best interests of others. But is insider trading really ethically wrong? Do insiders really have a moral obligation to the people they are acting on behalf of? Below we will look at this relationship and the ethics surrounding insider trading with reference to Kant’s universal principles approach.

What is insider trading?

According to Wikipedia, “Insider trading is the trading of a public company’s stock or other securities such as bonds or stock options by individuals with access to non-public information about the company.” The individuals referred to above are called insiders, these are usually people working within the company who have access to information that the public doesn’t and this information can be used to profit the beneficiary. These individuals are referred to as ‘insiders’ and include corporate officers, key employees, directors, or significant shareholders with access to information not made public about securities. This is a very extensive definition because even though it says insiders could be guilty of insider trading, in actual fact any person even (closely related) to the insider who has access to the non-public information and acts on it could be guilty of insider trading.

It seems that there are no set rules for what actually classifies the criminal offence of insider trading and the rules differ extensively from country to country.

Ethical issues surrounding insider trading

As mentioned above, illegal insider trading has been a hot topic in recent years as more and more high profile cases come to surface. It is not as simple and obvious as it seems with arguments on both sides emerging. It is a complex matter but really comes down to simple principles.

If we look at this from a purely business point of view it (in a way it makes sense and) doesn’t seem too harmful. Business in essence exists to generate money (income) but is this making money for a few at the expense of the many taking it too far? As Carey (2014) points out, to counter this argument, “When investors have little faith in the markets and they don’t invest...” (because of lack of funds or confidence) it can have relentless effects on the market which could last years and even cripple a country.

Insider trading also violates the duty of trust that an individual entrusts to him/her. But we’ll discuss that later.

Kant’s Universal Principles

Insider trading has a definite moral aspect to it. Does insider trading go against moral decision making? And if so, to what extent is the damage and what criteria do we use.

Firstly let us look at Immanuel Kant’s approach to ethical decision making. Kant stated his categorical imperative in two ways:

* Firstly: an action is morally right for a person in a certain situation if, and only if, the person’s reason for carrying out the action is a reason that he or she would be willing to have every person act on, in any similar situation (Velasquez.2002:97).

* Secondly: An action is morally right for a person if, and only if, in performing the action, the person does not use others merely as a means for advancing his or her own interests, but also both respects and develops their capacity to choose freely for themselves (Velasquez.2002:99).

If we look at the above statements we can see that they both come to the same conclusion which in very basic terms is the old biblical saying, “do unto others as you would like them do unto you.” It is a very universal outlook and doesn’t leave much room for innovations or interpretations with a similar undertone to that of religious teachings. What Kant ultimately says is that if you allow certain behaviours such as stealing, lying or cheating, then you in return will have no problem in people acting this way towards you as you believe

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