business ethics
1. A drug company applied for the approval of the Food and Drug Administration (FDA) to market a miracle drug that the company believed could cure some cancers. During the period that the application was under consideration the company’s stock rose to $65 per share. The president of the company learned that the FDA application was about to be denied. You are a personal friend of the president, and he told you that he believed that the stock will start trading downward. You sell 4,000 shares of stock which you purchased for $10 per share. Your decision appears to be a good one since you made a profit of about $200,000. When questioned about the sale by an investigator from the Securities and Exchange Commission, you state that the sale was because of a preexisting arrangement to sell the shares when the price fell below $60 per share. Following the announcement that the FDA application was denied, the stock went to $7 per share.
- Did you commit a crime when you sold the stock?
- Did you commit a crime in your answer to the federal agent?
- Were you part of an illegal conspiracy?
2. You and two of your college roommates have discussed plans to open a restaurant. You intend to attract college-age students who are health- and fitness-minded to your restaurant. You and your co-owners agree that each will invest equally in terms of time and money. However, in addition to contributions made by each of you, another $700,000 is essential for the restaurant to succeed.
- What type of organization is best suited for this business activity?
- Who will manage the restaurant during times that you and your co-owners are not present?