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SHAREHOLDERS and BUSINESS ETHICS

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					SHAREHOLDERS & BUSINESS ETHICS

                     TEAM 5
CASE 1



Ethical issues in Corporate Governance


     A milk empire going sour
                  The company

 Parmalat is an Italian food group active in milk &

 dairy products and fruit-based beverages.

 Founded by Calisto Tanzil in 1962

 Company had 36000 employees in 2002

 It has operation in 30 countries with € 7.5 bn

 turnover
                   The turning point

 Overstated cash reserves by € 3.95 bn

 Understated debts by € 14.3 bn

 The European style corporate ethics scandal

 Parmalat defaulted on a $185 million bond payment in mid-
  November.
 The scandal began on December 19, when Bank of America
  revealed that $4.9 billion assets were missing
 Fraudulent offering $100 million worth of unsecured notes to
  U.S. investors
                       The flaws…

 Family influence- concentration of power

 Issues with the auditor- Grant Thornton

 A fraud account in Bank of America

 Good relationship with banks and its officials with
  overlapping positions
 Close ties with politicians

 Forged papers

 The board of statutory auditors
             Remedial actions taken

 Renewal of the whole corporate governance

 Reforming the legacy of the ex-prime minister

 New laws for corporate responsibilities

 New rules regarding corporate information

 New administrative and accounting procedures
CASE 2



WHO CARES WHOSE SHARES?
                   The Company

 PharmChemCo – A pharmaceutical and Chemical

 company

 Successful at the stock market
              The Problem Situation

 A special meeting to inform the top executives

 Lethal side effects in one of the best product

 An article against the drug was due in a magazine the

 following week

 The managers were urged to keep silent
                 The dilemma…

 Probability of share prices going down

 Decided to sell personal shares

 Freddie has invested heavily in the company

 He has also advised a lot of clients in investing in

 PCC
                The Ethical issues…

 Freddie might come to know from his contacts
 before the news reaches the media
 Freddie will sell his shares for sure

 He will also advise his clients not to invest

 The effect on the share price before the publication
 can be enormous
 To help Freddie or not?
                 Stakeholders

 Shareholders

 Employees

 Media

 Doctors

 Pharmacists

 Public/Consumers
                    The decision…

 Decide to keep information to self

 Prove to be loyal to the organization

 Do not indulge in insider trading

 Save oneself
                 The Difference…

 Unethical Practice

 May result in chaos

 Adverse effects on the reputation of the organization

 Insider Trading
CASE 3



 The Norwegian Petroleum Fund
 Keeping the Nobel Prize sponsors Nobel
                    Introduction

 One of the largest oil exporter in the world

 0&G contributed 18% to the GDP

 More than a quarter to the annual budget

 The NPF- Norwegian petroleum fund

 Biggest single fund
                     The issue

 Investments in a Singaporean company producing

 antipersonnel mines

 Nobel peace prize to Jody Williams-International

 prohibition of landmines movt

 Actively   supporting companies which the govt
 disapproved of
             Arguments against NPF

 Investing is taking risk with respect to the future
 generations
 Proper tools should be used to tackle political issues
 and not NPF
 High burden of administrative cost

 No   agreed international standards for ethical
 standards
                 The success story

 Public in full favor of ethical guidelines for NPF

 Ethical guidelines led to disinvestment

 Nuclear energy entered the black list which led to
 more disinvestments
 Initial fears about the price of an ethical approach
 were disproved
 NPF outperformed
THANK YOU