Professional Practicum & Graduate Seminar
The
Guiding Light
Peter Cheng Chung Man (Student ID# 48754)
Date: 4th June, 2005
Stock trading is a fast and
competitive business. Situation can change within minutes and results in
trillions. Setting off chain reactions which not just affect the investors, but
also shape the atmosphere of our society, change the lives of the common
people.
As the world’s leading trade
centers, both Wall Street and Hong Kong, they both have comprehensive rules and
regulations to serve and protect their trade deals. Legislations which in their
own views, fair and competent, sufficient to provide non-discriminatory and
transparent trades within their markets.
As the trade markets grow larger, more rules
and legislations will be implemented. However, will these really protect the
ones which they intended? “You must know all the rules properly, so you can
break them properly”[1]
Laws are too often used or abused by people who know how to use them, since
there are always ways to get around regulations legally. (A classic example,
Euron, which was mentioned in the case study) Therefore another set of
boundaries is needed besides the word “Laws”.
“Ethics” should comes
into play, especially to the people who’s decisions can affect the
markets.
1. Chairman Mr. X of a Hong
Kong listed company, broadcasted via media that his company would have 10%
increase in net profit without auditor’s verification. This already breached
the requirements of The Securities and Futures Commission (SFC), which is the
regulatory body of the Hong Kong stock market. As a result, his company had to
justify his comments as “his own opinion” the next day to avoid any future
legal liability. However, his actions might have already affected the stock
price.
2. Chairman Mr. Y of another
Hong Kong listed company, also broadcasted his company’s three year profit
predictions to the public. However, it is considered to be completely legal and
appropriate since Mr. Y made full use of the “three year prediction” clause which
is stated in the requirements of the SFC.
3. Company Z organized a
private meeting which announced their stock price affecting information.
However, company Z cannot be convicted since those ones who received the
information (which may leads to benefits) would not come forward to stand
trail.
These cases circle around
three different situations on the subject of “should price affecting
information of stocks allowed to be broadcasted in Hong Kong?” However, all
three companies announced information via different methods yet all
successfully avoided any legal responsibilities. Therefore ethical frameworks should be introduced to explore,
analyze and justify their actions.
The actions of Mr. X or Mr.
Y (hence Mr. Y is only using a legal loophole in the system) are considered to
be “wrong” to many people, since these actions also have already affected their
companies’ reputations and the general public’s
interest. However, by using Egoistic
Hedonism’s Cyrenaicism which argues that “My pleasure is the highest good”,
then their actions can be considered to be totally acceptable. Since Mr. X’s
and Mr. Y’s intentions might be to gain monetary benefits, or just simply to
publicize the fact that they have the power to broadcast important information
to satisfy their own egos.
Moreover, if a Basic
Teleological framework is used which based on the arguments that “anything
that result in over increase in happiness is a good thing”, then all Mr. X’s; Mr.
Y’s and Company Z’s behaviours are entirely suitable. Since making profits for
their companies or for themselves will increase their happiness. Furthermore,
they can be auxiliary supported according to Milton Friedman’s theory “there is
only one social responsibility of business; which is to use its resources and
engage in activities designed to increase its profits.”
On the other
hand, if Utilitarianism is
used to analyze the cases of Mr. X; Mr. Y, and Company Z, their acts are
immoral since it only leads to the benefits of a small population which are
simply the shareholders or investors who can access these information before
the stock prices go up, and not the general investors. (Hence the general
investors could be buying stocks more than they should pay for after the prices
have gone up because those information might not be accurate).
“Given that Utilitarianism
is a theory based on a moral principle that holds that the morally right course
of action in any situation is the one that produces the greatest balance of
benefits over harms for everyone affected. According to utilitarianism, the
ethical action is the one that provides the greatest good for the greatest
number.”
Then how about if these
cases are looked at in a boarder aspect? In the aspect of the whole stock
market system. Based on the theory of Universality Argument, “Act in
such a way that the subjective principle can become a universal law”. If all
listed companies abuse the system and broadcast faulty information about their
profit predictions, then the stock exchange system will collapse since no one
will trust any values of any stocks.
In spite of all the consequential and deontological ethical
frameworks used above to analyze these cases, what if all are to be ignored and
just simply focus on the basic Virtues as human beings. E.g. Chinese’s
Daoism or Ancient Greek, Plato’s four Cardinal Virtues which states that all
should have Fortitude; Temperance; Justice with fairness and honesty and
Prudence. Then their actions can be considered as sinful, especially with the
cases of Mr. X and Company Z. In views of the facts that their broadcastings
were done without temperance nor self-control; without fairness or honesty for
the public; and total recklessness in the sense of lacking consideration for
the health of the stock exchange system as a whole.
To broadcast or not to
broadcast? This question seems to be the focal point of this case. And
supposing-ly, an answer is to be generated after in this conclusion, or is it?
However as we can see, there are always ways to get around regulations legally,
as all cases avoided committing any offenses. Even with ethical frameworks
analyses as excised above, there were to be two sides of the story for each
situation depending on the ways a person exploit or manipulate these so called
ethical frameworks.
So what is the conclusion as
I question myself after these extensive analyses? As United States and Hong
Kong, both as the world’s leading stock markets already have opposite standards
and views on this matter, so can there be a correct or incorrect answer in
these cases? Moreover, who am I to comment the right or wrong of another
person’s ethical believes based on my own ethical views?
Nevertheless, I do believe
that every human being should have an ethical believe to follow. Although
everyone else might not agree with it, at least it can act as a guild line to a
person. Moreover, as one’s power and influential capability increase in the
society (as were the cases of Mr. X and Mr. Y), this person owes this society
and other beings greater responsibilities. Therefore such person should
acknowledge the importance of ethics, try to adopt a set of ethical or
religious believes to follow in order to maintain a balance and harmony within our
society.
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