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Question 1

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In 2021, the U.S EPA concluded updates to the Cross-State Air pollution rule to assist areas affected by pollution created by power plants in other states. (E.,2021) EPA forecasts that the improvements will reduce toxic emissions in 12 states in the eastern US. Additionally, EPA’s forecast states that the reduction will avert about 290,000 asthma attacks, 560 hospital and emergency visits, and more. (E.,2021)

As a manager and someone in a leadership position, I believe the best approach to the situation described above is to do a significant amount of research before deciding. Stakeholders who would be in favor of installing additional controls are those who are wealthy, environmentally friendly or those in highly populated areas. (Rakowski,2020) Although there might be pushback from other stakeholders, I believe the right thing to do is focus on the health and safety of residents. Additionally, as a manager, my focus would be turned towards social responsibility. (Langvardt, et al., 2019) Social responsibility speaks to the importance of balancing the interests of stakeholders as well as investors, meanwhile taking into consideration the general public. (Langvardt, et al., 2019) Companies such as Airbnb who focus heavily on social responsibility have been successful in making both stakeholders, employees, and the public happy.

Installing the additional controls will come at a cost and will require a lot of research beforehand. To gain the approval of corporate executives, as a manager I would focus on pointing out all the harm and danger an inadequately regulated chemical could cause. Although that might seem like an obvious step, a utilitarian will choose this approach. A utilitarian focuses on achieving the highest level of satisfaction, and will only proceed should his acts benefit society. (Langvardt, et al., 2019) It is important to remember that a utilitarian focuses on society as a whole, although some of his actions may be harmful to some. (Langvardt, et al., 2019) While the installation will be expensive, it will be beneficial to society in the long run therefore and a utilitarian would be supportive. This approach would be the least harmful to society and will maximize human flourishing.

Virtue theory might also be applicable in the scenario above as it focuses on outcomes and penalties. (Langvardt, et al., 2019) This approach concentrates on the importance of individual and organizational character and requests that an individual know his values and how they relate to his habits and engagement with others. (Langvardt, et al., 2019) For example, a utilitarian might make the decision to install the controls as that will maximize overall well-being, however, a virtue theorist would focus on becoming a better person. (Langvardt, et al., 2019) It is important to note that virtue theory approaches ethical problems from a commitment to integrity and focuses on character development. (Langvardt, et al., 2019) As a manager, focusing on becoming a better person and helping others will be of the uttermost importance therefore virtue theory is something I might focus on. Installing the controls may be costly, however, it will assist me in becoming a more ethical person and will aid in my personal development.

Question 2

A company should not only practice Corporate Social Responsibility (CSR) but also practice Corporate Environmental Responsibility (CER). A company should set internal rules and regulations to help govern itself to be environmentally responsible. There are many laws and regulations in place that help with this and keep companies from excessive pollution. In the United States these are regulated by the Environmental Protection Agency (EPA). The EPA helps determine which sectors need regulating, what materials should be regulated, and enacting laws to help the environment. Two such laws are the Clean Air Act (CAA) of 1970 and the Clean Water Act (CWA) of 1972 (United States Environmental Protection Agency, n.d.).

            As a manager of a company that emits chemicals into the air, we would need to follow all regulations set under the CAA. The first priority would be to ensure we followed all laws and regulations correctly. Then if it was known that our sector was not as regulated as others and the regulations set by the EPA were not as strict as they should be. As the manager I would require internal testing to determine where these levels should be to be safe for the environment and people in the area. Push-back from executives and shareholders for taking extra measures above the requirements of the EPA could be expected. Regardless of the resistance, as manager I would continue to push forward with additional analysis and any extra processes in place to bring the emission levels to a range that is acceptable.

            There are several ethical theories that would agree with ensuring these levels are brought down to a more acceptable level. The Rights Theory is based around everyone having certain human rights. The focus is on each individual of society and their rights and you should not harm those fundamental rights (Langvardt et al., 2019). A rights theorist would argue that the controls and processes would need to be in place to ensure no single member of society would have their rights violated. The Utilitarianism Theory is based on the maximum utility for society as a whole. This would require someone to consider the effects of their actions to everyone in society (Langvardt et al., 2019). A utilitarian would argue that the controls and processes would have the greatest benefit to both the environment and society.

Question 3

Issue: During a cookout where Mr. Chen (the husband of CEO Judith Chen) spoke with Mr. Hastings regarding his wife and her dealing with her company New World Industries.  During this conversation and after receiving a phone call from his wife, Mr. Chen encouraged Mr. Hasting to invest in New World Industries first thing Monday morning.  This was after he received information from his wife (Judith Chen) and sharing information about confidential company information.  After receiving this news, Mr. Hastings then shared this information with Mr. Daniels and made an agreement that Mr. Daniels would pay Mr. Hastings 5% of his profits after investing in New World Industries. As we see in the video, New World Industries profits increase nearly 30% after opening on Monday. 

Rule: The information that was discussed is categorized as insider trading; Mrs. Chen shared critical company information with her husband.  Mr. Chen then shared this same information with Mr. Hastings, although no specific were given as to the information discussed. The act of sharing information regarding the resolution of an issue for the company can be deemed as insider information. As the CEO of New World Industries Mrs. Chen falls under section 16, since she is an officer of a corporation having equity securities (Langvardt, 2019).  Mrs. Chen violated her fiduciary duty by sharing critical and confidential information with her husband, as the CEO she is responsible to ensure that confidential information is not leaked or used for benefit.  

Application: Under rule 10b-5, Mrs. Chen committed insider trading, as the CEO she is entrusted with corporate information for a corporate purpose for keeping the information confidential (Langvardt, 2019). As the tippor she gave information to her husband the tippee who then shared this information with Mr. Hastings.  Mr. Chen and Mr. Hastings are considered the tippee as they are friends or relatives to the tippor. This information allowed Mr. Hastings and Mr. Daniels to profit from nonpublic information.  When Mr. Hastings shared this information with Mr. Daniels and agreed to receive 5% from the profits that Mr. Daniels made, this constituted insider trading. To prove insider trading the government must prove without a reasonable doubt that the tippee knew that an insider disclosed confidential information and he did so in exchange for personal benefit.  In the case of Mrs. Chen since she did not receive any personal benefits, she did not commit insider trading, however, she did violate her fiduciary duty as a CEO. Mr. Hastings, however, did commit insider trading, he used the confidential information that he received from Mr. Chen and gave it to Mr. Daniels in exchange for 5% profits returned this is a personal benefit according to section rule 10b-5. 

Conclusion: Mrs. Chen and Mr. Chen did share inside information but cannot be convicted of insider trading as neither received any benefit from the confidential information.  However, Mr. Hastings can be convicted as he shared this same information but did receive a personal benefit from Mr. Daniels in the form of 5% of profits made. 

Question 4

 Issue: Steve Chen attended a cookout and, while there, took a call from his wife, Judith Chen, the CEO of New World Industries. While Steve was on the phone Ken Hastings and another guest discuss who Judith is and her company’s patent lawsuit issues. When Steve comes back from talking with his wife, he explains how she is pleased about solving a big issue at work. After this, Ken asks if Steve has any good stock tips for him, and Steve mentions it wouldn’t be a bad idea to buy stock for a ‘certain company’ as soon as the markets open on Monday. Later while playing tennis, Ken mentions to his partner, Tim Daniels, about the stock tip and asks for a 5% finders fee based on the paperwork he had with him. Both Ken and Tim buy stock in New World Industries, which sees a 30% increase after the announcement of the patent lawsuit being taken care of.

Rule: Section 16 of the 1934 Securities Exchange Act deals with investor confidence in the securities market by limiting the ability of insiders to profit from trading. Section 16(b) deals with preventing an insider from profiting from short-swing sales dealing with their company’s stock. Additionally, Rule 10b-5 prohibits insider trading based on nonpublic information (Langvardt, et al., 2019).

Analysis: According to Rule 10b-5, insiders are anyone who is entrusted with corporate information and has a reason to keep the information confidential. The only person who had this level of information was Steve’s wife, Judith. No one else could be considered an insider. Judith did have knowledge of specific corporate details that needed to be kept confidential. So Judith would be regarded as an insider.

Judith would also not be considered a tipper. She was expressing her happiness, and she was on her way home to her husband, Steve. Since he did not take this information and profit from it, he would not be classified as a tippee. Steve did, however, share this information with Ken. When Ken asked about any stock tips after this, Steve did mention it would be a good idea to buy from a certain company. This would make Steve a tipper of information he gained from Judith. Ken would be classified as both a tippee and tipper as he received information from Steve and passed along information to Ken after their tennis match. Ken benefited from purchasing the stock before the news was announced. Ken would be classified as a tippee as he only received the information and benefited from the purchase of stocks.

 Conclusion: Based on the information, none of the people involved would be liable for insider trading. Judith was the only person that could be considered an insider, and she only expressed happiness. She did not breach her fiduciary duty to her company with any know information she passed along to her husband. Both Ken and Tim are liable to tipper/tippee rules and are subject to having their profits recovered based on information they received.

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