Introduction to Business
OER 2018 Edition
ISBN: 9781947172548
Author: OpenStax
Publisher: OpenStax College
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Textbook Question
Chapter 16, Problem 1EA
In late July 2017, senior management at Equifax. a U.S. credit-reporting company, discovered that hackers had stolen the personal data of more than 145 million U.S. customers, including names, birthdates, Social Cecurity numbers. and driver's license information. In addition, the hackers stole credit card information for more than 200,000 Equifax customers.
If that weren't bad enough. reports soon surfaced that three top executives, including Equifax's chief financial officer, sold close to $2 million in shares of company stock days after learning about the breach and more than a month before the company announced the data hack publicly. In a company statement, Equifax says the executives "had no knowledge that an intrusion had occurred at the time they sold their shares." The day after the company's announcement about the breach, Equifax's stock dropped by double digits, and the Department of Justice opened a criminal investigation.
Less than three weeks after the public announcement, Equifax announced its CEO, Richard Smith, would retire, taking a multimillion-dollar payout with him-even after shareholders lost more than $5 billion in stock value after the data breach was acknowledged.
Ethical Dilemma: Is it legal for company executives to sell stock shares for financial gain when they know
Expert Solution & Answer
Summary Introduction
To determine:
Whether selling shares for financial gain is considered as legal for the company when they knew the company details were hacked but outsiders.
Introduction:
Ethical in business terms means what is professionally acceptable which includes morality and ethical issues which may arise in a business environment. Ethics applies to all the aspects of business products or services and if a company is not bound to those ethics it will have to face major regulatory breach problems.
Explanation of Solution
It is not legal for the company executives to sell stock shares for financial gain after knowing the company details were hacked but outsiders. This is not ethical, as it is a sign of deceiving the shareholders and stealing their money without letting them know about the real situation of the company.
Besides this, the CEO of the company had taken an amount of money before retiring which will bring up major issues that the company would have to face. It will bring up fraudulent laws and so on as it was not an ethical move.
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Chapter 16 Solutions
Introduction to Business
Ch. 16.1 - What is the role of financial management in a...Ch. 16.1 - How do the three key activities of the financial...Ch. 16.1 - What is the main goal of the financial manager?...Ch. 16.2 - Distinguish between short- and long-term expenses.Ch. 16.2 - What is the financial manager's goal in cash...Ch. 16.2 - Describe a firm's main motives in making capital...Ch. 16.3 - Distinguish between unsecured and secured...Ch. 16.3 - Briefly describe the three main types of unsecured...Ch. 16.3 - Discuss the two ways that accounts receivable can...Ch. 16.4 - Distinguish between debt and equity.
Ch. 16.4 - Identify the major types and features of long term...Ch. 16.5 - Compare the advantages and disadvantages of debt...Ch. 16.5 - Discuss the costs involved in issuing common...Ch. 16.5 - Briefly describe these sources of equity: retained...Ch. 16.6 - Distinguish between primary and secondary...Ch. 16.6 - Describe the types of bonds available to investors...Ch. 16.6 - Why do natural funds and exchange-traded funds...Ch. 16.7 - How do the broker markets differ from dealer...Ch. 16.7 - Why is the globalization of the securities markets...Ch. 16.7 - Briefly describe the key provisions of the main...Ch. 16.8 - How has the role of CFO changed since the passage...Ch. 16.8 - Describe the major changes taking place in the...Ch. 16 - In late July 2017, senior management at Equifax. a...Ch. 16 - What issues should executives of a company such as...Ch. 16 - How else could Blue Apron have raised funds to...Ch. 16 - Use a search engine and a site such as Yahoo!...
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