More big bad behavior from corporate America

Do you think the laws keep corporate executives from undeservedly enriching themselves at the expense of the public and their own shareholders? We already know about outright theft at Adelphia, fiddling with the books at MCI-WorldCom,. All of these were violations of laws intended to protect the public, and many of the perpetrators are now in jail.

But avarice will find a way. If you’re a CEO and you know bad news about your company is about to break, it’s against the law for you to sell stock in the company until the news is out. And even if you could sell your stock you could face a big tax bill for the money you’ve made.

It turns out you’re not helpless. While you can’t sell your stock you can hedge it by buying any of a variety of financial instruments that guarantee the hedger that he can’t lose much if the stock nosedives. Business Week reports that’s what top executives of Union Pacific, Krispy Kreme, and Pulte Homes (and hundreds of other companies) have done, pocketing billions of  dollars of unethical—but not illegal—gains among them. And they didn’t have to pay taxes on the unethical gains, although the IRS is trying to make them.

Where is the business ethics that we teach about in our universities? Where are the ethical CEOs and why aren’t they ringing the alarm about their fellow CEOs who are legally fleecing the public? Or are there somewhere? Ethicists and hopeful MBA students want to know.


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