In this chapter, we said that individuals investing in large corporations must rely on pub- licly available information when making their investment decisions. But some individuals may have more than just publicly available information. Consider the following situation.

Suppose you and your mom were playing golf with two of her business “cronies.”

While waiting to tee off at the eighth hole, one of them, the chief financial officer of her company, mentioned (“off the record”) that her company had just finished the development of a new product that would “blow the socks off” the health care industry. Although she was not at liberty to discuss the product (it won’t be released until early next year), she speculated that once the product was released, the company stock price would “skyrocket.” She also mentioned that she intended to purchase a large number of shares of the company’s stock (which is being traded on the New York Stock Exchange)

later in the day, and to sell them after the product was released.

WHOA!!! This could be an opportunity for you to invest the $2,000 your wealthy Aunt Bertha gave you for your birthday. Also, your boss, coworkers, and friends might like to know about this opportunity.

Required: (1) What are the relevant facts for your decision?

(2) Are there any ethical issues involved in your decision?

(3) Who has a stake in your decision (who stands to gain and who stands to lose), and how might your decision affect these stakeholders?

(4) What do you think you should do? Why?

(5) Do you see any ethical issues in the chief financial officer’s discussion and decision?

(6) Who are the stakeholders in her discussion and decision?

(7) Suppose that when you got home after the golf game, your mom asked you what you thought of the conversation at the eighth hole. How wouid you answer her?

(8) What do you think should happen to “level the playing field”? TK-1