Tommy Gunn is a division manager for K-Cern Inc., a small pharmaceutical company. Tommy's
division has been working on a new drug that has the potential to revolutionize the treatment of
skin cancer. Once the drug is proven to be effective in clinical trials, it will be approved for sale by
the government and patented by the company. Because of the potential market for this drug, it is
highly likely that the company's revenues and net income will increase significantly when it is
approved. Tommy recently saw an internal company memo indicating that the drug passed its
final clinical trial and that the company has received government approval to sell the drug. The
company will issue a press release announcing this news in the next two days, and this
announcement is expected to result in a dramatic increase in the company's stock price. Tommy
knows that there is "free money" to be made if he invests in the stock before the announcement
is made. However, K-Cern has a strict policy against employee purchases of company stock
outside of established employee stock purchase plans. To get around this rule, Tommy asks his
father to purchase the stock for him. The next morning Tommy's father purchases the stock with
the understanding that he will split the profits with Tommy.
• Is Tommy behaving ethically? Why or why not?