RES 351 Week 2 – Individual - Business Research Ethics
RES 351 Week 2 – Individual - Business Research Ethics
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Date Created: 11/07/15
Business Research Ethics 1 Individual Business Research Ethics Resources The University Library or the Electronic Reserve Readings Find an article using the University Library or in the Electronic Reserve Readings that discusses unethical business research conduct that has resulted in individuals or a firm being convicted or at least tried for this conduct Some examples include the following Asking inappropriate questions Skewing research results Failing to maintain participants con dential information Using participant information for unintended purposes such as selling goods or services Summarize the article you researched Write a 750word paper in which you address the following questions What unethical research behavior was involved Who were the injured parties How has the unethical behavior affected the organization the individual and society How could the unethical behavior be avoided or resolved Format your paper consistent with APA guidelines Business Research Ethics RES351 May 5 2014 Business Research Ethics 2 Business Research Ethics Citigroup Inc providing financial assistance services to both corporate and consumer level customers is an expanded global institute for financial services There is a division of three segments of business among all of Citigroup s financial services Corporate and Investment Banking Global Wealth Management and Global Consumer There are many brands to Citigroup s name These brands include Citi Citibank Citistreet Primerica Salomon Smith Barney SSB CitiFinancial and BanameX There is a legacy of more than 200 years behind Citigroup involving success and innovation However Along with this great success there have been numerous investigations legal settlements and corporate scandals Eliot Spitzer New York State Attorney General initiated an investigation in 2002 regarding the investment banking practices of Citibank and the con ict of interest problems possibly associated with those practices In 2003 the investigation found a resolution and finally settled The outcome of the resolution and settlement was for 400 million to be paid and for Salomon Smith Barney SSB to implement a series of reforms and to make necessary corporate changes Unethical Behavior Many of Wall Street s top securities firms were accused of misleading investors Citigroup Inc was among them The research divisions of the securities firms performed the misconduct Knowing that the stock was not a good buy biased research was used by the analysts in order to sell the stock for a profit Fearing the backlash from investment Business Research Ethics 3 bankers the legitimate research was ignored by the analysts altogether The investment divisions of the companies were encouraging this behavior with the incentive of stock options and extra bonuses Corporate greed was the fuel in this case and it lacked regard for any ethics and practices of good business It was established by the investigation that the research and the ratings of stock supplied by the analysts were all done without integrity Salomon Smith Barney SSB encourages business practices that allow research analysts to deliver promising ratings of companies to the associated investment banking clientele With a company as large as Citigroup it is hard to imagine that striving for greed surpasses the compliance for the law However the evidence strongly suggests that corporations are not ignoring costbenefit evaluations when making decisions on legal compliance Di Lorenzo 2006 para 7 Some of these cases involved recommendations from analysts regarding the stocks that were not favorable At the time of the unethical conduct Citigroup was a parent company to the Salomon Smith Barney SSB Corporation O Rourke 2007 stated Jack Grubman was a notorious telecommunications analyst for Salomon Smith Barney He touted his relationships throughout the industry and earned an estimated 20 million per year In 10 different deals he helped SSB earn 24 million in fees from investment banking with WinStar Communications p 198 In 2001 Even though WinStar shares were traded at pennies on the dollar Mr Grubman maintained his buy rating and a 50 price target Gasparino 2002 para 2 He classified WinStar Communications with a rating of Buy Since the stock was later trading at the cost of 13 an email was sent by Grubman s assistant to a larger investor stating that the stock Business Research Ethics 4 should be bought at this price and sold at the low cost of 20 Conversely the target price and public rating were not changed by Grubman Actually the status quo remained as long as WinStar shares were for less than one dollar and bankruptcy was grasping at the company Later on in an email he noted If anything the record shows we support our banking clients too well and too long Teather 2002 para 10 In April 2001 Grubman stated privately the need to downgrade Focal but nevertheless once again advised investors to buy Focal Di Lorenzo 2006 para 37 While the analysts were still advising the purchase of the stock prices plummeted from 80 to 2 a share Years went by before these unethical practices were stopped Injured Parties One of the investors who were advised initially to purchase stock because of analysts research at Citigroup was one of the parties injured due to this business practice As the prices went down they continually bought stock after the initial purchase Listening to the unethical research reports they lost money and frequently invested in companies that were decreasing in stock price until the stock completely plummeted Companies whose stock was sold based on the research of the biased analysts were among those injured as well Due to the selling of stock with a complete disregard to the laws and the compliances of them these companies were having a false sense of success created around them Even the taxpayers were considered an injured party As a bank as large as Citigroup fails the implications are subject to corporate investments but similarly the working middle class investor is affected as well Unethical Behavior Affect Business Research Ethics 5 The analysts robbed the individuals of an ethical and unbiased decision due to the unethical behavior presented by the analysts Citigroup had their hands full with the heavy allegations and the various effects by the end of 2002 The costs of litigations both private and regulatory caused the monies owed by Citigroup to grow by the billions The reports presented by the analysts initiated the loss of money from countless people and numerous organizations Trust in Wall Street and the stock market itself may have become seriously damaged for the parties that were directly injured but also the public as well Avoiding Unethical Behavior Had ethics played a more centralized role in the corporate training procedures the unethical behavior may have been avoided Companies should instill a more ethical training process into the researchers that produce the major financial reports instead of trying to push making a profit no matter the cost With a clear division of the research and the investment departments of the business as well as implementing a checks and balances system the stop to all the biased unethical research may have occurred As long as the investors make their commissions centered on the analyst s research and the researchers work directly for the investors the occurrence of this kind of behavior will be continuous Breaking up the divisions and creating a Five Point Ethics Plan was part of the stipulations of the lawsuit against Citigroup in order to transformation the culture of the company Business Research Ethics References Di Lorenzo V 2006 Does the law encourage unethical conduct in the securities industry Fordham Journal of Corporate amp Financial Law 114 765805 Retrieved from httpsearchproquestcomeZDfoxvapollolibrarvcomdocview89067548 accountid458 Gasparino C 2002 September 25 Salomon agrees to NASD fine Citigroup unit Will pay 5 million to settle probe of its rating on WinStar Asian Wall Street Journal Retrieved from httpsearchproquestcomeZDfoxvapollolibrarvcomdocvieW315472367 accountid458 O39Rourke J S 2007 The Business Communication Casebook A Notre Dame Collection 2nd ed Mason OH Thomas Higher Education Teather D 2002 September 26 Overly bullish Salomon fined 5m The Guardian Retrieved from http searchproquestcomeZDfoxvapollolibrarvcomdocvieW245 864248 accountid458 6
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