Wall Street and Insider Trading

To me, the obvious choice of media material that screams business ethics is the popular movie, “Wall Street.”  It also happens to fit right in with the discussion we have been having recently about stocks and corporate information with the Enron and Lehman Brothers cases.  Charlie Sheen plays the main character, Bud Fox, in the 1987 film.  Fox is a young stockbroker who finds himself working with Gordon Gekko, a major actor on Wall Street, after yearning to get an in with him for years.  Right off the bat, business ethics is evident, when Fox uses inside information to get Gekko’s attention.

Fox resorts to several morally questionable acts to gain a competitive edge, such as spying.  Gekko convinces him to spy on a British businessman to find out what his next financial step is.  When he learns that he is about to purchase a steel company, Fox acts on this information and helps Gekko make a lot of money.

Insider trader plays a large role in this movie, as Fox constantly uses confidential information to make decisions about trading stocks.  Fox makes so many questionable trades that the SEC starts to notice his behavior.  This movie is a great depiction of the deceit that can so easily take place in the financial world.  While it is tempting to use little known information to get an edge in the trading world, it is also illegal.  It seems like it is obvious, but trading based on information gained without public knowledge is also ethically wrong.  It gives individual people the ability to make a ton of money at someone else’s expense, without them knowing until after it happens.  This is why the SEC was created, to catch insider traders before they scam too many people out of their money.


6 thoughts on “Wall Street and Insider Trading

  1. Nice post Grace. I feel as though most people look at insider trading on the surface, in terms of illegality. You bring up a great point in saying that this type of activity is unethical too. The film Wall Street does a great job of capturing what motivates the likes of Gordon Gekko, and why he would respond to the question of if he should wreck a company with, “Because it’s WRECKABLE.” Another quote from the film I enjoyed is “greed captures the essence of the evolutionary spirit.” It draws a nice parallel between mankind and animal’s most basic nature in the need to fight for survival – moreover, the strong preying on the weak – and how money affects the decisions we make in our lives.
    If anyone is interested in a great read that gives a historical and humorous take on the investment banking culture, specifically at Salomon Brothers, I recommend Liar’s Poker by Michael Lewis. You really can’t go wrong with any of his other books either.

    • Oh, yeah. Lewis is great. But, you know, in terms of nature, ants are very successful and they are usually not predators. Nor are squirrels. Trees. Wildebeasts. You know who is more successful between evolutionary cousins wolves and dogs? How many dogs are there in the world? Their competitive advantage? They make us love them.

  2. Hi Grace I think insider trading is illegal, but I also think that unequal information is unethical. My example for this is the Facebook IPO. Right before the IPO Morgan Stanley, Facebook’s lead bankers, posted some research saying they thought that the stock was overpriced. Mind you that they knew and understood this company better than anyone because they saw their financial. However, the bigger issue is that Morgan Stanley shared this information with their wealthiest investors, who did not buy the stock, and the average guy who bought the stock and made a huge loss had no idea.

  3. Pingback: First Annual BGS Blog Olympics | Business, Society, and Government 4

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