Ethics concerns itself with what is right and what is wrong. It sets a clear cut distinction between the two notions. However in management of a company the issue of ethics is spelt out by the company’s laws that stipulate the duties, roles and the responsibilities of company directors. This is in order to prevent the stakeholders in the company from unscrupulous and unethical conduct of business operations by the directors with an aim of benefiting themselves and disregarding the welfare of the other vital stakeholders especially the company’s investors. The directors have both the duties of care and diligence in running the company meaning that they must exercise reasonable acumen in the conduct of the business affairs of the company. They also have fiduciary duties which are duties of trust and good faith (Kingsolver, 2008).
However, some directors violate these duties in furtherance of their personal interests. An example is the case of board of directors of Hewlett Packard limited. In this case some of the directors of the company were guilty of leaking insider information to the press. The company’s laws provides that board members carry out their duties in skillful and careful manner and they should also employ their skills in business running fully in order to prevent the business from slipping into losses through making flawed and faulty business decisions despite having the competences to make the right investment and business decisions.
The Effects on the Company
This is very risky because it leads to unprecedented fall in the value of the company’s stock in a stock market. This is because the investors speculate what will happen using the leaked information and sell their shares consequently making the value of the company’s share to drop. It also made the company face financial and reputational risks. This is unethical to leak the inside information and it is a breach of the duties of skill and care in running the organization. Thus, this behavior is very risky for the business, especially those listed on the stock market (Armstrong, 2002).
It is thus very important that directors discharge their duties diligently in order to steer their companies to profitability and business heights.