The film “wall street” characterizes the effects of unscrupulous trading ethics illustrated by the main characters towards the economic position of respective stakeholders. The capital markets are critical in determining the economic position of the investors; therefore, critical rules, policies and procedures are required in effective and efficient conduct of business. The film illustrates the manipulation of the stock market through unethical methods.
The resulting effect of the main characters actions is to enrich them while the majority investors suffer significant losses. a). Capital represents the resources that when used have the capacity to generate a profitable economic activity; where goods and services are supplied in the present and future. Capital can be tangible or intangible. In reference to the film capital is illustrated as the finances used to acquire stocks in the capital markets. The stocks acquired represent capital to the investor; therefore, stock trading represents the application of capital to generate profits to the investor in the form of dividends, interests and profits on the sale of stocks.
The Film illustrates the different approaches of utilizing capital. Investors acquire stocks for daily trading in the stock market; hence, these are classified as short term capital investments. However, there are those investors who purchase shares of various companies with a view of sharing in the respective company’s profits; in the form of dividends and interests. b). Initial public offering is a strategic approach which companies use to raise funds for expansion purposes.
This is done through a public offering where the company’s shares are traded through the stock and capital markets. Initial public offering illustrates that the public did not have any previous holding in the company; hence, the companies stocks are offered for the first time. Companies offer their stocks to the public through initial public offering in order to raise money for designated expansion purposes. This is the cheapest method of raising money for the company in contrast to acquiring debt capital, which has significant, costs and associated liabilities. Initial public offering is the safest approach to raise money for the company since the shareholders will only be entitled to ordinary stock dividends. c).
Common and preferred stocks illustrate significant differences in their ownership and proportions of returns. Common stocks are characterized as ownership of the company while preferred stocks illustrate characteristics of fixed return financial instruments like bonds. Common stock and preferred stocks are traded by the companies through secondary stock markets. However, the rate and method of returns differ fundamentally.
The common stocks are held with a view of owning part of the company; therefore, sharing in its profits through dividends.Preferred stock, on the other hand, is less risky and does not depend on market forces to determine the company profits; hence dividend share, but has a guaranteed dividend payout for a defined period. However, common stock investors cannot lose their initial investments, unlike the preferred stock investors; in the event of significant losses being incurred as a result of market forces and dynamics. In the event of company dissolution or bankruptcy, investors in preferred stocks are compensated first while the holders of common stock are the last to share in the company’s assets.
Despite the high risks associated with common stocks, they offer a higher rate of return when compared to preferred stock, which have low risks, hence low returns. d) Gordon Gecko in his speech “greed is good” describes the economic challenges and deficiencies facing the private sector economies. Gecko implies that the challenges facing the political and economic realities of the country are characterized by unscrupulous management of the private and public sector industries. He asserts that, the significant fiscal and trade deficits facing the companies are a result of unethical and selfish management practices employed by the management.
The management’s lack of dedication and failure to incorporate best practice in managerial functions illustrate their incompetency and lack of interest in the shareholders well being. He observes the management’s avoidance of liability towards the company’s business aspects; through negligible investments in the company’s stock portfolio and misallocation of funds through irrelevant appointments. Gecko observes the inherent bureaucracy in management and business processes as the significant barrier to the implementation of best practice procedures and ppolicies aiming at improving the shareholders wealth and interests. Gecko ironically considers himself as a liberator of companies rather than a destroyer; given his role in the film. Gecko implicitly implies that greed is good; hence it is critical in capturing the evolutionary spirit in business processes. Greed is an aspect that lacks moral standing and is characterized by unethical, illegal and immoral practices in business.
Therefore, despite Gecko’s depiction of greed as an influential force in motivating innovative business and corporate practices aimed at maximizing returns, his assertion “greed is good” is fundamentally inaccurate. Significant corporate and business failures have been characterized by greedy individuals who place their greed for wealth ahead of responsible business practices. Greed demonstrates a short term ambition for wealth acquisition without considering the long term consequences of actions taken. Gecko implies that daily aspects of life should be based on greedy perspectives; though his statement may have a different meaning, it is easily misrepresented. Business practices should demonstrate ethical responsibilities and honest business processes; hence long term business and investor interests are safe guarded. Therefore, despite the significance of the context in which Gecko states greed is good, the inherent attributes of greed are not good.
Conclusion The film demonstrates the effects of unethical business practices on the shareholders economic well being. The aspects of insider trading negate the principles of price determination through the forces of demand and supply in the market environment; hence unfair trading. The film demonstrates the weakness of human nature in respect to instant wealth acquisition through greed motivated actions. The necessity of authority to safe guard shareholder interests in essential, in public and private business enterprises. Therefore, significant safeguards should be enforced to ensure marketing practices in stock and capital markets are in conformity with ethical business practices.
The Securities and Exchange Commission should implement deterrence policies that deter individuals from unethical trading. Therefore, safeguarding investors and creating a fair stock market and trading practices.
