Tuesday, November 1, 2011

“Insider Trading – A White Collar Crime” - Professor M.S.Rao

“A life spent in simplicity and humility is far better than the life spent with fame and shame.” – Professor M.S.Rao

Rajat Gupta’s involvement in insider trading cost his career and his image. He is the former chairman of Indian School of Business (ISB), Hyderabad.   It is indicted that Rajat tipped Raj Rajaratnam, the boss of Galleon Group and the latter benefitted out of insider trading. Rajat is the product of IIT Delhi and Harvard Business School.  The high flyer is under scanner currently.

What is Insider Trading?

Insider trading is a white collar crime. It is about trading of stock done on the basis of internal information which is not available to general public.  It is breach of security, violation of oath of office and secrecy because the information is leaked before it is made in public. Usually such information is known and accessible to top people within the company.  According to Wikipedia, Insider trading is the trading of a corporation's stock or other securities (e.g. bonds or stock options) by individuals with potential access to non-public information about the company.

Insider trading helps the traders enter and exit the security at the right time either to make money or prevent from losing money. In this process, it is the ordinary investors who lose money as they get information after the stock gets heated up.  By then the top players sell out their stocks and play safe.  It is only the ordinary investors who burn their fingers as they buy the stock at the peak and subsequently lose as the scrip falls.

Leaders at the top must learn lesson from Rajat’s fall from grace.  They must learn the fact that it is tough to climb the ladder of success and easy to have free fall from the top.  When leaders emphasize more on ends than means they end up in a great fiasco. Don’t get tempted by short term gains as it proves to be costly at the end leaving you in the lurch forever.  Emphasize more on means than ends to ensure longevity.  A life spent in simplicity and humility is far better than the life spent with fame initially and falling from grace finally.

Professor M.S.Rao
Founder, MSR Leadership Consultants, India
Where Knowledge is Wealth

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1 comment:

Anonymous said...

That is an excellent quote sir.