What is the Ethical Issue in This Situation?
An ethical issue is a situation or a problem in the society, which requires the attention of an organization or individual to evaluate whether is it wrong or right. An ethical issue in the case of Joyful Gas Company is the manner that it treated the discovery of oil in Dallas, Texas before revealing it to the public. The company bought most of the stocks secretly in preparation to make a profit at the expense of the public before revealing the discovery (Massey, 2017). The public is part of the stakeholders as the oil was discovered in their territory that they would benefit from the oil equally with the company. The company increased its stock price from $5 to $28 such that the public would buy stocks at a higher price and make profits.
What Accounting Principle Is Involved?
The accounting principle involved is the full disclosure where the investor is required to disclose any information that benefits it through financial statements. In most cases, such information is disclosed using footnotes attached to the financial statement. The information about the discovery of oil in Dallas, Texas under the Joyful Gas Company was beneficial to the company, but they were not disclosed in the financial statements (Massey, 2017). The company bought stocks secretly without informing the public when the financial statements were prepared.
Who Are the Stakeholders in this Situation?
Stakeholders are the people and organizations that benefit or have an interest in a business or property. In this case, the stakeholders include; Joyful Gas Company, the public, and the government. In consideration of the economic status, the company is benefiting by increasing its profit through the discovery while the government and the public will suffer as the economic status will decrease. The government or the public will have little benefit from the discovery as the company is operating secretly and selling stocks at higher rates. Legally, the company should be sued for operating secretly at the expense of the government and the public as stakeholders. The discovery of oil should have benefited the government and the public as compared to the company, but in this case, the opposite happened (Massey, 2017). It is unethical for the Joyful Gas Company to operate secretly in the process of discovery and inflate the stock prices, which would be sold to the public. The public and the government are supposed to control the oil discovery with Joyful Gas Company working as the private developer but the company in control of everything including prices of the stocks.