By the end of this lesson, students should be able to understand the ethical and legal considerations surrounding politicians’ involvement in stock trading and critically analyze real-world examples.
In Norway, it started with the Minister of Education (who had to resign). Then, the husband of the Ministry of Foreign Affairs (she has not resigned) and last week the revelations that Sindre Finnes, the husband of former Norwegian Prime Minister Erna Solberg, had bought and sold over 3600 shares in various companies during his wife’s tenure from 2013 to 2021. Some of these transactions could raise ethical questions, as they involved companies dealing with the government or were affected by political decisions. Several experts on this matter say that Finnes should have been more transparent about his stock trading and that there is a need for clearer rules and guidelines for spouses of political leaders.
Erna Solberg, who was prime minister Oslo from 2013 until 2021 and currently leader of the opposition, revealed on Friday that her husband Sindre Finnes had traded shares 3,650 times while she was head of the government. Source: The Financial Times
Forbes Lists#45 Power Women (2019) Dropped off in 2020
Why is this such a big issue in Norway?
Our political leaders can erode trust when they don’t adhere to the standard norms of typical political conduct. These norms include being open, promptly giving thorough and honest answers, and refraining from making serious and trust-destroying accusations against others until they have a solid factual basis. Trust can also be undermined when politicians imply, through their actions, that some individuals or rules are more important than others and when they fail to follow well-established guidelines on how politicians should behave.
However, there is a better approach. We can continue as we did before by ensuring that political mistakes have consequences. The question of whether someone should hold a prominent political or public office is not a matter of legal or criminal law; it’s a matter of trust. Being a top politician is not a human right, and no one is more important than the role they’ve been entrusted to carry out – not even someone like Erna Solberg, even if she held an exceptional status within Høyre (Norway’s now largest political party). Source: Trønderdebatt
Examples from other countries
- United States: In 2022, Nancy Pelosi, the Speaker of the United States House of Representatives, and her husband, Paul Pelosi, purchased shares in Alphabet Inc., the parent company of Google, for over $1 million. The purchase came just days before the House was scheduled to vote on a bill that would have increased tech industry regulation. Some criticized the purchase for creating a potential conflict of interest, as Pelosi is in a position to influence legislation that could impact Alphabet’s business. Source: Insider
As the pandemic raged, at least 75 lawmakers bought and sold stock in companies that make COVID-19 vaccines, treatments, and tests. Source Insider.
- The UK: In 2020, it was reported that several members of the UK government had sold shares in companies that were expected to be negatively affected by the pandemic. Fifth of UK Covid contracts ‘raised red flags for possible corruption’ Source: The Guardian Insider trading is illegal in the UK and is punishable by up to 10 years in prison and unlimited fines1.
These are just a few examples of politicians’ or spouses’ stock market trading. It is important to note that no larger consensus exists on whether politicians and their spouses should be allowed to trade stocks. Some people believe it should be allowed, while others believe it should be banned.
Here are ten questions from the video above
- What is the name of the act that was passed in 2012 to prevent insider trading and conflicts of interest in Congress?
- Which senator stepped down as chairman of the Senate Intelligence Committee amid the allegations of insider trading in March 2020?
- How many members of Congress were identified for violating the STOCK Act in 2019?
- What was the bill’s name that the House was scheduled to vote on in 2022 that would have increased regulation of the tech industry?
- Which company did Nancy Pelosi and her husband purchase shares in for over $1 million in 2022?
- What was the name of the watchdog group that filed complaints against four senators for insider trading in March 2020?
- How much did Richard Burr sell up to in stocks on Feb. 13, 2020, after receiving a classified briefing on the coronavirus threat?
- What is the name of the website that publishes financial disclosure reports of members of Congress and their staff?
- How often are members of Congress required to file periodic transaction reports under the STOCK Act?
- What is the name of the bipartisan bill that was introduced in May 2020 to ban members of Congress from trading individual stocks?
- What are the ethical and legal considerations surrounding politicians’ involvement in stock trading? Provide examples from Norway and other countries.
- How can politicians’ involvement in stock trading erode public trust? What can be done to prevent this?
- What are the consequences of insider trading? How can governments and regulatory bodies prevent insider trading?
Group Work Projects:
- Research the history of insider trading laws in your country. How have these laws evolved over time, and how have they impacted the financial industry?
- Analyze a recent case of insider trading involving a politician or government official. What were the circumstances of the case, and what were the consequences for those involved?
- Develop a set of guidelines for politicians and government officials regarding their involvement in stock trading. What ethical considerations should be considered, and how can transparency be ensured?