Researchers might think twice before using unreleased data for financial gain after a professor came under fire this week for trading stock based on special knowledge.
University of Michigan business Professor Claes Fornell is accused of profiting on unreleased information obtained through his involvement in U-M's American Customer Satisfaction Index. The index provides consumer satisfaction information for about 190 companies.
The ethics question provoked response from MSU instructors, such as hospitality business Professor Ray Schmidgall.
"If it's truly inside information, it's a violation of law," Schmidgall said. "That's kind of the situation people think Martha Stewart is in.
"It would allow a person to take advantage of a relationship to either make money or make up for losses."
In a statement released Tuesday, U-M Business School Dean Robert Dolan said he's instructed those involved in the project not to make personal use of the findings, prior to release.
Dolan said the university will continue to investigate the incident.
Schmidgall compared inside trading to university sporting teams. "They're able to obtain tapes of old games from other teams. But what if they were able to get inside to specific play information from the other teams?"
"To get inside" sports and research, he said, would be "an unfair advantage."
Although he doubts the similar scenarios occur at MSU, he said the potential is always there.
Researchers using unreleased information for personal gain wouldn't have a wide impact beyond their wallets, MSU economics Professor Richard Baillie said.
"It's almost impossible that an individual would have enough to money to impact a market," Baillie said. "They're just making a small personal gain."
Researchers aren't the only ones with special information, said Mae Kuykendall, a MSU-Detroit College of Law professor.
Cases of insider trading were more common several years ago. In one case, she said, a journalist received trader information for a column but shared it with others before it became public.
"If an employee makes use of this kind of information prior to its public release, that is considered to be a misappropriation of its employer's property, and they own the right to use it before it's publicly released."
Fornell could not be reached for comment Thursday, but said Wednesday that he would fully comply with Dolan's statement and discontinue trading.
The Associated Press contributed to this report.
Amy Bartner can be reached at bartnera@msu.edu.
