Tech Insider Trading Bodes Ill

Insider trading is always painful to watch. People once trusted within organizations conspire to benefit themselves at the expense of their employers, co-workers, neighbors, and anyone else who happens by. And we’re currently seeing that in spades in the high tech space, with such names being dragged into the spotlight as IBM, Intel, Google, AMD, Sun Microsystems, and Akamai Technologies. But the result for the industry is more than a morbid curiosity. It will, rather, drive investors farther into resentment and distrust, making stock prices for many companies harder to maintain — to say nothing of fueling suspicion of regulators and possibly setting off a wave of investigations.

Up until now, tech companies have had to deal with transferred anger from investors who were angry about how the financial industry. As a result, what companies had to face was largely heightened scrutiny redirected from bad experiences.

But this string of companies involved in insider trading scandals tosses that presumption out the window and suddenly makes tech far more distrustful than even the largest banks. They could at least plea some degree of ignorance and ineptitude. But at this point, major officers at IBM and Intel, at least, have been implicated. This doesn’t read as people at the top taking ill-advised chances. Instead, it calls into question the honesty of at least some people near the top of the tech power pyramid. If the ones caught are so influential, why should anyone else be given the benefit of the doubt?

And investors won’t be the only ones on guard. With the number of investigations brought by the FTC, FCC, and others, having yet another agency set up a probe, with all the potential distraction for management teams, has got to be one of the last activities you’d seriously suggest.