(Solution Download) Old Habits Die Hard

1. Describe the problems characterized in this case.
2. What are the likely causes of these problems?
3. What are consequences of these problems for investors, Czech companies, and the Prague Stock Exchange?
4. Outline a program of changes needed to correct the problems identified.












The ethical climate in the Czech Republic has improved since the early days, but we still have a long way to go,? said Josef Machinka, an economic adviser to the Ministry of Finance, while attending an investment seminar sponsored by the Prague Stock Exchange. ?We really lack an established ethical framework.? Adds Charles University professor Jana Vychopen? , ?Ethical problems still exist, but they stem from 40 years under a system that promoted corruption. Under the communists it was all political influence. There wasn?t an economy?corruption sustained the system back then, but now chokes it. We were shocked into a market economy and our coupon privatization was racked with scandal. Even the word ?tunneling,? meaning asset stripping, was coined here.? ?Ethics hangs over the market but so does a lack of transparency,? states Pavel Kraus, analyst for Merta Investment Management. ?Many of today?s managers forged their attitudes in the 70s and 80s. Under communism, secrecy?not transparency?was the watchword. They just don?t think it?s important to keep investors informed, so how do you know they?re not a bunch of shady managers trying to hide something??



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