Essay Question: 30 Points
Dan Ville, the President and CEO of Pick ‘Em Up, Inc., a
waste management firm, was recently hospitalized, suffering from exhaustion and
a heart ailment. Immediately prior to his hospitalization, Pick ‘Em Up had
experienced a sharp decline in its stock price, and trading activity became
almost nonexistent. The primary reason for this was concern expressed in the
media over a new untested pick up management system implemented by the company.
Mr. Ville had been unwilling to submit the procedure to testing before
implementation, but he reluctantly agreed to limited tests after the system was
operational. No problems have been identified by the tests to date.
The other members of management called a meeting to
determine what they should do.JohnKing, Sales Manager, suggested that the
company purchase a large number of shares of treasury stock. In that way,
investors might notice that activity had picked up, and might decide to buy more
shares. This plan would use up most of the company's available cash, so that
there will be no money available for a cash dividend. Pick ‘Em Up has paid cash
dividends every quarter for over ten years.
1. Is Mr. King’s suggestion ethical? Explain.
Is it ethical to discontinue the
cash dividend? Explain.