Corporation, is concerned about several large stockholders who have been very
vocal lately in their criticisms of her leadership. She thinks they might mount
a campaign to have her removed as the corporation’s CEO. She decides that buying
them out by purchasing their shares could eliminate them as opponents, and she
is confident they would accept a “good” offer. Jean Blacklung knows
the corporation’s cash position is decent, so it has the cash to complete the
transaction. She also knows the purchase of these shares will increase earnings
per share, which should make other investors quite happy. (Earnings per share
is calculated by dividing net income available for the common shareholders by
the weighted average number of shares outstanding. Therefore, if the number of
shares outstanding is decreased by purchasing treasury shares, earnings per
share increases.)
a. Who are the stakeholders in this situation?
b. What are the ethical issues involved?
c. Should Jean Blacklung authorize the transaction?
