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Stockholders and Ethics for Smokeless Tobacco

Jean Blacklung, president of the Smokeless Tobacco 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?

Solution Preview

a) The stockholders are stakeholders in this situation as they are affected by what is done with the shares of the company. Both the stockholders that Jean wants to eliminate along with the other stockholders who may be ...

Solution Summary

This solution briefly identifies the stakeholders, issues and recommendation in 154 words.