Centrepoint Company is a closely held investment service group that has been quite successful over the past five years, consistently providing most members of the top management group bonuses equal to 50 percent of their base salaries. In addition, both the chief financial officer and the chief executive officer have received 100 percent bonuses. Centrepoint expects this trend to continue.
Recently, Centrepoint's top management group, which holds 35 percent of the outstanding common shares, has learned that a major corporation is interested in acquiring Centrepoint. The other corporation's initial offer is attractive and is at a considerable premium over Centre- point's current share price. One member of management told a group of employees under him about the potential offer. He suggested that they might want to purchase more Centrepoint shares at the current price in anticipation of the takeover offer.
Required:
Do you think that the employees should take the action suggested by their boss? Suppose the action is prohibited by Centrepoint's code of ethics. Now suppose that it is not prohibited by Centrepoint's code of ethics. Is the action acceptable in that case?