Question: AVX Electronics is very close to bringing a revolutionary new computer chip to the market. The company fears that it could soon be the target

AVX Electronics is very close to bringing a revolutionary new computer chip to the market. The company fears that it could soon be the target of a takeover by a giant telecommunications company if this news were to leak before the product is introduced. The current AVX management intends to redistribute the company’s stock holdings so its managers will have a larger share of ownership. So, management has decided to buy back 20% of the company’s common stock while the price is still quite low and distribute it to the managers—including themselves—as part of the company’s bonus plan. Are the actions of AVX management ethical? Explain why this strategy would reduce the risk of a hostile takeover. Was any group hurt by this strategy?

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This seems to be a kind of insider trading The managers could repurchase the shares a... View full answer

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