Dylan Horn is the president, founder, and majority owner of Wesley Medical Corporation, an emerging medical technology
Question:
All of Dylan's personal capital and borrowing power is tied up in his 51% stock ownership. He knows that any offering of additional shares of stock will dilute his controlling interest because he won't be able to participate in such an issuance. But, Mary has money and would likely buy enough shares to gain control of Wesley. She then would dictate the company's future direction, even if it meant replacing Dylan as president and CEO.
The company already has considerable debt. Raising additional debt will be costly, will adversely affect Wesley's credit rating, and will increase the company's reported losses due to the growth in interest expense. Mary and the other minority stockholders express opposition to the assumption of additional debt, fearing the company will be pushed to the brink of bankruptcy.
Wanting to maintain his control and to preserve the direction of "his" company, Dylan is doing everything to avoid a stock issuance. He is contemplating a large issuance of bonds, even if it means the bonds are issued with a high effective-interest rate.
Instructions
(a) Who are the stakeholders in this situation?
(b) What are the ethical issues in this case?
(c) What would you do if you were Dylan?
Stakeholders
A person, group or organization that has interest or concern in an organization. Stakeholders can affect or be affected by the organization's actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees,...
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Financial and managerial accounting
ISBN: 978-1118016114
1st edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Question Posted: