Richard Petri is the chief financial officer at Computer Electronics, Inc. In this capacity, he attends all monthly board of directors meetings. A special meeting of the board of directors was called to discuss substantially increasing the amount of cash dividends paid to stockholders this year. The board voted unanimously to increase the dividend. Later that night, Richard called his uncle and hinted around that Computer Electronics, Inc., was going to make its stockholders very happy. His uncle didn’t own any stock in Computer Electronics but went out and purchased 500 shares the next day.

1. Did Richard do anything unethical? Would your answer be different if Richard specifically stated that the dividends on Computer Electronics, Inc., were being increased substantially?

2. What should Richard’s boss do if he finds out what Richard said to his uncle?

3. Write a short paragraph explaining the difference between cash dividends and stock dividends.

4. In groups of two or three, discuss possible reasons why a corporation might want to pay a very low or high dividend in any given year.