Ed Davidson is evaluating whether Freeman Plumbing Supplies should begin a dividend reinvestment plan (DRIP). According...

 

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Ed Davidson is evaluating whether Freeman Plumbing Supplies should begin a dividend reinvestment plan (DRIP). According to the plan, stockholders' dividends would be automatically reinvested in the company's stock. Such a plan probably would save money for stockholders who normally reinvest their dividends in Freeman's stock because little or no commissions/fees are associated with DRIPS. Although Ed likes the fact that DRIPS might benefit stockholders, he is concerned that the CEO's primary motive for introducing this new plan is to benefit Freeman's executives. Questions Is there an ethical problem? If so, what is it? Should Freeman start a DRIP program? What would you do if you were Ed? Ed Davidson is evaluating whether Freeman Plumbing Supplies should begin a dividend reinvestment plan (DRIP). According to the plan, stockholders' dividends would be automatically reinvested in the company's stock. Such a plan probably would save money for stockholders who normally reinvest their dividends in Freeman's stock because little or no commissions/fees are associated with DRIPS. Although Ed likes the fact that DRIPS might benefit stockholders, he is concerned that the CEO's primary motive for introducing this new plan is to benefit Freeman's executives. Questions Is there an ethical problem? If so, what is it? Should Freeman start a DRIP program? What would you do if you were Ed?

Answer rating: 100% (QA)

1 Yes there is an ethical problem with this and that is the automatic rein... View the full answer