Ethics Case

CT$2\mathrm{.}9$ At one time, Hoeing closed a giant deal to acquire another manufacturec, McDonnell Douglas. Boeing paid for the acquitition by issicy shares of its own stock to the stockholders of McDonnell Douglas. In erder for the deal not to be revelaed, the value of Boeing's atock cond not decline below a certain level for a number of months after the deal.

During the first half of the year; Boeing suffered significant cost overruns because of inefficiencies in its production methods. Had these problems been disclosed in the quarterly financial statements during the first and second quarters of the year, the company's stock moat likely would have plummeted, and the deal would have been revoloed. Compary managers spent considerable time debating when the bad news should be disclosed. One public relations manager suggested that the cempany's problems be revealed on the date of either Princess Diani's cer Mother Teresa's funcral, in the hope that it woeld be lost among those big stories that day: Instead, the company walhed uneil October $22$ of than $x$ year to announce a $$2\mathrm{.}6$ billion write$-$off dae to cost overruns. Within one week, the company's stock price had fallen $20\%,$ but by this time the McDonnell Douglas deal could not be reversed.

Instructions

Answer the following questions.

a$.$ Who are the stakeholders in this situation?

b$.$ What are the ethical issues?

c$.$ What assumptions or principles of accounting are relevant to this case?

d$.$ Do you think it is echical to try to "time" the release of a story so as to diminish its effect?

e$.$ What would you have done if you were the chief executive officer of Boeing?

f$.$ Boeing's top management maintains that it did not haive an obligation to reveal its problems during the first half of the year What implications does this have for investors and analysts who follow Boeing's stock?

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