Exercise $1-19$ Ethical Issues

Objective $5$

Bedron Company is a closely held investment service group that has been quite successful over the past $5$ years, consistently providing most members of the top management group with $50\%$ bonuses. In addition, both the chief financial officer and the chief executive officer have received $100\%$ bonuses. Bedron expects this trend to continue.

Recently, Bedron$$s top management group, which holds $35\%$ of the outstanding shares of common stock, has learned that a major corporation is interested in acquiring Bedron. The other corporation$$s initial offer is attractive and is several dollars per share higher than Bedron$$s current share price. One member of management told a group of employees under him about the potential offer. He suggested that they might want to purchase more Bedron stock at the current price in anticipation of the takeover offer.

Required:

Conceptual Connection: Do you think that the employees should take the action suggested by their boss? Suppose the action is prohibited by Bedron$$s code of ethics. Now suppose that it is not prohibited by Bedron$$s code of ethics. Is the action acceptable in that case?