ommittee Liz Plummer, vice president and general counsel, chairs the for Sunlight Corporation. Four and one-half...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
ommittee Liz Plummer, vice president and general counsel, chairs the for Sunlight Corporation. Four and one-half years ago, the compensation committee designed a performance bonus plan for top management that was approved by the board of directors. The plan provides an attractive bonus for top management if the firm's earnings per share grows each year over a five-year period. The plan is now in its fifth year; for the past four years, earnings per share has grown each year. Last year, earnings per share was $1.95 (net income was $7,800,000 and the weighted average common shares outstanding was 4,000,000). Sunlight Corporation has no preferred stock and has had 4,000,000 common shares outstanding for several years. Plummer has recently seen an estimate that Sunlight's net income this year will decrease about 5% from last year because of a slight recession in the economy. Plummer is disturbed by an item on the agenda for the board of directors meeting on June 20 and an accompanying note from Rob Lundy. Lundy is vice president and chief financial officer for Sunlight. Lundy is proposing to the board that Sunlight buy back 600,000 shares of its own common stock on July 1. Lundy's explanation is that the firm's stock is undervalued now and that Sunlight has excess cash available. When the stock subsequently recovers in value, Lundy notes, Sunlight will reissue the shares and generate a nice increase in contributed capital. Lundy's note to Plummer merely states, "Look forward to your support of my proposal at the board meeting." on oth tedW REQUIRED Why is Plummer disturbed by Lundy's proposal and note? What possible ethical problem does Plummer face when Lundy's proposal is up for a vote at the board meeting? ommittee Liz Plummer, vice president and general counsel, chairs the for Sunlight Corporation. Four and one-half years ago, the compensation committee designed a performance bonus plan for top management that was approved by the board of directors. The plan provides an attractive bonus for top management if the firm's earnings per share grows each year over a five-year period. The plan is now in its fifth year; for the past four years, earnings per share has grown each year. Last year, earnings per share was $1.95 (net income was $7,800,000 and the weighted average common shares outstanding was 4,000,000). Sunlight Corporation has no preferred stock and has had 4,000,000 common shares outstanding for several years. Plummer has recently seen an estimate that Sunlight's net income this year will decrease about 5% from last year because of a slight recession in the economy. Plummer is disturbed by an item on the agenda for the board of directors meeting on June 20 and an accompanying note from Rob Lundy. Lundy is vice president and chief financial officer for Sunlight. Lundy is proposing to the board that Sunlight buy back 600,000 shares of its own common stock on July 1. Lundy's explanation is that the firm's stock is undervalued now and that Sunlight has excess cash available. When the stock subsequently recovers in value, Lundy notes, Sunlight will reissue the shares and generate a nice increase in contributed capital. Lundy's note to Plummer merely states, "Look forward to your support of my proposal at the board meeting." on oth tedW REQUIRED Why is Plummer disturbed by Lundy's proposal and note? What possible ethical problem does Plummer face when Lundy's proposal is up for a vote at the board meeting?
Expert Answer:
Answer rating: 100% (QA)
Why is Plummer disturbed by Lundys proposal and note Plummer is disturbed by Lundys proposal and note because if approved the proposal would result in ... View the full answer
Related Book For
Statistics for Business and Economics
ISBN: 978-0132930192
8th edition
Authors: Paul Newbold, William Carlson, Betty Thorne
Posted Date:
Students also viewed these accounting questions
-
CondoCleaners.com is now in its third year of operations. The prior two years financial statements received a review engagement report. In the current year, Jim has decided that an audit will be...
-
One nautical mile is defined to be the distance on the surface of the Earth that subtends an angle of one minute at the centre of the Earhth ( 1 degree= 6o minutes). How many nautical miles are...
-
Several years ago, Western Electric Corp. purchased equipment for $25,000,000. Western uses straight-line depreciation for financial reporting and accelerated depreciation for tax purposes. At...
-
StudentGrades.java import java.io.File; import java.io.FileReader; import java.io.IOException; import java.io.PrintWriter; import java.util.Map; import java.util.Scanner; import java.util.Set; import...
-
Distinguish between a voluntary and involuntary bankruptcy petition.
-
The velocity v of a pulse traveling in a string varies directly as the square root of the tension T in the string. If the velocity of a pulse in a string is 450 ft/s when the tension is 20.0 lb, find...
-
When the sum of the \(x\) values is equal to zero, the calculation of the coefficients of the regression line of \(Y\) on \(x\) is greatly simplified; in fact, their estimates are given by...
-
Kim Panenka asked to borrow $ 4,750 from her sister, Kris, to make a mortgage payment. Kris deposited a check for that amount into Kims bank account. Hours later, Kim asked to borrow another $ 1,100....
-
High ethical standards are essential in the Healthcare industry. These standards fall under the umbrella of health or medical ethics, the field of applied ethics that is concerned with moral...
-
It has been proposed that oxygen be separated from nitrogen by absorbing and desorbing air in water. Pressures from 101.3 to 10,130 kPa and temperatures between 0 and 100C are to be used. (a) Devise...
-
Oaks Company is a small company that employs 15 people in a town with a population of about 9,000. Oaks plant manager is considering the acquisition of a new machine that will cost $474,500. The...
-
Utilitarian Jeremy Bentham argued that if utility is good, then it is good irrespective of whose utility it is, and thus the sum of societal utility should be maximized. In what ways do you feel this...
-
What is the source of energy for the building you are in or closest to? What barriers prevent more energy from being obtained from clean sources?
-
Does the independence of \(X-X^{\prime}\) and \(Y-Y^{\prime}\) imply the independence of \(X\) and \(Y\) ?
-
Rawls (1999, 205) writes that if government is assumed to aim for the common good, and if "some men can be identified as having superior wisdom and judgment, others are willing to trust them and to...
-
How do you think being seriously ill (e.g., having cancer, HIV/AIDS) would affect your relationships with family? With friends? With students? With co- workers? Are there different effects depending...
-
True or False? The financial statements that a company files with the Securities and Exchange Commission (SEC) are among the main sources of information that investors use to research that company
-
A simple random sample of 220 university students were asked what pasta they usually order and with which sauce. The preferences of these respondents are summarised below: Sauce Bolognese Pasta...
-
National education officials are concerned that there may be a large number of low-income students who are eligible for free lunches in their schools. They also believe that the percentage of...
-
Suppose that a regression relationship is given by the following: Y = 0 + 1X1 + 2X2 + If the simple linear regression of Y on X1 is estimated from a sample of n observations, the resulting slope...
-
Given an arrival process with l = 5.0, what is the probability that an arrival occurs after t = 7 time units?
-
Refer to Problem 14.9. What would the loss of the seller of the put option be if, at expiration, XLB is trading at \($20?\) What would the profit of the seller be if, at expiration, XLB is trading at...
-
Name five variables that can affect the price of options, and briefly explain how each affects prices. How important are intrinsic value and time value to in-the-money options? To out-of-the-money...
-
Which of the following methods is an investor least likely to use to terminate a futures contract? a. Exchanging cash for physical assets b. Permitting the contract to expire worthless c. Making an...
Study smarter with the SolutionInn App