The R&D division of Hancock Chemical Corp. has just developed a chemical for sterilizing the vicious Brazilian killer bees which are invading Mexico and the southern states of the United States. The president of Hancock is anxious to get the chemical on the market to boost the company's profits. He believes his job is in jeopardy because of decreasing sales

Chapter 11, FINANCIAL REPORTING AND ANALYSIS #6
The R&D division of Hancock Chemical Corp. has just developed a chemical for sterilizing the vicious Brazilian "killer bees" which are invading Mexico and the southern states of the United States. The president of Hancock is anxious to get the chemical on the market to boost the company's profits. He believes his job is in jeopardy because of decreasing sales and profits. Hancock has an opportunity to sell this chemical in Central American countries, where the laws are much more relaxed than in the United States. The director of Hancock's R&D division strongly recommends further testing in the laboratory for side-effects of this chemical on other insects, birds, animals, plants, and even humans. He cautions the president, "We could be sued from all sides if the chemical has tragic side-effects that we didn't even test for in the labs." The president answers, "We can't wait an additional year for your lab tests. We can avoid losses from such lawsuits by establishing a separate wholly owned corporation to shield Hancock Corp. from such lawsuits. We can't lose any more than our investment in the new corporation, and we'll invest in just the patent covering this chemical. We'll reap the benefits if the chemical works and is safe, and avoid the losses from lawsuits if it's a disaster." The following week, Hancock creates a new wholly owned corporation called Badell Inc., sells the chemical patent to it for $10, and watches the spraying begin.

Instructions
(a) Who are the stakeholders in this situation?
(b) Are the president's motives and actions ethical?
(c) Can Hancock shield itself against losses of Badell Inc.?

Stakeholders
A person, group or organization that has interest or concern in an organization. Stakeholders can affect or be affected by the organization's actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees,...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...

This problem has been solved!


Do you need an answer to a question different from the above? Ask your question!
Related Book For answer-question

Financial and managerial accounting

1st edition

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

ISBN: 978-1118016114