The R&D division of Pele Corp. has just developed a chemical for sterilizing the vicious Brazilian killer
Question:
The director of Pele's R&D division strongly recommends further research in the laboratory to test the 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 lab." 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 Pele Corp. from such lawsuits. We can't lose any more than our investment in the new corporation, and we'll invest 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, Pele creates a new wholly owned corporation called Cabo 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 Pele shield itself against losses of Cabo 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...
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Related Book For
Accounting Tools for Business Decision Making
ISBN: 978-1118096895
6th edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
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