Treasury Stock Lois Kenneth, president of Sycamore Corporation

(Treasury Stock) Lois Kenneth, president of Sycamore Corporation, is concerned about several large stockholders who have been very vocal lately in their criticisms of her leadership. She thinks they might mount a campaign to have her removed as the corporation’s CEO. She decides that buying them out by purchasing their shares could eliminate them as opponents, and she is confident they would accept a “good” offer. Kenneth knows the corporation’s cash position is decent, so it has the cash to complete the transaction. She also knows the purchase of these shares will increase earnings per share, which should make other investors quite happy. (Earnings per share are calculated by dividing net income available for the common shareholders by the weighted average number of shares outstanding. Therefore, if the number of shares outstanding is decreased by purchasing treasury shares, earnings per share increases)

Answer the following questions.

(a) Who are the stakeholders in this situation?

(b) What are the ethical issues involved?

(c) Should Kenneth authorize the transaction?

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,...


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