Stacey Buyer is the CEO, chairman, founder and majority owner of Hanley Medical

Question

Stacey Buyer is the CEO, chairman, founder and majority owner of Hanley Medical Ltd, an emerging medical technology products business. Hanley is in dire need of additional capital to keep operating and to bring several promising products to final development, testing and production. Stacey, as owner of 51% of the ordinary shares, manages the company’s operations. She places heavy emphasis on research and development and on non- current growth. The other principal shareholder is Mary Sommers who, as a non- employee investor, owns the marketing function to maximize short-run sales and profits from existing products. She believes this strategy would raise the market price of Hanley’s shares. All of Stacey’s personal capital and borrowing power is tied up in her 51% share ownership. She knows that any offering of additional shares will dilute her controlling interest because she won’t be able to participate in such an issue. But, Mary has money and would likely buy enough shares to gain control of Hanley. She then would dictate the company’s future direction, even if it meant replacing Stacey as CEO and chairman. The company already has considerable debt. Raising additional debt will be costly, will adversely affect Hanley’s credit rating, and will increase the company’s reported losses due to the growth in interest expense. Mary and the other minority shareholders express opposition to the assumption of additional debt, fearing the company will be pushed to the brink of bankruptcy. Wanting to maintain her control and to preserve the direction of ‘her company’, Stacey is doing everything to avoid an equity issue. She is contemplating a large issue of bonds, even if it means the bonds are issued with a high effective-interest rate. Questions: 1. Who are the stakeholders in this situation? 2. What are the ethical issues in this case? 3. What would you do if you were Stacey?

Explanation / Answer

1. In case of issuing the bonds the bondholders shall be the holders of new security,when issuing the bonds the stakeholders like Banks and other small insitiution needs to be considered.

2 the eithical issuse is that the company even been holded with shareholding is working as per the direction of a single owner. the other issuse will be that just to maintain control creditbility is put to stake.

3 I would suggest stacey to take a personnel loan so that he can subscribe to shares and maintain the ownwership stake

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.