Ethics: Jake Granville, the president and CEO of Earth Systems Ltd, a waste management company, was recently hospitalised, suffering from exhaustion and a heart ailment. Immediately prior to his hospitalisation, Earth Systems had experienced a sharp decline in its shares price, and trading activity became almost non-existent. The primary reason for this was concern expressed in the media over a new untested waste management system implemented by the company. Mr Granville had been unwilling to submit the procedure to testing before implementation, but he reluctantly agreed to limited tests after the system was operational. No problems have been identified by the tests to date.
The other members of management called a meeting to determine what they should do. Roger Calfrey, the marketing manager, suggested that the company buy back a large number of shares. In that way, investors might notice that activity had picked up, and might decide to buy some more shares. This plan would use up most of the company's available cash, so that there will be no money available for a cash dividend. Earth Systems has paid cash dividends every quarter for over ten years.
Required:
1. Is Mr Calfrey's suggestion ethical? Explain.
2. Is it ethical to discontinue the cash dividend? Explain.

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The Answer of Ethics: Jake Granville, the president and CEO of Earth Systems Ltd, a waste management company, was recently hospitalised, suffering from exhaustion and a heart ailment. Immediately prior to his hospitalisation, Earth Systems had experienced a sharp decline in its shares price, and trading activity became almost non-existent. The primary reason for this was concern expressed in the media over a new untested waste management system implemented by the company. Mr Granville had been unwilling to submit the procedure to testing before implementation, but he reluctantly agreed to limited tests after the system was operational. No problems have been identified by the tests to date.
The other members of management called a meeting to determine what they should do. Roger Calfrey, the marketing manager, suggested that the company buy back a large number of shares. In that way, investors might notice that activity had picked up, and might decide to buy some more shares. This plan would use up most of the company's available cash, so that there will be no money available for a cash dividend. Earth Systems has paid cash dividends every quarter for over ten years.
Required:
1. Is Mr Calfrey's suggestion ethical? Explain.
2. Is it ethical to discontinue the cash dividend? Explain.

Ethics: Jake Granville, the President and CEO of Earth Systems