Question

Essay Jim Marks is the president, founder and majority owner of Galena Medical Corporation, an emerging medical technology products company. Galina is in dire need of additional capital to keep operating and to bring several promising products to final development, testing and production. Jim, as owner of 51% of the outstanding stock, manages the company's operations. He places heavy emphasis on research and development and on long term growth. The other principal stockholder is Jill Hutton, who, as a nonemployee investor, owns 40% of the stock. Jill would like to deemphasize the R&D functions and emphasize the marketing functions to maximize short-run sales and profits from existing products. She believes this strategy would raise the price of Galen's stock. All of Jim's personal capital and borrowing power is tied up in his 51% stock ownership. He knows that any offering of additional shares of stock will dilute his controlling interest because he won't be able to participate in such an issuance. But Jill has money and would likely buy enough shares to gain control of Galen. She would then dictate the company's future direction, even if it meant replacing Jim as president and CEO. The company already has considerable debt. Raising additional debt will be costly, will adversely affect Galena's credit rating, and will increase the company's losses due to the growth in interest expense. Jill and the other minority stockholders express opposition to the assumption of additional debt, fearing the company will be pushed to the brink of bankruptcy. Wanting to maintain his control and to preserve the direction of "his" company, Jim is doing everything to avoid a stock issuance. He is contemplation a large issuance of bonds, even if it means the bonds are issued with a high effective interest rate. Instructions: a) Who are the stakeholders in this situation? b) What are the ethical issues in this case? c) What would you do if you were Jim? (15 points) The essay must be a minimum of three paragraphs.

These 3 questions are Essay 3 paragraphs (1 paragraph is for one question, Paragraph should contain from 5-6 sentences) Please do not answer with short answers. Minimum 5 sentences for each question. Thanks.

Answer 1

a) The stakeholders in the above situation includes Mr.Jim Marks - owner of 51% of outstanding stock who is the President Founder and Majority Owner of Galena Medical Corporation ; Mr.Jill Hutton - owns 40% of the stock who is a Nonemployee Investor ; Minority Stockholders owns rest of the 9% of stock.

b) Jim Marks is having a majority stock in the company and Jill Hutton is other principal Stock holder .Even though Jim Marks is the owner of the company and who has the responsibility to look after the company , he is more concerned about his personal benefits to avoid the stock Issuance.Whereas Jill wants to emphasize the marketing functions in the company .

c)If I'm Jim , I would like to revise the face value of the stock i.e; split the share value of each share into lesser value say 10 each and hold all the shares in hand.This will help to raise addition capital and to avoid creating more debt to the company.