Dividend Policy
Hancock Inc. is owned by nearly 100 shareholders. Judith Stitch owns 48% of the stock. She needs cash to fulfill her commitment to donate the funds to construct a new art gallery. Some of her friends have agreed to vote for Hancock to pay a larger-than-normal dividend to shareholders. Judith has asked you to vote for the large dividend because she knows that you also support the arts. When informed that the dividend may create a working capital hardship on Hancock, Judith responded: ‘‘There is plenty of money in Retained Earnings. The dividend will not affect the cash of the company.’’ Respond to her comment. What ethical questions do you and Judith face? How would you vote?
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