Greyhound Stables Inc. operates several dog racing tracks throughout the United States. Since most facilities are outdoor tracks only most of the cash receipts for Greyhound are received from April through October. These funds are usually invested in short-term very liquid investments such as stocks and bonds. Among the stocks purchased last year was Servitronics a company specializing in automatic vending equipment.
The company decided not to sell its Servitronics stock at the end of last year and has purchased more of the stock this year. The company intends to continue to purchase stock until it holds enough to make a takeover bid for the company. The accountants have been instructed to continue to classify the investment as short-term until the takeover is accomplished so that less attention will be directed to it. (Presently Greyhound has no long-term investment in stock at all.)
Required:
1. Is it ethical for Greyhound to attempt to take over another company? Explain.
2. Is it ethical for Greyhound to leave its investment in the short-term investment category? Explain.

Question

Cirmelch Malolot · Accepted Answer

Final Answer :

1. Yes Greyhound may attempt to "take over" or purchase another company. The means that it uses to accomplish its goal must be ethical and certainly building up a portfolio of the stock in question is ethical. Unethical takeovers are those in which a company is purchased for its assets and "harvested" leaving employees without jobs and possibly irreparably damaging a community.
2. It is not ethical for the company to leave the stock in the short-term category if it no longer meets the criterion for a short-term investment. It would depend upon whether the company was serious in its intention to purchase a controlling interest in Servitronics. Since there is no evidence to the contrary it appears that Greyhound's investment should be classified as long-term.

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