Chapter 6
Corporations: Contributed Capital and Dividends
318
Case Study
CS-1
(
10
)
McIntosh Pharmaceutical develops and manufactures cancer-related drugs. For the last 10
years, it has been developing a unique chemical that has been shown to reduce the risk of
breast cancer in middle-aged women. Unfortunately, just before going into mass production,
scientists within McIntosh uncovered harmful side effects of the drug and strongly
recommended to management that mass production be delayed for another five years to
better study the drug. McIntosh management contemplated its response and after three days
it announced this news to the public. Following the announcement, McIntosh’s share price
dropped 40%. During the three days of meetings, however, many managers decided to sell
their shares in McIntosh.
Was their decision to sell shares ethically sound? Explain.
