ETHICAL DILEMMA

Interworld Distributors has paid quarterly cash dividends since 1980. The dividends have steadily increased from $.25 per share to the latest dividend declaration of $2.00 per share. The board of directors is eager to continue this trend despite the fact that revenues fell significantly during recent months as a result of worsening economic conditions and increased competition. The company founder and member of the board proposes a solution. He suggests a 5% stock dividend in lieu of a cash dividend to be accompanied by the following press announcement:

In lieu of our regular $2.00 per share cash dividend, Interworld will distribute a 5% stock dividend on its common shares, currently trading at $40 per share. Changing the form of the dividend will permit the Company to direct available cash resources to the modernization of physical facilities in preparation for competing in the 21^st century.

Please evaluate the above situation with the seven steps provided in the Analytical Model for Ethical Decisions.

ANALYTICAL MODEL FOR ETHICAL DECISIONS

Ethical codes are informative and helpful. However, the motivation to behave ethically must come from within oneself and not just from the fear of penalties for violating professional codes. Presented below is a sequence of steps that provide a framework for analyzing ethical issues. These steps can help you apply your own sense of right and wrong to ethical dilemmas.

Step 1.	Determine the facts of the situation. This involves determining the who, what, where, when, and how.
Step 2.	Identify the ethical issue and the stakeholders. Stakeholders may include shareholders, creditors, management, employees, and the community.
Step 3.	Identify the values related to the situation. For example, in some situations confidentiality may be an important value that may conflict with the right to know.
Step 4.	Specify the alternative courses of action.
Step 5.	Evaluate the courses of action specified in step 4 in terms of their consistency with the values identified in step 3. This step may or may not lead to a suggested course of action.
Step 6.	Identify the consequences of each possible course of action. If step 5 does not provide a course of action, assess the consequences of each possible course of action for all of the stakeholders involved.
Step 7.	Make your decision and take any indicated action.