Using the money from their recent bond issue, Terrys management has decided to declare an additional $562,500 dividend. The date of declaration is December 30, Year 3. The date of record will be January 15, Year 4, and the date of payment will be January 30, Year 4.

As an additional signal to the market, Terrys management repurchased 205,000 shares of Terrys common stock on December 15, Year 3 for $8.00 a share.

At the beginning of Year 2, Terrys Board of Directors authorized stock options for the executive team. The team could buy shares from the company at a set price for $10.00/share, then sell them at the current market price to make a bonus. On December 10th, Terrys stock price was only $8.40/share, making these stock options worthless. Based on this information, do you think that the management teams decision to authorize an additional dividend and repurchase shares on December 15th was ethical? Why or why not?