General Dynamics is one of the many firms that has instituted bonus plans. Below is an excerpt from a description of the implementation:

[Ojne element of the plan is a gain-sharing provision that gives senior executives annual bonuses equal to their base salaries, under one condition: that General Dynamics stock trades for 10 consecutive days at a price at least $10 a share above where it stood when the plan was adopted. ... At least half of each bonus paid as a direct result of increasing shareholder value must remain in a General Dynamics account, the value of which we intend to link directly to the company's long-term performance until the individual participant reaches age 65. .. . Consequently, every manager who is part of gain-sharing has a continuing, tangible incentive to work to increase shareholder value over the long term.

The plan was adopted in February of 1991. On May 6, 1991, the stock price met the conditions specified above and managers split a pool of $5.1 million.

[SOURCE: William A. Anders, “Hefty Bonuses for Hefty Gains,” Wall Street Journal (May 20, 1991), p. A18. Reprinted by permission of The Wall Street Journal, © 1991 Dow Jones &

Company, Inc. All Rights Reserved Worldwide.]

a. Do you think that General Dynamics’ managers could take actions between February 1991 and May 1991 that were so significant that share price would rise by $10? Explain.

b. As a shareholder, would you have been suspicious of the timing of the im¬ plementation of this plan? Explain.

c. In your view, is there any ethical problem with the implementation of the General Dynamics plan?

d. What factors, other than managerial actions, could have caused the stock price to rise?