CASE

The R&D division of Healy Chemical Ltd has just developed a chemical for sterilizing
the cane toads prevalent in Queensland and the Northern Territory of Australia. The
CEO of Healy is anxious to get the chemical on the market to boost Healy’s profits. He
believes his job is in jeopardy because of decreasing sales and profits. Healy has an
opportunity to sell this chemical in two states of Australia to help control the number of
cane toads.
The manager of Healy’s R&D division strongly recommends further testing in the
laboratory for side- effects of this chemical on the other animals, plants and even
humans. He cautions the CEO, ‘We could be sued from all sides if the chemical has
tragic side- effects that we didn’t even test for in the labs’. The CEO answers, ‘We can’t
wait an additional year for your lab tests. We can avoid losses from such lawsuits by
establishing a separate wholly owned company to shield Healy Chemical Ltd from such
lawsuits. We can’t lose any more than our investment in the new company, and we’ll
invest just the parent covering this chemical. We’ll reap the benefits if the chemical
works and is safe, and avoid losses from lawsuits if it’s a disaster’. The following week
Healy creates a new wholly owned entity called Toad Ltd, sells the chemical patent to it
for $10, and watches the spraying begin.
Questions:
 Who are the stakeholders in this situation?
 Are the CEO’s motives and actions ethical?
 Can Healy shield itself against losses of Toad Ltd?

Case

1. Who are the stakeholders in this situation?

A: CEO of Healy Chemical Ltd. proprietors of Healy Chemicals Ltd., whole

management of Toads Ltd. and all the common equity holders at large are the
stakeholders

2. Are the CEO’s motives and actions ethical?

A: No, action and motives of CEO is not ethical. First, CEO is not concerned about any
side effects that might chemical cause. He is only interested in profitability of company
by any means even if method is unfair. Secondly, he did not take into account any
penalty that his company might face, in case of any tragic side effect of chemical. He
found a way out of escaping his company from the possible penalty suits. He is just
irrational to actual effect of new chemical and has profit making his sole target .

3. Can Healy shield itself against losses of Toad Ltd?

A: Healy shield cannot protect itself as it is a parent company of Toad Ltd. From the
further investigation, concerned authority will make out the intention of management of
Healy Shield Ltd. which was merely profit making without waiting for the result of testing
of chemical. Once concerned authority is aware of such intentions of CEO and their
motives, they can sue the management of Healy Shield Ltd. with heavy penalty or
imprisonment or both