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The Ethics of Leveraged Management Buyouts Revisited

Thomas M. Jones and Reed O. Hunt, III
Journal of Business Ethics
Vol. 10, No. 11 (Nov., 1991), pp. 833-840
Published by: Springer
Stable URL: http://www.jstor.org/stable/25072222
Page Count: 8
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The Ethics of Leveraged Management Buyouts Revisited
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Abstract

Although previous ethical analyses of management buyouts have presented useful insights, they have been flawed in three major ways. First, they define the transaction too narrowly, emphasizing the "going private" aspect and ignoring the "leveraged" aspect. Leveraging alters the nature of the transaction substantially and warrants additional ethical analysis. Second, these previous analyses ignore the impact of buyouts on non-stockholder constituents of the firm, an omission which renders their implicit utilitarian approach incomplete. Third, these analyses do not include Rawlsian, libertarian, or Kantian perspectives on ethics. This paper addresses these shortcomings and finds the ethical status of leveraged management buyouts to be highly suspect.

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