Description: Valeant pharmaceuticals continues to be in the business press, with word this week that Goldman Sachs sold a huge chunk of CEO Michael Pearson’s shares in order to collect on a $100 million loan it had made Mr. Pearson. Apparently Mr. Pearson did not want his shares to be sold, though they had been pledged as collateral on a loan Goldman had made to him to cover charitable donations, pay taxes and purchase Valeant shares. Concern over Valeant’s dropping share price may have prompted Goldman’s action.
Date: November 6, 2015
1) Do you think it was right for Goldman to sell the shares without Mr. Pearson’s permission?
2) What might be some of the tax consequences of this arrangement?
3) How might the practice of pledging shares as collateral affect executive behaviour?