You are the chief financial officer (CFO) for Advanced Nutriceuticals, a leading manufacturer of nutritional supplements in the United States. The company’s CEO, Jeff Johnson, is passionate about health and the value of nutritional supplements. Jeff has a compelling story—he is a survivor of Stage IV skin cancer, an outcome he attributes to the use of nutritional supplements. He is featured widely in company advertising and is admired by most of the company’s employees.

Unlike prescription medications, nutritional supplements are not subject to U.S. Food and Drug Administration regulation, and the company does not have a lot of well-supported research to support the efficacy of its products. In addition, there has been considerable competition from manufacturers outside the United States, who can produce the same products at a much lower cost. The company has spent a year developing a long-term strategy that involves increasing production and expansion into international markets.

As the CFO, you have been asked to develop a budget for the next three years. The company has plans to expand its operations, and you have projected that there will be a need for a large amount of capital. You have presented your budget to the CEO and board of directors and have discussed various options for raising capital, such as the sale of bonds and a public offering of additional stock. After analyzing each of the alternatives that you have presented, Jeff has come back with a new option: He wants to move all of the employees’ retirement funds to stock in Advanced Nutriceuticals and encourage every employee to show “company spirit” by investing as much as possible. Jeff is convinced that he can sell this to the employees based on his charm and charisma. You are concerned that this is a risky move for employees; if the company is not successful, they will be out of a job and a retirement fund. You are also aware that the employees respect Jeff and believe in him, and they will probably follow his recommendations.