Response to the following problem:
Media One owns 18% of the voting stock of Web Talk, Inc. The remainder of the Web Talk stock is held by numerous investors with small holdings. Austin Cohen, president of Media One and a member of Web Talk's board of directors, heavily influences Web Talk's policies. Under the fair value method of accounting for investments, Media One's net income increases as it receives dividend revenue from Web Talk. Media One pays President Cohen a bonus computed as a percentage of Media One's net income. Therefore, Cohen can control his personal bonus to a certain extent by influencing Web Talk's dividends. A recession occurs in 2014, and Media One's income is low. Cohen uses his power to have Web Talk pay a large cash dividend. The action requires Web Talk to borrow in order to pay the dividend.