A case study for MBA types

[kleverkljogs]

You are a shareholder in a major corporation.

The new CEO has implemented a plan which includes substantial dividend payments but only to board members and major shareholders.

You are not one of these preferred shareholders.

The new CEO also has a very aggressive growth plan which includes a hostile takeover of a rival company. This will be an expensive, resource consuming process and some shareholders have serious doubts as to whether the takeover, now bogged down in never ending due diligence, will ever be a success. The merger definitely will require long term injections of massive amounts of capital just to bring the acquired company up to minimum standards of operation.

Further more, the main reason given by the CEO to win support for this hostile takeover was that the target company had some very interesting technologies in the R&D stage, control of which would benefit the acquiring company tremendously. To your dismay, after the deal has gone beyond the point of no return it turns out that you as a shareholder had been mislead by the CEO and the board. No such technology existed within the target company after all. However, the costly takeover still proceeds.

As a result of these selective dividend pay outs and aggressive take over activity the company is no longer profitable and has been forced to take on huge amounts of long term debt.

In order to reduce borrowing requirements and fund the above, the CEO has implemented a series of cost saving measures company wide. One of these measures is a drastic reduction in the maintenance budget.

About 2 years after the maintenance budget cuts a major plant in the Southern US collapses in adverse but predictable weather conditions, killing over a 1000 people. In addition, although the budget savings had originally only been in the miilions, the rebuild cost for this facility is estimated at in excess of 40bn. Money the company can barely afford.

At the first shareholder meeting subsequent to these events, with shareholder confidence in the CEO polled at an all time low, the CEO makes a speech in which he accepts full responsibility for all of the above.

As a shareholder, what would you expect the CEO to do next?

Discuss.

[This message has been edited by kleverkljogs (edited 16-09-2005).]

[Joseph27]

If my moneys in that company - the prick better resign and without a golden parachute

[patch900]

bend over, pull his pants down and ask "who's gonna make me their bitch now?"
Brutal scenes follow......

[Reason]

It reminds me of our first CEO. Actually, our company wasn't even incoporated yet, but he led the fight to extract our department from the confines of a much larger corporation. Only 25% of his subordinates agreed with his campaign, but he knew what was best. Now the resulting company has been succesful for years.

I'd stick it out with the CEO you're speaking of. When you hear about things like "selective dividends," you should be careful that you're not falling prey to the scare tactics of his rivals.

Also, strive to understand the truth from all angles.

[This message has been edited by Reason (edited 16-09-2005).]

[Reason]

Actually, I should have been more adamant. The OP has definitely fallen prey to rivals' scare tactics and gotten the facts dead wrong.

EVERY SHAREHOLDER GOT A DIVIDEND INCREASE! In fact, the smaller the shareholder, the greater the increase was on a percentage basis.

This is one of the simplest facts to know, but you got it wrong.

This should cause you to revisist what you think you know about this CEO.

Remember: In business knowledge is power; False knowledge is more dangerous than no knowledge at all.

[This message has been edited by Reason (edited 17-09-2005).]

[T2K]

It's an interesting analogy, but also a very contrived and stretched one.  As such, it would be easy to structure it the other way.

-The share price of this company is the highest of all companies on all the world's exchanges, and has remained so under the current CEO.

-The share price consistently rises and has split many times, as it has done under the current CEO.

-People all over the world wish to work for this company, many even try to do so illegally, without the consent of the corporate HQ.

-The company faced a major crisis in 2001 from a competitor that was ignored by the previous CEO, but the current CEO has aggressively mounted a campaign to challenge them.

-etc

It's a fun little word game.  Everything can be twisted around though.  It easier to lose the analogy and discuss facts, if you want to discuss the Bush Presidency.
Like why won't he secure the Mexican border, as a start.

There are plenty of things about Bush that suck in terms of policy.  But the conspiracy theory that a rich guy spent a lot of money to become President so he could make himself and his rich friends richer is laughable.

[This message has been edited by T2K (edited 17-09-2005).]

[Joseph27]

Mr T2K - we all knew what he was getting at but it was too far a stretch so i came up with a lame ass reply instead  

[God himself]

And there I was thinking it was Temasek Holdings.

I must get out more ...

[kleverkljogs]

-The share price of this company is the highest of all companies on all the world's exchanges, and has remained so under the current CEO.

That makes no sense, you don't seem to understand share prices.

-The share price consistently rises and has split many times, as it has done under the current CEO.

This also makes no sense.

-People all over the world wish to work for this company, many even try to do so illegally, without the consent of the corporate HQ.

Possibly true but with resumes mostly only coming from underfunded failing smaller companies.

-The company faced a major crisis in 2001 from a competitor that was ignored by the previous CEO, but the current CEO has aggressively mounted a campaign to challenge them.

No. In response the CEO engaged in a hostile takeover that was unrelated to the original crisis while implying that the two events were related. It is true that the less intelligent shareholders do still believe the events are linked but they are not. As a result of these actions the global market is now more hostile to the companeis original products than ever before.

[T2K]

What makes no sense is your analogy.  I understand the issues at hand very well.

Just discuss the topics you want to discuss, don't create contrived and useless analogies to twist around.

Or, if you must make analogies to help you understand complicated issues, at least use interesting reference models like the Roman Empire, fishing, chess, picking up chicks, or something like that.

Companies?  CEO's?  Share prices?  We all live that boring crapola every day in the Straits Times.

[kleverkljogs]

You have been reading the Straits Times too much if you now want to control who discusses what and in which manner.

Here's an idea, if the manner a discussion is presented bores you then don't join the discussion.

Is it that hard to keep your mouth shut?

[This message has been edited by kleverkljogs (edited 20-09-2005).]

[T2K]

I usually try and help those in need.

Star Wars is the analogy you really should have chosen.

[kleverkljogs]

yawn

[Joseph27]

Star War's - Episodes I,II,III all friggen suck.  How do you take such a classic and screw up the entire thing.  Without all the fancy technology Lucas made possibly the best trilogy of all time and then when more advanced means were available he made possible the worst (matrix notwithstanding)

Well thats may whinge for the day

[T2K]

J27, an experienced conspiracy theorist like you should get it.

Bush is The Emperor, and "bringing balance to the force" is a metaphor for increasing the share price so that he can put the hotties in checkmate, thus landing the legendary 10 pound bass - it's all in Gibbons' book, of course.