This case is a follow up to HR-29A, and explains the actions taken by Keller Williams in response to the residential real estate market downturn in 2008 and 2009. The case explains the programs and initiatives put in place by the company to boost agent count, increase productivity, and reduce expenses throughout the organization. It also explains how the company relied on these initiatives to not only survive the market downturn but to thrive, achieving success by leveraging the strengths of the company's operating model, core principles, and values.
In 2002, Baker Hughes was accused of violating the Foreign Corrupt Practices Act (FCPA). This case describes the actions taken by the company in response to those accusations. These include hiring a third-party law firm to undertake an independent investigation and voluntarily reviewing its entire global operations with the purpose of discovering other FCPA violations. Simultaneously, the company engaged in a comprehensive restructuring of its policies and systems for preventing and detecting the issuance of questionable payments.
This case takes an inside look at CEO succession planning at Energy Corp. The case provides an overview of various models of succession planning, including external search, COO appointment, a horse race, and the inside-outside model. The case then outlines the process by which Energy Corp chooses to identify a successor. Readers of the case are expected to evaluate Energy Corp's effectiveness, and discuss the various risks of succession planning and how they can be mitigated.
This case is a follow up to CG20A, and explains the actions taken by Tarco in response to threat from activist investor Barracuda. The case explains how the company relied on an analysis of its shareholder base and predictive proxy voting to inform its decision.
In July 2006, Barracuda became the largest investor in Tarco International. In a meeting with management, Barracuda's managing director advised that strong measures needed to be taken to improve operating performance. If management failed, Barracuda would force a sale of the company. In response, the board of Tarco hired FD, a leading financial communications consultancy specializing in strategic investor relations. The board asked FD to compile extensive research on the Tarco's shareholder base, investor perception of the company and management performance, predictive voting on potential proxy proposals, and tactics used by Barracuda in previous activist engagements. Armed with this data, the board had to decide what steps to take, if any, to keep Barracuda at bay and ensure that Tarco retained the support of its investors
Netflix was among a small group of Silicon Valley companies to emerge from the technology bubble of the late 1990s a clear winner in terms of growth, market share, and profitability. That Netflix was able not only to prevail over this competition but also to thrive was largely attributable to the culture of freedom and responsibility inculcated by founder Reed Hastings. To foster this culture, the company adopted a series of unique employment practices that were meant to attract, retain, and motivate the type of employee that Netflix valued. Among these practices was a compensation system with several unconventional features. Whereas most companies provided compensation packages with a predetermined mix of cash and equity-based awards, Netflix turned the model on its head and allowed employees to request their own mix. Management was interested in finding out whether this practice supported or detracted from the company's main objectives for its employees.
In 2006, Samsung Electronics semiconductor business was the world's largest supplier of flash memory components. The company, however, did not originally invent flash technology and entered the market in the early 1990s behind technology leader Toshiba Corporation of Japan. This case explains how Samsung became a leader in the global market for flash memory over the following fifteen years. Readers are asked how they would make investment decisions to maintain this leadership position going forward.
Following the revelation that the Royal Dutch/Shell Group of Companies had overstated its proved oil reserves by over 4 billion barrels, company officials announced dramatic changes to the company's organizational structure and governance system. These changes were intended to improve management oversight and long-term corporate performance. This case outlines those changes.
In January 2004, the Royal Dutch/Shell Group of Companies announced that it would reduce its estimate of proved oil reserves by nearly 4 billion barrels, or 20 percent. The announcement set off a series of events, including a drop in the company's share price, internal and external investigations, and the resignation of several senior officers. During this period, details came to light about the sometimes bitter disputes among company officials over its reserve practices. Company officials had to decide what changes to make to restore public confidence in the organization.
Berkshire Hathaway is known to many as the investment vehicle of Warren E. Buffett. To some extent, this reputation is well founded, given the investment success that the company has enjoyed under his leadership. Less attention, however, has been paid to the management success of Berkshire Hathaway. By 2008, the array of companies that Berkshire Hathaway owned was unique in its diversity. Even more unique was the operating structure that the company employed to manage these operations. It was a model based on extreme decentralization of operating authority, with responsibility for business performance placed entirely in the hands of local managers. While many public corporations implemented strict controls and oversight mechanisms to ensure management performance and regulatory compliance, Berkshire Hathaway moved in the opposite direction. Many of the company's operating principles were in stark contrast to those generally employed by most public corporations. Company shareholders would have to decide for themselves whether these operating principles posed a risk to long-term performance or whether, contrary to expert opinion, they were a source of competitive advantage that could be sustained in the future.
Over the last 10 years, the number of publicly traded companies that have had to restate financial results has risen dramatically. Regardless of whether the restatements stemmed from the aggressive application of accounting standards or the need to correct intentional distortion of results by management, the outcome was often the same: a sudden and significant loss of shareholder value. In many cases, the restatement process led to significant turmoil within the company, including investigations by financial regulators, the resignation of chief executives and other senior officials, wide-scale restructuring and employee layoffs, and lawsuits against the board of directors, auditors, and other involved parties. The effects on the organization were often felt for years, taking a significant financial and reputational toll. This case examines five categories of financial restatements, as defined by Charles W. Mulford and Eugene E. Comiskey: recognizing premature or fictitious revenue, aggressive capitalization and extended amortization of expenses, misreporting assets and liabilities, other income statement items, and problems with cash flow reporting. Examples are provided for each category based on the events at Catalina Marketing, Krispy Kreme, Royal Dutch Shell, Royal Ahold, Nortel Networks, and Parmalat.
Retail grocery sales represent a significant portion of the U.S. economy. The industry was highly competitive, with companies operating on low gross and net margins. As a result, grocery stores were generally under significant pressure to reduce their operating costs in order to maintain profitability. For the last several decades, the grocery industry grew roughly in line with gross domestic product and was considered a mature industry. In order for companies to succeed, they needed to find effective strategies to steal customers from competitors. Many sought to differentiate themselves through store format, store location, product mix, ancillary services, or quality of customer service. Strategies, however, could easily be imitated by competitors, putting grocery store chains under constant pressure to innovate and remain efficient. In general, growth also required the expansion into new store locations. Companies that failed to grow often went bankrupt or were acquired. This case explores executive compensation at four retail grocery stores: Safeway, Kroger, Costco, and Whole Foods. Consideration is given to each company's strategy and market position and corporate governance structure. Readers of the case are asked to evaluate in a critical manner the appropriateness of each company's compensation strategy and compensation levels, given company performance.
In 2007, corporate governance became a well-discussed topic in the business press. Newspapers produced detailed accounts of corporate fraud, accounting scandals, excessive compensation, and other perceived organizational failures-many of which culminated in lawsuits, resignations, and bankruptcy. Central to these stories was the assumption that somehow corporate governance was to blame. That is, there was a functional failure in the system of checks and balances established to prevent abuse by executives. This case explores the various corporate governance systems that have been adopted in the United States and in various countries in Europe and Asia. The issues of control, director independence, auditor independence, dual-board versus unitary-board structure, comply-or-explain, and legislative versus market-driven solutions are explored. Readers are asked to evaluate what governance systems or elements they consider to be most effective. Plentiful examples--including Johnson & Johnson, BMW Group, Michelin, Heineken, Toyota, Samsung, Posco, PetroChina, Infosys, and many others--are used throughout as illustration.
In 1996, Andrea and Barry Coleman launched Riders for Health, a United Kingdom-based nonprofit dedicated to the improvement of transportation systems for health workers in Africa. The nonprofit's main program, Transportation Resource Management, involved a maintenance and training program for motorcycles and other vehicles used by health workers to deliver medical care in remote African communities. Although dedicated to an unglamorous area of health care, the program was incredibly successful and one of the few examples of a practical solution to the world's most intractable health care problems. Nevertheless, by 2007, the organization was at a critical decision point. It had tapped its established, external funding sources almost to maximum levels but still required significant capital to expand. The organization had to decide what strategies, both financial and operational, to implement in order to achieve the much larger scale it needed to spread the benefits of its program across wider sections of Africa's afflicted population.
In 2006, David Zucker, chief executive officer of Midway Games, came under fire for selling a significant amount of Midway stock just weeks before a precipitous decline in the company's share price. One year later, Angelo Mozilo, chairman and chief executive officer of Countrywide Financial, also increased the pace of his stock sales in the months before troubles in the U.S. mortgage lending market led to a similar drop off in Countrywide's share price. Both executives placed their trades through prearranged programs known as 10b5-1 plans. 10b5-1 plans, named after the Securities and Exchange Commission rule which led to their creation, provided a systematic method for corporate executives who were routinely in the possession of material nonpublic information to engage in the sale of company stock. When implemented appropriately, 10b5-1 plans provided a safe haven that shielded these individuals from liability under insider trading laws by demonstrating that certain safeguard conditions were in place at the time the trades were executed. However, the circumstances under which both executives carried out their programs led to an outcry from shareholders that the programs were being abused. Regulators and shareholders were left to decide whether the two men executed their 10b5-1 plans in good faith as required or whether their actions amounted to a sophisticated form of illegal insider trading.
In 2007, there were three prominent corporate governance ratings firms-The Corporate Library (TCL), Governance Metrics International (GMI), and Institutional Shareholder Services (ISS). These firms assessed the effectiveness and deficiency of the governance systems of thousands of publicly traded companies. Although members of the investing public agreed that sound policies were important to protect the interest of shareholders from potentially self-interested managers, there were many questions around the usefulness of published governance ratings themselves. Questions ranged from whether a system of governance could be adequately summarized in a single, numerical score to what a high or low rating was supposed to indicate. Furthermore, allegations that ISS engaged in a conflict of interest by selling consulting services to companies on how to improve their ratings led some to question the objectivity of the ratings process.
As the chief financial officer of The Walt Disney Company, Tom Staggs was responsible not only for the financial management of the company, but also for the communication of the company's financial and strategic objectives to its investor base. Because of Disney's stature as the world's most iconic entertainment brand, the company had a particularly broad investor base: over 991,000 common shareholders in fiscal year 2006 compared with 51,400 for Time Warner. Staggs had to develop and implement a communication strategy that was appropriate for the diversity of this investor base, which included individual, institutional, brokerage house, and mutual fund investors. In doing so, he had to be mindful of the fact that these constituencies often had different time horizons and investment perspectives. In addition, Staggs had to bear in mind several other factors. First, he had to consider that any message delivered was perceived by investors as a direct reflection of management's capability and credibility. Second, he had to consider how the company's stated objectives influenced the behavior of its employees. Third, he had to decide how to implement the communication strategy across a wide array of channels, keeping in mind the purpose of the forum, regulatory requirements, and investor expectations.
In 2006, AARP was one of the largest, most well known nonprofit organizations in the United States. Its membership base exceeded 38 million individuals, by far the largest nonprofit membership base in the country. In recent years, it had influenced major federal legislation on issues including Medicare, Social Security, and pension reform through a coordinated effort of professional lobbyists and grassroots volunteers numbering close to one million. In addition, AARP Services Inc, the organization's wholly owned, taxable (earned income activities) subsidiary, managed relationships with AARP-endorsed businesses that generated over $500 million in royalties from health insurance, life insurance, mutual funds, and other products--making it one of the largest social enterprises in the country. With activities in the commercial, charitable, and political arenas, AARP had adopted a truly cross-sector approach to achieving its mission to "enhance the quality of life for all as we age." Despite its size, influence, and visibility, AARP felt the public did not fully appreciate or understand the organization. In the face of growing public interest and media fascination with the application of business practices and market principles in the social sector--under the rubric of social entrepreneurship--AARP received relatively little attention from journalists, thought leaders, and academics for its enterprising approach. The organization also faced a public relations challenge over the fundamental principles of its cross-sector model. Left unchecked, AARP knew that such allegations, regardless of their validity, could undermine its ability to achieve its long-term goals. The organization also faced competitive challenges and the problem of increasing internal cooperation and synergy across the entire organization in order to improve its competitiveness and execute its social impact and member value agendas.
Reviews the impact of SFAS 142--Goodwill and Other Intangible Assets--in the context of the AOL Time Warner merger. Under SFAS 142, companies were required to perform periodic testing to determine whether economic goodwill had been impaired. Includes a detailed account of the AOL Time Warner merger from its announcement in 2000 through its completion in 2001. Students are asked to assess what the likely impact is of SFAS 142 on the combined AOL Time Warner balance sheet.