Al Dunpal Case Study
Situation-
Albert Dunlap was known for turning around badly shaped companies into profitable companies. Through his radical restructuring and downsizing methods, he created shareholder value. At Scott Paper, Dunlap fired 35% of all the employees and 71% of the corporate staff raising the stock price from $38.00 to $120.00 and sold the company to Kimberly Clark for more than $6B. Due to his past success, Al Dunlap was hired to turn around Sunbeam. Sunbeam had a long period of management and financial instability. In other words, Sunbeam needed a “savior.” Many believed this was Al Dunlap. Unfortunately, through his tenure at Sunbeam, stock price fell from a high $53.00 to $16.00 on the day that he was fired. Were his “rightsizing” techniques not adequate? or was he just an overpaid CEO?
1. Consider Dunlap’s statement on page 3 of the case: “Stakeholders! Everytime I hear the word I ask how much did they pay for their stake? There is only one constituency I am concerned about and that is the shareholders.” Do you agree or disagree with Dunlap’s view of shareholder primacy?” Explain
I completely disagree with Dunlap’s statement. Although shareholders are owners of the company who have “paid” for their stake, stakeholders do play a key role in an organization. In essence, shareholders are stakeholders. According to Kim in Corporate Governance (p. 166) although the primary goal of a firm is to create wealth for the shareholders many believe companies should a have a greater responsibility to society – stakeholders. I agree with this perspective. Every decision Dunlap made as a CEO affected not only the shareholders but also affected the needs and interests of the stakeholders in the company. In the short-term, shareholders profited from the company wide staff cuts and savings but Dunlap sacrificed Sunbeam’s culture and morale of its employees. In the long-term, the company suffered. During Dunlap’s tenure, many employees were let go
Albert Dunlap was known for turning around badly shaped companies into profitable companies. Through his radical restructuring and downsizing methods, he created shareholder value. At Scott Paper, Dunlap fired 35% of all the employees and 71% of the corporate staff raising the stock price from $38.00 to $120.00 and sold the company to Kimberly Clark for more than $6B. Due to his past success, Al Dunlap was hired to turn around Sunbeam. Sunbeam had a long period of management and financial instability. In other words, Sunbeam needed a “savior.” Many believed this was Al Dunlap. Unfortunately, through his tenure at Sunbeam, stock price fell from a high $53.00 to $16.00 on the day that he was fired. Were his “rightsizing” techniques not adequate? or was he just an overpaid CEO?
1. Consider Dunlap’s statement on page 3 of the case: “Stakeholders! Everytime I hear the word I ask how much did they pay for their stake? There is only one constituency I am concerned about and that is the shareholders.” Do you agree or disagree with Dunlap’s view of shareholder primacy?” Explain
I completely disagree with Dunlap’s statement. Although shareholders are owners of the company who have “paid” for their stake, stakeholders do play a key role in an organization. In essence, shareholders are stakeholders. According to Kim in Corporate Governance (p. 166) although the primary goal of a firm is to create wealth for the shareholders many believe companies should a have a greater responsibility to society – stakeholders. I agree with this perspective. Every decision Dunlap made as a CEO affected not only the shareholders but also affected the needs and interests of the stakeholders in the company. In the short-term, shareholders profited from the company wide staff cuts and savings but Dunlap sacrificed Sunbeam’s culture and morale of its employees. In the long-term, the company suffered. During Dunlap’s tenure, many employees were let go