Case Study “Al Dunlap at Sunbeam” - 1020 Words

Case Study â€Å"Al Dunlap at Sunbeam† Response to Dunlap’s view of shareholder privacy I don’t agree with Dunlap’s view that shareholders are the only constituencies about which corporate directors and executives should be concerned. In light of agents’ obligations to principals, managers are supposed act in the best interest of the company’s shareholders, the major capital providers, when making decisions; however, as shareholders and stakeholders interests are to a large extent compatible, especially from a long-term perspective, managers should also take into consideration the interests of multiple constituencies when operating a company. For example, both shareholders and customers may benefit from a company’s successful research and†¦show more content†¦It was reasonable for a CEO’s compensation to increase as the company expanded and became a larger entity, and the newly-granted shares and increasing stock options further aligned the CEO’s personal interests with those of the company and shareholders. In t his sense, the second compensation package was also well-structured and not excessive. Seeing Sunbeam’s revenue rising and stock price climbing steeply upwards, Sunbeam’s shareholders and directors were fully convinced by Dunlap’s leadership, so they might perceive the increase in compensation amount necessary to retain and better motivate Dunlap to enhance the company’s value. Nonetheless, they neglected the fact that the increased portion of the equity-based compensation also further motivated the CEO’s dangerous behaviors pertaining to improper earnings management. Opinions on Sunbeam’s corporate governance From my perspective, Sunbeam’s board made a wise decision in firing Al Dunlap, and it was an example of effective corporate governance as the decision stopped Dunlap to further impair tone at the top in Sunbeam and further generate agency cost within Sunbeam. According to SEC litigation release No. 17001, during Dunlap’s tenure in Sunbeam, Dunlap was involved in applying improper earning management such as channel stuffing and â€Å"cookie jar†Show MoreRelatedThe Sunbeam Board Of Directors1488 Words   |  6 PagesThis case attempts to study and analyze the decisions of the Sunbeam Board of Directors (BOD) during Albert Dunlap’s stint as the Sunbeam’s Chief Executive Officer (CEO). This analysis will comprise the CEO hiring and his shareholder primacy view, first year and second year CEO compensation package review and will conclude the BOD’s decision to fire the CEO. In July, 1996 Sunbeam was a dying brand, which struggled to survive in the increasingly competitive market-place and needed a savior.(case p.Read MoreSunbeam Corporation Ethics4981 Words   |  20 PagesJournal of Business Case Studies – January/February 2010 Volume 6, Number 1 Sunbeam Corporation: A Forensic Analysis Patricia Hatfield, Ph.D., Bradley University, USA Shelly Webb, Ph. D., Xavier University, USA ABSTRACT The members of the Board of Directors at Sunbeam were completely bewildered. Al Dunlap, Sunbeam’s highly successful but controversial CEO was threatening to resign after almost two years of leading Sunbeam successfully out of a slump that had threatened the long-termRead MoreThe Sunbeam Board Of Directors1620 Words   |  7 Pagesattempts to study and analyze the decisions of the Sunbeam Board of Directors (BOD) during Albert Dunlap’s stint as the Sunbeam’s Chief Executive Officer (CEO). This analysis will comprise the CEO hiring and his shareholder primacy view, first year and second year CEO compensation package review and will conclude with the BOD’s decision to fire the CEO. In July, 1996 Sunbeam was a dying brand, which struggled to survive in the increasingly competitive market-place and needed a savior.(case p. 2) Sunbeam’sRead MoreFinancial Statement Frauds29904 Words   |  120 Pageshave attracted high profile attention recently. There have been several cases by businesses of what appears to be financial statement fraud, which have been undetected by the auditors. In this thesis, the main purpose is to identify some of th e reasons why auditors have not detected financial statement fraud and to suggest possible solutions for improving the audit process in these areas. In order to achieve this target, some cases of the fraudulent financial statements of revenue recognition will beRead MoreCorporate Governance : How Corporations Are Managed2041 Words   |  9 Pagespolicy will be biased (Rankin, et al., 2012). Also where directors are paid their bonuses as shares, to meet the expectation of the market and maintain the favorable share prices, managers often use biased accounting policy or distort accounting information. A case study of sunbeam is great example of misuse of accounting policy and what having dominant personality can lead to. In 1996 Al Chainsaw Dunlap undertook mass firing and started overstating losses in Sunbeams. 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