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Gannett to follow after Tribune? April 10, 2007

Posted by Stacey Swift in Growth, Stakeholder management, sustainable development.
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During last week’s class we talked about how the Tribune should handle their large variety of different companies.  Their recent acquisitions has gotten other large newspaper companies thinking, should we be doing the same thing?  Gannettis a large publisher of USA Today and many other newspapers for small and mid-size cities (their headquarters is right by my house, its the most beautiful building….but anyways).  Recently they have been under pressure to increase their return to shareholders, as their price earnings ratio is the lowest in the industry.  Shareholders have watched Real Estate mogul Sam Zell buy out Tribune and their value increased.

The article says Gannett has a $13.2 billion value, but also $5 of debt, making it an unlikely candidate for a buy out.  They also say they could create value by spinning off its NBC stations.  This got me thinking, How much responsibility does the company really have to its shareholders?  Do they need to change their current operations just to increase their dividends to shareholders?  Currently their annual dividend is $1.24, but Barrons says they could technically afford to give $4 per share, or they could spin of their stations to increase profits.  Are they responsible to give shareholders as much as they can?  With huge conglomerates such as Tribune, smaller corporations are under even more pressure to increase profits.  Do you think that Sam Zell is setting a trend and we will begin to see more buyouts in the future?


Whirlpool’s Maytag, Samsung Recall Washing Machines for Fire Hazard March 21, 2007

Posted by silviamocanu07 in Business-Society Issues, Consumers, Stakeholder management.

I found this article in the Wall Street Journal (Link: http://online.wsj.com/article/SB117448544919944057.html?mod=us_business_whats_news) about the recall of 270,000 washing machines sold in the US, as they are thought to be a fire hazard. Maytag and Samsung also guarantee free repairs for these machines.

Despite the fact that Samsung only received one customer complaint, while Maytag received five, with no actual injuries reported, the companies took a proactive approach and decided to recall the appliances. This shows a responsible approach of dealing with the problem by admitting that the machines had a manufacturing flaw and addressing the problem, instead of shying away from it.

This issue I believe relates perfectly to one of our previous class discussions on corporate responsibility and the impact of the external environment on organizational operations and internal decision-making in times of a potential crisis. The case illustrated by the article shows a positive reaction from the companies involved. It is a case that also shows that corporations are greatly influenced by consumer demands, as well as by the potential threats posed by their products to the consumers, be it because of ethical reasons or because of negative legal implications.

Jet Blue’s Blooper February 19, 2007

Posted by Elaine in Cases, Consumers, Stakeholder management, transportation.

This past Valentine’s Day was not exactly ideal for the 10,000 passengers that were stuck in Jet Blue planes, which were left stranded for six hours each on runways at JFK Airport in an ice storm. 23% of their flights to 11 different cities were cancelled due to the weather leaving many customers aggravated. After reading about corporate social responsibility in Chapter 7, I think Jet Blue is trying its best in taking a proactive approach to gaining its credibility back. They are working on a “Bill of Rights” which outlines the penalities Jet Blue faces and rewards for its passengers in situations where they experience difficulties during weather-related cancellations. Airlines would be required to offer travelers food, water, and clean bathrooms for any delays over three hours, and refund 150% of a flight’s ticket price for those delayed more than 12 hours. Is Jet Blue doing this because they’re morally obligated to compensate for their mistakes or is this just to deter being detested?

It’s to fend off any potential bad press in the future, but it did not mitigate the experience of those people on that flight, says Kate Hanni, one of the customers on the stranded planes.

She believes this is a move on Jet Blue’s part to save themselves from bad publicity. She was mad that the passengers weren’t informed (timely or at all) about the crucial weather impact and will most likely not be a Jet Blue customer after this inconvienent experience. Are the airlines to blame for mother nature’s behavior or should they have obliged to the warnings and consulted with their passengers beforehand? The mistakes have been made, but at least they’re taking steps to counteract their errors.

Becoming Environment Friendly February 14, 2007

Posted by collage9 in Consumers, Organizational Environment, Stakeholder management.

Just recently, some of the top corporations in the U.S. were called out publicly by some environmentally conscious investors for not doing more to prevent global warming.  Among them were ConocoPhillips, ExxonMobil, Wells Fargo, and Bed Bath & Beyond.  I think it is interesting how some of the top corporations in the country are some of the last ones to join the movement to be more environment friendly.  It went on to say how in the future it could hurt their business as investors are looking for cleaner technologies.  You would think that these major corporations would be the first to ensure that they are part of this movement, especially if it is good for business.

Not only can it hurt their profits, but it can also hurt their public image as well.  People in general now are starting to become much more mindful of the environment.  With this said, companies ignoring the environment and global warming might be looked over for a more responsible company.  I just found it interesting, and a little surprising, that companies like this would put their business in some risk when they could easily find ways to fix the problem.  Not only should they want to do it for themselves, but I think companies should want to improve the environment seeing the state that it is in currently, and more importantly what it is heading towards.

Agency Theory, Home Depot, and Stakeholders January 24, 2007

Posted by Jordi in agency theory, Retail, Stakeholder management.

There was a lot of media coverage of former Home Depot CEO Nardelli being paid too much in his severance package. Today, Home Depot announced that they would pay the new CEO “only” $8.9 million. And, 89% of this is based on performance.

Home Depot, under fire by critics who charged that it overpaid former Chief Executive Robert Nardelli, on Wednesday said the 2007 compensation package of its new CEO was valued at $8.9 million, with 89 percent of that at risk based on company performance.

This seems like a fine example of the agency problem discussed in Chapter 2. The former CEO’s compensation of $210 million (in severance!) was because he had an information advantage in terms of evaluating his performance. Who was on that board, anyway? Did it have outside directors? Traditional arguments will say that this is what the “market will bear.” One flaw I see with that argument is that market theory assumes equal information. Because the former CEO’s pay was divorced from the actual market performance of the company, he took advantage of the agency problem.

Home Depot, now, as an organization, has to deal with some irate stakehodlers. To induce their contributions, it has modified its policies.

What role did institutional investors like CalPERS play in this?