DEPARTMENT OF ACCOUNTANCY
UNIVERSITY OF ILLINOIS
September 14, 2011
Al Dunlap at Sunbeam analysis
This memo will reflect on and analyze the decisions of the Sunbeam Board of Directors during Albert Dunlap’s tenure as CEO. This analysis will include an overview of Sunbeam’s goals, evaluation of 1996 – 1997 and 1998 compensation package, assessment of the firing decision by BOD and the overall governance of the BOD. Sunbeam’s Goals
Dunlap is famous for his ruthless but seemingly successful turnaround techniques that he has employed: “For much of his career before coming to Sunbeam, Al Dunlap was known as the poster child of corporate restructuring.” Given that the Board was familiar with Dunlap – his reputation and employment history, hiring Dunlap clearly showed they needed a fast and powerful turnaround and Sunbeam was becoming helpless in the struggle to protect its market share in an increasingly competitive industry. Also, Dunlap’s priority focuses largely and explicitly on stockholders and virtually no regards for other stakeholders. Hiring Dunlap meant that Sunbeam’s goals are limited to just maximizing stockholders’ wealth and all other important aspects of the existence of corporation such as ethics, product quality, employee and customer satisfaction are severely impaired. A corporation is not solely an instrument of stockholders, built to cater to stockholders’ wealth, but a coalition between many resource suppliers with a view to increasing their common wealth: supplying goods and services to customers with efficiency (at relatively lower costs or with high quality), providing jobs to employees with suitable skill sets and so on. Thus, Al Dunlap’s shareholder primacy is unreasonable and contradictory to the essential objectives of the corporation. Flawed perspectives led to wrong decisions. In an effort to create the “fast turnaround,” Dunlap fired many employees and shut down many factories to cut costs...
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