Al Dunpal Case Study

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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...
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