University of Phoenix
Finance for Decision Making
November 19, 2012
Assessing the Goal of Sports Products, Inc.
Loren Seguara and Dale Johnson are employees at Sports Products Inc. which is a major producer of boating equipment and accessories for the last 20 years. Loren is a clerical assistant in the company’s accounting department and Dale is a packager in the company’s shipping department. While having lunch one day Dale and Loren discussed their concerns over the company’s declining stock prices even though profits have been rising. Dale pointed out that the packaging department works hard to be efficient and cost-effective, despite their efforts stock price dropped by $2 per share in a 9 month period. Loren added that she has seen documents that describe the company’s profit sharing plan and the only people benefiting from increased profits were the managers and that is not right considering the company has never paid-out dividends to its stockholders. That makes sense on why Sports Products Inc. is getting sued by the state and federal environmental officials. They are saving money on pollution control by dumping pollutants in the nearby stream in an effort to keep profits up. With all of these facts coming out, questions on the company’s priorities and values have come up. The first question in the Sports Products, Inc. case is: What should the management of Sports Products, Inc., pursue as its overriding goal? It is apparent to investors due to the decline in stock prices even though experiencing an increase in profits that Sports Products, Inc. is not focusing on maximizing shareholders wealth. Instead their focus on profits to the benefits of managers through performance bonuses has led them to make unethical decisions that have given them a reputation of not being environmentally friendly and has scared off potential investors. If the company is not managed properly...