Marriot Corporation
Why is Marriott 's CFO proposing Project Chariot?
2. Is the proposed restructuring consistent with management 's responsibility?
3. The case describes two conceptions of managers ' fiduciary duty (p. 9). Which do you favor: the shareholder conception or the corporate conception? Does your stance make a difference in this case?
4. Should Mr. Marriott recommend the proposed restructuring to the board?
Marriott Corporation (A)
1. Why is Marriott 's chief financial officer proposing Project Chariot? What is your assessment of MC 's financial condition? Is this project necessary for the company 's survival?.
2. Is Project Chariot consistent with management 's responsibilities? To bondholders? To shareholders? To the public?
3. The case describes two conceptions of manager 's fiduciary duty. Which do you favor: the shareholder conception or the corporate conception? Does your stance make a difference in this case?
4. Should Mr. Marriott recommend the proposed restructuring to the board?
5. Who will be affected by Project Chariot? Should MC make any concessions to the bondholders?
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Ans. 1
Project Chariot involves a conflict of interest between the shareholders and the bondholders since in this case the debt being held by Marriott Corporation (MC) is risky. Project Chariot aims to create MII with low debt and HMC with high debt. Thus bondholders will find that their investment gets tied to risky real estate assets whose appreciation is uncertain. Food management which is a major segment of MC remains with MII. Thus Project Chariot aims to give shareholders the business upside and bondholders the real-estate downside. Hence this appears to be a case of risk shifting. Shareholders stand to gain while bondholders will lose if Project Chariot is implemented.
Ans. 2
This seems to be a case of ‘Cashing out’/’Wealth Transfer’
2. Is the proposed restructuring consistent with management 's responsibility?
3. The case describes two conceptions of managers ' fiduciary duty (p. 9). Which do you favor: the shareholder conception or the corporate conception? Does your stance make a difference in this case?
4. Should Mr. Marriott recommend the proposed restructuring to the board?
Marriott Corporation (A)
1. Why is Marriott 's chief financial officer proposing Project Chariot? What is your assessment of MC 's financial condition? Is this project necessary for the company 's survival?.
2. Is Project Chariot consistent with management 's responsibilities? To bondholders? To shareholders? To the public?
3. The case describes two conceptions of manager 's fiduciary duty. Which do you favor: the shareholder conception or the corporate conception? Does your stance make a difference in this case?
4. Should Mr. Marriott recommend the proposed restructuring to the board?
5. Who will be affected by Project Chariot? Should MC make any concessions to the bondholders?
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Ans. 1
Project Chariot involves a conflict of interest between the shareholders and the bondholders since in this case the debt being held by Marriott Corporation (MC) is risky. Project Chariot aims to create MII with low debt and HMC with high debt. Thus bondholders will find that their investment gets tied to risky real estate assets whose appreciation is uncertain. Food management which is a major segment of MC remains with MII. Thus Project Chariot aims to give shareholders the business upside and bondholders the real-estate downside. Hence this appears to be a case of risk shifting. Shareholders stand to gain while bondholders will lose if Project Chariot is implemented.
Ans. 2
This seems to be a case of ‘Cashing out’/’Wealth Transfer’