Al Dunpal Case Study Essay

1405 Words Apr 17th, 2011 6 Pages

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”
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Closing down manufacturing plants not only affected the employees but the whole community. Stakeholders, specifically employees are the ones who drive shareholder’s profit through their labor, time and effort. Perhaps a more accurate compensation plan would give employees more of an incentive to make the company even more profitable but the employees do bring value to the company. Today, companies like Zappos and Southwest Airlines focus on making their stakeholders, primarily their employees, happy which has resulted in a very profitable business in a very competitive ecommerce and airline industry.

2. Describe the first compensation package offered to Dunlap. Was it well designed? What type(s) of behavior would it motivate?

Dunlap is known for turning around badly shaped companies into profitable companies. Due to his past success, Dunlap’s first compensation package was very competitive. His compensation consisted of $507K salary, no bonus and millions in stock options and awards. Because he believed that CEOs should invest into the company they worked, he also invested $5M in Sunbeam Stock the first year of his tenure. According to the case, Dunlap made about $1.5M from his initial purchase of $244, 898 shares @ $12.25 two days before it was announced that he would be the next CEO at Sunbeam. Most stock-based compensation leads CEO’s to focus only on driving the stock price up no matter what is at stake. Given Sunbeam’s past

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