Address the following in 2-3 pages.
Dilbert Metal Fixtures Company, Inc. (DFMC) is a publicly traded corporation.
DFMC has experienced rapid growth over the past two decades. However, the company has operated at a loss for the past 8 quarters due to recent competitive pressures and decreases in demand brought on by the lingering effects of the COVID-19 pandemic and inflationary pressures in the industry. Directors have decided major changes are needed to improve the organization’s financial health. In response, DFMC executives have decided to initiate one of the following measures to reduce costs:
Eliminate the company’s sponsorship of the town’s Big Brothers, Big Sisters program, which will likely be fatal to the local program.
Eliminate 100 positions within the company deemed to be unnecessary in the current operating reality. None of the positions contemplated for elimination are executive team members (all executives were deemed essential – don’t fight the hypothetical). The positions are lower-paying, and 70 of the 100 are held by women, representing 30% of the company’s female employees.
Recommend a reduction in distributions to shareholders. This likely will spark expensive lawsuits from shareholders (derivative lawsuits) and further degrade the financial health of the DFMC, up to and including further reductions or winding up the business.
Assume that ONE of the three measures as contemplated above must be implemented. Then, address the following:
Pick the measure that best fits the shareholder theory and explain why, explicitly noting why the other two measures are not as preferable under the shareholder theory.
Pick the measure that best fits the stakeholder theory and explain why, explicitly noting why the other two measures are not as preferable under the stakeholder theory.
As an independent question, (i) which measure would you implement and why (ii) does your approach align with the shareholder or stakeholder approach, (iii) support your response with additional ethical frameworks beyond the shareholder and stakeholder theories.
Sources:
https://markets.businessinsider.com/news/stocks/warren-buffett-companies-should-prioritize-profitability-over-social-causes-esg-2020-1-1028791675
https://www.cnbc.com/2024/02/27/war-on-woke-capitalism-stanchart-ceo-says-esg-is-good-for-business.html
