This report is based on Sunbeam Corporation and Albert Dunlap, the CEO from 1996 till 1988. In July of 1996, Michael Price and Michael Steinhardt hired Dunlap as the CEO and chairman of the board for Sunbeam Corporation.
As the two original investors who bought Sunbeam from bankrupt Allegheny Internal, Price Steinhardt together own 42 per cent of its stock. Prior to hiring Dunlap they had tried unsuccessfully, to sell Sunbeam. They believe that he was the one person who could turn the company around and increase stock prices and profits. The increase in stock prices did occur, almost instantly.
The turnaround took just fifteen months. On July 19, 1996, the day Dunlap was named Chairman and CEO of Sunbeam, the stock jumped 49 per cent. The jumped increased the share price from 12 to almost 19 adding $500 million to sunbeam’s market value. The stock continued to increase and reached a record high of $52 per share in March 1998.
The Corporate turnaround specialist Dunlap praised himself for achieving such feat. Later on, the inevitable was unravelled. It was revealed that Dunlap and his ally had been using bill-and-hold strategy that gave rise to its share price. In the light of the analysis, the inferring themes of Shareholder theory will consider the Executives behaviours unethical and at the same time selfish.
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Reason being, they all involved in an illicit activities at the detriment of their shareholders. In the words of Gibson (2000), stakeholder theory suggests that an entity will do a service to its stakeholder if it embraces and choose an ethical code of conduct. This theory strongly highlights wide range of responsibilities that lies upon corporations: which states that corporations are not only saddled with satisfying its shareholders interest, but all other constituents such as individuals, groups, that happen to have a vested interest in a specific company (Jennings, 2003).
With this in view a conclusion could be drawn that both Dunlap and his CFO shunned all these responsibilities.
Based on this, their behaviours are deemed unethical. This has clearly underlined some deficiencies in corporate codes and ethical breakdown which confirms that a concept of code will surely have bearings not only in Sunbeam Corporation but to all other Corporations. As such, corporation should reverse their preference to ethical trainings.
Introduction Sunbeam Corporation was set up by Stewart and Thomas Clark in 1897. Its first product manufactured and sold were agricultural tools. In 1910, the company began manufacturing electrical appliances; one of the first being was clothes iron. Sunbeam’s electrical appliances sold well even during the great depression.
They capitalize on this to maintain their growth and improve innovation. The next major development came in 1960 when Sunbeam acquired rival appliance maker John Oster Manufacturing Company. This acquisition helps Sunbeam into the leading manufacturer of electric appliances. During the 1980s, a period of relatively high inflation and interest rates, corporations were going through acquisitions, mergers, restructurings, and closings – doing whatever they could to continue operating profitably.
In 1981 Allegheny Int. an industrial conglomerate, acquired Sunbeam. Allegheny retained the Sunbeam name and added John Zink (air pollution control devices) and Hanson Scale (bathroom scales) to Sunbeam product line. After sales of other divisions of Allegheny Int. declined, they were forced into bankruptcy on 1988. In 1990 Michael Price, Michael Steinhart, and Paul Kazarian bought the Sunbeam division from Allegheny.
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They renamed it Sunbeam-Oster Company. Later on, Kazarian was forced out of his chairman position and out of the company. Sunbeam relocated to Florida and purchased the consumer products units of De Vilbiss Health Care. In 1994 Sunbeam-Oster acquired Rubbermaid’s out-door furniture business.
The company changed its name back to Sunbeam Corporation in 1995. By 1996 Sunbeam had more than 12,000 stock units, 12,000 employees as well as 26 factories, 61 warehouse and six headquarters. Despite this, the company’s earning had significantly declined by 83% and its stocks were 52% down. Therefore, Sunbeam needed help. Restructures in Sunbeam
Prior to his appointment, Dunlap had acquired a reputation as one of the country’s toughest executives as well as nicknames like “Chainsaw Al”, “Rambo in Pinstripes”, and “The Shredder” because he eliminated thousands of jobs while restructuring financially troubled companies.
His reputation and business philosophy were recognized throughout the world. Later in his career, Dunlap authored a book outlining his strategy, entitled Mean Business, in which he highlights four simple rules of business. They are as follows: 1. Get the right management team. As Dunlap assumes office, he retained only one senior executive from Sunbeam’s old management team.
Dunlap first hire was Russ Kersh, a former employee of Dunlap, as executive vice president of Finance & Admin. The new management team also included 25 people who had previously worked for Dunlap at various companies. Dunlap believed in hiring these people because they had all worked with him and had been successful in past turnarounds. 2. Cut back to the lowest cost.
Sunbeam’s employees also knew of Dunlap’s reputation for slashing jobs, which left many employees feeling threatened and insecure. As expected, after less than four months as Chairman and CEO, he announced plans to eliminate half of Sunbeam’s 12,000 employees worldwide. On hearing of Dunlap’s layoff plan, U.S. Labour Sec. Robert Reich reportedly remarked, “There is no excuse for treating employees as if they are disposable pieces of equipment”.
Around the same time, the company’s share price rose to the mid-$20 range, and one of its major shareholder, Michael Steinhardt, sold his shares and left Sunbeam. Another method used by Dunlap to eliminate costs was to reduce the number of SKUs 12,000 to 1,500. This enabled Dunlap to close a number of factories and warehouses. He reduced warehouses from 61 to 18. 3. Focus on the core business.
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After the layoffs, Dunlap and his dream team defined Sunbeam’s core business as electric appliances and appliances related businesses. They identified five categories surrounding the core business as vital to Sunbeam’s success: Kitchen appliances, health and home, outdoor cooking, personal care and comfort, and professional products. Any products that do not fit into these categories were sold. 4. Get real strategy.
The strategy was to drive growth through the company’s core business by further differentiating Sunbeam’s product from competitors, moving into global markets, and introducing new products that were linked directly to emerging customer trends. Early in 1997, Sunbeam opens ten factory-outlet stores to increase brand awareness, sales, and ultimately shareholder wealth.
By following these four rules, Dunlap claims he helped turn around companies in 17 states and across three continents. Sunbeam’s stock price increased by 49% on the day Dunlap was named CEO and Chairman. The share price rises from $ 12.12 to $ 18.58 added $ 500 million to Sunbeam’s market value. Turnaround of Sunbeam
