Maccianti on Fiduciary Responsibility of an Aging Owner

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Table of Contents

Introduction
Analysis and Discussion
Conclusion
Reference

Introduction

This paper aims to critique the article “The Fiduciary Responsibility of an Aging Owner” by Tom Maccianti. The framework used in the critique is to evaluate the options available regarding Michael and to attempt to trace the cause of the present problem for the purpose of possibly preventing a similar situation in the future.

Analysis and Discussion

The options that Company A has regarding Michael are as follows: The first one is to allow Michael to continue to work while the company continues to pay completely his salaries without rendering the corresponding service. The other option is creatively make a way for him to retire.

As to which of the two options is the best should be based on an objective criteria by considering what is beneficial to Company A and its stakeholders. There are many stakeholders of the company whose interest may be conflicting but the conflict must be resolved on what is just to every stakeholder in the context of the decision that must be made using the given options. These stakeholders include the stockholders, the company officers and employees, the customers, the creditors, the management, the government and the general public. Under the given the case study, the ones that are mostly affected are the management, the stockholders or the owners and the employees. Thus the effect on decision to be made will have to consider these groups of stakeholders.

If the first option is chosen, what are the advantages and disadvantages that may ensue? The advantages may include the fact the company’s management may be showing some respect to the man who became an important of Company and possibly this would afford the company of paying back the man who was helped much in bringing success to the company.

There are however disadvantages on the other side of the side, which must be brought out. First, the company may be paying him what is not fair to company and this could be a bad policy of the company since payment is not made in the basis on what is necessary but on what is charitable. Case facts say that Michael has been observed to be spending 3-4 hours a day 3-4 days a week and the company is already lucky to have the same. Case facts say that in addition his spotty attendance and combative nature at time set people back and distracts them from tasks at hand (Maccianti, 2008). In other words, Michael is becoming a liability rather than an asset in the workplace

A business should be run on the basis of sound management practices and any wrong decision what would deviate from such practice or policy could eventually bring the company to its knees. The second disadvantage is that it would is that management would be run inefficiently since it would be paying for some from which it would not get the value in return. A business organization like Company is basically for profit and any action to treat the case of Michael with emotionalism will make the company a charitable organization not a profit-oriented one. The company can only chose what is in accordance with its nature.

Going by the second option, which is to make a creative way for Mr. Michael to retire is necessarily different from the first option. The advantages of this option include facing and doing what is just and fair for Mr. Michael. Allowing him to retire would not be unfair to Mr. Michael since Mr. Michael is still a major stockholder. Making him retire may not affect his being stockholder. Since making him retire would only affect his employment, then said retirement would be the reasonable thing to do since it is an acknowledged business wisdom that a company must be able to hurdle the challenges in the industry brought by the changing conditions.

Another advantage of retiring him now is to make the business to be professionally run in order to compete in the environment where it is in. This would also make employees more satisfied by witnessing the fact that the management is doing what is right and fair for every body and the management cannot afford to lose money where it does not get the fair value in exchange on the matter of Michael’s services.

The disadvantage of this option may include the loss of a precious experience of a man that has done much for the company. This is however balanced by management responsiveness to react to changing conditions. The fact the Michael owns 35% or almost 1/3 of the total stocks of the company does not leave him without choice when he is retired. He will still have his share of the profits of the business. Profitability will however come easier if decisions are right and profits are maximized for the company. Not to retire him would be contrary to a profitable nature of the company that would provide Michael the just share in profits.

Could Company A have planned along time ago about the retirement of Michael? Since it is a business reality that everybody will get old, it is every company’s concern to plan for the retirement of its employees. Case facts say that the business had undergone events which required the company to adjust accordingly. Case facts further say that there were times that services and experience of Michael were very valuable and useful to the company until the market of the company’s products in the US experience a downtrend (Maccianti, 2008).

The company had to make choices because of changes such as balancing the manufacture of semiconductor inspection equipment and domestic sales. Needing to look at its cost structure in order to improve profitability, the general manager found that running a production shop was costing the company too much. Thus the company needed the scaling back manufacturing and better resort to outsourcing at it would save the company big cost which was needed in bring up profitability. At this point Michael started to feel the decrease demand for these skills which affected the way he does his job for the company.

The time frame within which decision was made was too short as case fact say that it was about five (5) years ago that there was a down turn in the demand for company product in the US and then there was a decision to outsource. In other words, there was great need for the services of Michael at a certain point and by the passage of so short a time, suddenly his services was not as useful as before. To say therefore that Company A could have anticipated providing retirement to Michael in such eventuality seems to sound too simple.

To plan for retirement of an employee it is assumed that an employee must be rendering at least 10 to 20 years of service, thus, it would appear that time was too short to plan for retirement of Michael. Moreover, Michael was one of the founders and major stockholder thus, the plan to retire employees including himself rest more on him than on present management.

Conclusion

The best option is to creatively make a way for Michael’s retire. After weighing the advantages and disadvantages, it was found that making him retire is the best thing to do since the same is consistent with the nature and purpose of the business of Company A. The same decision will also more probably assure Michael to get his just share of the profits as one of the major stockholders since the same would make the company pay for just expenses. The decision is also fair to all concerned stakeholders as the same will allow professionalism to be observed in the company.

As to the possibility of preventing the kind of situation that the company had, it could be asserted that proper planning on the part of Michael and the management of the company should have been done at the most earliest possible time for the retirement of the employees. The situation however in the case has only described the very past turn of events that necessitated the company to make decisions and which eventually resulted to finding the situation where Michael was in. Thus planning should have been broad and long term enough to anticipate changing business conditions.

Reference

Maccianti, T. (2008) The Fiduciary Responsibility of an Aging Owner.

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Maccianti on Fiduciary Responsibility of an Aging Owner

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