Question

A company’s top managers decided to split the company into two separate companies and since the split, both companies have completed massive employees’ layoff, especially senior employees, and both companies were able to pay significantly less corporate taxes from restructuring and impairment of intangible charges. Both new companies’ stock prices have increased significantly after the split. Briefly contrast the top managers’ action based on both the investing stakeholders versus the non-investing stakeholders’ interests and business ethics.

Answer 1

This was a case in which managers interest & employee interest were not taken into account before the split of the company was announced as we can say that after the split has been announced and company has been separated into two new companies the top management as well as employees were laid off so other stakeholders interest has not been taken into the perspective whereas shareholders interest has been the prime focus of the company because it has led to massive increase in this share price of both the companies and leading to increase in the overall wealth of shareholders as the overall market capitalisation of the company has increased and it has lead to increase in the overall value of the shareholder so other non investing stakeholders interest has not been taken into the perspective of the company and it has led to overall decrease in the value of company from other non investing stakeholders perspective.

This decision has been made by keeping the shareholders as the priority and it has also lead to increase in the value of the shareholder but other non investing stakeholders as suffered as it has seen into the massive unemployment from the perspective of the society and perspective of government as well as from the perspective of employees and managers, so other stakeholders has suffered.