You have recently been hired by Intersoll Motors Inc. (IMI) in its relatively new treasury management department. IMI was founded eight years ago by Geoff Boycott. Geoff found a method to manufacture a cheaper battery that will hold a larger charge, giving a car powered by the battery a range of 700 km before requiring a charge. The cars manufactured by IMI are midsized and carry a price that allows the company to compete with other mainstream auto manufacturers. The company is privately owned by Geoff and his family and it had sales of $97 million last year. Cost of goods sold totalled $80M and depreciation was $2M.

IMI’s growth to date has come from its profit. When the company had sufficient capital, it would expand production. Relatively little formal analysis has been used in its capital budgeting process. Geoff has just read about capital budgeting technique and has come to you for help. For starters, the company has never attempted to determine its cost of capital, and Geoff would like you to perform the analysis. Because the company is privately owned and not yet publicly traded, base all weights on the book values instead of the market values.

IMI’s capital is made up of a bank loan and owner’s equity. It has a 15-year loan for 8,000,000 with an APR of 13.15% based on semi-annual compounding. IMI has been paying 100,200 monthly for 8 years. Geoff receives a salary in the form of an equity dividend of $1M per year. This amount is expected to grow at 3% per year indefinitely. His required return on equity is 20%. The firm’s marginal tax rate is 35% and this is expected to continue indefinitely.

1. What is IMI’s outstanding debt value? Calculate the book value of debt as the amount still owing on the bank loan.

2. What is the value of the unlevered firm? The levered firm?

3. Determine IMI’s yearly cost of capital based on book values. (Find the after-tax WACC using the

   yearly cost of debt)

4. Would the firm benefit from increasing its debt? Why? (No calculation necessary)

5. In a real-world situation, why might firms choose to avoid debt? (No calculation necessary)

Case Study #11—Martha Stewart Read the Martha Stewart case study located in the section titled Case Studies in your textbook concerning the following situation: This case focuses on the corporate governance aspect of Martha Stewart Living Omnimedia (MSO), a media empire founded by Martha Stewart. Stewart is a former model and devoted her career to domestic perfection and luxury. She is the brand icon of MSO; however, with new technology and the shift of consumer tastes and preferences, MSO’s business model is receiving serious threats from other competitors. After a review of the history of Martha Stewart Living Omnimedia, the case discusses its competition, the legal problem that Martha Stewart encountered, changing leadership within MSO, Martha Stewart’s questionable compensation, and the future of MSO. The case concludes with a discussion of MSO’s future at a crossroads.

The case underscores the importance of corporate governance when conditions in the environment change. An analysis of the separation of ownership and managerial control, board of directors, and executive compensation will aid in evaluating the future of MSO. Some analysts suggest that MSO will lose its competitiveness once Martha Stewart leaves the company; others suggest that the MSO brand has lost its brand image by going into product lines such as cleaning fluids and dog poop bags. Also, a few analysts suggest that MSO is a potential takeover target.

This case is ideal for demonstrating the importance of corporate governance. The following points are to guide a review and discussion of some important concepts.

Discuss MSO’s corporate governance. Has the company been able to separate the ownership and managerial control?

Evaluate the effectiveness of MSO’s board of directors. Have the directors been able to monitor and control the company?

Executive compensation is a method of governance mechanisms. Discuss Martha Stewart’s compensation and evaluate its effectiveness.

Is MSO in financial trouble? Discuss the possibility of the market for corporate control. Will MSO become a takeover target?

Describe MSOs next move in terms of growth and expansion. Provide an analysis, of what additional recommendations would be required to be done to help MSO achieve its goals?

Evaluate MSO’s international strategy and its use of alliances to achieve company objectives, what would be their best strategy?

You have recently been hired by Bio Lux Company, in its relatively new treasury management department. Bio Lux was founded five years ago by Jessica Parker. Jessica found a method to produce high quality shampoo using natural ingredients. The shampoo produced by Bio Lux is in a good position to compete with other more established shampoo producers. The company is privately owned by Jessica Parker and her family, and it had sales of $12 million last year.

Bio Lux primarily sells its products through a wholesaler who distributes the products through its network of retailers throughout the country. Bio Lux’s growth to date has come from its innovation, quality, and low costs. When the company had sufficient capital, it would expand production. Relatively little formal analysis has been used in its capital budgeting process. Jessica has just read about capital budgeting techniques and has come to you for help. For starters, the company has never attempted to determine its cost of capital, and Jessica would like you to perform the analysis. Because the company is privately owned, it is difficult to determine the cost of equity for the company. Jessica wants you to use a similar company to estimate the cost of capital (WACC) for Bio Lux, and she has chosen Procter & Gamble as a representative company. The following questions will lead you through the steps to calculate this estimate.

1. To estimate the cost of equity for Procter & Gamble, go to finance.yahoo.com and enter the ticker symbol “PG.” Follow the various links at this website to find answers to the following questions:

a) What is the most recent stock price (and provide the associated date) listed for Procter & Gamble?

b) What is the market value of equity, or market capitalization?

c) How many shares of stock does Procter & Gamble have outstanding?

d) What is the beta for Procter & Gamble?

e) Now go back to finance.yahoo.com and follow the “Bonds” link. What is the yield on three-month Treasury bills? Using a 6 percent market risk premium, what is the cost of equity for Procter & Gamble using the CAPM?

Anil is planning a birthday party at an amusement park for his younger daughter and her friends. The manager of the park is considering whether to use uniform pricing or two-part-pricing. Anil's willingness to pay for rides for the party is p = 25 - 0.5Q, where p is the ticket price per ride and Q is the number of rides. The amusement park has a marginal cost of $5 for each additional ride. Its fixed cost for handling the party is $20.

a. Create a spreadsheet with quantity, price, consumer surplus, revenue, marginal revenue, cost, marginal cost, and profit as column headings. Fill in the spreadsheets cells for Q = 5 to Q = 50 in increments of 5 units. If the manager uses uniform pricing, what is the profit maximizing ticket price per ride, the number of rides, and the profit earned by the park?

b. Suppose that the manager uses two-part pricing: an entry fee for the entire party of young girls and price per ride. Calculate the profit-maximizing entry fee if the price per ride is the same as the monopoly price that you determined in part a. Calculate the total profit earned by the park.

c. Now suppose the manager uses two-part-pricing with a per-ride price equal to marginal cost and a profit-maximizing entry fee. Determine the price per ride, the number of rides, and the total profit (including profit from ticket sales and the entry fee) in this case.

1.

A couple has just purchased a home for $447,300.00. They will pay 20% down in cash, and finance the remaining balance. The mortgage broker has gotten them a mortgage rate of 3.72% APR with monthly compounding. The mortgage has a term of 30 years.

How much interest is paid in the first year?

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2.

A professor has two daughters that he hopes will one day go to college. Currently, in-state students at the local University pay about $22,119.00 per year (all expenses included). Tuition will increase by 3.00% per year going forward. The professor's oldest daughter, Sam, will start college in 16 years, while his youngest daughter, Ellie, will begin in 18 years. The professor is saving for their college by putting money in a mutual fund that pays about 7.00% per year. Tuition payments are at the beginning of the year and college will take 4 years for each girl. (Sam's first tuition payment will be in exactly 16 years)

The professor has no illusion that the state lottery funded scholarship will still be around for his girls, so how much does he need to deposit each year in this mutual fund to successfully put each daughter through college. (ASSUME that the money stays invested during college and the professor will make his last deposit in the account when Sam, the OLDEST daughter, starts college.)

Revise the following employment message following up after submitting a resume.

Did you receive my resume? I sent it to you at least two months ago and haven't heard anything. I know you keep resumes on file, but I just want to be sure that you keep me in mind. I heard you are hiring health-care managers and certainly would like to be considered for one of those positions. Since I last wrote you, I've worked in a variety of positions that have helped me prepare me for management. To wit, I've become lunch manager at the restaurant where I work, which involved a raise in pay. I now manage a waitstaff of 12 girls and take the lunch receipts to the bank every day. Of course, I'd much rather be working at a real job, and that's why I'm writing again. Is there anything else you would like to know about me or my background? I would really like to know about your company. Is there any literature you could send me? If so, I would really appreciate it. I think one reason I haven't been hired yet is that I don't want to leave Atlanta. So I hope when you think of me, it's for a position that wouldn't require moving. Thanks again for considering my application.

How does Advertisment hurt the kids you love?

Marketing to children is unfair: Kids are more vulnerable than adults. Their developing brains are no match for today’s invasive and sophisticated advertising.

It undermines parents: Getting children to nag is a common marketing strategy. And it works! Nagging accounts for one in three trips to fast food restaurants.

It glamorizes greed: The false message of advertising — that what we buy will make us happy — leads to excessive and unsustainable consumption.

It encourages unhealthy eating: How effective is junk food marketing? Very! Preschool children report that food in McDonald’s wrapping tastes better — even when it’s not from McDonald’s!

It glorifies violence: Research links media violence to aggression, desensitization and fear, yet violent movies, TV programs and video games are marketed to kids as young as preschoolers.

It distorts body image: From impossibly thin dolls to bulked up action figures to digitally enhanced fashion models, marketers sell kids on unhealthy physical aspirations.

It sexualizes kids:Even very young children are bombarded with graphic media and marketing that encourage girls to focus primarily on appearance and sex appeal.

Discussion: Which effect in this list had a significant impact on your own childhood or adolescence? In what way? Explain how you experienced this effect and what you can do as a social worker to protect children from this effect in the future.

How does Advertisment hurt the kids you love? Marketing to children is unfair: Kids are more vulnerable than adults. Their developing brains are no match for today’s invasive and sophisticated advertising.

It undermines parents: Getting children to nag is a common marketing strategy. And it works! Nagging accounts for one in three trips to fast food restaurants.

It glamorizes greed: The false message of advertising — that what we buy will make us happy — leads to excessive and unsustainable consumption.

It encourages unhealthy eating: How effective is junk food marketing? Very! Preschool children report that food in McDonald’s wrapping tastes better — even when it’s not from McDonald’s!

It glorifies violence: Research links media violence to aggression, desensitization and fear, yet violent movies, TV programs and video games are marketed to kids as young as preschoolers.

It distorts body image: From impossibly thin dolls to bulked up action figures to digitally enhanced fashion models, marketers sell kids on unhealthy physical aspirations.

It sexualizes kids:Even very young children are bombarded with graphic media and marketing that encourage girls to focus primarily on appearance and sex appeal.

Discussion: Which effect in this list had a significant impact on your own childhood or adolescence? In what way? Explain how you experienced this effect and what you can do as a person to protect children from this effect in the future.

David Stern, Commissioner of the National Basketball Association (NBA), scanned the arena from his courtside seat at the sold out Toyota Center in Houston, TX during the 2004 Western Conference Playoffs game between the Houston Rockets and the Los Angeles Lakers. The video commercials and fan-response prompts he viewed on the high-tech scoreboard reminded him of how far technology had progressed since he first took the helm of the league in 1984. The NBA’s tremendous growth that stemmed from increased revenue opportunities through state-of-the-art facilities had begun to taper off since there was only one team left in the league that had yet to move into a modern arena. Now, the NBA leadership team spent much of its time pondering ways to offer fans alternative options to experience the NBA using cell phones, video games, and other innovative media channels of communication. While Stern contemplated how the league would continue to benefit from new technological advances, he noticed fans waving pictures of Yao Ming, a 7-foot 6-inch player from China. Stern’s global vision of the NBA was slowly coming to fruition through the recent influx of international players and the NBA’s initiatives to broadcast and market games internationally, yet he believed there was a much greater potential to be realized. Stern still had a few months to prepare for the annual Board of Governors meeting. In front of the NBA’s owners, Stern would deliver a “state-of-the-league” address and unveil a plan for confronting the league’s challenges and systematizing recommended changes across the league’s 30 teams. While the league was healthy on most fronts, team owners were recently alarmed after receiving reports indicating that revenues were down even though overall attendance had increased during the 2003- 04 season. Additionally, the league had just withstood several public relations disasters involving a few high-profile players and was facing the perception from many fans that the quality of play had diminished. Stern reflected on the competing demands and wondered how to prioritize and sort them out. The following morning, Stern would meet with Russ Granik, Deputy Commissioner and COO, and Adam Silver, President and CEO of NBA Entertainment, to begin thinking through a strategy. Just as Stern turned to Granik to remind him of the meeting, the crowd erupted as Yao Ming scored a last second shot to send the game into overtime. By 2003, the NBA had grown to include 29 teams, and had plans to expand to 30 teams in 2004.8 Each team was independently owned, either by an individual or by an ownership group. The NBA’s league office intended to work “for” the owners and was primarily responsible for operating the league.9 Revenue and costs for the league were largely driven by collective individual team activity. In 2002, 41% of the league’s revenue came from each team’s gate receipts, 45% from the league’s television contract with national television networks to broadcast NBA basketball games, and 12% from other sources including sponsorships, licensing partnerships, concessions, and preseason promoter fees.10 Of the league’s costs, over 63% were due to player salaries, which had escalated significantly over time (see Exhibit 1).11 The remainder of the league’s costs was split evenly among team basketball operations, promotions, arena rentals, and general & administrative costs.12 The league office was funded by 6% of each team’s gate receipts, and all other gate receipts were kept by each individual team.13 All national revenue—including licensing and national TV deals—was split evenly amongst all 29 teams.14 However, each team retained any local television revenue it generated.15 Over the years, the league had implemented a number of measures to control costs and distribute money equitably across the league. These measures were captured in a collective bargaining agreement (CBA), which is negotiated between the owners and players. In 2004 the league had a salary cap in place that attempted to “cap” the amount of money that each team spent on player salaries, generally at 55% of Basketball-Related Income (BRI, or the sum of gate receipts and national television revenue).16 However, there were numerous exceptions that enabled teams to exceed the cap in order to retain players. Although the league had numerous sources of revenues and costs, there were a handful of critical factors that drove the financial success of the NBA. The overriding factor, according to senior league management, was the quality of play and the excitement generated over the 82-game regular season and the post-season playoffs. Granik noted that “the key to this league is the public perception of our product, the quality of the games being played on the court, the level of competition between the teams, and the expertise of the athletes involved.”17 Mike Bantom, Senior Vice President of Player Development, summed up the league’s critical success factor as “exciting, competitive basketball games that would effectively compete against other entertainment options for the consumer.”18 Others tied the success of each team to its respective win-loss record. Bob Criqui, the league’s SVP of Finance, noted that “even more importantly than the win-loss record, a team must inspire hope among its fans. If a team’s fans believe that the team will be successful, the fans will actively cheer for the team, and come to watch the team’s games.”19 All mentioned that it was difficult to quantify or measure this critical success factor, but agreed that the excitement of the game translated into strong attendance, TV ratings, and scoring averages. Exhibits 2 and 3 present recent attendance levels and TV ratings for the league. Another success factor often cited by league executives was the image of its players, both on and off the court. Granik noted that “how people perceive our players is certainly an issue for us.” NBA League Office Overview The NBA league office, headquartered in New York City and Secaucus, NJ, consisted of five main entities—NBA League Operations, NBA Entertainment, NBA International, the WNBA, and the NBDL—which all reported to the Commissioner’s Office, led by Stern. Exhibit 5 presents the NBA organizational structure. NBA League Operations, headed by Granik, governed the basketball side of the league, including game scheduling and officiating, and oversaw league administrative duties, such as finance, human resources, and security. Other divisions, such as Player Development, worked closely with NBA teams to promote best practices and to ensure that teams adhered to league guidelines. NBA Entertainment, led by Silver, housed all revenue-generating properties at the league level, including the NBA Store and NBA TV. NBA International consisted of satellite offices situated to maximize revenue and marketing opportunities abroad. Similar to NBA League Operations, the WNBA and the NBDL offices served as governing bodies for their respective leagues. WNBA In the fall of 1996, the NBA launched the Women’s National Basketball Association (WNBA) as a wholly-owned subsidiary of the league so that the eight WNBA teams would be collectively owned by the NBA’s 29 owners, unlike NBA teams which were franchised individually to owners. Eight inaugural teams would begin play during the summer season of 1997 in the following NBA team cities: Charlotte, Cleveland, Houston, New York, Los Angeles, Phoenix, Sacramento and Utah. Although the WNBA league office managed many aspects of WNBA team operations such as negotiating player contracts and disbursing player salaries, the affiliated NBA teams were responsible for using existing resources and/or hiring employees to fulfill the league’s mandated operational and sales requirements. Within four years, the WNBA had expanded to 16 teams, all of which were affiliated with existing NBA teams. After the 2002 season, the league decided to shift WNBA team ownership from the NBA to each affiliated team. At this point, NBA owners were given the option to purchase and gain full control of their corresponding WNBA team. All the owners accepted the league’s offer with the exception of those in Portland, Orlando, Utah, and Miami. Subsequently, two of the teams relocated to other cities with owners who wanted a WNBA team, while the other two teams dissolved. Beginning in the 2004 season, the WNBA consisted of 13 teams. National Basketball Development League (NBDL) In the fall of 2001, the NBDL, a minor league wholly-owned by the NBA, became the league’s official training ground for team staff, officials, and players who met the minimum 20 year age requirement. The NBDL tipped off with teams in Asheville, NC; Charleston, SC; Columbus, GA; Fayetteville, NC; Greenville, SC, Huntsville, AL; Mobile, AL; and Roanoke, VA. NBA Board of Governors Major strategic decisions for the league were approved by the NBA’s Board of Governors. The Board of Governors comprised the owners of all 30 NBA teams, each of whom controlled a vote. David Stern was the Chairman of the Board, and the Board met twice annually. As the league became increasingly successful, the nature of the Board of Governors changed as team ownership changed hands. New owners such as Howard Schultz (Owner of the Seattle Supersonics and Chairman of Starbucks Coffee), Mark Cuban (Owner of the Dallas Mavericks and co-founder of Broadcast.com and current CEO of HDNet), and Joe and Gavin Maloof (Owners of the Sacramento Kings and Co-CEOs of Maloof Sports and Entertainment) began to take a more proactive approach to the management of their teams and their role on the Board of Governors. As Silver explained, “the biggest difference with the current Board of Governors is that we have much more substantive discussions about the business decisions of the league, which David actually encourages. We still have a ‘strong commissioner model’, we just have a much more active board. We now have owners on the board who spent $10 million on their team, and owners who have spent $300 million on their team. There is clearly going to be a difference in the demands from these two different sets of owners with regards to the direction of the league.” National Basketball Players Association (NBPA) The NBPA was the NBA players’ union that negotiated the Collective Bargaining Agreement (CBA) with the NBA. The CBA defined the rules of interaction between the players and the league on multiple fronts, including player compensation, conduct and appearances. As such, the NBA’s major product improvement and development recommendations were typically subject to approval by the NBPA, whose interests were not always aligned with the league’s and team owners. For instance, the league’s attempt to impose a harder player salary cap for purposes of increasing competitiveness across teams was met by extreme opposition from the NBPA during the 1998 collective bargaining period. This dispute, among others, ended after the longest ever NBA lock-out (strike). Consequently, the league suffered considerable financial losses from having to cut the regular season from 82 to 50 games and sustained substantial brand damage from negative media coverage. The NBPA provided its own set of programs and services to the players and, on occasion, would join forces with the NBA’s Player Development department to administer certain programs. All NBA league-mandated programs and appearances in which players participated were negotiated as part of the CBA. Superstar Turnover Much of the NBA’s popularity in the 1980s and 1990s was built on a handful of superstars. The NBA encouraged this by actively promoting its superstars, and turning their burgeoning popularity into booming ratings and attendance figures. Michael Jordan of the Chicago Bulls – perhaps the game’s greatest player and certainly its most popular player – joined the league in 1984 and continued playing until 199827 , after which returned to the league for 2 more seasons with the Washington Wizards in 2001-2003. The contests between Magic Johnson’s Los Angeles Lakers and Larry Bird’s Boston Celtics in the 1980s became one of sports’ greatest rivalries, as these two teams combined to win 8 of 10 NBA titles during the decade. Other charismatic superstars – such as Charles Barkley, Isiah Thomas, Julius “Dr. J” Erving, Dominique Wilkins, and Hakeem Olajuwon – propelled the NBA and created an exciting identity for the league. However, as these superstars began to retire in the early 1990s, the league struggled to identify comparable superstars to capture fans’ imagination in the same way. Fans constantly searched for the “next Jordan”, and throughout the 1990s players like Harold Miner, Jerry Stackhouse, Grant Hill and Vince Carter attempted to fill Jordan’s shoes only to fail. Although the NBA had its stars in the late1990s and early 2000s—including Shaquille O’Neal, Tim Duncan, Kevin Garnett, Kobe Bryant, Tracy McGrady, Allen Iverson and Jason Kidd—many fans were unable to connect to these players in the same way as the superstars of the 80s and early 90s. Was it just a matter of time until these players blossomed into the same types of superstars as those of the days of old, or did the existence of these new players require a different approach for the league? Negative Off-the-Court Image of NBA Players The league suffered incalculable damage to its image during a 6-month long work stoppage (better known as a “lockout”) of the players that eliminated 32 games from the 1998-99 NBA season as a result of contentious negotiations between the league office and the NBPA. After the lockout was finally settled, many felt the NBA as a whole had lost. Utah Jazz guard Jeff Hornacek said “I wouldn't blame the fans if they didn't come back…neither side is coming out of this thing looking good.”1 All in all, players lost $500 million in salaries, the NBA’s important corporate partners lost significant revenues (Nike reported a 50% drop in fiscal second quarter earnings and a 15% drop in revenues in December of 1998) (Motley Fool), and the NBA’s goodwill amongst fans and the general public was at an all-time low. As one fan stated in a Detroit News article in March 2000, “I hate the NBA and I'm not really a Pistons fan anymore. I'm sick and tired of the bitching players and owners. They're a bunch of big millionaire babies and I'm not going to pay to see them” (Detroit News). Other critical source for this section: The NBA continued to face image problems in 2003, when an ESPN poll revealed that the number one “problem” with the NBA, as perceived by its fans, was “player off-court behavior.” 39 A summary of the poll is presented in Exhibit 10. There were certainly a number of negative off-court incidents involving NBA players in the late 1990s and early 2000s that couldn’t be ignored, including: • All-Star Latrell Sprewell choking and threatening his coach, P.J. Carlesimo, during a practice in December 1997.40 • A scathing 1998 Sports Illustrated article revealing the significant number of paternity suits and out-of-wedlock births among professional athletes. The article mentioned several NBA superstars by name, including Larry Johnson, who was supporting five children by four women, and Shawn Kemp (drafted shortly after his high school graduation), who had fathered seven children out-of-wedlock. Other players highlighted in the article included NBA superstars Patrick Ewing, Juwan Howard, Scottie Pippen, Jason Kidd, Stephon Marbury, Hakeem Olajuwon and Gary Payton, Larry Bird, and Isiah Thomas. Kobe Bryant—three-time NBA champion and mega-superstar, high school draftee, married father with a young daughter—was arrested and charged with the sexual assault of a young woman at a hotel in Colorado during the 2003 off-season. In 2004, David Stern openly discussed plans to expand the league to Europe, noting that “it is not out of the realm of possibility that the NBA could have teams in Milan, Munich, Barcelona and London within a decade.” Many in the league office were excited at the possibility of brand-new revenue sources overseas—including international gate receipts, increased sponsorship and merchandising revenue from international companies and consumers, and a new source of television rights fees (or potentially broadcast-related revenues from NBA TV international telecasts). To many this expansion only seemed natural, and in some cases necessary. Stern noted “90% of our buildings are full at any given NBA game in the U.S…90%! Expansion overseas is the only way to grow this revenue source.” There was already cross-fertilization between the two markets, such as the increased number of international NBA superstars and the burgeoning popularity of NBA players and games in European and Asian markets. The NBA was already working on “seeding” these markets by holding exhibition games in international markets like China and Russia and expanding the presence of NBA TV, which was already in 30 countries in early 2004. Another open question was the future of the NBDL. While initially launched as a “training ground” for team staff, officials and players, many saw the opportunity to transform the NBDL into a true “minor league” for the NBA, which would operate similar to the minor leagues in Major League Baseball. Under this system, each NBDL would “belong” to one or two NBA teams, and the NBA team would have the ability to send a player down to their minor league team, or call them up when they needed a player, all the time retaining their contractual rights. Many saw this as an attractive option in order to handle the increasing number of high school and international players into the league. Upcoming Collective Bargaining Agreement Discussions Looming in the distance was a new collective bargaining agreement (CBA) to be negotiated with the NBPA. The current CBA was scheduled to expire after the 2004-2005 season, and all parties wanted to avoid a repeat of the lockout of 1999. Issues on the table included the percentage of revenues to be allocated to players and owners, the salary cap, the luxury tax, a potential age limit or a NBDL minor league, and any other issue that would have a direct impact on players. One NBA team president noted that one of the most important issues for the league going forward was “to find labor peace without bloodshed, so everyone is a little better off and teams have a chance to make money.” Decisions, Decisions Tomorrow, Stern, Granik and Silver would meet to begin planning for the upcoming gathering of the Board of Governors, where they would present the league’s strategic plan and the organizational requirements to support these strategic goals. As such, the three needed to discuss the competing priorities of the league’s stakeholders, and determine whose issues were most important to the future of the league. On the one hand, the trio would have to grapple with the serious issues that were undermining the league’s short-term vitality with certain segments of its fans. They would also have to address the concerns of the league’s ownership group and players association. Finally, Stern was eager to build consensus for his growth agenda. But how would the owners react to this proposal? How would this translate into the upcoming Collective Bargaining Agreement negotiations with the NBPA? And what systemic organizational changes were required to ensure that these recommendations would take root and sustain themselves across all 30 teams in the league? -------------------------------------------------------------------------------------------------------------------

1.What is the case about?

2.What are the important events that occurred in the case?

3.What can we learn from reading the case?

4.What advice do you have for the leaders in the case and/or company in the case?