Sears Case Study Essay -- essays research papers

Sears Case StudyIntroductionThe great advantage of publicly held companies is that they bring together capital and managerial expertise, to the benefit of both groups. An investor need not know anything about making or marketing results in order to invest in a chair factory. A gifted producer or seller of chairs need not chip in capital in order to start a business. When it runs well, both profit, and the capitalist system achieves its goals. Our system of capitalism has been less successful when the company does not run well. As some of Americas most visible, powerful, and successful companies began to slide, they demonstrated an all-but fatal weakness in the ability of our system to react in time to pr heretoforet disaster. Managers and directors at companies like IBM, General Motors, and Sears took their success--and their customers--for granted. They took their investors for granted, too, until it was almost too late. The problem is that the strength of the system, the separ ation of ownership and control, is also its weakness. A shareholders investment in a chair factory gives him certain rights, including the right to elect the directors and the right to inspect the books. These rights may have some meaning when the company is small enough that the investors number in the hundreds. But in large, complex companies, with investors in the millions, they are likely to exercise a third right, the right to sell. While some economists will argue sale of the stock sends a signficant message to management, I agree with Edward Jay Epstein, who said that "just the qualify of one powerless shareholder for another in a corporation, while it may lessen the market price of shares, will not dislodge management--or even threaten it. On th... ...illing the vacancies left by the directors "fired" in the 1991 shrinkage. Ironically, Sears was left with a board with a higher percentage of outside directors. I swear Brennan found that at least some of the ext ra accountability I was seeking was the result of the actions he took to stop me.Less than six months after the yearly meeting, Sears announced a massive restructuring. Coldwell Banker would be sold off in its entirety, Dean Witter would be spun off to shareholders, as would 20 percent of Allstate. The market reacted to the give-and-take by sending Sears stock up 8 percent in a single day.Changes at SearsI firmly believe that Sears recent renascence (STOCK PRICES) is a direct result of the increased accountability of management. I believe that Sears serves as a perfect study for the values to be generated by touch on and informed shareholders.