Case Study on Sears Essay

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SEARS CASE STUDY by Robert A.G. Monks and Nell Minow -------------------------------------------------------------------------------- Introduction The 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 chairs in order to invest in a chair factory. A gifted producer or seller of chairs need not have 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 America's most visible, powerful, and successful companies began to slide,…show more content…
In a survey of business leaders, Sears management was ranked 487 out of 500.3 It was no secret that the company's performance was poor, both in comparison to the market as a whole and in comparison to its peers. But all of that was not enough to get management to change direction. What could the shareholders do? They could sell out, as many of them did, even at a loss, but as noted above that does not force the company to improve. Those whose stake was big enough to merit some attempt at communicating with management tried that, too, but with little success. Sears's twelve largest investors met with CEO Ed Brennan and retail chief Michael Bozic in August of 1990. Brennen and Bozic gave an upbeat assessment of the corporation's plans. But the investors wanted more than rosey projections. They cited a grim share performance -- value had dropped 15 points since 1989 -- and gave Brennan one year to achieve marked improvement in retail, or to look for another job. Brennan fired Bozic, and promised to make cuts. But it was too little, too late, and the shareholders were not satisfied. In early December, the California Public Employees Retirement System (CalPERS), holder of 2.2 million shares, voiced its concern about Sears's performance, citing depressed stock and the failure of retailing strategies. CalPERS' message, says CEO Dale Hanson, was simple: "From 1984 on, Sears went to hell
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