How Should The Directors Evaluate The Proposal Given To Them In The

Case?

The first CFO’s suggestion that Mega buyback shares. The CFO suggestion for Mega to
change its state of incorporation to Virginia. If Mega seek to reincorporate wouldn’t Delaware be
a more advantageous state .Virginia law is different from Delaware because it holds the directors
less accountable for the outcome of their decisions. CFO knows the suggestion to buy back
shares is a risky move for Mega, but the fact that the directors may be more open to taking risk if
their exposure to legal liabilities is reduced. Reincorporating to a state that is more pro-director
coupled with a share buyback plan may send a message to the shareholders that Mega isn’t sure
of its strategy and is taking steps to protect themselves if it doesn’t work.

The CFO is not strengthening the shareholders trust and wealth in the board of directors if they
move forward with this decision. The sally was also intrigued. She was concern that the
foundation should be diversifying its holdings and this would go a long way toward solving the
problems. He also suggests that if the foundation sold half of its shares, it would receive over
$175 million tax free.

The CFO also thought to streamline Mega’s organizational structure, suggested eliminating
subsidiaries unless there was a strong financial or operational advantage. Eliminating
subsidiaries after creating debt may result in Mega being over leveraged. In addition, CFO also
suggested terminating the boards at the subsidiaries and appointing Mega’s CEO as the one and
only director.

Rock is already struggling to perform above a threshold that is below Mega’s cost of capital.
With Mega’s current CEOs performance being average at most, adding to his responsibilities
would not be beneficial to Mega in the long run. Rock described CFO as being a good treasurer
but not an effective controller. Treasurers place their focus outward and on cash management
and risk management whereas controllers focus on the internal workings of the company by way
of analysis and reporting.

What would you have done if you were the CEO of the company?
If I was the CEO of company first I would set the company’s long-term goals and approve or
took vote from the board of directors about this.
First, Strategic planning and management in organization, maintain competitiveness in the
market, Because it is powerful tool that help the organization in identifying its existing resources,
capabilities, deficiencies, the existing opportunities and threats prevailing in the market. A
strategic planning framework is commonly used to evaluate the organization, a plan, business or
any other project. It helps in determine the organizational and environmental factors that could
affect the decision to be made.
It is carried out to analyze the position of an organization in in the market compare to its
competitors and the major factors that are affecting the competitiveness before crafting any
business strategy. Shareholders right is an integral part of any corporate governance system.
These rights ensure that shareholders are able to voice their opinions on board nominees and
other corporate actions, so if I was the CEO then I would take shareholders into confidence an
any corporate governance decisions.
Furthermore, analyzing the company internal and external dimensions is a best way. Internal
dimension includes all the factors that could affect the organization which is the strength and the
weakness, while the external factor includes the environmental factors that is the opportunities
and the threats. I would also primarily not focus on short-term payoffs but taking into
consideration the long term effects. In case study the CFO was proposed” that there be one
director for all subsidiaries, and that director would be the CEO of Mcga”. Instead of him I
would not replacing the current boards with one person because less knowledgeable is not in the
best interest of the shareholders.