BM2001

CASE ANALYSIS: DMX Manufacturing

DMX Manufacturing Company suffered significant losses due to the COVID-19 pandemic. The collection of trade
receivables is delayed due to lockdown, which resulted in chain reactions of problems with respective customers and
the company operations. Mr. Abedo, the Chairman of DMX Manufacturing’s Board of Directors (BOD) gathered the audit
committee (comprises of persons with expertise in accounting, legal and audit) and remuneration committee (consists
of persons with expertise in human resource policies, compensation, and benefits) to find ways on how can the entity
survive the pandemic, and at the same time provide maximum support to its employees. After two (2) weeks of careful
deliberation and study the committee arrived at the following possible solutions:
• Sustain a loss of profit for the rest of the year, and spend its surplus just for survival.
• Close an affiliate of the company composed of 10 officers and staff.
• Reduce board and top management’s compensation and fringe benefit by 10%.
The board meeting has arrived. They have agreed with all the solutions, except in the reduction of the board and top
management’s compensation. Mr. Dimaano, one of the board members, recommends that it is better to classify their
employees into two (2) types: essential employees and non-essential employees. With that decision, some of the
employees will be in no-work, no-pay status, with pay but with 50% reduction in their original pay and termination of
contracts (for probationary employees). In addition, a lesser loss will be sustained by the company because some jobs
that are assigned to non-essential employees will be transferred to essential employees, based on their capacity or
workload. Mr. Abedo did not agree with the recommendation of Mr. Dimaano because, for him, it is inhumane. He said,
“We should never let our employees down, especially in this crisis. Let us sacrifice for a while because it is not only
them who will be affected by this decision but also the people in their homes.” As their regular practice when deciding
on important matters, they cast votes, and after tallying the result, the recommendation of Mr. Dimaano was
considered.

Required:
Answer the following in no more than three (3) sentences:

1. Are you in favor of the three (3) solutions identified by the committee? Why or why not?
Yes, I am in favor of the 3 solutions that the committee has identified. This is because the solutions will
provide the company with an opportunity to continue its operations in the short-term while waiting for the pandemic
to end and the economic to recover. Moreover, the committee that proposed the solutions was composed of experts
who have a better understanding of the industry.

2. Did the company complied or violated any of the eight (8) characteristics of good governance?
The company complied with the 8 characteristics of good governance. The solutions that were proposed
by a team of experts were effective and efficient geared towards the achievement of the strategic vision which were
made in an accountable manner. In addition, there was participation of the board members were there was a
consensus among them to ensure equity in their responsiveness to the pandemic that the company was facing.

3. Are you in favor of the recommendation of Mr. Dimaano? Why or why not?
Yes, I am in favor of the recommendations that were proposed by Mr. Dimaano. It is true that even
during the hard times for a company they should not abandon their employees. In this case, the decision will ensure
that the employees and the company are both able to survive during this pandemic.

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4. Do you think the board of directors has done their job properly?
No, I do not think the board of directors did their job properly. The proposed solutions by the committee
were to the best interest of the entire company. However, they rejected the reduction of the board members and the
top management compensation coupled with salaries benefits by 10% as it directly affected them.

5. Assuming you are Mr. Abedo, the chairman of the board, what will you do after learning that a vote rejected your
opposition of Mr. Dimaano’s recommendation?
If I was the chairman, I will accept the decision that was made by the board of directors. This is because
it was done on the pretext of equity and rule of law where all the board members participated. Even though it is not
what I wanted I will decide to implement it for the good of the company.

6. Are you satisfied with the decision-making process of the company’s BOD? If not, provide ways on how they can
improve.
I am not satisfied with the decision making process of the BOD. They can improve their decision making
by placing the interests of the company above their own personal interests. In addition, they can involve experts in
their decision making process to ensure they get a comprehensive understanding of the situation before making a
decision.

Rubric for grading:

CRITERIA PERFORMANCE INDICATOR POINTS
Content Provided pieces of evidence, supporting details, and factual scenarios 3
Organization of Expressed the points in clear and logical arrangement of ideas 2
ideas
TOTAL 5

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