AL DUNLAP AND CORPORATE TRANSFORMATION (A & B) Sam Perkins, Babson College Case Objectives And Use These cases

take a multi-disciplinary approach to the situation with Albert Dunlap and his transformation of the Sunbeam Corporation. In particular, they address issues related to organizational behavior/leadership, ethics, accounting and law. Their primary focus is Al Dunlap's style of leadership and corporate restructuring. Given his speedy layoffs of large numbers of employees, based solely on the recommendation of outside consultants, both leadership and ethical issues should be discussed. The A case ends at what appears to be the height of Dunlap's success in order to provide a fairly neutral basis for discussing both the strengths and weaknesses of his approach. The B case is sufficiently brief that it could be distributed towards the end of a single session class to inform the students that much of the purported corporate transformation was actually accomplished through accounting manipulations. Sunbeam acquired other firms, perhaps to better enable the use of accounting tricks, but eventually, the accounting practices were revealed, the share price plummeted, Dunlap was fired, and litigation began. This case is used in the integrated first year of the MBA program at the Olin Graduate School of Business of Babson College. It is taught by faculty from four disciplines in two days. During the first day, the A case is taught by leadership and ethics faculty, traditionally in separate class sessions. At the end of the last session, the B case is distributed. It is taught the following day in a single joint session between the accounting and law faculty. The A case also could be used in Organizational Behavior courses and the B case could be used in accounting courses. Case Synopsis The A case chronicles the career of Al Dunlap as a corporate "turnaround artist." It examines his early career and apparently successful transformation and sale of Scott paper. It focuses on the situation in March 1998 when the Sunbeam Corporation announced the acquisition of three companies - Coleman, Mr. Coffee, and Signature Brands. The move came five weeks after the company had announced record sales and earnings for the fourth quarter and full year 1997. The market reacted to the March 3 news by driving up Sunbeam shares 24% in a week to a record $53, more than quadruple the price when Dunlap was hired and giving him paper profits of $73 million on his new employment contract. The B case then picks up and describes the situation in mid-March 1998 when the Bubble Bursts at Sunbeam as Sunbeam sought to increase its insurance coverage for directors and officers liability by $10 million, in excess of the existing $30 million coverage. On April 3, 1998, Sunbeam released tentative figures for the 1st quarter, showing a loss of $44.6 million on a 5% decrease in sales. The news triggered a 25% sell-off in Sunbeam stock to 34 3/8 and was followed by a June article in Barron's alleging that of the $109.4 million in net income for 1997, $120 million could be attributed to "artificial profit boosters." The B case concludes with the firing of Dunlap and the filing of litigation against Sunbeam and Dunlap.