Al Dunlap at Sunbeam Case Solution

1. Please analyse Sunbeam's agency problem and sources (e.g., how Sunbeam was not maximizing its stock price and why) right before Dunlap was hired. 

The agency problem at Sunbeam before the hiring of Al Dunlap was primarily caused by a disconnect between the management team and the company's shareholders. The management team, led by CEO Jerry Levin, was focused on maintaining the status quo and preserving the company's reputation rather than maximizing shareholder value. This led to a lack of innovation and a failure to adapt to changes in the market. One of the main sources of the agency problem at Sunbeam was the company's lack of focus on cost-cutting and efficiency. The management team was more concerned with maintaining the company's reputation and preserving jobs rather than finding ways to reduce costs and increase profits. This led to a lack of competitiveness and a failure to keep up with the changing market.

Another source of the agency problem at Sunbeam was the company's lack of transparency and communication with shareholders. The management team was not providing enough information to shareholders about the company's performance and plans, making it difficult for shareholders to make informed decisions about the company. This lack of transparency and communication also led to mistrust and dissatisfaction among shareholders. The company also had a high level of debt, making it difficult to invest in new opportunities or pursue growth strategies. The management was not taking any steps to reduce the debt or invest in the company's future growth.

All these factors together led to a lack of confidence in the management team among shareholders and a decline in the company's stock price. This is where Al Dunlap came in, and he was hired as the CEO of Sunbeam to turn the company around and maximize shareholder value. Dunlap implemented a series of cost-cutting measures, including layoffs and selling underperforming assets, and increased transparency and communication with shareholders. These actions led to an improvement in the company's financial performance and an increase in the stock price. Still, they also led to a controversial reputation of Al Dunlap as a "downsizer" and raised ethical questions about his leadership style.