NEWSWIRE - January 31, 2000
Topic: Corporate Control, Restructuring, Agency Costs,
Ethics
Source: "Behind Coke’s Massive Cuts: An Impatient
Board," by Betsy McKay and JoAnn S. Lublin, Wall Street
Journal, Thursday, January 27, 2000, page B1.
Synopsis of Article: The article discusses the recent
announcement by the Coca-Cola Company that it is laying off 20% of
its workforce, or 6,000 employees. The layoffs were prompted by
pressure from the board of directors, after disappointing earnings
announcements over the past several quarters. There is also some
hint of possible earnings manipulation. The article affords an
opportunity to discuss corporate governance, agency costs,
restructuring, and how a company may legally manipulate its
earnings.
Questions:
- What has Coke’s strategy been for maximizing
shareholder value? What problems has it encountered over the
past few years?
- Why might Coke’s management have hesitated in
laying off employees? Is it ethical for the board of directors
to pressure management to lay off employees?
- How did Coke influence its earnings for last year? How
did this impact the stock price?
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