Once again, the Eastman Kodak Company has altered the determinants of pay raises for US employees. Whereas in the past pay increases for managers, professionals, and hourly workers had been automatic, starting in 1996 the company began determining the size of an annual bonus pool
1- Once again, the Eastman Kodak Company has altered the determinants of pay raises for US employees. Whereas in the past pay increases for managers,
professionals, and hourly workers had been automatic, starting in 1996 the company began determining the size of an annual bonus pool and then allocated
lump-sum bonuses to employees on the basis of performance. Hourly workers were to be evaluated within their annual performance appraisals; professional-
level employees would work with their supervisors to establish personal goals against which they would be measured.
a) What problems do you foresee with the implementation of this arrangement? Be specific about who will be affected by the problems you’ve identified.
b) What recommendations would you offer to top management at Kodak to preempt or minimize problems with the new reward system?
2 – What incentive conflicts exist in corporations? What mechanisms are used to address the incentive conflicts in corporations? Why is important to
separate decision management and control in publicly traded corporations? Discuss how a well designed governance system achieves this objective. What
characteristics do you think are important in evaluating the quality of a corporate board?
3 – The Black Diamond Company mines coal. It would like to build a processing plant right next to its major mine. The location of this mine is relatively
remote and is not near other coal mines. Tax considerations, as well as government regulations, dictate that the processing plant be owned and operated by
some independent company (other than Black Diamond). Your company, the Greg Norman Coal Company, is considering building and operating the plant for Black
Diamond on a contract basis. Your job is to negotiate the contract with Black Diamond. Discuss the terms that you will try to get Black Diamond to agree to
in the contract. Explain why these terms are important to you.
4 – It is frequently claimed that meaningful change is difficult to achieve in large companies. Why do you think this might be the case? What does
leadership have to do with organizational architecture?
5 – Why do externalities such as pollution occur? To what extent do you think a “cap and trade” system can be effective to reduce pollution?
6 – Ben and Jerry’s Homemade Inc. has received much favorable press for its Rainforest Crunch ice cream. It uses official rain forest nuts and berries and
all natural ingredients; it also sends a percentage of profits to charities. However, another flavor, Cherry Garcia, contains sulfur dioxide preservatives,
and other flavors use margarine, not butter. What are the problems a firm faces if it is “politically correct” in some products but not others?
7 – What would be an example of an innovative company? Why is this company innovative? Why are some companies more innovative than others? How should
organizations be structured to foster innovation?
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