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?
2. Did the company complied or violated any of the eight (8) characteristics of good governance?
3. Are you in favor of the recommendation of Mr. Dimaano? Why or why not?
4. Do you think the board of directors has done their job properly?
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?
6. Are you satisfied with the decision-making process of the company’s BOD? If not, provide ways on how
they can improve.
Rubric for grading:
CRITERIA PERFORMANCE INDICATOR POINTS
Content Provided pieces of evidence, supporting details, and factual scenarios 3
Organization Expressed the points in clear and logical arrangement of ideas 2
of ideas
TOTAL 5
01 Task Performance 1 *Property of STI
Page 1 of 1
Step-by-step explanation
Question 1
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.
Question 2
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.
Question 3
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.
Question 4
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.
Question 5
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.
Question 6
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.
