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

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