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?

Yes, I am in favor of the 3 solutions identified because these will help the company slowly recover from the
financial and operational damage it faced during the pandemic even during its operations while the
pandemic is still present regardless of the small sacrifices it must make. Among all the possible solutions,
these are considered ethical and will benefit the company.
2. Did the company complied or violated any of the eight (8) characteristics of good governance?
The company did not comply with all the 8 characteristics. The company failed to consider important
characteristics which were participation, transparency, and equity & exclusiveness. As for participation, Mr.
Dimaano abruptly decided that they should let go of the non-essential employees and reduce the pay of
essential employees and they did not even give the employees a voice when it comes to this decision. As for
transparency, this information concerning this decision would not even be available to the employees but
only until they have agreed upon it and suffered the consequences. As for equity & exclusiveness, they
evidently excluded the employees concerning this decision and only the committees and the board voted
upon this matter.
3. Are you in favor of the recommendation of Mr. Dimaano? Why or why not?
I am completely not in favor of Mr. Dimaano’s recommendation because just as what Mr. Abedo has said, it
is inhumane it targets the vulnerable and removes the opportunity for the employees to improve or
maintain their well-being. Not only will the employees be affected but also those that are connected to them
who need to benefit from what they earn.
 4. Do you think the board of directors has done their job properly?
For me, they did not do their job properly because if they did, the would’ve silenced Mr. Dimaano’s
recommendation and instead thought of other solutions that would benefit the whole organization.
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?
I would chasten them and remind them of the consequences that would follow if they pushed through this
recommendation knowing that it is unethical and it will devastate the lives of those employees who are
working hard especially during this pandemic and their families. I would then tell them, “How would you feel
if you were in their situation and you suddenly knew that you are about to lose your job because their leaders
care more for the company rather than sacrifice.

6. Are you satisfied with the decision-making process of the company’s BOD? If not, provide ways on how
they can improve.

I am not satisfied. They need to truly understand what it means to have good governance. As a start they
should learn to care for their company and its organization and not just the company. They need to improve on
the characteristics that they failed to follow which are participation, transparency, and equity & exclusiveness.

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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