Tidal Community Bank is a perfect example of a company embroiled in conflicts attributed to differing opinions on the best growth strategy to adopt. While the management prefers to expand into new markets through acquisition, the institutional investors are interested in growing their earnings per share. The two protagonists are involved in vicious disagreements that are observed even at the investor conferences. They are all determined to force through their proposal, and none is willing to give a thought to any opposing views. One investor was quoted saying that they do not care about the strategies the management was proposing. On the other hand, Matt was also quoted telling investors who were not happy with their proposal to exit. This strained business relationship raises questions on whether Tidal Community Bank is driven by business ethics. It is not uncommon for investors and management to disagree on growth strategies. However, good business practices demand that decisions are based on business interests. The institutional investors have a critical role to play in the running of Tidal Community Bank. They provide the capital needed for financing capital investments and operational activities. Consequently, they cannot be ignored in any decision that affects the company. They have the right to put pressure on the management to grow their earnings as Tidal investors are doing. However, they are not right to impose key management decisions. Tidal Community bank has other owners that include employees and local people. The ownership of the local people twice that of that of institutional investors. Consequently, it would have been expected that they could have had a bigger influence in decision making. Surprisingly, all the other investors except institutional investors are not in agreement with the management on growth strategies. Fairness and justice demand that all the people who have ownership in the company be treated equally irrespective of whether one is an intuitional investor or local investor. Therefore, it would not be recommended for institutional investors to abandon their opposition for expansion strategy but rather consult with all other owners and management on the way forward. Employee Stock Ownership Plan (ESOP) and Stakeholder Stock Ownership Plan (SSOP) are meant to encourage staff and people from where the business is located to grow together with the business. Companies that have these plans are often appreciated and supported by the employees and local community because they feel part the company and share it fortunes and misfortunes. Unfortunately, institutional investors do not appreciate the role of ESOP and SSOP. Institutional investors invest in companies on behalf of other investors. Consequently, they have great pressure to deliver returns for their shareholders as opposed to employees and local people. This situation is not unique to Tidal Community Bank. In many corporations, the institutional investors tend to have good knowledge of investment decisions. As a result, they always try to push for investments with great prospects of return. Nevertheless, if the ownership structure is reflected in the company’s board, Matt and John can persuade ESOP and SSOP to support its growth strategy during voting. Despite the strained relationship between Tidal management and institutional investors, the two have to perform their obligations to the bank. The management is obliged to make management decisions that add value to the company. They ensure that the investors get good returns on the money invested in the company. Above all, they should steer the company to greater sustainability and profitability. Tidal has registered good growth since its inception 63 years ago. It has been listed one of the most active securities markets in the world. The listing is an indication that the company adheres to capital market regulations and rules. It has grown its branches by about 300% since 1985. However, as noted by the management, the company has started experiencing slow growth. To this, end the management is of the view that the company needs to expand in new markets. They have good reason for this proposal. The company focuses on the retail market that requires the bank to open more branches. They have identified a bank to acquire in order to venture into that market. This decision is supported by employees who are also shareholders. However, the institutional investors are opposed to the proposal. One of these investors is Eagleye with vast knowledge in banking and investment. These disagreements should be harmonized for the benefit of the company. The most suitable organ to spearhead reconciliation at Tidal Community Bank is the board. Boards of corporations are the highest decision-making organs. The board sits to approve the budget, plans, and investment decisions and also give directions on issues relating to salaries and human resources. John, Matt and representative of ESOP, SSOP, and institutional investors sits in Tidal Community Bank’s board. Consequently, disagreements among the top mangers and institutional investors are a manifestation of a dysfunctional board. The board should do the company favor by having unilateral decisions on all issues that are presented before it. Matt and John should lead the reconciliation. The board has a duty of calling special shareholders meetings to discuss contentious issues such as growth strategies. This approach is appropriate because it gives all shareholders opportunity to participate in company’s decision-making process. Once, the majority of shareholders have made the decision, the institutional or other investors have no merit questioning the decision. Therefore, there would be no conflicts in the board because all issues that they could not agree on are passed to shareholders to vote on. The authority of investors over management is often more of a legal issue than management issue. Usually, investors do not have a say in the day to day management of the companies they have invested in. It is not common for investors to fire staff or order chief executive officer to employ certain people. Nevertheless, investors are empowered to make decisions that have immense effects on even the management of the company. They can decide to liquidate the company and get back their investment. All these powers are contained in companies’ registration and capital markets statutes. The statutes spell our, for instance, the obligations of directors and shareholders. They also have provisions on the ownership structure. For instance, maximum shares that can be held by directors. On the other hand, the roles of the management are provided by the board of directors who are the shareholders. Managers are not necessarily investors, but maybe people employed within the company to provide the leadership needed for growth. Logically, investors have greater authority over businesses than management. The management of Tidal Community bank ought to understand that it must consult all investors including institutional investors in every investment decision. Investors have representative in the board, and the management must convince them to approve funding for expansion.
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Types of Case Studies
- Company Case Studies
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- Growth Case Studies
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