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Segment 3.

Environmental Sustainability
Patagonia: Encouraging Customers to Buy Used Clothing (A) William Davidson
Institute

I thought it would be helpful to have a general classroom discussion of the Patagonia
case as it exemplifies a situation in which a corporation takes its responsibility to
society very seriously so please prepare this case and focus on the following
questions:

Patagonia core values:
- Quality: Pursuit of ever-greater quality in everything we do.
- Integrity: Relationships built on integrity and respect.
- Environmentalism: Serve as a catalyst for personal and corporate action.
- Not Bound by Convention: Our successand much of the funlies in
developing innovative

ways to do things.
1. From a commercial point of view what are the pros and cons of the Ebay
proposal?
Pros:
- encourage customers to sell used products online rather than throw them
away
- Increase Patagonia sales among those who care about the environment and
among those who want to sell their old gear and use the proceeds to
purchase new Patagonia products.
- Brand awareness
- Online presence
- More customers, Once customers took the pact, the brand would elevate
their attempts to find new homes for their gear through a special auction
section on eBa
Cons:
- Risk of losing loyal customers. They might find it cheap to buy/sell used
cloths
- Cause significant damage and loss to brand

2. What CSR actions are Patagonias closest competitors taking? Are these
initiatives forcing Patagonias hand?

North face Passionate about protecting env, and started lufe cycle
assessment on its manufacturing process. They implemented energy reduction
and efficiency initiatives to improve manuf process, and reduce env impact

REI Enthusiastic about protecting and maintaining env. Used organic cotton,
organic wool, recycle materials, bamboo fabric etc. ecoSensitive label.
- Energy efficient, in incorporated reduce, reuse, & recycle into its
operation

Columbia sportwear Mitigate env impact actoss its biz operations. Ongoing
sustainability projects installing solar panel, practicing energy efficiency,
earling LEED certificate.

Mountain hardware -

ARCTERYX -

3. List the special factors that enable Chouinard to seriously consider this
proposal.


4. Is this an example of a pure normative case for CSR?


5. Should Chouinard agree to partner with Ebay?




Segment 4. Executive Compensation, the public, the government and other
stakeholders
General Dynamics Harvard Business School Case

Team Assignment 1: General Dynamics

The General Dynamics case takes a look at executive pay and bonus arrangements
which aroused the ire of many stakeholders. Were their criticisms valid? Does it
change your view of executive compensation and incentivesa hot topic which has
been getting even hotter since this case was written in the early 1990s.

You are a director of General Dynamics and you are concerned with the perception of
the various stakeholders (some shareholders, labor unions and shareholders rights
groups as well as the media) of the implementation of the gain sharing plan and the
actions taken in its aftermath. You are so concerned, in fact, that you have written a
letter to fellow outside directors asking them to meet to consider the following
questions:

1. Who are the relevant stakeholders in this situation?
o Anders, Chairman and CEO
o Mellor
o James, President and COO
o Harvay, Vice Chairman
o 9 corporate VPs
o 4 Operating group Executive VP
o Several business heads

2. Is the gain sharing plan congruent with the interests of the companys
shareholders?
Gain sharing was based on stock price performance and awarded cash
bonus for each $10 increase in stock price. Plan paid large cash rewards
for increases in the stock price. This program gave huge incentives to
executive manager to boost the share price, which was the in the favor of
share holders.


3. After having garnered overwhelming stockholder approval for the new
bonus arrangement, have we acted appropriately and responsibly in
instituting the gain sharing plan?


4. Should the gain sharing plan be left in force, amended, or terminated?
It resulted in below
a. 50% reduction in R&D spending
b. Large reduction in capital expenditures $321M to $82M
c. Reduction in inventories, & working capital, to reduce cost and
increase revenue
d. Large layoffs of employees
e. Returned excess cash to shareholders, CEO refused to diversify
away from defense industry.
f. Sell off of Cesna Aircraft, Data Systems, Fighter Aircraft units.


5. Will the gain sharing plan as currently constituted help achieve the goals
that Bill Anders has articulated?

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