ETHICS ASSIGNMENT

Submitted by: - Group 9

Meghna 13A1HP112
Saubhagya Jyoti 13A1HP098
Tanvi Lal 13A1HP020
Sunaina Tandon 13A2HP053
Rahul Sankruth 13A3HP055
Neha Singh 13A1HP100
Navin Kumar 13A2HP014
Akshat Sinha 13A3HP030



Q1) What is Ron Burkles problem regarding the way Leonardo Riggio is managing Barnes &
Noble? Why is it important for Riggio to respond to Burkles concerns?

Answer: Ron Burkle, founder of Yucaipa and also a shareholder of Barnes and Noble, was
unsatisfied with the strategic decisions of Riggio. He had following problems regarding the way
Riggio managed the company:-
1) He was scoffed at the $514 million deal made by Barnes and Nobles to acquire Barnes
and Nobles College bookstores, which were privately owned by Riggio and his wife. He
viewed this as a conflict of interest on Riggios part; given Riggio's ownership stakes in
both companies .He also felt that snapping up a chain watching over hundreds of college
bookstores would be a step back as campuses were starting to flock to digital textbooks.
The shift to digital was validated by Barnes & Noble itself when it introduced the Nook
e-reader a year later.
2) Burkle even felt that the board of Barnes and Noble was completely under the influence
of Riggio. Since Riggio has vested interests, he was compromising on the long-term
sustainability of the company to achieve his short-term goals. He even proposed a way
out of this, when he asked for the appointment of independent directors on the board of
Barnes and Noble. He believed that independent directors would serve as a counterweight
to Riggios influence on the Barnes & Noble board.
Burkel, founder of Yucaipa companies, was also a major stakeholder in the company as he held
around16.8% shares in BN. Like in case of every company, the Board of Directors is accountable
for its decisions to the shareholders. As Riggio was the Chairman of the Board, it was important
for him to respond to Burkles concerns.

Q2) What corporate governance issues are involved in the Yucaipa proxy fight?
Answer: Following corporate governance issues are evident in the Yucaipas proxy fight:-
1. Role of Board of Directors of the company: The primary responsibility of directors of
the Company is to oversee the affairs of the Company for the benefit of stockholders. But
when BN acquired Barnes and Nobles college bookstores from Riggio, there was an
outrage from the stockholders of the company as they felt that Riggio was benefitting
himself at the expense of the company. It put a question mark on the very integrity of the
members of board.


2. Absence of Independent Directors on the Board: The Board of Barnes and Noble
lacked independent and non-executive directors. Because of this, the board was
discriminate and also lacked diversified membership. Due to this, Riggio was able to take
the decisions as suited to him, rather than the company.

3. Function of Nomination Committee: In any company, there is a nomination committee,
which is responsible for nominating and appointing the members to the board. But in the
case of Barnes and Noble, the members and the CEO was appointed by Riggio, who was
himself the Chairman of the Board and also the founder of BN.