People's Money Why Did Jorgy

¶ … People's Money Why did Jorgy continue to operate the Wire and Cable Division? He, more than anyone else, was aware that the division was losing money and would probably continue to lose money. Jorgy continued to operate the wire and cable division out of a sense of obligation to the employees and the community. He also had a personal feeling for the business because it had been started by his father 81 years ago and he had been in charge for 26 years.

Both Jorgy and Garfield refer to the firm as "my company." Jorgy says "…you can't come into my town and takeover my company." Garfield says, "…I don't like the way my company is being run." Who is right? Whose company is it? If both are correct, how do their perspectives differ? How do these different perspectives cause Garfield and Jorgy to have different incentives for the firm? Both Jorgy and Garfield have a claim to ownership of the company.

Jorgy's claim is based on his position as Chairman of the Board and Director of the company. He has invested his life into the success of the company, and owns 20% of the stock. Garfield, as a stockholder, has a right to expect a return on his investment. He buys stock with the idea gaining control and selling the company's assets at a profit.

Jorgy knows that the company has been successful over the long-term, provide employment for the workers and their families, and has a vision of a return to profitability. Garfield sees the company as an opportunity to make money immediately and believes there is no future in the wire and cable business. 3) Garfield initiated a tender offer at $20 per share to existing shareholders. What was the net effect of this action? What do you think of Garfield's action? Garfield offered $20 per share because he valued the stock at $25 a share.

He believes that by offering $20 dollars per share he can gain control of the company and still make a profit. Sullivan had also tried to gain control of the stock by buying shares under another name. Garfield and Sullivan had a standstill agreement, which both of them violated. I think Garfield's and Sullivan's actions were unethical because they had made an agreement, but neither kept their word. 4) Sullivan makes an argument that laws should be passed to stop the actions of Garfield and those like him.

Assuming that there are no anti-trust issues (anti-competitive issues), does government have a legitimate role here? While I can understand why Sullivan would be angry, I don't think government does have role in this situation. We have a free enterprise system, and you can't legislate ethics. Both sides had tried to deceive each other, but neither side had tried to deceive the people. 5) Jorgy states that a business is worth more than the price of its stock.

Garfield uses an example of buggy whips to make the point that management has a responsibility to allocate corporate resources in such a way as to maximize shareholder value. and, if management fails to uphold its fiduciary responsibility in this way, then you can't blame people like him for stepping and doing what the board should have done. Garfield counters Jorgy's argument that he (Garfield) does not make anything but instead simply destroys companies and lives.

He states "…I don't make anything? I make money." Despite the crass way in which Garfield expresses himself, isn't he correct? Isn't the pursuit of profit the primary reason for investing in the firm? Is Jorgy.