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Case Studies by Morten Bennedsen

28 case studies

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Abstract:
On 30 August 2016, Margrethe Vestager, the European Commissioner for Competition, ordered Ireland to recover €13 billion in illegal state aid that the state had granted Apple over a decade from 2003. In allowing Apple to pay close to zero in taxes, she ruled, Ireland had given the foreign company a selective advantage over other businesses paying the regular corporate tax rate of 12.5%. Tim Cook, CEO of Apple, and Enda Kenny, the Irish Prime Minister, appealed the ruling, a process that is still ongoing. The case explores this event from five analytical pillars: 1) the role of Ireland’s low corporate tax rate in attracting FDI; 2) Apple’s decision to allocate its earnings to a paper company in Ireland with no physical presence in the country; 3) the repatriation of foreign earnings to the United States; 4) the transfer payments that Apple makes to the US to pay for R&D; 5) the Commissioner’s decision to impose a retroactive tax penalty on a foreign company that acted in accordance with the tax arrangements granted by its host country.

Pedagogical Objectives:
The case is designed to encourage students to think about the role of tax policy from the perspective of the company. With the rise of global companies such as Apple whose products are sold all over the world, the question of where they should be taxed becomes a particularly controversial issue. Students will be asked to reflect on tax policy around the following five points: 1) as a national competitive advantage in attracting FDI; 2) on shrewd corporate accounting that renders taxable income to nearly zero sums; 3) on powerful tax disincentives for the repatriation of earnings approaching two trillion dollars to the United States, 4) the political rational behind the current corporate tax principle that states taxes for innovative companies like Apple should be paid in the source country where R&D is carried out; 5) and that supranational entities such as the European Commission should take preventive measures and not corrective punitive measures in dealing with foreign countries who have created thousands of jobs in a particularly vulnerable host country such as Ireland.

Keywords:
Margrethe Vestager, Public Finance, Corporate Tax, Repatriation of Earnings, State Aid, Tax Haven, Ccctb, Apple, European Commission for Competition, Transfer Payments, Enda Kenny, Tax Minimization, United States, International Taxation

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published: 30 Jul 2018

  • Topic: Family Business
  • Industry: Heating equipment
  • Region: Europe

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Abstract:
Family-owned firm Brunata, an engineering business and major player in Denmark’s heat consumption market, faces a leadership crisis after the retirement of its charismatic founder. Although his four children have worked in the company, none ultimately have the right stuff to lead, notably the eldest son who is removed by his father three years after taking over the top job. The professional manager who is subsequently appointed lasts only two years. The case includes interview material and highlights the emerging role of the board, whose external directors tried to turn the situation around.

Pedagogical Objectives:
The case offers penetrating insight into the issues of succession and professionalization of management at family-owned firms. It provides information for a lively discussion on the role of founders, owner-managers, next gens, professional managers and board members planning for the long term, as well as the distinctive hurdles that such firms face. It can be used for courses on family business, directors, leadership and negotiation.

Keywords:
Family Business, Board of Directors, Brunata, Danish Market, Heat Meters, Owner-Managers, Negotiations, Succession, Next Gens, Ceo, Founders, Sibling Disputes, Professionalization, Denmark

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published: 30 Jul 2018

  • Topic: Family Business
  • Industry: Heating equipment
  • Region: Europe

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Abstract:
Family-owned firm Brunata, an engineering business and major player in Denmark’s heat consumption market, faces a leadership crisis after the retirement of its charismatic founder. Although his four children have worked in the company, none ultimately have the right stuff to lead, notably the eldest son who is removed by his father three years after taking over the top job. The professional manager who is subsequently appointed lasts only two years. The case includes interview material and highlights the emerging role of the board, whose external directors tried to turn the situation around.

Pedagogical Objectives:
The case offers penetrating insight into the issues of succession and professionalization of management at family-owned firms. It provides information for a lively discussion on the role of founders, owner-managers, next gens, professional managers and board members planning for the long term, as well as the distinctive hurdles that such firms face. It can be used for courses on family business, directors, leadership and negotiation.

Keywords:
Family Business, Board of Directors, Brunata, Danish Market, Heat Meters, Owner-Managers, Negotiations, Succession, Next Gens, Ceo, Founders, Sibling Disputes, Professionalization, Denmark

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published: 30 Jul 2018

  • Topic: Leadership & Organisations
  • Region: Global

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Abstract:
The case accounts for the gender pay gap in companies and industries around the world. In Europe, women earn on average 84 cents per hour for every euro men make. In the United States, they earn between 80 and 82 cents per hour for every dollar made by a man. The gap widens further after women have children. Iceland is a rare exception; companies in Iceland are under a legal obligation to prove that they offer equal pay. Elsewhere, the under-representation of women in leadership roles in government, industry, the boardroom and c-suite means a dearth of role models for girls. The case shines a spotlight on ingrained behaviours and perceptions that condone the gender pay gap on the grounds that men have more responsible jobs and hold more senior positions.

Pedagogical Objectives:
The case is designed for MBA participants and senior executives entering the labour force at management level or returning to the job market (female and male employees alike). It focuses on a key public policy issue that is present at all levels in the public and private sectors. Without seeking to present instant solutions to one of the thorniest problems facing organizations, it gives instructors the opportunity to demonstrate concern about gender-related issues and flexibility in handling classroom discussion on this hot topic.

Keywords:
Gender Pay Gap, Job Discrimination, Pay Data, Childbirth, Senior Positions, Low-Paid Work, Government Intervention, Women’s Work, Gender Segregation, Female Earnings, Pay Difference, Career Choices, Status Quo, Public Policy

published: 26 Mar 2018

  • Industry: Internal Affairs
  • Region: Global

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Abstract:
The case explores the murky world of tax havens and hidden wealth. The so-called ‘Panama Papers’, ‘Paradise Papers’, ‘Swiss Leaks’ and ‘LuxLeaks’ are essentially digital dumps that exposed where the the ultra-rich had for decades stashed their billions to evade paying taxes. Academics such as Gabriel Zucman have mined these revelations for insights about global wealth inequality. Their research and that of investigative journalists have put public policymakers under pressure to make laws to “regain control over globalized financial capitalism” as economist Thomas Piketty calls it, arguing that the continued legality of tax havens puts at stake the basic social contract on which democracies are founded, and that the resulting shortfall in tax revenues deprives advanced economies of resources for nation building for future generations.

Pedagogical Objectives:
This short case is designed to spark discussion among students regardless of background. Starting with the electronic dumps that have provided huge amounts of data for academic researchers and investigative journalists, it describes the vast amount of wealth that is hidden in tax havens and the taxation policies designed to entice the super-rich to keep their wealth ‘at home’. It can be used for students from undergraduate to MBA, part-time masters and executive education. Instructors of public policy courses can use it to discuss taxation issues. In family business courses it can focus on intergenerational transfers of wealth. Instructors of courses on international business can highlight the role of globalization in hidden wealth. Experientially, the case enables students to visualize a world where tax evasion offers no advantages.

Keywords:
Wealth Inequality, Tax Havens, Wealth Taxes, Corruption, Transparency International, Thomas Piketty, Panama Papers, Hidden Wealth, Tax Evasion, Swissleaks and Luxleaks, Tax Shelters, Icij,gabriel Zucman, Paradise Papers

published: 26 Mar 2018

  • Topic: Family Business
  • Industry: Transportation
  • Region: Asia

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Abstract:
The case highlights a bloodless succession coup that was over within weeks following the death of the founder of one of the largest conglomerates in Taiwan. In January 2016, Chairman Chang Yung-fa, 88, founder of Evergreen Group, died, leaving a handwritten testament disinheriting his three sons from his first deceased wife. All of his assets, plus the position of Chairman, were supposed to go to his only son from his second wife. Did that happen as the founder thought it would? Absolutely not. He had apparently overlooked the majority shareholdings of his first three sons, which made his will not worth the paper it was written on. The three sons voted, with their majority shareholdings, their half-brother out of the family-run business altogether. For one or two weeks, the young man nursed his ejection, literally—he had been CEO of Eva Airways, a key division of the conglomerate, and a respected pilot. But it soon dawned on him that his remaining assets—the modest sum of €1.5 billion—could be used to launch a new airline company in Taiwan. This is where the cases leaves the four Chang brothers. The case brings into sharp relief what can happen when no long-term planning is put in place by even the most respected of founders.

Pedagogical Objectives:
The case focuses the attention of students, execs, family leaders, next gens and all those interested in family business, on the critical importance of long-term planning. One of the biggest challenges facing owner-managers in family firms is the design and implementation of a long-term plan that will ensure the sustainability of their firms for decades to come. To this end, owner-managers will learn to go beyond the day-to-day activities to consider a diverse range of strategic questions that will come up in 10 or 20 years’ time. They will create a transparent system of rules and procedures so that the possible roles of individual family members are communicated well in advance of retirement, health problems or death. Owner-managers who have the courage to confront difficult and emotionally charged issues that arise in family businesses can thus avoid the type of breakup of a family-run business as happened to the Evergreen Group following the death of its founder.

Keywords:
Evergreen Group, Chairman Chang, Eva Airways, Starlux, Chang Yung-Fa Foundation, Yang Ming, Evergreen Line, Family Succession, Taiwanese Conglomerate, Family Business, Chang Yung-Fa, Chang Kuo-Wei, Bronson Hsieh, Transasia Airways

published: 29 Jan 2018

  • Region: Europe

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Abstract:
The case examines the reforms to the French labour code made by President Emmanuel Macron after his election in April 2017, essentially designed to loosen restrictions on hiring and firing. The new laws gave smaller companies more flexibility in negotiating wages and conditions directly with employees (rather than being bound by industry-wide collective deals negotiated by trade unions) and the right to lay off workers in periods of economic difficulty. In the context of an upturn, Macron was hoping the reforms would encourage foreign investment such as financial institutions relocating in response to Brexit. He resorted to issuing executive decrees (ordonnances) to avoid the massive street protests typically sparked by macro-economic adjustments in France, ultimately consolidating his leadership at home and in the larger European Union.

Pedagogical Objectives:
The case is ideal for economic and political science instructors for a discussion of labour reform in a country reputed for rigid regulations, highlighting the role of the executive in pushing through macro-economic changes after decades of stubbornly high unemployment. At the regional level, Macron has shifted the balance of power in the European Union by aligning himself with the German Chancellor both in approach and level of influence, in a combined effort to strengthen the European bloc in the face of Brexit and the rise of populist movements in Austria, Poland and Hungary.

Keywords:
Emmanuel Macron, Labour Reforms, Thomas Piketty, Jean Tirole, Eric Cohen, Judith Krivine, Myriam El Khomri, French Economy, Flexicurity, Francois Hollande, Prud’hommes, Unemployment, Trade Unions, Negotiations

published: 27 Nov 2017

  • Topic: Family Business
  • Industry: Radio, Television, Consumer Electronics
  • Region: Asia

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Abstract:
This three-part case covers the history of Samsung from its origins as a small trucking company to one of Korea’s largest conglomerates. Part A, “Drivers of Success, Family Assets and Business Strategy”, charts the growth of Korea’s the export-led economy after the end of Japanese occupation in 1945, driven by a handful of family-owned ‘chaebols’. Founder Lee Byung-chull’s trucking business, set up in 1938, diversified in the aftermath of the Korean War, as he forged a strong political network that enabled him to embed his family’s influence and assets in the business strategy. Part B, “Heart Attack Puts Succession Planning at Risk”, describes how the ill health of the second-generation leader Lee Kun-hee deprived the firm of a clear succession plan. As the de facto leader of Samsung, his son had to build up his power base to assume the role in the context of a complex ownership structure. Part C, “Court calls time out on Lee Jae-yong”, examines how the de facto heir was convicted of bribery and given a five-year prison sentence, prompting speculation that he would run the Samsung empire from his cell.

Pedagogical Objectives:
The three parts can be used together or as stand-alone cases in the classroom. Part A (16 pages) explores the success of a family business with modest beginnings, transformed within a generation into a major conglomerate; the role of the second-generation leader who transformed the export-driven firm into a global company with factories and R&D facilities all over the world; and the role of family relationships that enabled the Lee clan to retain ownership over the sprawling enterprise. Instructors can use the shorter Part B (11 pages) to look at the Lee family and the choices available to the de facto heir after his father’s heart attack; the tax avoidance measures he must have taken (in view of Korea’s hefty 50% tax on estates of this size); and the much publicized merger of two Samsung affiliates that was clearly not in the interests of minority investors. Part C (10 pages) enables discussion of the legal ramifications of illegal behavior and the possibility of reforming aspects of the family-run chaebols, which critics blame for the state of the economy today.

Keywords:
Samsung, Lee Jae-Yong, Korea, Lee Byung-Chull, Chaebol, Lee Kun-Hee, Lee Boo-Jin, Lee Seo-Hyun, Paul Elliott Singer, Elliot Management, Park Geun-Hye, Park Chung-Hee, Samsung Electronics, Conglomerates

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published: 27 Nov 2017

  • Topic: Family Business
  • Industry: Radio, Television, Consumer Electronics
  • Region: Asia

Show details ...

Abstract:
This three-part case covers the history of Samsung from its origins as a small trucking company to one of Korea’s largest conglomerates. Part A, “Drivers of Success, Family Assets and Business Strategy”, charts the growth of Korea’s the export-led economy after the end of Japanese occupation in 1945, driven by a handful of family-owned ‘chaebols’. Founder Lee Byung-chull’s trucking business, set up in 1938, diversified in the aftermath of the Korean War, as he forged a strong political network that enabled him to embed his family’s influence and assets in the business strategy. Part B, “Heart Attack Puts Succession Planning at Risk”, describes how the ill health of the second-generation leader Lee Kun-hee deprived the firm of a clear succession plan. As the de facto leader of Samsung, his son had to build up his power base to assume the role in the context of a complex ownership structure. Part C, “Court calls time out on Lee Jae-yong”, examines how the de facto heir was convicted of bribery and given a five-year prison sentence, prompting speculation that he would run the Samsung empire from his cell.

Pedagogical Objectives:
The three parts can be used together or as stand-alone cases in the classroom. Part A (16 pages) explores the success of a family business with modest beginnings, transformed within a generation into a major conglomerate; the role of the second-generation leader who transformed the export-driven firm into a global company with factories and R&D facilities all over the world; and the role of family relationships that enabled the Lee clan to retain ownership over the sprawling enterprise. Instructors can use the shorter Part B (11 pages) to look at the Lee family and the choices available to the de facto heir after his father’s heart attack; the tax avoidance measures he must have taken (in view of Korea’s hefty 50% tax on estates of this size); and the much publicized merger of two Samsung affiliates that was clearly not in the interests of minority investors. Part C (10 pages) enables discussion of the legal ramifications of illegal behavior and the possibility of reforming aspects of the family-run chaebols, which critics blame for the state of the economy today.

Keywords:
Samsung, Lee Jae-Yong, Korea, Lee Byung-Chull, Chaebol, Lee Kun-Hee, Lee Boo-Jin, Lee Seo-Hyun, Paul Elliott Singer, Elliot Management, Park Geun-Hye, Park Chung-Hee, Samsung Electronics, Conglomerates

Related:

published: 27 Nov 2017

  • Topic: Family Business
  • Industry: Radio, Television, Consumer Electronics
  • Region: Asia

Show details ...

Abstract:
This three-part case covers the history of Samsung from its origins as a small trucking company to one of Korea’s largest conglomerates. Part A, “Drivers of Success, Family Assets and Business Strategy”, charts the growth of Korea’s the export-led economy after the end of Japanese occupation in 1945, driven by a handful of family-owned ‘chaebols’. Founder Lee Byung-chull’s trucking business, set up in 1938, diversified in the aftermath of the Korean War, as he forged a strong political network that enabled him to embed his family’s influence and assets in the business strategy. Part B, “Heart Attack Puts Succession Planning at Risk”, describes how the ill health of the second-generation leader Lee Kun-hee deprived the firm of a clear succession plan. As the de facto leader of Samsung, his son had to build up his power base to assume the role in the context of a complex ownership structure. Part C, “Court calls time out on Lee Jae-yong”, examines how the de facto heir was convicted of bribery and given a five-year prison sentence, prompting speculation that he would run the Samsung empire from his cell.

Pedagogical Objectives:
The three parts can be used together or as stand-alone cases in the classroom. Part A (16 pages) explores the success of a family business with modest beginnings, transformed within a generation into a major conglomerate; the role of the second-generation leader who transformed the export-driven firm into a global company with factories and R&D facilities all over the world; and the role of family relationships that enabled the Lee clan to retain ownership over the sprawling enterprise. Instructors can use the shorter Part B (11 pages) to look at the Lee family and the choices available to the de facto heir after his father’s heart attack; the tax avoidance measures he must have taken (in view of Korea’s hefty 50% tax on estates of this size); and the much publicized merger of two Samsung affiliates that was clearly not in the interests of minority investors. Part C (10 pages) enables discussion of the legal ramifications of illegal behavior and the possibility of reforming aspects of the family-run chaebols, which critics blame for the state of the economy today.

Keywords:
Samsung, Lee Jae-Yong, Korea, Lee Byung-Chull, Chaebol, Lee Kun-Hee, Lee Boo-Jin, Lee Seo-Hyun, Paul Elliott Singer, Elliot Management, Park Geun-Hye, Park Chung-Hee, Samsung Electronics, Conglomerates

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