Problematic India Case Study

Problematic India Pvt. Ltd. is a wholly owned subsidiary of Problemo Italy,

which in turn, is itself a wholly owned subsidiary of Aristocracy Victorian

England Plc., London (“AV”). AV is a holding company with cross border

investments in countries including United States (Delaware – specifically),

Singapore, India, Australia and Canada. The board of directors of Problematic

comprise of two non-executive Indian directors, six independent Indian

directors and 3 directors who are also directors at Problemo. Of the three

Problemo directors Mr. Negotiable is the managing director, Mr. Anxiety is

the finance director and Ms. Non Existent is the Director for Key Accounts.

Problematic India is involved in the trading of dairy products

After the first

quarter of 1994, urgent board meetings of Problematic took place and it led

the directors to decide that they needed strategic plan for the next five years in

order to maintain their market position. As part of the strategic plan, directors

at Problematic thought it fit that they gradually withdraw their products and

re-introduce them after a buffer period of a year. Accordingly, resolution to

this effect was moved at the board level on July 10, 1995, which was voted by

8 out of the 11 directors of Problematic; with 7 voting in favor of the motion

while 1 voting against – Ms. Non Existent was the sole director to vote against

the resolution. However, resolution was passed and was directed to be

implement by the chairman of the board (independent), Mr. Law.

As Problematic set out to implement the plan (supra) by fading out products

one by one, the company’s already piled up losses aggravated. Ms. Non

Existent voiced her concern throughout, reiterating that she had never believed

in the so-called, “strategy”. This voice of dissent from within the board

However, they chose to not pursue legal actions and instead

decided to sell their stake in Problematic to seven shareholders, namely,

Garden, Flower, Rose, Petal, Thorn, Actionable and Tom. Garden and Flower

were graduates from the most premium business school in the world and were

known across circles for their management skills. In 1991, they had bought

loss-making companies and led them all to become successful international

ventures.

In light of their experience, Garden and Flower suggested to the board of

Problematic that they withdraw their strategic plan immediately as it’s not in

the best interests of the company. They believed that products had gained

some publicity and once faded out, it will give rise to competitors and hence

will be difficult to re-introduce. The board of Problematic was also

pressurized by other companies in India in which Problematic had substantial

investments (in terms of shares), such companies believing that loss to

Problematic is affecting the goodwill of the group as a whole and hence

causing losses to these other companies of which, Problematic was a

substantial shareholder.

Considering the above circumstances and dissent within the board