JKL

Merbatty is a listed company now and their sole financial objective is shareholder wealth
maximization. According to this Merbatty is performing well as they are paying a dividend
pay-out ratio of 50% for the year ended on 31st December 2012.
But still as Simone is feeling that Alberto is viewing Merbatty as his personal property, we
would give some advice to Alberto regarding this.
Currently Alberto has the highest % of shares of 30% and JKL is next having 28%. If there is
another flotation there will be chances for Alberto to sell his shares and most likely JKL will
be looking forward to buy it. But if they get the impression of that Alberto is viewing
Merbatty as his own property then they will be thinking on purchasing more shares.
Also as JKL is a shareholder having a substantial % of shares they will have high power on
the decisions as well as high interest on the plan and operations of Merbatty so according to
the Mendelow Matrix JKL is a key player so Merbatty should satisfy and include JKLs
opinions. For that Merbatty can include more than 2 representatives from JKL in the board.
Simone is thinking that if Alberto accepts the racing boat plan of Jesper, then it is all because
they are from the same family, so this opinion must be disproved. For that as we have
recommended Merbatty to go with the racing boat plan, Alberto should compromise
Simone by telling the advantages that the shareholders will be getting if this project is
undertaken.
Also it is recommended that profit making companies to undertake non-profit making
activities in order to ensure corporate social responsibility and Merbatty here is following a
philanthropic approach. But too much of charitable works might dissatisfy the shareholders.
According to the plan given in the case study it can be seen that the % of (money spent on
charity/retained earnings) increases year by year. It is advisable to maintain a constant ratio
of a reasonable % (1.25%) of the retained earnings each year to be spent on charity.
As Merbatty is working under capacity(94%) spending extra hours on charitable work will
not be encouraged by shareholders, so Merbatty can reduce the man hours used on
charitable work as Simone feels it is 5 man years (9120 hours) which is too much.