Paper Summary:

The paper describes the case of NorthEastern Mutual Life (NML), a business that was confronted with the sharp decrease in net income, and faced with an age-old question familiar to most companies: Should it downsize its staff in order to be more financially sound? The paper asserts that NML is representative of this trend, as companies are constantly dealing with the undesirable option of downsizing as a means of survival in a competitive market. The paper explains that this case is particularly fascinating because of the ethically controversial nature of NML's approach towards its employees (the potential firing of its staff) and its potential decision to not adhere to the legal framework (the filing of the partial wind-up to the Alberta Pension Commission). The paper concludes that whether NML wants to admit it or not, its financial success ultimately depends on being socially responsible to its clients, because its reputation was largely built on this premise.

Outline:
Introduction
Ethical Issues
Stakeholders
Alternatives
Choice of Alternative
Solutions
Conclusion

From the Paper:

"There could be a number of solutions for NML to turn to in order to increase their ROE, but the more realistic could include: salary cuts for the CEOs/CFOs etc, freezing of common share disbursement or sell shares of their subsidiary companies. The CEO salary cuts would be self-explanatory, but alone would possibly be not enough to organize an increase in ROE. If NML froze the selling of common shares they could also start buying back some of their shares through a stock repurchase, which would decrease the equity of the company and in turn increase ROE. NML could also attempt to cut costs through other expenses within the company. Selling their subsidiary shares would allow NML to buyback more of their own shares. Something could be done in terms of paying out dividends or selling off assets (in return, decrease equity), but in the case of dividends, the article states that any effect on dividends would affect the amount of revenue generated through sales ("a lower yield rate would directly affect sales")."

Sample of Sources Used:

• Mark, Ken "NorthEastern Mutual Life: Preparing for Employee Terminations." Cases in Business Ethics. David J. Sharp. California: Sage Publications, 2006. 203-210.
• Investopedia. "Return on Equity - ROE". http://www.investopedia.com/terms/r/returnonequity.asp 2010. Accessed March 24, 2010.

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