a. Response to the Chairman’s Proposals:

The measures proposed by the Chairman may boost earnings per share (EPS) in the short term, but they could also have negative consequences for the company’s share price and the interests of its stakeholders.

Consequences for the Price of Shares:

• Short-Term Boost to EPS: Delaying payments to trade creditors, reducing capital expenditures, freezing staff pay, and cutting sponsorships will all likely reduce costs and improve reported earnings. This can enhance EPS in the short term.
• Market Perception: Investors often value firms based on long-term profitability and growth potential. Actions that reduce capital expenditures, especially on critical projects like Oloro II, may signal a lack of long-term strategic investment, which can hurt future growth prospects.
• Financial Risk: Delaying payments to trade creditors may harm relationships with suppliers, potentially leading to supply disruptions or unfavorable credit terms. This could increase operating risks and have a negative impact on future profitability.
• Ethical Considerations: Freezing staff pay and eliminating charitable sponsorships could affect employee morale and the company’s reputation. Negative public perception could impact the company’s brand and lead to loss of trust among customers, investors, and other stakeholders.

Consequences for Stakeholders:

• Suppliers: Extending payment periods beyond agreed terms can damage supplier relationships, making it harder to negotiate favorable terms in the future or ensure reliability of supply.
• Employees: Freezing pay and eliminating sponsorship for staff-led charity events will likely lead to dissatisfaction among employees, reducing productivity and increasing turnover rates.
• Environmental Concerns: Postponing the Oloro II project, which aims to reduce toxic emissions, indicates a lack of commitment to environmental responsibility. This could lead to regulatory challenges and loss of goodwill, particularly among environmentally conscious stakeholders.

In conclusion, while the measures may result in a short-term boost in EPS, they carry significant risks to the company’s reputation, long-term value, and relationships with key stakeholders, potentially leading to a reduction in the company’s share price.

b. Ways to Encourage Managers to Achieve Stakeholder Objectives:

1. Balanced Scorecard Approach: Introduce a balanced scorecard performance measurement system that considers financial and non-financial metrics, including customer satisfaction, internal processes, and employee engagement. This ensures that managers focus on multiple dimensions of performance, not just short-term EPS.
2. Performance-Linked Incentives: Align management incentives with long-term shareholder value creation and broader stakeholder objectives. For example, bonuses can be tied to metrics such as environmental compliance, customer satisfaction, and employee retention.
3. Stakeholder Engagement Initiatives: Encourage regular engagement between management and stakeholders such as employees, customers, suppliers, and community members. Incorporating stakeholder feedback into corporate decision-making will help managers understand the importance of maintaining positive relationships with these groups.
4. Corporate Governance Framework: Establish a strong corporate governance framework with clear guidelines on ethical behavior and responsibilities towards stakeholders. Having independent directors who represent various stakeholders can ensure that managerial actions align with stakeholder objectives.