I need to write a discussion for my class.
these are the directions
Review the opening case on Bed Bath and Beyond (pg, 249). You will find that this case was written a couple of years back. Since that time, the company has declared bankruptcy. Give a brief analysis of the case first. Then answer the following questions in an essay format:
- What is the role of corporate governance and how does it play a role in the future of a company?
- What are the positives and negatives of someone holding a large percentage of the organization, and their ability influence the decision-making process?
- Several large companies have gained profitability or have had to close up their active businesses due to the governance and shareholder issues. Find several examples of such companies and share the pros and cons of the decisions made?
- If you had to revise Bed Bath and Beyond, what steps would you take to reestablish the brand that is still very popular?
When the company was launched in the early 1970s, “big-box” stores specializing in a particular type of merchandise were becoming increasingly popular. In the mid-1980s, Bed Bath & Beyond opened its first superstore. The company grew rapidly after that time. However, as has happened with a lot of traditional “brick-and-mortar” retailers, Bed Bath & Beyond began to suffer from increased competition from Walmart and Target, as well as a wide variety of Internet providers of domestic merchandise. The company has performed poorly on the Internet relative to competitors.
Bed Bath & Beyond’s problems led to poor financial performance, including steady declines in sales and net income. Total revenue was $12.3 billion in the fiscal year ending March 3, 2018, with net income of $425 million. Since then, revenue has declined every year, all the way down to $7.9 billion in the fiscal year ending on February 26, 2022, according to a press release. This revenue was associated with a net loss of $559.6 million.
An exterior view of the Bed Bath and Beyond store. It shows glass entrances with a sign above that reads, Bed Bath and Beyond. A row of shopping carts is present in front of the store.
JHVEPhoto/Shutterstock.com
As a result of poor performance, activist investors have pushed for changes in governance at Bed Bath & Beyond. Shareholder activism refers to actions shareholders take to pressure top managers to amend corporate policies and practices that are more to their liking. In this case, activists have focused on changes in top management and in the board, as well as some new policies regarding governance in the firm. For example, in March 2019, three activist investment firms—Ancora Advisors, Marcellum Advisors, and Legion Partners—joined forces to oust CEO Steven Temares. They had an approximate 5 percent stake in the company at the time. Their pressure also led to the resignation of five directors and a smaller board. Later that year, Mark Tritton, who was previously chief merchandising officer at Target, was appointed CEO.
In 2020, Bed Bath & Beyond “announced a strategic restructuring program as part of the next phase of its work to rebuild the foundation of the business and create a sustainable, durable business model. The restructuring program includes a reorganization and simplification of its field operations, significant reduction in management positions across the business, and outsourcing of several functions.” As a part of the reorganization, the company laid off approximately 500 employees. The program was intended to dramatically reduce operating expenses. The company also developed initiatives to improve the customer experience and increase sales.
Despite these efforts, as described above, financial performance continued to decline. Then, in early 2022, another activist investor made a bold move. Ryan Cohen’s firm, RC Ventures, acquired almost a 10 percent stake in Bed Bath & Beyond. Mr. Cohen then “sent a letter to the company criticizing the retailer’s turnaround strategy and calling for a separation of the buybuy Baby chain or a sale of the entire company.” Mr. Cohen also wanted the company to narrow its strategic focus. Bed Bath & Beyond agreed to add three new directors to the board, selected by RC Ventures. Two of these new directors—Marjorie Bowen and Ben Rosenzweig—would join “a four-member strategy committee to explore alternatives to unlock greater value from the buybuy Baby business, which sells, baby gear, furniture, clothes, and more.” The other two members of the committee were existing independent (non-company affiliated) directors Sue Gove and Andrea Weiss. Both a spin-off and a sale of buybuy Baby were among the potential alternatives.
Mr. Cohen, the billionaire cofounder of Chewy Inc., an online pet products company, is also known for his investor activism at GameStop in 2020, picking up a board seat at the company and urging improvement in the company’s ecommerce business and exploration of other technologically driven opportunities. Perhaps his influence will have a positive impact on turning the company around. Only time will tell us if this is the case; however, Wall Street investors seem fairly positive. Bed Bath & Beyond’s share price increased by 34 percent on the day it was announced that RC Ventures had acquired a large stake in the company.
Sources: J. Lee, 2022, Bed Bath & Beyond goes to moon, Wall Street Journal, March 8: B10; C. McCabe, 2022, Activist sparks Bed Bath shares, Wall Street Journal, March 8: B1; W. Feuer, 2022, Bed Bath & Beyond adds new directors in deal with activist Ryan Cohen, Wall Street Journal, www.wsj.com, March 25; 2022, Bed Bath & Beyond, Standard & Poor’s Global NetAdvantage, April 16; 2022, Fortune 500: Bed Bath & Beyond, Fortune, www.fortune.com, April 16; 2020, Bed Bath & Beyond Inc. announces strategic restructuring program to simplify operations and reset cost structure, PR Newswire, www.prnewswire.com, February 27; L. Fortado & K. Y. Pan, 2019, Activist funds seek to replace Bed Bath & Beyond board, Financial Times, www.financialtimes.com, March 26.