Corporate Governance and Social

Responsibility
UNDER SUPERVISION OF

DR. Manal El Kordy

EMBA COHORT 9

GROUP MEMBERS:

ASHRAF KHALIL
MAREY
AHMED BAHER
HANI RAMADAN
SHOUKRY RAMADAN
WAEL BARAKAT

The Wallace Group Summary:

The Wallace Group Summary:
The Wallace Group, Inc. is diversified company
dealing in the manufacture and development of
technical products and systems.
The company currently consists of three operational
groups and a corporate staff.
The three groups include Electronics, Plastics, and
Chemicals, each operating under the direction of a
Group Vice President.

The Wallace Group Summary:

The company generates $70 million in sales as a
manufacturer of plastics, chemical products, and
electronic components and systems.
Principal sales are to large contractors in
governmental and automotive markets. With respect
to sales volume, Plastics and Chemicals are
approximately equal in size, and both of them
together equal the size of the Electronics Group.

The Wallace Group Summary:

Electronics offers competence in the areas of
microelectronics,
electromagnetic
sensors,
antennas,
microwaves,
and
minicomputers.
Presently, these skills are devoted primarily to the
engineering and manufacture of counter measure
equipment for aircraft. This includes radar detection
systems that allow an aircraft crew to know that the
yare being tracked by radar units on the ground, on
ships, or on other aircraft. Further, the company
manufactures displays that provide the crew with a
visual fix on where they are relative to the radar
units that are tracking them.

AQUESITION MAP

WALLACE PORTOFLIO
OVERVIEW

VERTICAL
INTEGRATION

FINANCIAL POSITION &

RATIO

Structure

Structure

Structure

What Wallace asked Rampers to do?

Dont give me a laundry list of problems, Fran. Anyone

can do that. I want a set of priorities I should focus on
during the next year. I want a clear action plan from
you. And I want to know how much this plan is going
to cost me!

Selected Interviews
Rampar: What is your greatest problem right now?
Campbell: Trying to contain my enthusiasm over the fact that Wallace
brought you in!
Morale is really poor here. Hal runs this place like a one man operation,
when its grown too big for that. It took a palace revolt to finally get him to
see the depths of the resentment. Whether hell do anything about it, thats
another matter.
Rampar: What would you like to see changed?
Campbell: We badly need a management development program for our
group. Because of our growth, we have been forced to promote technical
people to management positions who have had no prior managerial
experience. Mr. Tuscher agreed on the need for a program, but Hal
Wallace vetoed the idea because developing such a program would be too
expensive. I think it is too expensive not to move ahead on this.

Selected Interviews
Rampar: What is your greatest problem right now?
Smith: Corporate brass keeps making demands on me and others that dont
relate to the job we are trying to get done.
An example is the Vice President, Marketing (L. Holt), who keeps asking us
for supporting data so he can prepare a corporate marketing strategy. As
you know, we prepare our own group marketing strategic plans annually, but
using data and formats that are oriented to our needs, rather than
Corporates.

Selected Interviews
Rampar: What is your greatest problem right now?
Kane: Knowing you were coming, I wrote them down. They fall into four
areas:
Our salary schedules are too low to attract good, experienced EEs. We have
been told by our Vice President (Frank Campbell) that corporate policy is to
hire new people below the salary grade midpoint. All qualified candidates are
making more than that now and in some case are making more than our
grade maximums. I think our Project Engineer job is rated too low.

Selected Interviews
Rampar: What is your . . . ?
Lowell: . . . great problem? Ill tell you what it is. I still cannot get the support I
need from Kane in Engineering. He commits and then doesnt deliver, and it
has me quite concerned. The excuse now is that in his judgment, Sid
Wright needs the help for the Air Force program more than I do. Wrights
program is one week ahead of schedule, so I disagree with his judgment.
Kane keeps complaining about not having enough people.

Selected Interviews
Rampar: What is your greatest problem right now?
Jones: Wheel spinningthats our problem! We talk about expansion, but
we dont do anything about it. Are we serious or not?
For example, a bid request came in from a prime contractor seeking help in
developing a countermeasure system for a medium-range aircraft. They
needed an immediate response and concept proposal in one week. Tuscher
just sat on my urgent memo to him asking for a go/no
go decision on bidding. I could not give the contractor an answer (because
no decision came from Tuscher), so they gave up on us.
I am frustrated because (1) we lost an opportunity we were naturals to win,
and (2) my personal reputation was damaged because I was unable to
answer the bid request. Okay, Tuschers gone now, but we need to develop
some mechanism so an answer to such a request can be made quickly.

Analysis of Internal environment analysis and

External environment analysis.

ANALYSIS OF INTERNAL &

EXTERNAL ENVIRONMENT

19

What are the most important problems facing The Wallace

Group? What is the most important one?
The president runs this place like a one man operation, when it's
grown too big.
Hal admits he never listened to his key people when they
complained.
No communication and feedback taking place between the corporate
staff and the groups
No corporate strategy
Wallace Group is holding back Electronics because they are
"encouraged" to buy from Chemicals and Plastics, which have high
prices due to manufacturing problems.
Fast growth lead incompetent engineers be a managers without
management experiences, also no training and support provided to fill
the skill & knowledge gaps.

The Most important one is the president one

Unsuitable Wallaces leadership style (considering the size of the
company)
Unclear corporate strategy & Vision.

Develop a specific action plan to deal with these problems:

Corporate Governance
Develop a new organizational chart, with clearly defined job
responsibilities.
Hire a new President/CEO for each company who can create a
stronger management team.
Formulate the corporate strategy involving all division directors,
detailing the goals and objectives of the company as a whole.
Establish objectives for each division where Inputs from the various
directors expressing each divisions need
Evaluation and control will be important to the Wallace group.

Develop a specific action plan to deal with these problems:

Personnel management
Determine what motivates employees through a survey..
Review the recruitment process and identify what causes the slow
turn-over of hiring staff
Review the salary structure, & conduct economic or cost of living
study to come up with sound company salary philosophy.
Identify the staffing needs, promote trained and skilled staff if there is
a problem in hiring new staff
Develop a staff career development to help employees advance their
work lives within a specific organization.
Establish performance standards and evaluate output.

Develop a specific action plan to deal with these problems:

Reports management:
Management should set a standard reporting format.
Team-building should be done to build rapport between departments and all
staff.
Information Technology
Conduct system survey among staff to determine their need and wants in
terms of MIS.
Corporate policy on transfer pricing
Competitive analysis on purchases should be done and will be a basis of
procurement. The transfer pricing policy must be reviewed, revised and
updated to cope with the existing demands.
Diversification
Diversify product mix and customer base to hedge against loss of large
customers. Allocation of sufficient and proper resources must be given priority
Financial and Accounting issues
Unprofitable chemical division needs new management or it needs to be
analyzed and sold off based on
Cost analysis to corporation.

How do you handle the transfer pricing problems involved in the

backward integration?
Competitive analysis on purchases should be done and will be
a basis of procurement. The transfer pricing policy must be
reviewed, revised and updated to cope with the existing
demands.
Clarify transfer pricing policy. Make sure that all managers
understand that it is a team effort. The overall profitability of the
corporation is what is important. This policy needs to be
weighed in terms of overall profitability to corporation and not
individual departments.

If Mr. Wallace is found to be one of the major problems, should he be

addressed directly or indirectly?
He must be approached directly clarifying the need of separation
between owner ship and management.
The required organizational change should address his value in
setting strategies along with the managing directors team.
Each group should have Marketing Director ,Sales Director to focus
on Business Development.
Minimize BLOCKHOLDER (45% of Harold Wallace's hold stock) Because "Large Block Shareholder" means greater probability that
strategic decision will be focused on maximizing shareholder's wealth
only.

Has the Wallace Groups diversification strategy been effective? If

yes, please explain. If no, please explain.
No, it was not effective as both Chemicals and plastics were
depending on selling the majority of their production to the
electrical division on prices that are higher than the electrical
division.
The company did not achieve growth and profit ( the same rate
for the last 3 years )
Allocation of more resources to electrical division and
purchasing the required material at the most low cost level
would improve the profitability of the group.