RK JHA Solutions for Chapter: Decision Making, Exercise 10: Solved Paper 2011

Wind turbine maker Leone Energy posted a net loss of $₹250$ crore for the fourth quarter ended March $31,2010$as against a net profit of ₹$350$crore in the same quarter a year ago. In the financial year $2009-10$, the company clocked a gross income of $₹6517$ crore, as against ₹$9778$ crore in the previous year. Leone Energy clocked a loss of $₹1100$ crore in $2009-10$, as against a net profit of $₹320$ crore in $2008-09$. The sales revenues stood at $₹22400$ crore for the year, approximately $21\%$less as against $₹28350$ crore last year. For the financial year ending March $31,2010$, Leone Energy's sales volume (in terms of capacity of projects executed) was $4560\mathrm{MW}$ from $2935\mathrm{MW}$ a year ago. The CEO of Leone Energy in his message to shareholders suggested that the poor performance of the company was the result of adverse economic conditions during the year ended March $31,2010.$

You are a shareholder owning $5\%$ of the shares of Leone Energy, have seen the stock price decline by more than $50\%$ during the year $2009-10$ and are quite upset with the way the management has been handling the business. You have decided to confront the management at the next shareholders' meeting and have chosen the following $5$points to argue against the CEO's version of the story. In light of the above paragraph, select the most appropriate order of these $5$statements that you, as a disappointed shareholder, should adopt as a stinging and robust preface in your case against the management in front of the management and other shareholders.

(A) The management is not doing its best to maintain the profitability of the company.

(B) The company has actually increased its sales volume during the year under consideration.

(C) The adverse economic conditions have led to a worldwide increase in the adoption of alternative energy sources, reflecting in all-time highest profits for wind turbine makers in both developed and developing countries.

(D) The management has been lax with its employees as the management enjoys a large set of benefits from the company that they would have to forgo, if they became strict with employees.

(E) The company is trying to increase sales by charging lower, unprofitable prices.

Indian Government may hold top executives responsible if state-run power companies fail to meet performance targets and punish them with fines and transfers. The strict performance parameters are aimed at ensuring that at least the reduced target for $62000\mathrm{MW}$ of generation capacity addition is achieved before the end of the $11\mathrm{th}$ Plan, said a power ministry official. Performance of chairmen and managing directors of the power Public Sector Units (PSUs) in project implementation will be assessed as per the terms and conditions stipulated in the company's Memorandum of Understanding (MoU) with the power ministry, he said, requesting anonymity. Performance parameters of executives had come under strict scrutiny due to a lack of progress in the capacity addition program. While the target for the $11\mathrm{th}$ five-year plan has already been scaled down by the government from $78500\mathrm{MW}$, in the first three years of the plan yielded only $22302$MW of fresh capacity.

If you were the chairman of one of these power PSU's, which of the following statements (all of which are assumed to be true) could best be used in order to strengthen your case against the government holding top executives responsible?

i. The labor unions, owing allegiance to the ruling party at the Centre, are not allowing work to progress with their demands for wage hikes that are untenable.

ii. The actions of the mid-level management are not in line with the objectives laid down by the top management.

iii. The delays have been due to difficulties in obtaining funds at reasonable interest rates on account of the recessionary conditions.

iv. We are not to blame. The government is not doing enough to ensure the availability of sufficient fuel to power the existing plants, let alone the new plants.

v. The government had ignored the infrastructure availability like roads etc., and environmental clearances required for such projects and therefore set an unrealistic target, to begin with, and the revised target is also unrealistic as well.