Page 7 - CIMA SCS Workbook February 2019 - Day 2 Suggested Solutions

CIMA FEBRUARY 2019 – STRATEGIC CASE STUDY

I would also advise you to consult the company’s legal advisors on any requirements to notify the
shareholders and/or the Stock Exchange on the Funfitt approach.

Exercise 3

Email

To: Paul Pau, CFO
From: Senior Manager
Subject: Sheila Jones’ resignation

The purpose of this email is to consider how Vita might respond to the resignation of Sheila Jones
and her three colleagues, and then to address how the company might avoid a similar instance
happening again.

Response to resignation

There are a number of steps that the Board can take in response to Sheila’s resignation.

The first step should be to try to dissuade her from leaving Vita. It may be that she can be
persuaded not to accept the offer from Funfitt; she states that she enjoys working for Vita and
that the decision to resign has not been an easy one to take. It may simply be that she feels her
ambitions will not be satisfied at Vita, and that the only way to become an Executive Director is to
take the present opportunity at a rival company.

Software is becoming an increasingly important element of our industry. If Sheila is an asset that
Vita truly wants to retain, it may be worth creating a new Executive position now of Executive
Head of Software Development. If Sheila can be persuaded to stay, it is also far more likely that
her three colleagues will also reverse their decision.

There may also be the need to grant Sheila and her colleagues a stake in the equity of the
company. I do not know if Sheila has shares in Vita or, if so, how many. However, giving or
increasing an equity stake could be a clear commitment of how much they are valued by the
business.

A word of caution here, though. Sheila and her colleagues might be highly valued members of
staff, but if retaining them means giving them special treatment, other employees might expect
the same. There may well be other employees at senior levels of Vita who, on seeing how the
company responds to a threat that a member of staff might join one of its greatest competitors,
may try to engineer their own way to another company as a means of forcing the same
improvements in position and remuneration as those offered to Sheila.

It is therefore assumed that Sheila’s resignation will be accepted. The company should therefore
decide how to proceed, as there are a number of options.

On the one hand, Sheila and her colleagues could be made to work for the entire notice period
stipulated in their contracts of employment. This would have the advantage of giving the
company time to identify suitable replacements as well as retaining the skills of the 4 employees

66 KAPLAN PUBLISHING