"They made several efforts to destroy us. They spread misinformation about the quality of our product. That didn't work. After we gave advertisements in the media, giving exhaustive information about our product quality, the misinformation was not only thwarted, but our sales increased, as well.
"Then, they instigated some leaders of our workers' union to go on a strike, making some unreasonable demands. We took firm action by dismissing the leaders of the union who instigated the strike. At the same time, we raised the wages of the workers. The workers got the message that if they were loyal to the company they would be rewarded and that if they rebelled, they would be punished with dismissal. Hereafter, they won't fall prey to any instigation by mischievous elements."
"Excellent, Mr. Babu. You have our full support for your actions" said a senior Director. Other Directors applauded, endorsing what he had said.
"But our enemies won't give up. They will try something else. Therefore, I believe that to safeguard ourselves from their future attacks, we should not stop with taking defensive action but also launch an offensive" said Babu.
"What is your plan?" asked a Director.
"I think we should manufacture one of their products and create some competition for that product. Then, they will be forced to turn their attention to safeguard their interests. They won't have the time or energy to attack us."
"What product do you intend manufacturing? What are your plans for that?"
Babu explained his proposal.
"But we need to invest money to set up the manufacturing facilities for this product. How are we going to raise the money for this?" asked another Director.
"The investment required is not much. We can skip paying dividends for this year and use that money for the investment. I have circulated a one page note, summarizing the details of the proposal. Please go through the note."
The Directors spent a couple of minutes going through the note. Most of them nodded their heads in agreement.
"If we skip the dividend, it will send a negative signal about our company to the market. Our share price will fall" said one of the Directors.
"It will only be a short term effect. We will issue a press release explaining that we are skipping the dividend for this year, because we are investing this year's profit for setting up facilities to manufacture a new product, that our profit would increase next year, after we start manufacturing the new product and that we would be able to pay dividend at a higher rate, from the next year. So, even if the share price were to fall, it would recover soon" explained Babu.
"I think you need to make a deeper study of the consequences of skipping the dividend" said the Director, not convinced by Babu's reply.
However, the other Directors voted in favour of the Managing Director's proposal.
After about a week, the Company Secretary came to Babu's cabin outwardly perturbed, and told him, "Sir! For the past five days, our share price has been falling in the market. Some people seem to have spread some misinformation in the market about the reason for our skipping the dividend."
"Don't be perturbed. This was expected. The price will begin to go up in a couple of days" said Babu.
"No, sir. The volumes are very high. I hear that our enemies, taking advantage of our announcement of skipping the dividend for this year, have been spreading false information about our finances, thereby creating a fear among the shareholders. This has led to a panic selling. Now our enemies are buying the shares. Since we don't have majority holding, they may be attempting to take over our company, by buying a huge proportion of our shares from the existing shareholders, at a low price" said the Secretary.
Babu began to feel apprehensive. He remembered the advice of one of the Directors to make a deep study of the impact skipping the dividend would create.
Section 2
Acting After Due Consideration
pAththip paduppadhOr ARu.
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