Individual Case Study: Phase 1

Individual Case Study - Phase 1 

Shovan Gandhi

February 22nd, 2015

Introduction

Early History:

Mr. Shantilal Shah, and his wife Kanchan used to stay with their 8 children in a small one bed room apartment in the lower east end of Mumbai, India. Due to the political instabilities at that time and the difficulty of business, they could not manage to get a bigger house at that time, now set up their own business.

Mr. Harendra Shah, the eldest son of Mr. Shantilal Shah,would spend his summers in Radiant Engineering Works, where his father was a minority stake partner. Harendra or Harry as he was fondly called, despite being in the 9th grade, had a very sharp eye and was keen to learn the working of things around him. By the time Harry turned 20, his father had already decided to cash out his shares at Radiant Engineering Works, and to shift to a more profitable market. Mr. Shantilal decided to set up his own firm, Harry Engineering Works. This company would manufacture gear boxes and motors for application in machines in various different industries. Harry decided to drop out of college and join his father full time due to his growing interest in the business. Following his footsteps, Harry’s younger brothers, Henry and Karl, still in the 7th grade decided to spend their summers in the manufacturing unit and in the office. With the untimely demise of Mr. Shantilal Shah in 1959, the company was left in the hand of a 24 year old Harry. Mr. Henry decided to drop out of engineering college, to help Harry with the business and to curtail the expenses of schooling, giving a chance to Mr. Karl to pursue his degree in engineering.

Plot

There was a lot of animosity in the work place amongst the second generation, and hence, after Mr. Henry’s death and with the deteriorating health of Mr. Harry, ideally, the company would be in the hands of hiss eldest son, Mr. Bobby, but due to his negligence as the head of the purchase department, and his hot headedness, he lost out on the chance and George, his younger brother was still learning the working of the business, hence, the company landed in the hands of Mr. Karl’s family. The cousins were irritated and angry with this ordeal, since they thought there was foul play involved. Since each family had equal stake, there was no superseding power to make the final judgement, and hence the reigns of the company did come in the hands of Karl’s family, but Karl, selflessly, made Bobby, George and Sandy (Karl’s son), the Heads of the department of Sales, Manufacturing and Purchase respectively. Henry’s son, Nick was keen on designing and he focused his attention on that, making a point not to come in the way of his brothers. After working for 7 years under Karl, Bobby and George decided overnight that they no longer wished to work under Karl, the wanted out.

There was major chaos in the family, as no one had ever expected this to happen. Karl and his brothers too were shocked, and they had no idea how to handle the situation. Harry and his wife Anna summoned his children and tried to reason with them about their decision, but they were really adamant and did not obey their father. They also specified that they did not want any stake in the company, and they wanted to sell off their shares. With the cash flow for the other partners being curtailed, there was a confusion as to how the shares would be bought by the others, since 2 brothers would buy out the shares of the third one. Nick considered Karl as a father figure in his life and told him that Karl’s decision would be final, and he would support that decision. The situation had sort of become a battle ground, with the entire families being against each other and it felt like the onset of a cold war.

• How will the shares be bought by the remaining two families?
• Would the families remain hostile after the split?
• Who would take charge of the functions on the board, and as the head of the various departments?