The Company Men

This week we were asked to choose a financial movie of our choice and from the list I chose The Company Men, which is set in the context of America post- financial collapse in 2008. Of course, the movie stood out to me because Ben Affleck plays the lead character (and who didn’t fancy Ben Affleck before the terrible back tattoos). 

So, the movie begins with thousands of workers being ‘laid off’ and even those who survive till the end of the day with a job intact are worried if they’re next to go. It was interesting to see how the financial collapse affected businesses in the US, although I don’t remember much from this time as I was only just starting secondary school, my experience of the financial crash would mainly be from watching English documentaries rather than American movies on the subject.

One of the characters, Gene, argues against the CEO Salinger’s actions with calls to innovate rather than just firing people. It seems as though the CEO really doesn’t have a choice either as he states that they work for the shareholders now and there is nothing else to do apart from increasing their share price. I would agree with Gene that in the long term that Salinger should focus on creating value through ways such as innovation but with no money to innovate with and the panic not only with shareholders but with the rest of the world due to the crash, I can understand why the CEO is just looking at the share price, as it seems as though it is the only way to survive at the time.

It is clear that the shareholders are demanding more for their shares and want the share price to continually increase even at this time. The CEO even states that the business would lose more jobs through a merger than simply downsizing, which may have been the case but what about the loss of employee morale and the decrease of job satisfaction? Of course, this may have decreased naturally due to the financial climate, but I don’t think it would be nice for anyone to see their friends fired and fear that they would be next, especially when their workload is then added to yours.

Another aspect of the movie I found interesting was the fact that despite the financial strain on the business already, the firm still planned on moving relocating to their new building even though there would be less staff. Similarly, Bobby Walker also still drives a Porsche and plays golf despite the fact he can’t afford these luxuries anymore.  It is clear that both these scenes show that the they are trying to keep up appearances so others around them don’t panic. Salinger may be going ahead with the new headquarters in order to show shareholders that there is nothing to worry about.

As the film continues to follow these characters and how they adjust to a new lifestyle of being unemployed with little to no prospects for the future, I think the most important aspect I took away from the film was the CEO doing everything possible to drive up the share prices. This was to maximise shareholder wealth and to avoid being bought and sold off in pieces (as he put it). 

There are different ways that the CEO could have maximised value for shareholders, and this could have been through divesting their assets which are not profit generating. We did observe this at the start of the film with Salinger selling off certain ports which weren’t generating enough profit. However, where I feel the CEO went wrong was the way in which the business was cutting down their number of employees and this was mostly based on age.  These older members of staff may have had the knowledge and expertise which may have driven up shareholder value in other ways. 

Towards the end of the film, Salinger is happy because the firm is sold for 39 billion with the shares being worth 600 million. Although this is obviously a fictional film, I would have loved to know how this was calculated as this is a topic we recently explored in last week’s lecture. My guess would be that most of the valuation would have been relatively easy to work out with the nature of the company being a shipping company. Therefore, many of its assets would be tangible assets where a fire sale value would be easily calculated by finding out their worth on the open market. The fire sale value would also be useful to the buying firm if their aim is to break apart and sell the company. 

Furthermore, it seemed as though that the company was a large corporation which was well known, I think an intangible asset would be the firm’s reputation and brand name and this may have also been added to the final value. Although Salinger was clearly ecstatic with the valuation, due to the financial climate at the time which destroyed shareholder wealth, it is not clear if this is a good deal for the company or not. Especially with the process of a valuation being subjective with its value being ‘in the eye of the beholder’. I personally think that $39 billion is most likely a good deal for both parties because the buying firm can sell off the physical assets if they’re unable to achieve their desired outcome from the deal (to make $$$$). On the other hand, an issue which would have to be considered by the buying firm would be the possibility that the assets don’t sell with many other firms not being able to make large purchases. This would leave the firm with added financial stress. However they obviously do not think this will be the case as they acquired Salinger’s business when the board accepted the deal.