Tanya Burnside

MSM 630 T-301

July 29, 2013

Down Goes RESOURCES UNLIMITED

• IN THE BEGINNING• CORPORATE HISTORY• PROFITS 1986 – 1988

• GAS and OIL ACCOUNTS?• 1988 & 1990

• MOVIN’ AND A SHAKIN’• DERIVITIVES…HEDGE FUND ACCOUNTS

• ENTRY LEVEL $$$$• BASIS FOR ENTRY LEVEL MANAGEMENT SALARIES

• SHE WORKS HARD FOR THE MONEY• ENTRY LEVEL MANAGEMENT SALARIES• PROPOSED FEMALE SALARY TO AVOID LAWSUIT

• ACCOUNTS GOING DOWN?• CORPORATE SENIOR MANAGEMENT STYLE• FAULTY ACCOUNTING PRACTICES• SHAKY PROFIT STRUCTURE• FAULTY COMMUNICATION

FROM THE BEGINNING TO THE END

• 1985 MERGER OF TWO NATURAL PIPLINE COMPANIES FORM RESOURCES UNLIMITED

• RESOURCE UNLIMITED BECAME LARGEST GAS DISTRIBUTION NETWORK IN THE U.S. WITH 38,000 MILES OF PIPELINE

• NATURAL GAS INDUSTRY UNDER FEDERAL REGULATION• RESOURCE UNLIMITED PURCHASED GAS AT FEDERALLY

APPROVED PRICES AND SOLD GAS TO USERS AT FEDERALLY APPROVED PRICES

• DEMAND WAS HIGH AND CONSISTENT AND SO WERE PROJECTED PROFITS

IN THE BEGINNING…

• DEREGULATION HITS THE NATURAL GAS INDUSTRY • PURCHASE COST SWELL• SALES COST ARE UNPREDICTIBLE• SUPPLY AND DEMAND CHANGES DAILY• PRESIDENT OF RESOURCES UNLIMITED USES COMPLEX

MODELS• DERIVITIVES AND HEDGES• ABSORB RISKS OF UNPREDICTIBLE COSTS AND PRICES

IN THE BEGINNING…

Quarter 1 Quarter 2 Quarter 3 Quarter 40

50100150200250300350400

1986-19871987-1988

PROFITS 1986 – 1988 (DATA IN MILLIONS)

BASELINE PROFITS: 1986 – 1987 Quarterly average $271.751987 – 1988 Quarterly average $200.75

GAS OIL0

20

40

60

80

100

19881990

GAS and OIL ACCOUNTS?

1988 1990GAS ACCOUNTS 32 43OIL ACCOUNTS 64 86

ACTUAL ACCOUNTS VS. HEDGE ACCOUNTS

ACTUAL GAS ACCOUNTS

GAS ACCOUNTS REQUIRED

TRANSFERRED TO DUMMY HEDGED FUND

MOVIN’ AND A SHAKIN’

ACTUAL GAS ACCOUNTS IN 1988 32GAS ACCOUNTS REQUIRED TO MAINTAIN THIRTY DAY CASH FLOW500TRANSFERRED ACCOUNTS TO DUMMY HEDGE FUND468

SALARY 1

SALARY 3

STANDARD DEVIATION

$0 $20,000 $40,000 $60,000

AVERAGE ENTRY LEVEL SALARIES

ENTRY LEVEL SALARIES

ENTRY LEVEL MANAGEMENT $$$

THREE MALE ENTRY LEVEL SALARIES $50,000 $55,000$52,000MEAN SALARY $52,333STANDARD DEVIATION $2,054.80

SHE WORKS HARD FOR THE MONEY

THREE MALE ENTRY LEVEL SALARIES $50,000 $55,000$52,000MEAN SALARY $52,333STANDARD DEVIATION $2,054.8SALARY ADJUSTMENT REQUIRED $52,333 – ($2055+2055) = $48,223

TO AVOID LAWSUIT $48,223 – 32,000 = $16,000 (ROUNDED)

MALE SALARY 1MALE SALARY 3

STANDARD DEVIATION

$0

$20,0

00

$40,0

00

$60,0

00

MALE VS. FEMALE SALARIES

SALARIES

• CORPORTE SENIOR MANAGEMENT STYLE• CEO MAKES HIGH RISKS CHOICES • DERIVITIVES USED TO HEDGE RISKS• Investopedia (2013) asserted that concern should arise when

companies use derivatives. Companies may use them for protection against unforeseen events, “adverse foreign-exchange or interest-rate movements, and unexpected increases in input costs. The investor on the other side of the derivative transaction is the speculator”. The protection well cost the company no matter the outcome. “Warren Buffett's stand is famous: he has attacked all derivatives, saying he and his company "view them as time bombs, both for the parties that deal in them and the economic system“ - 2003 Berkshire Hathaway Annual Report” (as cited in How Companies, 2010).

• DECISIONS VOID OF RESEARCH WHICH EXPLORES OPTIONS• NO CORPORATE GOVERNANCE• J. Wolfensohn, 1999 president of the World Bank defines corporate

governance as “…promoting corporate fairness, transparency and accountability” (Definitions of Corporate Governance, 2013)

DOWN GOES RESOURCES UNLIMITED

• FAULTY ACCOUNTING PRACTICES• LACK OF ACCOUNTABILITY• WILLFUL PARTICIPATION IN UNETHICAL FINANCIAL PRACTICES • ETHICAL RESPONSIBILITY TO REPORT FINDINGS• SHAKY PROFIT STRUCTURE• UNRELIABLE – UNVERIFIABLE /FRAUDULENT DATA PRESENTED TO WALL

ST. , STAKEHOLDERS, AND THE PUBLIC• UNSTABLE• PREDICTIONS UNREALISTIC• SALTY COMMUNICATION• POOR TOP-DOWN COMMUNICATION• ACCOUNTING AND OTHER MANAGEMENT PERSONNEL’S FAILURE TO

REPORT UNETHICAL PRACTICES• JUNE 1994 RESOURCES UNLIMITED GOES BANKRUPT

(Written Analysis of the Case Study Problems in Management., 2013)

DOWN GOES RESOURCES UNLIMITED

Carroll-Chu, M. C. (2008). Basic statistics: Mean and standard deviation. Retrieved from http://scienceblogs.com/goodmath/2008/03/24/basic-statistics-mean-and-stan/

Cooper, D. R. & Schindler, P. S. (2011). Business Research Methods. NewYork, NY.McGraw-Hill/Irwin

Definitions of Corporate Governance. (2013). Retrieved from http://www.mbaknol.com/strategic-management/definitions-of-corporate-governance/

Dorr, H. (2013, Week 7-Summer). Standard deviation. [Lecture]. Retrieved https://cyberactive.bellevue.edu/webapps/portal/frameset.jsp?tab_tab_group_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_293486_1%26url%3D

How Companies Use Derivatives to Hedge High Risk. (2010). Retrieved fromhttp://www.investopedia.com/articles/stocks/04/122204.asp

REFERENCES

Standard Deviation Formula (Chart Controls). (2013). Retrieved from http://msdn.microsoft.com/en-us/library/vstudio/dd489251(v=vs.100).aspx

Written Analysis of the Case Study Problems in Management. (2013). Retrieved from http://www.mbaknol.com/management-concepts/written-analysis-of-the-case-study-problems-in-management/

REFERENCES