Up to now, we have taken an analytical approach towards divestitures.

But these divestitures come with lots of emotion,

and these emotions are very likely to differ across people.

For example, whether you are a manager at the top of

the organization versus an employee lower down in the organization,

or whether you're part of the business that's being

divested versus being part of a business that remains,

or the emotion will defer versus an employee or a shareholder.

Now, the emotions or feelings may not only differ across people but

may very well differ also across regions or cultures.

I have a question for you.

Let's imagine you're the CEO and you're forced to make a decision.

You can either cut dividends or lay off employees.

What would you do? A similar question was asked in research conducted among managers.

However, instead of asking what they would do,

the managers were asked which alternative would be chosen in their country?

Here are the results.

The choice differs heavily by country.

On the one end, respondents in Japan overwhelmingly indicated cut dividends.

On the other end, respondents in the UK and

the US chose predominantly, lay off employees.

Germany and France were in between.

This research was conducted 20 years ago.

However, I asked the same question in my classes at

UCL and I'm fortunate to have an international audience.

The results are the same.

The choice the students make differs

heavily by the country where they're currently living.

So one reason why divestitures can become so

contentious is that the outcomes differ across people.

In addition, what you consider a fair outcome will depend on where you grew up.

Thus, I cannot tell you what the right outcome is.

I would like, however,

to point out one thing.

Let's look at the US,

one of the countries most tilted towards keeping dividends for the shareholders.

In the US, the fiduciary duty of the board,

that is the legal responsibility of its directors,

is towards the organization as a whole,

including employees, not just shareholders.

Because even in the US, we cannot simply justify on legal grounds

only that we need to retain dividends in order to maximize shareholder value,

or that we need to divest a business purely on legal grounds.

Divestitures involve tough decisions,

and these decisions can be difficult,

not only because they're analytically complex,

but also because outcomes will differ across people.

And which outcomes are deemed acceptable will depend on the country where you operate.

Understanding the Regional Perspective

Corporate Strategy

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