Deutsche Brauerei Case

After evaluating the Deutsche Brauerei case our team is giving our recommendation to Greta Schweitzer on the January 2001 Board of Directors meeting agenda. The items we will be focusing are:

• the approval of the 2001 financial budget,

• the declaration of quarterly dividends, and

• the compensation scheme of Oleg Pinchuk.

On the 2001 financial budget, Deutsche Brauerei calls for a EUR7 million plant and equipment to be built in the Ukraine. Our team believes that this investment will not benefit Deutsche Brauerei for the reason that Ukraine distributors have defaulted on their payments since 1998. Deutsche Brauerei has relaxed their terms to 2% 10, net 80 and yet they have not been able to meet their due dates. Based on this we recommend Greta to:

• tighten credit policy toward the Ukrainian distributors,

• stop capital expansion towards Ukraine in order to collect outstanding receivables.

Deutsche Brauerei also is considering increasing their dividend payout to 75%, to help their relatives meet ends. Our consideration to this proposal is to increase their dividend payout by only 25%. Our decision will benefit both present and future family stockholders.

Uncle Lukas is also proposing to increase Oleg Pinchuk salary base by EUR48, 500 and increase his of annual sales incentive payment by 60%. After thoroughly analyzing Pinchuk Exhibits 1-5, our team believes that Pinchuk is only focused on the sales aspect of the business. Our suggestions for Mr. Pinchuk include:

• focusing on collections

• profits, and

• efficient use of assets.

With our analysis, Deutsche Brauerei should stop expansion to the Ukraine until the risk on returns is levied. Dividend payouts need to be raised only 25% in the interest of retired and future family stockholders. As for Mr. Pinchuk an increase for his salary should only be granted after he begins showing better profits in the Ukraine.