XYZ is a multinational with its head office in Montreal with extensive production and trading activities in a number of countries from which it derives the majority of both its profits and turnover. Its principal activities are in major government infrastructure projects. The firm had a acquired a reputation for an above average dividend payout when compared to the TSX average and the stock had been bought by many investors, including off-shore for its regular flow of income. Mr W. Bell, the Chair of the Board writing in the Annual Report in January 2018, stated that he felt reasonably confident about the firm's prospects for 2018, despite some softness as a result of an expected slow down in global GDP growth as forecasted by the IMF. While he indicated that the downward revisions in expected profits would persist, he was confident that the geographic diversification would be a continuing advantage. However, by the early summer of 2018 the company was warning of a marked drop in expected profits with further IMF downward revisions in global growth forecasts and increasing global trade tensions. But he stated that the Board was hopeful that XYZ could maintain dividends. However, in September 2018, while the company reported better than expected profits, ( down 5% on 2017 levels), the Chair reported that the upcoming dividend would be cut to zero. While he stated that there was neither a trading or cash crisis, XYZ did have a significant cash deficit as it had in the previous 3 years. If it was to pay the expected dividend, it would have to run down its unused borrowing facilities from close to 10% to 8% of total sales. The Board's reasoning in its unanimous decision was that conserving cash within the firm would be in the best short- and long-term interests of the shareholders, as the retention would be worth more to XYZ than shareholders. The immediate response of the announcement was that XYZ's share price fell by 10% with institutional shareholders - both domestic and off-shore voicing concern for the loss of income and the fall in market capitalization. The investment advisory firms added their voice from a governance standpoint, recommending that shareholders should consider withholding their vote at the AGM on both the financial statements and the re-election of directors. In response, the Board of XYZ maintained its decision but indicated this was a one time decision and it hope to restore the dividends in 2020. At the AGM, the Directors were attacked for not only for the effect of the dividend decision, particularly on 'small investors as many of whom would be relying on the dividend income, but also the apparent remoteness of the Board and top management from its shareholder base, including institutional. More broadly, some media commentators attempted to place the dividend decision as a rational response by XYZ as follows. To the financial Cloud cuckoo-land in which we are living, XYZ has introduced an element of realism in terms of protecting the short- and long-term interests of shareholders". Others speculated that if its share price remained low and with the erosion of trust with its shareholders and the market that it would become a future takeover target. Discuss this case. Note, this case does track an actual real life firm. XYZ is a multinational with its head office in Montreal with extensive production and trading activities in a number of countries from which it derives the majority of both its profits and turnover. Its principal activities are in major government infrastructure projects. The firm had a acquired a reputation for an above average dividend payout when compared to the TSX average and the stock had been bought by many investors, including off-shore for its regular flow of income. Mr W. Bell, the Chair of the Board writing in the Annual Report in January 2018, stated that he felt reasonably confident about the firm's prospects for 2018, despite some softness as a result of an expected slow down in global GDP growth as forecasted by the IMF. While he indicated that the downward revisions in expected profits would persist, he was confident that the geographic diversification would be a continuing advantage. However, by the early summer of 2018 the company was warning of a marked drop in expected profits with further IMF downward revisions in global growth forecasts and increasing global trade tensions. But he stated that the Board was hopeful that XYZ could maintain dividends. However, in September 2018, while the company reported better than expected profits, ( down 5% on 2017 levels), the Chair reported that the upcoming dividend would be cut to zero. While he stated that there was neither a trading or cash crisis, XYZ did have a significant cash deficit as it had in the previous 3 years. If it was to pay the expected dividend, it would have to run down its unused borrowing facilities from close to 10% to 8% of total sales. The Board's reasoning in its unanimous decision was that conserving cash within the firm would be in the best short- and long-term interests of the shareholders, as the retention would be worth more to XYZ than shareholders. The immediate response of the announcement was that XYZ's share price fell by 10% with institutional shareholders - both domestic and off-shore voicing concern for the loss of income and the fall in market capitalization. The investment advisory firms added their voice from a governance standpoint, recommending that shareholders should consider withholding their vote at the AGM on both the financial statements and the re-election of directors. In response, the Board of XYZ maintained its decision but indicated this was a one time decision and it hope to restore the dividends in 2020. At the AGM, the Directors were attacked for not only for the effect of the dividend decision, particularly on 'small investors as many of whom would be relying on the dividend income, but also the apparent remoteness of the Board and top management from its shareholder base, including institutional. More broadly, some media commentators attempted to place the dividend decision as a rational response by XYZ as follows. To the financial Cloud cuckoo-land in which we are living, XYZ has introduced an element of realism in terms of protecting the short- and long-term interests of shareholders". Others speculated that if its share price remained low and with the erosion of trust with its shareholders and the market that it would become a future takeover target. Discuss this case. Note, this case does track an actual real life firm