Provide a two page report on asset control devices utilized by Ben & Jerrys. Be certain to discuss the impact these devices have on a company. Include your opinion on whether these controls should be used by Ben & Jerrys and provide explanation. What is the companys Return on Assets and Return on Equity? Calculate an expected rate of return.

Ben & Jerrys Homemade, a leading distributor of super-premium ice creams, frozen yogurts, and sorbets, was founded in 1978 in an old gas station in Burlington, Vermont. Cohen and Greenfield recounted their companys beginnings: One day in 1977, we [Cohen and Greenfield] found ourselves sitting on the front steps of Jerrys parents house in Merrick, Long Island, talking about what kind of business to go into. Since eating was our greatest passion, it seemed logical to start with a restau- rant. . . . We wanted to pick a product that was becoming popular in big cities and move it to a rural college town, because we wanted to live in that kind of environment. We wanted to have a lot of interaction with our customers and enjoy ourselves. And, of course, we wanted a product that we liked to eat. . . . We found an ad for a $5 ice- cream-making correspondence course offered through Penn State. Due to our extreme poverty, we decided to split one course between us, sent in our five bucks, read the ma- terial they sent back, and passed the open-book tests with flying colors. That settled it. We were going into the ice cream business. Once wed decided on an ice cream parlor, the next step was to decide where to put it. We knew college students eat a lot of ice cream; we knew they eat more of it in warm weather. Determined to make an informed decision (but lacking in technological and finan- cial resources), we developed our own low-budget manual cross-correlation analysis. Ben sat at the kitchen table, leafing through a U.S. almanac to research towns that had the highest average temperatures. Jerry sat on the floor; reading a guide to American colleges, searching for the rural towns that had the most college kids. Then we merged our lists. When we investigated the towns that came up, we discovered that apparently someone had already done this work ahead of us. All the warm towns that had a decent number of col- lege kids already had homemade ice-cream parlors. So we threw out the temperature crite- rion and ended up in Burlington, Vermont. Burlington had a young population, a significant college population, and virtually no competition. Later, we realized the reason why there was no competition. Its so cold in Burlington for so much of the year, and the summer sea- son is so short, it was obvious (to everyone except us) that there was no way an ice cream parlor could succeed there. Or so it seemed.1 By January 2000, Cohen and Greenfields ice cream operation in Burlington, Ben & Jerrys Homemade, had become a major premium ice cream producer with over 170 stores (scoop shops) across the United States and overseas, and had developed an important presence on supermarket shelves. Annual sales had grown to $237 mil- lion, and the companys equity was valued at $160 million (Exhibits 1 and 2). The company was known for such zany ice cream flavors as Chubby Hubby, Chunky Monkey, and Bovinity Divinity. Exhibit 3 provides a selected list of flavors from its scoop-shop menu.

Asset Control

The pursuit of a nonprofit-oriented policy required stringent restrictions on corporate control. For Ben & Jerrys, asset control was limited through elements of the com- panys corporate charter, differential stock-voting rights, and a supportive Vermont legislature.

Corporate Charter Restrictions

At the 1997 annual meeting, Ben & Jerrys shareholders approved amendments to the charter that gave the board greater power to perpetuate the mission of the firm. The amendments created a staggered board of directors, whereby the board was divided into three classes with one class of directors being elected each year for a three-year term. A director could only be removed with the approval of a two-thirds vote of all shareholders. Also, any vacancy resulting from the removal of a director could be filled by two-thirds vote of the directors who were then in office. Finally, the stock- holders increased the number of votes required to alter, amend, repeal, or adopt any provision inconsistent with those amendments to at least two-thirds of shareholders. See Exhibit 4 for a summary of the current board composition.

Differential Voting Rights

Ben & Jerrys had three equity classes: class A common, class B common, and class A preferred. The holders of class A common were entitled to one vote for each share held. The holders of class B common, reserved primarily for insiders, were entitled to 10 votes for each share held. Class B common was not transferable, but could be converted into class A common stock on a share-for-share basis and was transferable thereafter. The companys principalsBen Cohen, Jerry Greenfield, and Jeffrey Furmaneffectively held 47% of the aggregate voting power, with only 17% of the aggregate common equity outstanding. Nonboard members, however, still maintained 51% of the voting power (see Exhibit 5). The class A preferred stock was held exclu- sively by the Ben & Jerrys Foundation, a community-action group. The class A pre- ferred gave the foundation a special voting right to act with respect to certain business combinations and the authority to limit the voting rights of common stockholders in certain transactions such as mergers and tender offers, even if the common stock- holders favored such transactions.

The Offers Morgan reviewed the offers on the table. Discussion with potential merger partners had been ongoing since the previous summer. In August 1999, Pillsbury (maker of the premium ice cream Haagen-Dazs) and Dreyers announced the formation of an ice cream joint venture. Under past distribution agreements, Pillsbury-Dreyers would become the largest distributor of Ben & Jerrys products. In response, the Ben & Jerrys board had authorized Odak to pursue joint-venture and merger discussions with Unilever and Dreyers. By December, the joint-venture arrangements had broken down, but the discussions had resulted in takeover offers for Ben & Jerrys of between $33 and $35 a share from Unilever, and an offer of $31 a share from Dreyers. Just yesterday, Unilever had raised its offer to $36, and two private invest- ment houses, Meadowbrook Lane Capital and Chartwell Investments, had made two separate additional offers. The offer prices represented a substantial premium over the preoffer-announcement share price of $21.7 See Exhibit 6 for a comparison of investor-value measures for Ben & Jerrys and the select competitors. Dreyers Grand Ice Cream Dreyers Grand Ice Cream sold premium ice cream and other frozen desserts under the Dreyers and Edys brands and some under nonbranded labels. The Dreyers and Edys lines were distributed through a direct store-delivery system. Total sales were over $1 billion, and company stock traded at a total capitalization of $450 million. Dreyers was also involved in community-service activities. In 1987, the company established the Dreyers Foundation to provide focused community support, particularly for youth and K12 public education. Unilever Unilever manufactured branded consumer goods, including foods, detergents, and other home- and personal-care products. The companys ice cream division included the Good Humor, Breyers, Klondike, Dickie Dee, and Popsicle brands, and was the largest producer of ice cream in the world. Good Humor-Breyers was headquartered in Green Bay, Wisconsin, with plants and regional sales offices located throughout the United States. Unilever had a total market capitalization of $18 billion. Meadowbrook Lane Capital Meadowbrook Lane Capital was a private investment fund that portrayed itself as socially responsible. The firm was located in Northampton, Massachusetts. The Mead- owbrook portfolio included holdings in Hain Foods, a producer of specialty health- oriented food products. Meadowbrook proposed acquiring a majority ownership interest through a tender offer to Ben & Jerrys shareholders. Chartwell Investments Chartwell Investments was a New York City private-equity firm that invested in growth financings and management buyouts of middle-market companies. Chartwell proposed investing between $30 million and $50 million in Ben & Jerrys in exchange for a convertible preferred-equity position that would allow Chartwell to obtain majority representation on the board of directors.