Marriott Corporation (A) and (B)
Teaching Note
Synopsis
In the fall of 1992, the chairman and president of Marriott Corporation (MC), a premier hotel
developer, owner, and manager, was considering a proposal to split the corporation into two separate
companies by a stock dividend to shareholders. One of the new companies would contain most of MC's
profitable management operations, while the other would retain ownership of its hotel properties as well
as almost all of its long-term debt. The Marriott Corporation case focuses on whether the chairman
should recommend the proposed split, called "Project Chariot," to the company's board of directors.
Marriott Corporation (A) (No. 394-085) describes the history of MC as well as its position at the
time of the decision, and allows students to evaluate the arguments for and against the transaction from
a variety of perspectives. A short (B) case (No. 394-086) describes MC's decision and reactions when it
was announced.
The Marriott Corporation case raises an important issue of management ethics in the context of
a complex financial decision: to whom and for whom is management responsible? The proposed spin-
off will enhance shareholder wealth, but at some cost to bondholders. A central question concerns the
nature and extent of management's responsibilities to bondholders and other constituencies in this
situation. In order to assess the proposed transaction, students must understand and evaluate MC's
financial situation, the purpose and effects of the spin-off, and the principles governing management's
responsibilities to the various affected parties.
The case may also be used to discuss two differing conceptions of management's fiduciary
obligation: the shareholder conception and the corporate conception. The shareholder conception holds
that managers' fiduciary duty is to enhance shareholder wealth within the law. That is, managers have
no obligations to constituencies other than shareholders except as provided by law or legally enforceable
contracts. According to the corporate or institutional conception, managers are fiduciaries for the
1
,395-188 Marriott Corporation (A) and (B)
corporation as a whole. The corporate conception gives managers greater discretion to recognize the
interests, and not only the legal rights, of non-shareholder constituencies.
Context in Course
Marriott Corporation was developed for the second-year MBA elective course, Managing for
Organizational Integrity. Taught in Part II of the course, the segment focusing on critical decisions, the
Marriott case concludes a module on moral conflict and ambiguity. It is the last in a series of cases
exploring managers' responsibilities to various corporate constituencies. The case may also be taught in
a finance or general management course.
Suggestions for Classroom Use
The Marriott Corporation case may be taught in a variety of course contexts. Suitable for a
management ethics course, a finance course, or a general management course, it could easily be taught
over two classes with the first focusing on the finance issues and the second on the issues of ethics,
management responsibility, and public policy. The case presents an opportunity for finance faculty and
ethics faculty to collaborate in teaching. This teaching note is designed for an 80-minute class
emphasizing the ethical aspects of the case. The (A) case should be prepared before class, and the (B)
case distributed after approximately 65 minutes.
Educational Objectives
• To develop skill in ethical thinking.
• To develop skill in making complex decisions involving multiple responsibilities.
• To enhance understanding of differing conceptions of the manager's fiduciary
duty.
Study Questions
1. Why is Marriott's chief financial officer proposing Project Chariot?
2. Is the proposed restructuring consistent with management's responsibilities?
3. The case describes two conceptions of managers' fiduciary duty (p. 9). Which do
you favor: the shareholder conception or the corporate conception? Does your
stance make a difference in this case?
4. Should Mr. Marriott recommend the proposed restructuring to the board?
2
, Marriott Corporation (A) and (B) 395-188
Class Overview
The main discussion areas and the approximate time for each are as follows:
Introductory remarks (2-3 minutes)
1. Understanding the situation (22-23 minutes)
1.1 What is Project Chariot all about? Why is MC's chief financial officer recommending it?
1.2 What is your assessment of Marriott's financial condition? Is this transaction necessary
for the company's survival?
1.3 What other reasons have been offered for the transaction?
2. Ethical analysis (25 minutes)
2.1 Who will be affected by Project Chariot? Who gains and who loses if it is implemented?
2.2 So what if stockholders gain at the expense of bondholders? Is there a problem with that?
Do bondholders have any right to complain?
2.3 Is Project Chariot consistent with management's responsibilities? To bondholders?
Shareholders? To the public?
2.4 Is the restructuring consistent with the values and ideals on which successful and
enduring organizations are built?
3. Recommendations (15 minutes)
3.1 Are there any risks to Marriott of going forward with the transaction? What is the risk
of being sued for fraudulent conveyance?
3.2 Is Mr. Marriott safe to assume the project can be abandoned if public reaction proves to
be negative (p. 9)?
3.3 Should Mr. Marriott recommend Project Chariot to the board?
4. Appraisal of developments (10 minutes)
4.1 What's your assessment of the reactions to Project Chariot?
4.2 Should MC proceed with Project Chariot?
4.3 Should MC make any concessions to the bondholders?
3
Teaching Note
Synopsis
In the fall of 1992, the chairman and president of Marriott Corporation (MC), a premier hotel
developer, owner, and manager, was considering a proposal to split the corporation into two separate
companies by a stock dividend to shareholders. One of the new companies would contain most of MC's
profitable management operations, while the other would retain ownership of its hotel properties as well
as almost all of its long-term debt. The Marriott Corporation case focuses on whether the chairman
should recommend the proposed split, called "Project Chariot," to the company's board of directors.
Marriott Corporation (A) (No. 394-085) describes the history of MC as well as its position at the
time of the decision, and allows students to evaluate the arguments for and against the transaction from
a variety of perspectives. A short (B) case (No. 394-086) describes MC's decision and reactions when it
was announced.
The Marriott Corporation case raises an important issue of management ethics in the context of
a complex financial decision: to whom and for whom is management responsible? The proposed spin-
off will enhance shareholder wealth, but at some cost to bondholders. A central question concerns the
nature and extent of management's responsibilities to bondholders and other constituencies in this
situation. In order to assess the proposed transaction, students must understand and evaluate MC's
financial situation, the purpose and effects of the spin-off, and the principles governing management's
responsibilities to the various affected parties.
The case may also be used to discuss two differing conceptions of management's fiduciary
obligation: the shareholder conception and the corporate conception. The shareholder conception holds
that managers' fiduciary duty is to enhance shareholder wealth within the law. That is, managers have
no obligations to constituencies other than shareholders except as provided by law or legally enforceable
contracts. According to the corporate or institutional conception, managers are fiduciaries for the
1
,395-188 Marriott Corporation (A) and (B)
corporation as a whole. The corporate conception gives managers greater discretion to recognize the
interests, and not only the legal rights, of non-shareholder constituencies.
Context in Course
Marriott Corporation was developed for the second-year MBA elective course, Managing for
Organizational Integrity. Taught in Part II of the course, the segment focusing on critical decisions, the
Marriott case concludes a module on moral conflict and ambiguity. It is the last in a series of cases
exploring managers' responsibilities to various corporate constituencies. The case may also be taught in
a finance or general management course.
Suggestions for Classroom Use
The Marriott Corporation case may be taught in a variety of course contexts. Suitable for a
management ethics course, a finance course, or a general management course, it could easily be taught
over two classes with the first focusing on the finance issues and the second on the issues of ethics,
management responsibility, and public policy. The case presents an opportunity for finance faculty and
ethics faculty to collaborate in teaching. This teaching note is designed for an 80-minute class
emphasizing the ethical aspects of the case. The (A) case should be prepared before class, and the (B)
case distributed after approximately 65 minutes.
Educational Objectives
• To develop skill in ethical thinking.
• To develop skill in making complex decisions involving multiple responsibilities.
• To enhance understanding of differing conceptions of the manager's fiduciary
duty.
Study Questions
1. Why is Marriott's chief financial officer proposing Project Chariot?
2. Is the proposed restructuring consistent with management's responsibilities?
3. The case describes two conceptions of managers' fiduciary duty (p. 9). Which do
you favor: the shareholder conception or the corporate conception? Does your
stance make a difference in this case?
4. Should Mr. Marriott recommend the proposed restructuring to the board?
2
, Marriott Corporation (A) and (B) 395-188
Class Overview
The main discussion areas and the approximate time for each are as follows:
Introductory remarks (2-3 minutes)
1. Understanding the situation (22-23 minutes)
1.1 What is Project Chariot all about? Why is MC's chief financial officer recommending it?
1.2 What is your assessment of Marriott's financial condition? Is this transaction necessary
for the company's survival?
1.3 What other reasons have been offered for the transaction?
2. Ethical analysis (25 minutes)
2.1 Who will be affected by Project Chariot? Who gains and who loses if it is implemented?
2.2 So what if stockholders gain at the expense of bondholders? Is there a problem with that?
Do bondholders have any right to complain?
2.3 Is Project Chariot consistent with management's responsibilities? To bondholders?
Shareholders? To the public?
2.4 Is the restructuring consistent with the values and ideals on which successful and
enduring organizations are built?
3. Recommendations (15 minutes)
3.1 Are there any risks to Marriott of going forward with the transaction? What is the risk
of being sued for fraudulent conveyance?
3.2 Is Mr. Marriott safe to assume the project can be abandoned if public reaction proves to
be negative (p. 9)?
3.3 Should Mr. Marriott recommend Project Chariot to the board?
4. Appraisal of developments (10 minutes)
4.1 What's your assessment of the reactions to Project Chariot?
4.2 Should MC proceed with Project Chariot?
4.3 Should MC make any concessions to the bondholders?
3
