Flying J is engaged in various business operations which include a travel plaza, oil refineries, and trucking companies. It is a family-owned company founded in 1968 by Crystal Call Maggelet's father. In 2009, Maggelet, being the majority shareholder and CEO of the company, must save it from bankruptcy. The company's plight was brought about by the decrease in crude oil prices and cash reserves, among other challenges. Maggelet's goals are to resurrect the company into profitability, repay all its debts, protect its employees from being out of work, and not to compromise employees' savings. Many thought those were not possible but were surprised when Flying J was able to pay its debts in full. This was achieved partly by minimizing operating expenses and, later, selling some of its assets. The company became a small one but still brought profits in.
Harvard Business Review (KEL887-PDF-ENG)
January 16, 2015
Case questions answered:
- What were the causes of Flying J’s bankruptcy? What part did governance play?
- How could the company not have known it was running out of cash?
- What were the keys to the turnaround? How did the “priority of claims” affect the ability of the family to retain any equity?
- How would you differentiate among the legal, governance, and ethical issues facing Maggelet?
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Case answers for Flying J: Governance through Crash and Takeoff
In 2009, the Flying J company faced bankruptcy, after spending the four decades post-creation enjoying overall growth. A fully integrated company, Flying J was divided into eight main divisions including highway hospitality, oil refining, and pipeline operations. While it does not guarantee against loss completely, diversification of the company’s interests can prove useful in mitigating risk and reaching long-term financial goals while mitigating risk.1
While there was variety within the main divisions of the company, it was not sufficient to diminish the potential financial ruin faced by Flying J. As corporate Flying J experienced pressure on its cash reserves, the subsidiaries of the company filed bankruptcy protection in hopes they could survive while their parent company crashed and burned.
Major shareholder and daughter of the company’s founder, Crystal Call Maggelet became the new CEO to handle the company’s impending bankruptcy, after the previous CEO, Phil Adams, abruptly resigned. There were several causes of Flying J’s bankruptcy, including decreased oil prices, and flawed governance of the company.
The tightly reined governance of Flying J, as well as market shifts and internal structuring issues, led to the company’s severe financial troubles. Administration of the company contributed to the bankruptcy that erupted in 2009.
As the CEO, Phil Adams directed division managers, expecting full compliance, and discouraging his subordinates from sharing their opinions. Adams had instilled a corporate culture of strict top-down management with no room for questioning directions. This type of authoritarian management led to…