...C. Lindsay Executive Compensation Legal & Ethical Issues In Management (MGT 623) Oct. 27, 2012 Executive compensation a very controversial matter, and there are plenty of mixed feelings about it, but according to the ethics tool kit, it can be analyzed in two different way; freedom and responsibility. If a person is the CEO of a company, and that company belongs to him/her, he/she should have the freedom to give money when they want, take money when they want, and grant bonuses. The issue here is that that is not always the ethical approach. A company is run by its employees, but according to the Halbert and Ingulli, the trend in big companies has been to grant executives with more money and give their employees the bare minimum. As an executive/CEO of a company one of your main goals should be to make sure that your employees are happy, simply because a happy employee is more productive, and production boosts sales. It is the companies responsibility to keep their employees happy, and the best way to do that is to give them more money. It makes them feel like that are really making a difference in the company, and it lets them know that all of their hard work is not being done in vain. Milton Friedman is a supporter of freedom in corporations, but he also believes that, “it is wrong for managers to use corporate resources to deal with problems in society at large,” (Halbert & Ingulli 2012). Friedman also said that for managers to make the decision to use corporate...
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...buyer to buy an asset on or before a certain date at a fixed price. A futures contract obligates the exchange to take place on a certain date for a specified price (Ross, Westerfield, & Jaffe, 2013). In today’s financial market, many executives of firms are given stock-based compensation. This serves as a positive reinforcement to the executive when the firm becomes more financially successful. It also serves as a negative reinforcement when the firm is doing poorly. While stock-based compensation may seem fairly logical, it results in an undiversified portfolio, which is not ideal as an investment because of unsystematic risk (Ross, Westerfield, & Jaffe, 2013). Hedging by executives has become a popular option for executives with stock-based compensation who want to reduce the risk of their portfolio (Dunham, Managerial Hedging and Firm Risk, 2010). The ethical dilemma of executive hedging has been a controversy in the corporate finance world for many decades. Some recent examples of executive hedging involve companies like Krispy Kreme, Hasbro, and Chattem. Dunham and Washer describe the major increase and decrease of stock prices for Switch and Data Facilities in 2008 (Dunham & Washer, The Ethics of Hedging by Executives, 2011). Unfortunately most shareholders in this case experienced a great financial loss. Hedging activities, however, prevented the CEO...
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...from or are harmed by, and whose rights are violated or respected by, corporate actions. Based on the James Hardie asbestos case, the stakeholders included customers who used the product, employees and families of employees, local community, suppliers, demolition contractors, the neighbours of mines and manufacturing plants and the Government of Australia (Shaw, Barry & Sansbury 2009, pp 262-263). (54 words) 2. What do you think of the way in which the boards of James Hardie have managed the asbestos compensation issue? The board of James Hardie Industries has managed the asbestos compensation issue with principles of egoist. Egoism defined as an act is morally right if and only if it best promotes a person’s long term interest (Shaw, Barry & Sansbury 2009, pp59-60). Based on the case, the action of James Hardie has used the restructuring to limit its liability and the concept of Separate Legal Entity to protect him in 2001 to avoid the compensation issue (Shaw, Barry & Sansbury 2009, p 263). However, on Thursday 15 February 2007, the long-term interest has no longer promoted to the company due to the Australia Securities and Investment Commission (ASIC) commenced civil penalty towards on the company. (Shaw, Barry & Sansbury 2009, p 263) Therefore, applying Egoism to the Board of James Hardie was still immoral by his action. Utilitarianism prescribes that people look not merely to their own pleasure, they should be concerned to maximise pleasure wherever...
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...Business ethics are a pivotal aspect in strategic business finance, or finance in general. Poor ethical practices and immoral acts have been conducted across many years by many individuals and businesses in the business world in regards to finance. This paper will focus on two of the more well-known ethical issues that occurred in the late 1990s and early 2000s, Enron Corporation and WorldCom. This paper will focus on the factors that led to the demise of the corporations, as well as the violations that occurred within the accounting practices, and the specific ethical violations in strategic financial planning. To summarize, the largest contributing factor to the demise of Enron Corporation and WorldCom was simply corporate governance failure (Stanford GSB Staff, 2016). The smaller factors that led to the governance failure were such things as increases in executive compensation and stock options, jumps to incentives to manage earnings, and major shifts in the structure of auditing firms. These changes directly led to the loss of money and public confidence. These reason can be classified as nothing other than management greed. This can be validated by the statistical increases in worker compensation which rose forty-two percent in the 1990s as well as corporate profits rose eighty-eight percent, the standard and poor index increased two hundred and forty-eight percent, as well as CEO compensation rose four hundred and sixty-three percent during this timeframe (Stanford GSB...
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...did the HP board gain by forcing Hurd to step down? HP board try to do the right thing when unethical behaviour of their company have been exposed. HP board dont want thier executives member or their employees follow what have been done by Hurd and also want to clear their name in the competitive market. 2. Hurd left HP with a severance package estimated to be up to $40million in cash and stock options. Does that dilute HP’s apparent commitment to strong corporate governance? Why or why not? HP have a weak corporate governance and their compensation committe dont their job properly. To force Hurd to step down, HP board give him 40$ million and stock options and it is too much. When HP have a commitment and strong corporate governance, the compensation should give to Hurd is less than what is he get now. Strong corporate governance should follow their code of ethics rather find an easy solution as give Hurd compensation and stock option. 3. AT what point did the HP board lose sight of its corporate governance issues and focus instead on apparently beating Oracle at all costs? HP fail to comply or explain to Oracle which gave companies the flexibility to comply with governance standard or explain why they do not in their corporate document. HP hired ex-oracle executive Ray Lane as it ne CEO of HP. In turn Lane convince the board to hire Leo Apotheker, ex-CEO of SAP which one of biggest Oracle rivals. This issues bring problem to HP when Oracle breach of contract...
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...performance management, regulatory compliance, and compensation and benefits. Thus, HRM is functioning to help place the right individuals for the right task and vice-versa to help the organization receive the maximum service from his or her employees. However, HRM is shaped by many factors depending on the type of organization (Traylor, T., Doherty, A., Mc Graw, P., n.d). Recruitment and retention is part of the decision-making in every organization to help obtain the best person to fit the job. The main goal is to assure that organizations will receive qualified people for the job, and order for the business to operate efficiently and effectively. In fact, many companies will evolve and change, while new recruits show enthusiasm to learn to work as a team. Implementing employee retention within the organization will help reduce employee turnover. However, employers can reduce turnover, and many other ways by improving communication within the organization, competitive salary, demonstrate feedback on performance, and flexible schedule. Training and Development provides different processes and activities to help employees accomplish their task and a professional manner. In fact, many programs are implemented in organization to enhance development opportunities which includes workshops, seminars, and video training modules. So, training will cover different topics such as communication, computer skills, diversity, and ethics to enhance employee performance. Training and development...
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...Executive Summary Cardinal Health is a Fortune 22 company known as the business behind healthcare in America. Cardinal Health helps pharmacies, hospitals and ambulatory care sites focus on patient care while reducing costs, improving efficiency and quality, and increasing profitability. Cardinal Health was founded in 1971 by Robert D. Walter, who initially opened a small distribution center in Columbus, Ohio. In less than ten years, the then-named Cardinal Foods became a prominent regional food distributor until branching into pharmaceutical distribution in 1979. That same year the company purchased a drug distributor based out of Zanesville, Ohio, and re-branded itself as Cardinal Distribution. The company re-branded itself a third time in 1983 while also going public. Following their NYSE debut, the company grew rapidly throughout the 80's and 90's with the acquisition of more than a dozen U.S. drug distributors. By 1991, Cardinal Health had reached revenues exceeding $1B. By 1994, Cardinal Health had established itself as a leader in the drug distribution business with a nationwide presence and annual revenues of approximately $6B. Today Cardinal Health boasts $100+B in annual revenue. Board Composition Cardinal Health's Board of Directors has remained mostly the same preceding and after Sarbanes-Oxley legislation. The Board is composed of independent industry experts within Healthcare, Technology, and Academic fields. Some of the organizations represented...
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...Assignment 2: Ethics and Corporate Responsibility in the Workplace and the World Law, Ethics & Corporate Governance 11/2013 Ethics and Corporate Responsibility in the Work Place and the World discusses one of the world’s most successful pharmaceutical companies that enjoys a reputation as a caring, ethical and well-run company which produces high-quality products that saves millions of lives and enhances the quality of life for millions of others. In this hypothetical scenario the following will be discussed. The stakeholders will be indentified. Analyze the ethics of PharmaCARE’s treatment of Colberia’s indigenous population and PharmaCARE’s rank-and-file workers versus that of its executives. Determine whether Allen could legally fire each of the three workers; Donna, Tom, and Ayesha. Suggest steps he should take to minimize the risks to his department and the company. Determine the whistle blowing opportunities, obligations, and protections that could benefit Allen. Assess PharmaCARE’s environmental initiative against the backdrop of its anti-environmental lobbying efforts and Colberian activities. Examine if this renders the company’s purported environmental stewardship better or worse and if the company’s public stance should carry an obligation to be a leader in environmental matters. Analyze the original purposes of and the changes to Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Determine which provision(s) of CERCLA apply to PharmaCARE...
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...NICOL Maëlle ISEG BFS5 1A [Nom de la société] | [Adresse de la société] ------------------------------------------------- FINAL ASSIGNMENT Business ethics NICOL Maëlle ISEG BFS5 1A [Nom de la société] | [Adresse de la société] ------------------------------------------------- FINAL ASSIGNMENT Business ethics Should executives have to be offered bonuses to do their job well when other employees are expected to do their job well in the absence of bonuses? Should executives have to be offered bonuses to do their job well when other employees are expected to do their job well in the absence of bonuses? Introduction Nowadays, in many companies, executives receives more and more incentives like bonuses if they do their job well. In these same companies, it’s a rare fact that workers have bonuses. Equality between executives and other employees’ compensation is often not respected, most of workers find the bonus system very unfair. That bring us to the following question: should executives have to be offered bonuses to do their job well when other employees are expected to do their job well in the absence of bonuses? In this paper we will see that executives have to be offered bonuses to do their job well only if others workers are expected to do their job well with the same advantage of bonuses as reward. Through this paper, we will see that bonuses can leads workers to be jealous of executives, we also see that bonuses improve the company performance...
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...Assignment Ethics and Corporate Responsibility in the Work Place and the World Legal 500 Law and Ethics 08/30/2013 Abstract Ethics and Corporate Responsibility in the Work Place and the World provides insight on who the stakeholders of an organization are and who takes on the overall responsibilities of the organization. The importance of the decisions made by mid-level management are discussed and answered. The ability to make changes to support a more ethical work environment. The ability to improve operations and turn a profit are explained by discussing management’s requirements to abide by regulations governed by the Occupational Safety and Health Administration, Federal Drug Administration, Environmental Protection Agency, Equal Employment Opportunity , Comprehensive Environmental Response Compensation and Liability Act and other regulatory policies. The stakeholders within PharmaCARE are all the individuals and groups that are affected by the company’s decisions. The employees that may suffer from the lack of environmental safety or abuse of the production location allowing the organization to payless to workers for their hard work. The consumers of the organization’s products that may purchase bad goods that cause a negative reaction. The investors and stockholders who will lose any monetary investment due to the company’s loss of profits which would be an effect of inappropriate management of the organization. Due to the inappropriate management...
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...Zimbabwean companies can draw a number of lessons from the Enron scandal. The lessons learnt from the Enron scandal have been one of the bases for the development of more robust corporate governance recommendations and legislation in some countries, for example the Sabanese-Oxley Act in the United States. According to Nowroozi (2002), the failures and lessons associated therewith can be classified as follows: Fudiciary failure Enron’s board clearly failed in its fudiciary duties to safeguard the shareholders’ interest in the following ways: * It allowed Enron to engage in high risk accounting * It allowed transactions carrying obvious conflicts of interest * It allowed off-the-book activities to go undisclosed as well as; * Lavish compensation policies The board may have been misled by management and, in some cases, by the Auditor. The board of directors must exercise due care in the...
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...Journal of Business Ethics (2009) 85:147–156 DOI 10.1007/s10551-008-9934-6 Ó Springer 2008 What’s Wrong with Executive Compensation? Jared D. Harris ABSTRACT. I broadly explore the question by examining several common criticisms of CEO pay through both philosophical and empirical lenses. While some criticisms appear to be unfounded, the analysis shows not only that current compensation practices are problematic both from the standpoint of distributive justice and fairness, but also that incentive pay ultimately exacerbates the very agency problem it is purported to solve. KEY WORDS: executive compensation, distributive justice, pay disparity, incentive alignment Introduction Few academic theories have been adopted as widely as the application of agency theory (Jensen and Meckling, 1976) to the structure of executive pay in modern corporations. After prominent suggestions that the inherent conflict of interest that exists between stockholders and corporate managers – or ‘agency problem’ – could be mitigated through the structure of managerial incentives (e.g., Jensen and Murphy, 1990a), the prevalence and size of stock option grants to senior executives have expanded increasingly and substantially (Hall and Murphy, Jared D. Harris, Assistant Professor teaches both Ethics and Strategy courses in Darden’s MBA program, and a doctoral seminar on corporate governance and ethics. His research centers on the interplay between ethics and strategy, with a particular focus...
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...Kudler Fine Foods Ethical Program XMGT/216 May 8, 2011 Kudler Fine Foods Ethical Program In order to build an Ethical Organization Profile it is very important to understand the culture and operations of the business. Kudler Fine Foods is an upscale specialty food provider. Kudler places strong emphasis on quality and the ability to provide one stop shopping for the finest foods across a large spectrum of products. The company currently has three locations that boast 8,000 square feet of retail space which host six specialty departments. Kudler Fine Foods has a fresh bakery, fresh produce, a butcher shop with meat and seafood, packaged foods, cheese and specialty dairy, and most importantly fine wines. The owner, Kathy Kudler, is aware that it is through her customers’ satisfaction that her stores will find success. Kudler connects with its customers with a knowledgeable staff that promises to make the shopping experience delightful and pleasing. While Kudler Fine Foods’ vision is to be the premier gourmet grocery store for savvy customers, Kudler does not ignore their social responsibility, “Kudler Fine Foods uses only the finest organic ingredients. Whenever possible, we purchase local produce from organic farmers. We use unbleached flour in our bakery goods and we don’t add unnecessary preservatives to our products. Food is rotated from the shelves on an ongoing basis. Those items that are still in “good” condition are donated to local homeless shelters and food...
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...WorldCom Corporate Monitor, Richard Breeden, believed that in order to correct the ills that faced the company, WorldCom needed to adopt a strong Corporate Governance structure. The central objectives of his proposal “Restoring Trust” included improving the composition of WorldCom Board, eradicating financial misconduct, correcting executive compensation and enhancing shareholder influence and involvement. According the Breeden the WorldCom board seemed to have a decent combination of backgrounds and independence, however, the board did not provide the proper oversight to manage the company or its personnel. The board was described as disinterested, dysfunctional and had no control over its CEO Bernie Ebbers. Breeden made suggestions to improve the board, such as recommending maximum term limits for directors, continued separation of the CEO and chairman, an improved meeting schedule reflecting a minimum of 8 meetings per year, two of which were offsite away from the headquarters and to be lead by the non-executive chairman. Breeden also outlined the functions of board committees, the committee composition and also set director compensation at a flat rate in an effort for the directors to take their roles more seriously. The benefits of these changes would be to conserve the experience of the board but reduce complacency by having them more engaged in the operating of the WorldCom business and its issues. Breeden believed the reason the financial misconduct of the organization...
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...Ethics Enron's culture during their heyday encouraged an entrepreneurial spirit along with a “loose tight” management style that has been highlighted in the media and the Darden CD as being part of their success (Darden CD). However, according to Hatcher (2003), Enron had a culture of “anything goes as long as it makes money”. For example, in a thesis written by Boje, Alder, and Black, the authors claim that Enron used theatre to influence how decision makers accurately or inaccurately interpreted the information presented. As part of this "anything goes culture" between 1998 and 2001 Enron set up a fake Hollywood type trading floor on the 6th floor of Enron corporate headquarters using simulated statistics and their employees pretending to be "energy service traders to influence investors, regulators and employees (Boje, 2004). Although it maximized shareholder equity one would consider this behavior unethical. What about Enron's ethics program? Enron’s Code of Ethics was published in 2000, and even included a forward written by its chairman Kenneth L. Lay, in which he states “Enron’s reputation finally depends on its people, on you and me.” However, even with this senior level "endorsement", Enron’s Code of Ethics, their policies and procedures and the associated training were not enough to circumvent the wanton fraud at Enron that resulted in the largest bankruptcy in American history (Wilkinson, 2005). Why did Enron’s ethics policy fail? One of the reasons that their...
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