"Impact of Government Regulation" Please respond to the following:
•* From the scenario for Katrina’s Candies, take a position as to whether government regulation is constraining or enabling in this situation, as it relates to the operational efficiency of the company. Speculate on the fundamental manner in which government regulation could impact the shareholders’ wealth and profitability.
Considering the scenario for Katrina’s Candies, I believe the government regulation is enabling in this situation, as it relates to the operational efficiency of the company. The government’s intervention in the US market place process is to; provide for a market that is competitive by keeping monopolistic and other anti-competitive tactics at bay, protect the public interest and enable and encourage innovation. These are accomplished through the antitrust regulation statues and their enforcement which prohibits monopolies as stated in the Sherman Act, 1890 (McGuigan et al., 2014).
The presence of anticompetitive business practices of collisional price fixing, wholesale price discrimination, exclusive dealing and tying contracts, anti-merger regulations, and interlocking directorates are specified in the Clayton Act, 1914. The Federal Trade Commission is the nation’s consumer protection agency that works for the consumer to prevent fraud, deception and unfair business practices in the marketplace. Government policies are there to ensure that products are available to the consumer at lower prices. It is against the law for firms to engage in price fixing and price discrimination because they hurt consumers. To protect consumer interest, the government prohibits these practices. The government also pays close attention to mergers; any merger has to be approved by the U.S. Department of Justice. This helps avoid the possibility of firms building monopolistic power by merger.
Imposition of government regulations could impact the shareholders’ wealth and profitability. Imposition of government regulations on business result in substantial increase in the firms’ total cost both directly and indirectly. These costs are in form of increased cost of material, labor, and equipment on one hand and lost productivity and market competition on the other. These adverse effects on business are in direct conflict with the main management objective of maximization of shareholder wealth realistically measured in terms of market value of shareholder equity. Advocates for government regulations to business argue that shareholder wealth maximization is not realistic and that there should be a balanced attention to all what they call stakeholders interest in which also the providers of risk capital are part. According to Peterson (2001), supporters of regulations argue that the cost of government regulations can simply become one of the conditions under which owners’ wealth maximization can be made.
McGuigan, J. R., Moyer, R. C., & Harris, F. H. deB. (2014). Managerial economics: applications, strategies and tactics (13th ed.). Stamford, CT: Cengage Learning.
Michael, J., (2001). Value Maximization, Stakeholder Theory, and the Corporate Objective Function. Boston, MA: Harvard Business School Press.
Peterson, P., (2001). The objective of Financial Management. Miami, FL: Florida University
Response1
Shareholder wealth is wealth accumulated on shareholders through their investment on a company. Members of the board have a fiduciary duty to the shareholders and a responsibility to protect their investment by running the company in line with generally accepted ethical practices. Failure to do so can result in penalties, including shareholder votes to remove board members as well as fines and jail time in some cases. Each shareholder has ownership of a small portion of a company. Issuing more shares will decrease the value in shares, providing dividends to existing shareholders will increase shareholder wealth.
A company can determine shareholder wealth by looking at the company’s overall value in terms of the current value per share and number of stocks issued. Sometimes board members must make strategic decisions that will temporarily reduce shareholder wealth, such as investing in new facilities or technologies. These investments will add value later, and are acceptable to shareholders because they demonstrate a desire to grow the company. Bad business decisions may result in losses with no projected future gain, and can be a cause for concern.
Peavler, R. (2014). What is Shareholder Wealth Maximization and Should Firms Pursue it?. . Retrieved June 3, 2014, from http://bizfinance.about.com/od/Basic-Financial-Management/a/what-is-shareholder-wealth-maximization.htm
Good post!
Response 2
Your statement, “Shareholder wealth maximization is the standard conduct and main goal for any firm,” is well stated. Shareholder wealth maximization is the idea behind trying to drive a stock's price up. The shareholders are the actual owners of the company. Maximizing shareholder wealth is often the most important goal of a company. The bottom line is that, profit is required to increase the dividends paid out with each common stock that constitutes shareholder wealth. An effective manager will be more concerned with the primary means of profit-making within a company. If a company makes money by maintaining a powerful brand name and manufacturing an enjoyable consumer product, to maximize shareholder wealth, the company must first maintain the status of its brand and product.Government regulations play a big role in the shareholder wealth maximization. It is a good idea for them to be assured that legislation has provided laws to ensure that they are not taken advantage of.
DQ2
“Government Regulation” Please respond to the following:
From the e-Activity, take a position on whether the banking industry needs more or less government regulation. Support your position with two (2) examples of the impact of regulation.
Yes, the banking industry will need more government regulation in the future. Today, the banking industry has further enforced a more complex regulatory environment. Due to financial credit crisis, high profile compliance breakdowns and increased consumer protection, the federal state regulatory agencies, investors, legislators, and the general public are focused on institutions' customer practices and regulatory compliance performance like never before.
Banks have not shown to be well-positioned to respond to new challenges. Many banks have begun engaging in cost-cutting initiatives, but few have made the material structural changes needed to operate profitably in this new environment. (Culp, 2012) The impacts of regulation for a compliance failure can result in litigation, financial penalties, regulatory constraints, and reputational damage that can strategically affect an organization.
The impact Dodd Frank has had on banking is newer extensive rules and policies, increased legal and regulatory compliance burden, further tilting of the regulatory playing field to the disadvantage of small banks and regulatory barriers to community banks’ ability to continue providing their bread-and-butter products and services. Regulation was at once a secondary concern but is now a primary consideration in determining long-term strategic direction and positioning of banks. Banks must be able to be compliant with new rules and regulations but also be able to effectively address the complex structural challenges needed in order to transform their operations and structures to maintain high performance in their industry; integrating their investments in regulatory response with the changes needed in the business model and in operations, developing a market focused solution that will lead to profitable growth in the new environment.
The following are significant and inter-related challenges needed for improvements in the banking industry:

1) Increasing profitability and lifting returns on equity.
2) Simplifying infrastructures that are too complex and costly for current operations.
3) Effectively implementing far-reaching and complex new regulations.
Bank regulatory compliance services. (2014). Retrieved May 30, 2014, from http://www.pwc.com/us/en/financial-services/regulatory-services/bank-regulatory-compliance.jhtml
Culp, S. (2012, May 8). Managing Regulatory Risk a Major Hurdle for Banks. . Retrieved May 31, 2014, from http://www.forbes.com/sites/steveculp/2012/05/08/managing-regulatory-risk-a-major-hurdle-for-banks/

McGuigan, J. R., Moyer, R. C., & Harris, F. H. deB. (2014). Managerial economics: applications, strategies and tactics (13th ed.). Stamford, CT: Cengage Learning.
Response1
I agree with your statement, "If banks are well regulated, the economy will run more smoothly." By following government regulation, a bank could make better decisions in the future which would cause the bank to run more smoothly. The common goal of govt. regulation is safety and stabalization. This will reduce the risk of financial crisis' from occurring. It's essential to follow these regulations to stop a reaccurance of economic crisis.
Response2
I support your argument that says, “Government Regulation must be increased and improved.” Over the years, the US government has seen and recovered from major financial setbacks. Due to poor, inaccurate, falsified, and sloppy accounting, several firms have become the source of major scandal and scrutiny. As a result of some of these scandals, many businesses caused a lot of financial ruin to not only themselves but to the American people as a whole. Banks should focus on what changes need to be made and implement them accordingly. This can lead to improved business models which provide better services for existing customers as well as attract new ones. Rules and regulations are and will continue to be an important part as well as a cost of doing business for banks. Banks need to understand and comply with these rules and regulations.