...What is more important life or mitigating financial loss? The case of “The Sole Remaining Supplier” looks at that question. In 1975 pacemaker technology was in its early years. The technology was so new that doctors were not very skilled at the installation of the pacemakers. Once installed these units acted as the patient’s normal heartbeat and any malfunction would have caused certain death. The pacemaker units were very sensitive and there had been a story of a “patient pulling the pacemaker wire in his chest, and dying after yawning deeply,” (Sole, para. 3). Stanton Medical Technologies manufactured these pacemakers. Stanton had only one transistors supplier because others would not sell to them. The Stanton Medical Technologies did not have an adequate check for the transistors reliability. Stanton needed transistors in the manufacturing of the pacemakers. Their sole supplier doesn’t want to supply them any more with the transistors. The transistor suppliers felt that it could also be legally responsible for damages if a major lawsuit were to be brought against Stanton. Any profit made from selling to Stanton for pacemaker manufacturing would be consumed by potential losses from legal proceedings. This isn’t a fiscally sound risk for the transistor supplier. The transistor supplier holds Stanton’s future in its hands. If they don’t supply the transistors, Stanton will go out of business, pacemakers will not be made and the people who need them will die. The transistor supplier...
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...RISK MANAGEMENT Definition * In the world of finance, risk management refers to the practice of identifying potential risks in advance, analysing them and taking precautionary steps to reduce or curb the risk. * Essentially, risk management occurs anytime an investor or fund manager analyses and attempts to quantify the potential for losses in an investment and then takes the appropriate action given their investment objectives and risk tolerance. * Inadequate risk management can result in severe consequences for companies as well as individuals. * Simply put, risk management is a two-step process - determining what risks exist in an investment and then handling those risks in a way best-suited to your investment objectives. Description When an entity makes an investment decision, it exposes itself to a number of financial risks. The quantum of such risks depends on the type of financial instrument. These financial risks might be in the form of high inflation, volatility in capital markets, recession, bankruptcy, etc. So, in order to minimize and control the exposure of investment to such risks, fund managers and investors practice risk management. Not giving due importance to risk management while making investment decisions might wreak havoc on investment in times of financial turmoil in an economy. Different levels of risk come attached with different categories of asset classes. For example, a fixed deposit is considered a less risky investment...
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...situations in which G-Biosport were faced with. The first case was the Case of Fair Warning and the second was the Case of Stringent Standard. Both of these situations involved many different stakeholders. These stakeholders included: Customers of G-Biosport, employees of G-Biosport such as, The Shareholders, The Board of Directors, Carson Nelson (Chief Executive Officer), Cary Bryant (Chief Legal Officer), Jennifer (Quality Control Manager/Quality Compliance Director), Elaine Shields (Operations Director), and Judy Birch (Director of Public Relations). One will be able to read what these two case simulations reflected in this journal. Simulation 1: The Case of Fair Warning The first simulation was the Case of Fair Warning. In this simulation, it was discovered that G-Biosport products were contaminated with hazardous Fibranafren. The problem is that the products had already been distributed and were on the market. The staff of G-Biosport had to get together and share their opinions on what to do about the issue on hand. It was decided that the customers always have the right to know about the quality of all products. In this case Jennifer, the Quality Control Manager, was responsible for letting all shareholders involved know of all potential hazards and risks of the product. The decision was made to make the knowledge of the contamination public. This decision was brought upon for the protection of the company and the customers. The company believed that it was in the best...
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...Abstract The purpose of this assignment is to provide a critical analysis of the decision faced by the transistor Board of Directors through the lens of utilitarianism. This analysis will be accomplished by discussing the key utilitarian ethical problems confronted by the transistor company board of directors; by discussing what advice would Jeremy Bentham would have given the transistor Board of Directors; the author will apply the first four steps of the Utility Test in regard to the case; the author will discuss the Common Good Test and its implication on the case; the author will also compare and contrast the Utility Test and the Common Good Test; and finally the author will explain which of the two tests is most informative, and why. The Case of the Sole Remaining Supplier The decision faced by the Transistor Board of directors is one of many examples that are challenging the everyday decision making in the organizational ethics. In the year 1975, the transistor company boards of directors were faced whether to continue to sell its product to the pacemaker company. If the transistor company decides not to supply its product the consequences would affect the stakeholders that include patients, cardiologists, Pacemaker Company, and the transistor company. For example, many patients who are suffering irregular heartbeat would not live without pacemaker. According to Pacemaker Company, “Pretty soon, no one will be making heart pacemakers, and many people need them. Without...
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...facing Lester. One is growth, which represents an essential component of a successful, long-term business strategy. Various internal growth strategies exist; add new and improved products to the portfolio, target new markets, move into additional geographic areas, increase the number of stores. Second being, the number of external growth strategies can also be considered. The main ones is a merger or acquisition. This strategy should be employed when it would be more profitable and efficient for a company to obtain desired characteristics. John Lin, founder and CEO of Shang-wa, is looking to spend less time with his business and more time with his family. John Lin has informally suggested to Bernard that they become partners that would enable both companies to meet the growing demands for their products. Shang-Wa finds that they are on the verge of being taken over, this not what John wants for his company. Transnational Electronics Corporation is making a run to takeover John Lin’s company. John Lin is feeling pressured to sell. If Shang-wa does not sell or enter into a joint venture with Lester, Shang-wa will not continue to remain in business. Lester also feels pressured by Avral Electronics, S.A. to sell the business. Lester must make the decision to partner with Shang-wa so that they are not forced out of business or to be acquired by Arval. Lester’s proposal to create a joint venture with Shang-wa may be the...
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...head of Merck’s research laboratories, who at the time was P. Roy Vagelos, requesting development of ivermectin for human use. Campbell's request causes a dilemma, the only viable uses for the drug would be for people who living in some of the poorest countries in the world; how could Merck underwrite the development of such a product for which there would most likely be of no economic value? On average it takes 12 years of research and development to bring a drug to market and costs in the neighborhood of $200 million. Merck would likely never recoup this investment cost and it would never be a profitable product. However, there would not be a lack of beneficiaries should the drug were to be developed; the greatest issue Vagelos faced; the people who need the drug the most are the...
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...Pamela is faced with the dilemma of deciding between potentially saving the company $300,000 per year or saving people’s jobs. Specifically, Pamela must decide whether or not she should correct mistakes in a report prepared by her assistant controller. The purpose of the report is to help key stakeholders decide between two alternatives for supplying the company’s telecommunications needs. The assistant controller overlooked some avoidable fixed costs of operating the company’s telecom division. Fixed costs are defined as expenses that do not change as a function of the activity of a business. By including these costs, the company would save $300,000 per year by going with the proposal to outsource the telecom division. Outsourcing though would cause the elimination of the telecommunication department and several jobs. The first primary stakeholder group that would have stake in Pamela’s decision is the executive management team at Murray Manufacturing. Decisions at this level impact the entire wellbeing and workforce of a company. Faced with a decision between two alternatives, the management team is reliant on the information in Pamela’s report to determine the best action for meeting business objectives. The management team would likely have internal controls that require Pamela to include the fixed costs and deliver a clear and accurate report. The second primary stakeholder group would be the telecommunications department at Murray manufacturing...
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...Value Statement for Let’s Score It (LSI) Let’s Score It Inc. strives to become the premier company providing sporting goods, sports apparel and equipment worldwide. We will provide World class service to our customers by using high quality goods and unique delivery standards. We will use innovative resources to streamline products to enhance our athletes performance. We will use creative resources to provide unique designs and logos for our apparel. We will remain competitive in the industry to provide returns to our shareholders. We will respect our multinational partners by acting socially responsible and environmentally responsible to employees, stakeholders, and shareholders. We will expand our organization globally to become a leading ambassador in the athletic industry. With the implementation of these values, we will achieve success and achieve our goal to reward our shareholders. LSI is committed to accept and implement social responsibility to our stakeholders. We will dutifully research our suppliers and venders to make sure they observe and implement high humanitarian standards. Child labors laws will be closely monitored. LSI will provide assistance to under developed countries to improve their living conditions. The assistance will help develop individual citizens and its government. Examples of assistance include but are not limited to educational assistance, nutrition programs, developing quality housing, and medical products. Reference About.com...
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...Value Statement for Let’s Score It (LSI) Let’s Score It Inc. strives to become the premier company providing sporting goods, sports apparel and equipment worldwide. We will provide World clawe canss service to our customers by using high quality goods and unique delivery standards. We will use innovative resources to streamline products to enhance our athletes performance. We will use creative resources to provide unique designs and logos for our apparel. We will remain competitive in the industry to provide returns to our shareholders. We will respect our multinational partners by acting socially responsible and environmentally responsible to employees, stakeholders, and shareholders. We will expand our organization globally to become a leading ambassador in the athletic industry. With the implementation of these values, we will achieve success and achieve our goal to reward our shareholders. LSI is committed to accept and implement social responsibility to our stakeholders. We will dutifully research our suppliers and venders to make sure they observe and implement high humanitarian standards. Child labors laws will be closely monitored. LSI will provide assistance to under developed countries to improve their living conditions. The assistance will help develop individual citizens and its government. Examples of assistance include but are not limited to educational assistance, nutrition programs, developing quality housing, and medical products. ReferenceIn...
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...The role of the financial manager has in maximizing shareholders value is key to the achieving the goals of the shareholders. The financial manager performs double duty working toward achieving profits for the company and optimizing the shareholders value. The flexibility of having the ability to hear viewpoints from different angles to achieve the goals of both the shareholders and the company’s manager. Today’s financial manager must have the skills and strength to evaluate and assess risks to help their company maintain a competitive edge. The responsible of the financial manager in maximizing shareholders and use real-time financial information to take advantage of the latest opportunity to capitalize on an investment. According to the text the financial managers works to achieve the goals of shareholders because shareholders are the owners of the company that employs the financial manager. This can give rise to conflict when a manager makes decision because of the needed to make decisions based on shareholders approval and what is best for the company ongoing success. Sometimes the goals of shareholders can tempt the financial manager to make unethical decision in managers attempt to maximize the goals of the shareholder value. Other times companies will have a disregard of shareholders values and not only disregard reducing expenses but foster an environment where financial abuse takes place from renting luxury cars to doing business at the most expensive...
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...question above your answer to make it easier to grade. Your answers should be in complete sentences. Based on the nature of the questions, one or two short paragraphs for each question should be adequate. You should print out your article write-up and submit it in class on the due date. 1. What was the nature of Enron’s business in 1985? How about in 2000? In 1985, it was a natural gas pipeline company. By 2000, it built leading businesses in energy trading and international energy-asset construction. 2. How could Enron earn money by trading in gas contracts? They would buy natural gas at spot prices instead of bundles (which was what was required before the deregulation of gas). This made the price of gas more volatile. Skilling suggested that Enron sell the gas in long-term fixed-price contracts with customers. To prevent the company from losing money due to price fluctuations, Enron would also enter long-term fixed-price contracts with producers by using swaps and forward and future contracts to make sure it met the energy requirements of customers. 3. Enron expanded its trading model to markets other than gas. What other markets did they expand into? Were there any concerns from expanding to these other markets? They got into electricity, water, broadband, coal, weather, pulp, and paper. They expanded into electric power by buying Portland General Electric in 1997. Soon after, they bought electric distributers...
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...and what it means in today’s world environment. Corporate governance refers to the system by which corporations are directed and controlled. The governance structure specifies the distribution of rights and responsibilities among different participants among different participants in the corporation and specifies the rules and procedures for making decisions in corporate affairs. Corporate governance has also been defined as "a system of law and sound approaches by which corporations are directed and controlled focusing on the internal and external corporate structures with the intention of monitoring the actions of management and directors and thereby mitigating agency risks which may stem from the misdeeds of corporate officers. www.ifc.org/corporategovernance There are many different models of corporate governance around the world. In America, we tend to focus on the interest of the shareholders and operate within a single –tiered Board of Directors that are normally dominated by people elected by shareholders. In India, they seem to be committed to values, ethical business conduct and about making a distinction between personal and corporate funds in the management of the company. In Europe, they require a two-tiered Board of Directors as a means of improving corporate governance. In today’s corporate governance environment, companies are walking a fine line between appeasing shareholders and conducting the business with fairness and integrity. Companies say...
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...interests in a company. The underlying assumption is that the agent's interests may differ from those of the principal. Usually, manager-agents have much less to lose versus the shareholders so they are faced with the dilemma of focusing on their own long-term job security which in some instances can motivate them to limit the amount of risks taken by the firm because an adverse outcome resulting from the risk could lead to their dismissal. The firm would need to look at what other companies are doing and the compensation tools that are being elsewhere. Not only is it crucial to maintain profits it is equally important to offer attractive incentive to managers so they are able to compete with other firms in retaining the best managers and also to motivate them to increase shareholders wealth. Also, compensation should also be based on the profitability of the company. 3 Short term pay-off should be the main focus to trigger executive bonus for that year and compensation should be based on the performance of agents. Issues that would arise with hiring the best managers are the attractiveness of the incentive package in relation to other companies. 6 a. If new foreign competitors enter the market, wealth would decrease because existing companies are forced to compete by lowering their prices and are forced to share their customers thus driving down economic profits. b. When strict pollution control requirements are enacted, companies are faced with higher cost...
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...cash outlay, and after Joe Roberts, the VP of Administration perpetuated the act by misappropriating a neon sign to pay off the customer, Patton finds himself in violation of the California Alcoholic Beverage Control and in danger of being out of business for 45 days. In order to come to a solution for Mr. Patton, we must first discuss the specifics of the fraud and what can be done in the future to prevent such an incident. Given the myriad definitions of fraud in accounting and legal literature, this act qualifies as such because it was intentional, mislead the company’s shareholders about a material fact, and caused financial damage to the company. The specific fraud schemes employed were an expense reimbursement scheme by submitting fictitious expenses, inventory larceny in the form of fictitious sales by claiming $100 more in sales than was collectible, and inventory misuse by misusing a neon display sign. Further, the three components of the fraud triangle were present. First, the system set up for sales and expense reporting created the opportunity for the fraud to be committed. Both George and Carter faced relaxed expense policies with no controls put in place to verify their claims. Second, the three could rationalize the act. Carter states in his letter to Vince Patton that he felt he was trying to achieve the “scenarios” that Vince and Elizabeth envisioned, therefore carrying out the company’s wishes. While George’s views are not known, one can imagine he felt...
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...an extremely important process and is a determinant to the success/failure of a corporation in controlling the market. To gain control of the market shareholder wealth maximisation and stakeholder interest satisfaction play a key role in the creating profit for the company. Should a manager who makes the final call focus solely on maximising shareholder value or should he/she also try to satisfy stakeholder interests which at the end of the day involves themselves. We will discuss points both for and against a manager’s responsibility of increasing long term profits of a business in order to maximise shareholder wealth and whether any rewards they receive should be calculated on this basis. A shareholder is an individual who owns one or more shares of stock in a company. They are the owners of the company, meaning if the company is doing well then they get a greater share of the profits and if the company does poorly then they have to suffer the losses. A sole objective of shareholder wealth maximisation should cause managers to take decisions that balance returns and risk in such a way that benefits the shareholder. Wealth maximisation may imply that interests of only one member of the coalition are pursued (the shareholder) perhaps at the expense of others. To an extent, this point is true as the shareholder wealth maximisation criterion provides a sound basis for financial decisions which then must be balanced against the objectives directed towards other...
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