Credit crunch and recession are great examples of external factors influencing the business. If the people are suffering from recession, they will not have money to spend money and this is how it affects the businesses. The current instability in Iraq is a good example of what may happen to businesses. In business it’s very important to understand, monitor and adapt to the political environment, because it crucially affects every business. Some of the very important factors are: Government stability effects businesses in a great range by competing with businesses to lower their costs, transparency is another important factor where anything the business does is revealed to the government and the government know exactly what they are up to.
It is clear that the parties involved in the Citigroup merger were operating under the moral philosophy of egoism. Egoism defines right or acceptable actions as those that maximize a particular person’s self-interest as defined by the individual. John Reed, Sandy Weill and Robert Rubin all acted in order to gain power and wealth for themselves; their actions were detrimental to the average consumer with deposits in their banks because the merger was risking their money in order for the individuals at the top to obtain monetary gains. They believed that they were doing right by themselves in this merger, by taking the opportunity that arose, and using business
Top executives of companies are hired to improve performance and the pressure to do so can lead them to take unethical action to ensure their success. Publicly traded companies are consistently pressured by internal and external stakeholders to perform at higher level. When organizations are about to release financial reports that would possibly lead to a financial loss to the shareholders, the pressure to perform unethical accounting practices will increase. There is an opportunity to adjust the numbers so the financial reports will represent a more desirable outcome. Employees have the same opportunity to perform unethical accounting activities as the top executives.
As we all know, education industry is like the lifeline and future in a country. If GE could consider this issue, they can do better than ever they did. According to chapter 5 in the text, corporate social responsibility is the corporate duty to create wealth by using means that to avoid harm to, protect, or enhance societal assets and even though Welch made GE the most valuable company in the world, as the CEO, Welch failed to fulfill the duty of social responsibility in some ways. He failed to fulfill that duty because of the following: pollution in the Hudson River, job cuts in the United States, subcontracting with other
Because earning management allows managers to reach their desired outcomes by influencing firm’s financial statements. According to Graham, Harvey and Rajgopal (2005), it is acceptable for senior mangers to use earning management so that they can provide positive and steady earning growth for the firm. In addition, the reputation of a CFO or CEO depends on whether the company they manage has a good prediction of future earnings. The labor market will regard a CFO as a “managerial failure” if the CFO perceive inability to reach the earnings target. In this case, the managers were encouraged to do their best and spend whether it was necessary to bring revenue.
In our current economic climate, the Keynesian model of economics is more accurate. Business owners operate their business outside of government control and without much thought to the economic situation. Their goal is to build revenue and raise net worth of their company. With this being said, prices are in fact “sticky”. Even though the prices will lower of time, companies will take advantage of the recession, knowing that consumers still require their goods, no matter if it falls outside their budget or not.
Creative Accounting Accounting practices by Enron could be considered nothing less than creative. Enron managed to cause the California energy crisis and inflate energy costs to benefit the company’s bottom line. Further, Enron’s accounting practices changed public opinion on the dealings of corporate America. “A continual stream of revelations about Enron's deceptive financial reporting has played a decisive role in making investors wary of corporate accounting and the stock market,” (Mandel & Zellner, 2002). Investors no longer had trust in financial or accounting records and reports.
Hermes believed in successful stewardship involving using its vote in approving the board of directors. Its aim is to lead in promoting better management and intervening in companies which were failing to resolve critical issues such as board structure, strategic direction, capital structure, and corporate governance, problems in company’s management. Their objective is to maximize the returns to its shareholders. The company is concerned about governance, ensuring that the board of the company had the right mix of entrepreneurship, expertise and independence to maximize the company’s values. They possess the necessary resources to build the monitoring capabilities and have better access to information.
The financial being of a corporation starts with shares. Few companies operate with the philosophy of losing money. With that in mind, I believe the shareholders will always be taken care of. However, corporations also need to look at their footprint on the world. I feel that society is steering away from operating purely to make a profit.
(Daft & Lane, 2011,2008) This did not stop companies from being selfish. When businessmen donated money, it was done as private philanthropists, not representative of their companies. In turn, their companies were guilty of exploiting workers. In attempt to fix this problem, government passed laws and regulations such as the Sherman Antitrust Act, to rein in the large corporations and to protect employees, consumers, and society at large. During the mid-20th Century, things were better, but there were events that caused problems for the working class.