Performance Management and Executive Compensation Essay Example for Free

Performance Management and Executive Compensation Essay Introduction In the history of modern economies, from the late 1800s to today businesses have faced ethical challenges regarding compensation for executives and its relation to job performance. In response to major economic crises during the 20th century, the United States enacted broad-based legislation measures as attempts to prevent what were seen as ethical challenges and agency conflicts surrounding both performance management and executive compensation. To understand the current issues facing businesses and regulators, it is important to look at three of most significant legislative acts Congress has passed. The Securities Exchange Acts of 1933 and 1934, as well as the Sarbanes–Oxley Act of 2002 represent legislative interventions regarding corporate financial accounting toward the goal of curtailing the ethical challenges and the conflict of agency problems that can arise from performance management and executive compensation. Yet even after these laws were enacted, ethical conflicts can and still do arise when it comes to the compensation for employers and executives. Securities Act of 1933 The Securities Act of 1933 was born in response to the stock market crash of 1929. Just as it was then, companies who issue securities to raise money for funding new investments or to expand operations have an inherent incentive to present their company and its plans in the rosiest light possible to investors (Sarkar, 2013). The Securities Act of 1933 serves the dual purpose of ensuring that issuers of securities to the public disclose material information to investors as well as ensuring that any securities transactions are not based on fraudulent information or practices (Sarkar, 2013). The Securities Act of 1933 affects public disclosures through a mandatory registration process for sellers and brokers and applies to the sale or trade of any regulated security type (Sarkar, 2013). Securities Act of 1934 (a.k.a. the Exchange Act) The Exchange Act primarily regulates transactions of securities that take place after its initial offering by a company (Sarkar, 2013). These transactions often take place between parties other than the issuer, such as through trades that retail investors execute via brokerage firms (Sarkar, 2013). The biggest effect of The Exchange Act was the creation of the Securities and Exchange Commission (SEC), a federal agency responsible for regulating the securities markets (Sarkar, 2013). Since 1934, the SEC has taken on the role of mitigating fraud, abuse, and other ethical issues in the financial reporting of publicly traded entities. Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley (SOX) Act of 2002 was the most significant legislation passed since the 1930s and came in the aftermath of the corporate scandals at companies such as Enron, WorldCom, and Arthur Andersen (Amadeo, 2013). Sarbanes-Oxley created the Public Company Accounting Oversight Board (PCAOB), a new organization whose purpose is to help oversee the accounting industry (Amadeo, 2013). To prevent the sort of conflicts of interest that had led to the Enron fraud, SOX established new prohibitions for auditors when engaging in consultation work for their auditing clients. It also banned company loans to executives and gave increased job protections to whistleblowers (Amadeo, 2013). Performance Management and Executive Compensation Even after the passing of the Securities and Exchanges Acts of 1933 and 1934 and the Sarbanes-Oxley Act of 2002, there are reasons to be concerned about ethical violations in financial accounting. Two areas where there still exist possibilities for unethical activity which could harm the supply of reliable information to investors are the performance management within a company and the compensation packages of executives. Current Ethical Challenges When evaluating situations to support ethical decision-making, one must first identify the ethical problems as they arise (Eldenburg, 2005). Performance measurements are most often measured in terms of time or financial figures – â€Å"how long† or â€Å"how much.† When selecting a new CEO, the board of directors is required to offer a financial package that is both lucrative enough to attract the most qualified individual and yet also appears fair to other ranking executives of the company. Such financial packages need to be approved by the major shareholders when the salary will impact the company’s financial reports. During an economic recession, firms may significantly downsize their workforce as well as benefits and labor rates employees receive, yet often find themselves contractually obligated to hand-out large bonuses and increasing salaries for their executives. This is potentially a major ethical issue for a company and its executives, with the fibers of the company being reduced while executives are earning more and more – even though the firm is struggling. â€Å"CEOs at the countrys 200 largest companies earned an average of 20 percent more last year than in 2009, according to recent corporate filings. By comparison, average pay for workers in the private sector rose just 2.1 percent last year—nearly the smallest increase in decades† (Harkinson, 2011). It is also not unheard of for CEOs to be forced to step down while still receiving their lucrative compensation packages only to also be given a generous â€Å"golden parachute† as they leave. Excesses like this can have detrimental effects on employee morale as the majority of the company often consists of those earning the least. Boards of directors should take into consideration the financial standing of the firm before they offer an over-the-top compensation package to a CEO. As an illustration of the contrary, Steve Jobs volunteered to work at Apple for a salary of only $1 per year: â€Å"A regulatory filing shows Apple CEO Steve Jobs’ compensation package remained the usual $1 in fiscal 2010†¦ as is customary, Jobs got no bonus or perk† (Steve Jobs, n.d.). In terms of ethical challenges and executive compensation, Jobs proved by his example that it is possible to put the company first – even if that meant earning a salary of $1. CEOs do not often have to settle for such low salaries to show leadership and camaraderie; however, accepting less exorbitant amounts can help avoid accusations of greed and impropriety altogether. Current Agency Issues â€Å"Principals hire agents to make decisions for them and to act in their behalf† (Eldenburg, Wolcott, 2005, pp. 591). Often, agents may go on to hire agents of their own, delegating authority and establishing sub-units known as responsibility centers which can decentralize decision-making and accountability. A particularly special case of the principal-agent relationship involves the executives of companies who are effectively agents of the shareholders selected to run the company. â€Å"Four common types of responsibility centers are cost centers, revenue centers, profit centers, and investment centers.† (Eldenburg Wolcott, 2005, pp. 595) Those agents who possess decision-making authority over a responsibility center use demographic financial data provided by the accountants for budgets and reviews of sales, profits/losses, value appraisals, and costs. Accountant and audit provided information is used to evaluate and measure performance, monitor the effectiveness of managers, reward performance, and influence decisions. (Eldenburg Wolcot, 2005) The audit information accountants prepare and present is vital to the principal/agent relationship and performance measurement, but also has its costs. The primary challenge presented by the principal/agent relationship concerns the high level of pressure to perform that an agent can experience in the form of the agent’s compensation. Money, as well as other forms of compensation such as bonuses and stock options, increased authority, and ownership expectations are direct motivators of challenges to the ethical foundation of agent performance. When principals evaluate the performance of agents, their decisions are likely to be based on the same accounting information their agents also used. This common use provides a potential incentive for an agent to alter, falsify, or otherwise misrepresent certain data that principals receive. As decision-making authority is granted from a principle to an agent, the agent’s performance is evaluated to some degree from each authority level. Evaluating the effectiveness of the decisions made in each agency level or responsibility center is the core of measuring, monitoring, and motivating performance. Poor performance leads to a loss of decision-making authority, responsibilities, compensation, and other benefits within the entire principal-agent structure. Conversely, outstanding performance has the opposite effect and benefits everyone up the principal-agent ladder. Conclusion The Securities Exchange Acts of 1933 and 1934 are essential because of their transparency as spelled out in their objectives, and for providing prospective investors detailed information about investment decisions. Their main purpose was to protect shareholders from misrepresentation and scam in the selling of security. The Acts mandated that securities sold to the public within the United States of America must be listed with the Securities and Exchange Commission. Later, the Sarbanes-Oxley Act of 2002 (SOX) was established to make sure that CFOs and CEOs authenticate and approve the financial reporting of their companies. Despite these monumental pieces of regulation, which resulted in the creation of two separate oversight agencies, there are still situations susceptible to ethical challenges and agency issues; particularly concerning performance management and executive compensation. References Amadeo, K; 2013. Sarbanes-Oxley Act of 2002. Retrieved from http://useconomy.about.com/od/themarkets/p/sarbanes-oxley.htm Eldenburg, L. Wolcott, S. (2005). Cost management: Measuring, monitoring, and motivating performance, (1st ed). Hoboken, NJ: John Wiley Sons. Harkinson, J. (2011). Americas 10 Most Overpaid CEOs. Retrieved from http://www.motherjones.com/politics/2011/04/10-most-ridiculously-overpaid-ceos McConnell, C., Brue, S. (2005). Economics: principles, problems and policies (16th ed.). New York: McGraw-Hill. Sarkar, D; 2013. Securities Act. Retrieved from http://www.law.cornell.edu/wex/securities_act_of_1933 Steve Jobs again earned $1 for work. (n.d.). Retrieved from http://www.timesleader.com/stories/Steve-Jobs-again-earned-1-for-work-at-A,115771

Treatment of Minorities in Turkey Essay -- Equality Justice Essays

Treatment of Minorities in Turkey Problems with format Turkey, a relatively new nation, is not new to internal conflict and the oppression of minorities. Wedged between Europe and the Middle East, the area occupied by Turkey has long served as a crossroads between these areas, and, as a result, Turkey's majority Islamic Arab populace is smattered with significant pockets of minorities. These religious and ethnic minorities have been the source of much controversy in Turkey, but now change appears to be on the horizon. As Turkey seeks the approval of the European Union, it has begun to implement impressive humanitarian reforms that should drastically improve the plight of the minorities that call the nation home. Undoing a Bitter History of Hate Turkey has been under the control of a self-pronounced secular administration for decades, and, ironically, progressive reform has only now become a reality as the Islamic Justice and Development Party (AKP) has assumed control of the government.[i] Thus far, the military establishment and existing political bureaucracy have been resistant to the AKP?s efforts to fully incorporate minority groups into mainstream society. Pointing to previous minority insurrections, military leaders are fearful that the new provisions will only serve to weaken the government's authority over the minority groups and to promote another wave of minority uprisings.[ii]? But, the possibility of membership to the European Union (EU) in 2004? has provided the AKP with adequate incentive to move forward with the reforms. EU membership does not currently include any majority Muslim nations. If Turkey were to be admitted next year, it would be first of its kind to do so. Therefore, Turkish officials hav... ...to Istanbul after synagogue blast,? The Independent (London), sec. News, November 17, 2003, LexisNexis Academic, December 12, 2003, p.4. [xviii] ibid, p.4. [xix] ibid, p.4. [xx] ibid, p.4. [xxi] Fiachra Gibbons, ?Comment & Analysis: The attack on Istanbul Jews is an attack on hope itself: The synagogue bombing threatens 1,300 years of tolerance,? The Guardian, November 17, 2003, LexisNexis Academic, December 19, 2003, p.20. [xxii] Geir Moulson, ?Erdogan challenges EU to admit Turkey, drop ?Christian club? image,? Associated Press Worldstream, sec. International News, September 3, 2003, LexisNexis Academic, December 19, 2003. [xxiii] ?At Last, Turkish Kurds,? p.14. [xxiv] ?Turkey still represses Kurds, despite EU-oriented reforms: rights group,? Agence France Presse, sec. International News, July 30, 2003, LexisNexis Academic, December 12, 2003.

The Merger of Ranbaxy and Daiichi

A REPORT ON Ranbaxy-Daiichi Deal 1/26/2012 Ranbaxy-Daiichi Deal Introduction: Daiichi Sankyo bought Ranbaxy for $4. 6 billion in June 2008. This report studies the implications of the merger between Ranbaxy and Daiichi Sankyo, from an intellectual property as well as a market point of view. There are many critical events happening in international pharma market including the growing preference for generics, increasing dominance of emerging markets such as India, fast approaching patent expiry etc. Also, this deal involves 2 major players who are the largest among their respective markets. Background: Daiichi Sankyo Co. Ltd. acquired 34. 8% of Ranbaxy Laboratories Ltd. from its promoters and increased its stake through preferential allotment, public offer and preferential issue of warrants to acquire a majority in Ranbaxy, i. e. at least 50. 1%. After the acquisition, Ranbaxy operates as Daiichi Sankyo’s subsidiary but supposed to manage independently under the leadership of its current CEO & Managing Director Malvinder Singh. Mr. Singh left the company in 2009 with a 4. 5 billion rupees severance package. Why: Daiichi Sankyo wanted to acquire a drug maker that specialized in generics after Japan eased its laws allowing sales of these cheaper versions of expensive drugs. The deal was a trendsetter in Indian market for future M&A deals. India's family-owned companies realized that it was not shameful to sell and profit from their businesses. Benefits Expected: Operational: The main benefit for Daiichi Sankyo from the merger was Ranbaxy’s low-cost manufacturing infrastructure and supply chain strengths. Ranbaxy gained access to Daiichi Sankyo’s research and development expertise to advance its branded drugs business. Expansion: Daiichi Sankyo’s strength in proprietary medicine complements Ranbaxy’s leadership in the generics segment and both companies acquire a broader product base, therapeutic focus areas and well distributed risks. Ranbaxy gains smoother access to and a strong foothold in the Japanese drug market. Financial: The immediate benefit for Ranbaxy was that the deal freed up its debt. Also, Ranbaxy’s addition elevated Daiichi Sankyo’s position from #22 to #15 by market capitalization in the global pharmaceutical market. Synergies: . A complementary business combination that provides sustainable growth by diversification that spans the full spectrum of the pharmaceutica l business. 2. An expanded global reach that enables leading market positions in both mature and emerging markets with proprietary and non-proprietary products. 3. Strong growth potential by effectively managing opportunities across the full pharmaceutical life-cycle. 4. Cost competitiveness by optimizing usage of R and manufacturing facilities of both companies, especially in India. † 5. Respective presence of Daiichi Sankyo and Ranbaxy in the developed and emerging markets 6. Ranbaxy’s strengths in the 21 emerging generic drug markets allow Daiichi Sankyo to tap the potential of the generics business. 7. Ranbaxy’s branded drug development initiatives for the developed markets significantly boosted through this relationship. 8. Daiichi Sankyo able to reduce its reliance on only branded drugs and margin risks in mature markets and benefit from Ranbaxy’s strengths in generics to introduce generic versions of patent expired drugs, particularly in the Japanese market. Post-acquisition objectives: Daiichi Sankyo’s focus was to develop new drugs to fill the gaps and take advantage of Ranbaxy’s strong areas ? To overcome its current challenges in cost structure and supply chain ? To establish a management framework that would expedite synergies ? To reduce its exposure to branded drugs in a way that it can cover the impact of margin pressu res on the business, especially in Japan ? In a global pharmaceutical industry making a shift towards generics and emerging market opportunities, Daiichi Sankyo’s acquisition of Ranbaxy signalled a move on the lines of its global counterparts Novartis and local competitors Astellas Pharma. Post acquisition challenges: Post acquisition challenges included managing the different working and business cultures of the two organizations, undertaking minimal and essential integration and retaining the management independence of Ranbaxy without hampering synergies. Ranbaxy and Daiichi Sankyo also needed to consolidate their intellectual capital and acquire an edge over their foreign counterparts. What went wrong? A lack of proper due diligence In its eagerness to tap the expertise of a generic drug maker, Daiichi took the risk of buying Ranbaxy for top dollar. Three weeks later, the US Food and Drug Administration banned imports of 30 of Ranbaxy's generic drugs, and later determined that the company was selling adulterated or misbranded medicine. It blacklisted two of the company's manufacturing units, limiting the company's ability to sell drugs made in those facilities. Ranbaxy then reported currency-exchange losses of nine billion rupees in 2008. This made Ranbaxy post losses in the same year. Ranbaxy Laboratories Cash Flow ——————- in Rs. Cr. ——————Dec '10 Dec '09 Dec '08 Dec '07 Dec '06 12 mths 12 mths 12 mths 12 mths 12 mths Net Profit Before Tax Net Cash From Operating Activities Net Cash (used in)/from Investing Activities Net Cash (used in)/from Financing Activities Net (decrease)/increase In Cash and Cash Equivalents Opening Cash & Cash Equivalents Closing Cash & Cash Equivalents 1565. 25 1168. 89 -2067. 8 991. 48 92. 57 69. 26 161. 83 1061. 92 -1619. 08 -665. 43 -599. 22 86. 12 -462. 91 -214. 14 2817. 2 -793. 46 1755. 07 862. 39 172. 14 68. 93 1927. 21 774. 41 442. 98 685. 77 315. 49 -708. 18 -2103. 74 132. 19 1739. 65 109. 78 -48. 6 62. 36 110. 96 172. 14 62. 36 What worked? Mr. Singh timed the sale of his family silver perfectly – he got a huge premium for the stake before U. S. regulatory concerns came to light. Daiichi, after the initial stumbles, seems to now be heading in the right direction and in the past year has integrated Ranbaxy's R&D unit in an effort to gain synergies. Daiichi also launched a generic version of Pfizer Inc. ‘s cholesterol drug, Lipitor in US recently. The verdict: Fail This is a classic example of an acquirer paying top price without looking too closely at the quality of the goods. Daiichi continues to pay for the huge risk it took in the deal. U. S. regulatory problems have slowed down the integration of Daiichi and Ranbaxy a lot more than expected. We can see that Daiichi is having similar level of operating expenses and yet to achieve anything special from Ranbaxy. US FDA said that, Ranbaxy had ‘numerous problems' at its facilities in US and India. The US DOJ has also filed the consent decree against Ranbaxy in the US district court of Maryland on 26th January 2012, which would further put pressure on the margins. â€Å"Daiichi is yet to realize anything concrete from this deal. â€Å"

World War 1 Battles

The battles of the World War I were fought across the globe from the fields of Flanders and France to the Russian plains and deserts of the Middle East. Beginning in 1914, these battles devastated the landscape and elevated to prominence places that had previously been unknown. As a result, names such as Gallipoli, the Somme, Verdun, and Meuse-Argonne became eternally entwined with images of sacrifice, bloodshed, and heroism. Due to the static nature of World War I trench warfare, fighting took place on a routine basis and soldiers were rarely safe from the threat of death. The battles of the World War I War are largely divided into the Western, Eastern, Middle Eastern, and colonial fronts with the bulk of the fighting taking place in the first two. During World War I, over 9 million men were killed and 21 million wounded in battle as each side fought for their chosen cause. Battles of World War I by Year 1914 August 7-September 13: Battle of the Frontiers - Western FrontAugust 14-25: Battle of Lorraine - Western FrontAugust 21-23: Battle of Charleroi - Western FrontAugust 23: Battle of Mons - Western FrontAugust 23-31: Battle of Tannenberg - Eastern FrontAugust 28: Battle of Heligoland Bight - At SeaSeptember 6-12: First Battle of the Marne - Western FrontOctober 19-November 22:Â  First Battle of Ypres - Western FrontNovember 1: Battle of Coronel - At SeaNovember 9: Battle of Cocos - At SeaDecember 8: Battle of the Falklands - At SeaDecember 16: Raid on Scarborough, Hartlepool, Whitby - At SeaDecember 24-25: The Christmas Truce - Western Front 1915 January 24: Battle of Dogger Bank - At SeaFebruary 19-January 9, 1916: Gallipoli Campaign - Middle EastApril 22-May 25: Second Battle of Ypres - Western FrontMay 7: Sinking of the Lusitania - At SeaSeptember 25-October 14: Battle of Loos - Western Front 1916 February 21-December 18: Battle of Verdun - Western FrontMay 31-June 1: Battle of Jutland - At SeaJuly 1-November 18: Battle of the Somme - Western FrontAugust 3-5: Battle of Romani - Middle EastDecember 23: Battle of Magdhaba - Middle East 1917 January 9: Battle of Rafa - Middle EastJanuary 16: Zimmermann Telegram - Western FrontMarch 26: First Battle of Gaza - Middle EastApril 9-May 16: Battle of Arras - Western FrontJune 7-14: Battle of Messines - Western FrontJuly 31-November 6: Battle of Passchendaele (Third Ypres) - Western FrontOctober 24-November 19: Battle of Caporetto - Italian FrontOctober 31-November 7: Third Battle of Gaza - Middle EastNovember 20-December 6: Battle of Cambrai - Western Front 1918 March 21-April 5: Spring Offensives - Operation Michael - Western FrontJune 1-June 26: Battle of Belleau Wood - Western FrontJuly 15-August 6: Second Battle of the Marne - Western FrontAugust 8-11: Battle of Amiens - Western FrontSeptember 19-October 1: Battle of Megiddo - Middle EastSeptember 26-November 11: Meuse-Argonne Offensive - Western Front