BCOR 3010 Final Exam

Board of Director Duties
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Terms in this set (83)
Board of Director Duties
Oversee CEO and senior management
Audit Committee
Corp Governance Committee
Compensation Committee
Respond to Shareholder Concerns
Management Duties
Operate Biz
Financial Statements
Strategic and Operating Plans; budgets
Select qualified mgmt; establish org. culture
Identify and manage risk
Duties of both BOD and Management
Deal fairly with employees and all constituencies
Generate long-term shareholder value
BOD link pay to performance for company executives
Include Debt based pay
Stock options/restricted stock as part of compensation
Give shareholders a say on pay
Contract View
Comply with terms of Contract
Lowest level of liability
buyer beware
Due Care View
Duty to take special care
not responsible for unforeseen risk
Seller beware
Strict Liability VIew
Most responsibility on the seller
Responsibility for unforeseen risk
3 questions for every stakeholder group
Legal requirements
Moral Obligations
Impact/Influence
Corp Governance
-Set of relationships between a company's management, board, shareholders, other stakeholders
-Provides structure thru which the objectives of the company are sed and the means of attainting those objectives and monitoring performance are determined
Corp Governance Relationships
Shareholders
BOD
CEO
Executives
Workers
ManagerialismRunning the firm for management's benefit, not the shareholdersBusiness roundtableCEOs Est. best practices Guiding principles - Believes that shareholder values is enhanced when a corp treats its employees well, serves its customers well, fosters good relationships with suppliers, maintains an effective compliance program and strong corp governance practices, and has a reputation for civic responsibilityBOD Failurenot aware of mgmt activities or true financial stateSarbanes Oxley ActInternal Auditors -> BOD audit committee -> external auditors Financial records req PCAOB CEO/CFO certification Whistleblower protection MaterialitysShareholder PwrSell stock Vote for directors, other issues on Proxy Statement Info Liquidation rights Sue for not meeting obligationsBenefit Corpcompany whose charter allows the board to consider social or env objectives ahead of profits For-profit, taxable Ex/ comet skateboards3 purposes of executive payAttract Retention MotivationBoard failure to control executive payCEO and Directors club Outsourcing compensation Romancing role of ceo EntitelmentLinking pay to performance with executivesCap CEO pay as a multiple of avg employee's salary Prohibit guaranteed severence and excessive perks Short Term Incentives: - Salary and conus based on annual objecives - 1-2 yr vesting periods for stocks - restricted stock Long term incentives: - add bebt-based pay; long performance evaluation period - Long vesting periods for stocks - stock optionsRestricted Stockoutright grant of shares restricted trade/transfer subject to vesting *penalty if stock goes down (less value than shares were granted)Stock optionsoption to buy shares in the future at fixed exercise price usually equal to stock price on grant date typically vests over 4 years; expires after 10 yrs No penalty if stock goes downConsumer Product safety - friedmanif consumers want safer products they will choose and pay for safer products and reject products that are less safe. NEITHER THE MANUFACTURER NOR GOVT SHOULD FORCE CONSUMERS TO BUY COSTLY SAFETY DEVICES IN ORDER TO PROTECT THEMArguments Against friedman view of product safetyfully informed? externalities? (Seatbelts) inequality problem freedom of choice? (monopoly, monopsony) consumers rational?Consumer product safety act 1972Consumer product safety commissionNational Highway and Transportation ActAuto safety and standards Fuel economy, manuf defects, accident stats, automobile and trans safety, seat belts, education/researchFood and Drug AdministrationRegulates range of products Recalls and import refusalsConsumer Financial Protection Bureauonline banking, mortgages, credit cards, payday loans, student loans financial products/servicesConsumer Protection ACT 2010poor wall street behavior sweeping legislation requirements for financial institutions protect consumers from abusive financial service practicesPractical Legal AdviseAssess and understand risks Consider design solutions If cant design out the hazard, provide protections if risks/hazards remain If cant protect against the hazard, provide warning/instructions3 views of the ethical duties of manufacturers/ suppliersContract View - comply w/ terms of contract -disclose nature of product avoid misrepresentation -avoid coercion -can disclaim duty -buyer beware Due Care View -duty to take special care - Liable for -negligence -misrepresentation -*Cannot disclaim duty - Not responsible for unforeseen risks - se;;er beware Strict Liability View - Pay for injuries due to defects - Foreseen/Not Foreseen - Despite Exercise of due care - Internalize costsDuty to the client as an advertising practitionerAgency ↑↓ Client ↓ ConsumerAdvertising EthicsMoral Myopia Moral Muteness Moral ImaginationMoral MyopiaDon't see ethical issuesMoral MutenessRemain silent about ethical issuesMoral ImaginationWilling to discuss/confront ethical issues and partner with client to find an alternative advertising solution Ex/ PatagoniaAdvertising Impact on ConsumersIdealized Imagery Offensive/Sexist Materialsim Manipulative Political Ads Targeting Children Unverified ClaimsAdvertising Benefits to ConsumersInfo Terms of Contract Lifeblood of media Jobs Competition -> qualityCommercial Speech can be regulated if:Misleading Illegal Product Substantial Govt InterestDeceptionMaterial representation, ommision, practice that is likely to mislead reasonable consumersSubstantial Govt Interest - AdvertisingProtect children time, place, manner Not intrusiveConsumer Influence - Consumer RIghtsSafety, Info, Choice, VoiceTitle VIIdiscrimination hiring, firing, terms/conditions of employment religion, gender, sex, race, national origin, color, ethnicity harassmentLaws Create Protected ClassesTitle VII - religion, gender, sex, race, national origin, color, ethnicity Age Discrimination in Empolyment Act - 40+ Americans with Disabilities Act - reasonable accommodations Pregnancy Discrimination ActProtected ClassesReligion, gender, sex, ethnicity, race, national origin, color, disabilities, age, pregnancyDisparate Treatmentintentional indiv of protected grp is shown to have been singled out and treated less favorably than others similarly situated on the basis of an impermissable criterion under title vii. discriminatory intentAdverse impactunintentional employment practices that appear neutral but have discriminatory effect on a protected grp hiring, promotion, training, development, transfer, layoff, performance appraisalSexual harrassmentquid pro quo hostile work environmentAffirmative ObligationsFor religion (Title vii) - if company can accommodate reasonably, the company has the legal obligation to provide For Disability (ADA) - reasonable accommodations - unless unduly burdensomeEmployer Defenses to discrimination or harassmentcorrective measures did not communicate to employer legit reason - bona fide occupation qualificationMoral Obligations of a FirmEqual Employment Opportunity - anyone considered - legal/moral minimum - level playing field Affirmative Action (Proactive Inclusion) - proactive steps to prevent barriers of opportunity - employer that does federal contracting - optimal practice - eradicate or prevent barriers to equal opportunity - widen pool, encourage candidate referrals, mentorship, diversity affairs programs - req for gov contractors - measure of good faith effors Preferential Treatment - not legal to base hiring decisions on protected class - university student recruiting4 Areas of Responsible Environmental Policy1. Waste/pollution 2. Natural Resources 3. Environmentally Sensitive Areas 4. BiodiversityFree Market View of the EnvironmentFree=Wealthy=Clean Property Rights Efficiency is ProfitableMoral Minimum - EnvironmentObey law Cause no avoidable harm No unduly influencing legislatorsSustainabilitydemands placed upon the environ by people and commerce can be met without reducing the capacity of the environment to provide for future generationsSustainable Products: Drivers/NeedsConsumers - product transparency - responsible products - sustainable product confusion - proliferation of single-attribute green labels and increase in green claims/green washing Supply Chain - no set standard to measure/reports sustainability - lack of data and traceability of system inputs/outputs Science - better understand resource availability and social/environ impacts over timeRegulatory Framework - LayoffsWARN Act - min 60 day notice - large company/large scale COBRA - 18 mo healthcare coverage - pd by employee Non-discrimination Laws - adverse impact - cannot just layoff protected classContinuum of Sustainable ActivitiesWaste Prevention Resource Productivity Design for Environment - product stewardship - BMW Clean Tech - tesla, wind pwr, solar Change Business Model - INTERFACE - no longer sells carpets but rather leases a floor covering service - reduces production by 80% - inferfaceFLOR Natural Capitalism - include cost of natural resources in business decisions - way of doing business that is more profitable - 3 principles: - redesign how we make and deliver everything so it is sustainable - use of sources more effectively - restorative of human/natural capital7 sins of greenwashing1. Hidden trade off 2. No prof 3. Vagueness 4. Worshipping false labels (3rd party endorsement that doesn't exist) 5. Irrelevance 6. Misrepresentation 7. Lesser of 2 evilsEnvironmental Burden 3 Factors1. Population 2. Affluence (ppl can afford more things) 3. TechGreenhouse gas emmissions by sector1. Power generation (e + g) 24.5% 2. DeforestationClimate Change: Precautionary Principlethe time to consider the policy dimensions to climate change is not when the link btwn greenhouse gases and climate change is conclusively proven but when the possibility cannot be discounted and is taken seriously by the society of which we are partEnvironmental LegislationSubsidies Mandatory Standards Carbon Tax Cap and TradeCarbon TaxTax on carpon emissions Mkt incentive for renewable energy tech attempt to internalize environ externalities regulatory streamlining; IRS already in place US only; no link or wealth transfer to develop countries Not very useful on international scaleCap and TradeImpose cap on emissions Allot "permits to pollute" that can be traded Rewards energy efficiency and innovation Huge bureaucracy Manipulation and fraud Energy price volatility Can work internationallyBenefits of community involvementIncrease morale and productivity Strong culture aligned around company values Attract and retain good employees Prestige/good will in the community Branding Strong supportive institutions and favorable legislationRisk/costs of community involvementFinancial costs positive reputation mixed blessing unrealistic expectations no reward guaranteeHow can companies get involved in community?Donate Time/Talent Philanthropy Active Partnerships ex/ Timberland created partnership[s, gave workbootsProposed StandardUS standards Fair wage Living Wage Mkt approach (local wages)Globalization challengesChallenges our view of business' social obligation; it complicates our analysis and understanding of what it means to be a good corporate citizen or socially responsible business It may pose even greater challenges to our values as we participate in business on a global scaleValues/Ethics Away from HomeEthical/Cultural Relativism - go with customs of where you are Ethical imperialism- implement out practices - our standards in the USBystander effectKitty Genovese social physchology phenomenon that refers to cases in which individuals do not offer any means of help to a victim when other people are present. The probability of help is inversely relation to # of bystandersWhistleblowing BarriersOrganizational (who to go to) Local (supervisor) PersonalInhibitors of Moral CourageOverconfident Cultures - very strong cultures, if you want to be a part, this is what you have to do Compromises Timidity (moral muteness) Tepid Ethics Rationalization (moral myopia) Bystander apathy Groupthink Normalized Deviancy - mafia Cultural DifferencesMoral Couragequality of mind and spirit that enables one to face up to ethical challenges firmly and confidently without flinching or retreatingSarbanes OxleyPublic COmpanies (civil provisions) - Audit Committees - protect whistleblowers All companies (criminal provisions) - retaliation against WB punishment - covers reporting of violation of any federal low **DOESNT GOVERN PRIVATE COMPANIESDodd frank Financial Reform LawFinancial Fraud Financial incentives for whistleblowing employees May undermine internal effortsEnablers of Moral Courageenlist allies self confidence strong ethics/beliefs appeal to shared purpose find win-win solution practiceCulturespecific collection of values and norms that are shared by ppl and grps in an organization that control the way they interact with each other and with stakeholders outside the organizationCulture BuildingTone at the top Message in the Middle behavior at the bottom ex/ Arthur andersonForces that place pressure on firm cultureGrowth Competition Management Turnover Atrophy Success DiversificationTeleopathyunbalanced pursuit of a single purposeSymptoms of TeleopathyFixation Rationalization Detachment (head from heard)Complimentary Strategies to LayoffsOrganizational Redesign Systemic Change Pinnacle Brands