Governance and Agency Issues

Discussion: Governance and Agency Issues

1. Respond to two of your classmates’ postings, writing as if you were reviewing their postings in an academic journal.  Your discussion responses should therefore answer the following questions as applicable:
   1. Are your classmates’ arguments articulate and logical?  Are their facts correct?
   1. Are your classmates’ interpretations reasonable and consistent with experts in the field?  Are your classmates consistent with both the substance and intent of their references?
2. Your discussion responses should not focus on whether or not you agree with your classmates, but how well they present their positions.  Each response should be at least 150 words in length and cite at least one academic source.

Classmate 1 Post:(Dinesh Dharanikota)

The primary goal of a publicly traded company is to maximize shareholders’ value by generating the maximum possible profit. Shareholders are part owners of a publicly-traded company, and they invest a significant amount to create more money in terms of share price growth or dividends (Ross et al., 2016). Various ethical conflicts can arise from exclusively focusing on this goal. The management may involve in unethical practices like fraud financial reporting, charging excess prices, and cheating practices. The entity could also neglect the interest of other stakeholders who are equally essential.

           Proverbs 11:20-21, “the Lord detects those whose hearts are perverse, but he delights in those whose ways are blameless.  Be sure of this, the wicked will not go unpunished, but those who are righteous will go free.” The verse applies to the situation as it encourages people to be ethical and righteous in their deeds to gain favor in the eyes of God.

            Governance entails the standards, processes, practices, and rules that an organization follows. Governance guides ethics, operations, compliance, and administration of an organization (Klein et al., 2019). Governance ensures that managers align with the goal by guiding and shaping their practices, activities, and operations towards shareholder’s goals.

References

Klein, P. G., Mahoney, J. T., McGahan, A. M., & Pitelis, C. N. (2019). Organizational governance adaptation: Who is in, who is out, and who gets what. Academy of Management Review, 44(1), 6-27. https://doi.org/10.5465/amr.2014.0459.

Ross, S. A., Westerfield, R., & Jordan, B. D. (2016). Fundamentals of corporate finance. (11^th ed.). New York, NY: McGraw-Hill Education.

Classmate 2 Post:( Ashwin Kumar )

A publicly traded corporation is an organization whose stocks are available on the stock market to the public, which can be bought or sold by individual or institutional shareholders. The major shareholders have their say in all decisions taken by the corporation in the annual shareholder’s meeting.

     The primary goal of a publicly traded corporation is to maximize the value of shareholders by generating maximum profits. It is diligent that a financial manager of an organization thrives on increasing the organization’s stock value. It is accomplished by generating maximum profits for its shareholders. As a result, new investors would invest their money in the corporation and lead to its growth.

     The Ethical conflicts which would result from exclusively focusing on this goal are. Corporate social responsibility is neglected as their primary focus is to please the shareholders. The companies employees, customers, suppliers, and business partners are given a low priority. 

      Corporate governance is defined as a set of rules, regulations, and practices implemented to guide and manage the organization. Its primary focus is to administer and control its operations by adhering to fairness, accountability, social and environmental responsibility, and transparency to all of its beneficiaries.

       The managers are key to the organization to control and facilitate the resources to generate maximum profits. The governance ensures that the managers follow the companies policies and rules to ensure all its beneficiaries are accounted for in the decisions they dictate. “Where there is no counsel, the people fall; But in the multitude of counselors there is safety” (Patricia, 2020).  As said in the bible, if there is no governance or counsel in place, it is evident that good cannot be rendered to all individuals. Fear and belief in the higher power would result in making decisions ethically and profitable to every shareholder.

References and Citation

1.) Patricia. (2020, September 16). 25 Bible verses about managing others. Retrieved May 13, 2021, from https://smartchurchmanagement.com/25-bible-verses-about-management/

2.3 Discussion: Sources and Uses of Cash

1. Navigate to the Discussion page and respond to the following prompts:
   1. Sources and Uses of Cash: Is an increase in Accounts Receivable a source or a use of cash?  Why?  What policies could we change to affect our Accounts Receivable balance?
   2. Statement of Cash Flows: Suppose a company lengthens the time it takes to pay suppliers.  How would this change affect the statement of cash flows?  How sustainable is the change in cash flows from this practice?
   3. Support your position with at least one biblical principle with a specific Bible verse that you feel is relevant to the situation (explain how and why it applies).
2. Your discussion should be based on the chapter, as well as other resources that can contribute to the discussion.
3. Your initial response should be 150 to 300 words in length and include at least one academic source that is properly cited.
4. Your initial post is due by the end of the fourth day of the workshop.
5. Respond to two of your classmates’ postings, writing as if you were reviewing their postings in an academic journal.  Your discussion responses should therefore answer the following questions as applicable:

5. Are your classmates’ arguments articulate and logical?  Are their facts correct?
6. Are your classmates’ interpretations reasonable and consistent with experts in the field?  Are your classmates consistent with both the substance and intent of their references?
7. Your discussion responses should not focus on whether or not you agree with your classmates, but how well they present their positions.  Each response should be at least 150 words in length and cite at least one academic source.  Please strive to make your discussion responses either extend the scholarly discussion in a productive direction or offer thoughtful analysis that helps your classmates deepen their own understanding.

3.3 Discussion: The Power of the Time Value of Money

1. Respond to two of your classmates’ postings, writing as if you were reviewing their postings in an academic journal.  Your discussion responses should therefore answer the following questions as applicable:
   1. Are your classmates’ arguments articulate and logical?  Are their facts correct?
   2. Are your classmates’ interpretations reasonable and consistent with experts in the field?  Are your classmates consistent with both the substance and intent of their references?
2. Your discussion responses should not focus on whether or not you agree with your classmates, but how well they present their positions.  Each response should be at least 150 words in length and cite at least one academic source. 

Classmate 1 Post:(Anjana Reddy)

a)The value of $100 is worth $9.23 today because of the concept of time value of money.

The value of $100 that one receives today is worth only $9.23 because of the discount being applied on the original value. In such a situation it takes nearly 25 years with a discount of 10 percent to reach the value of $9.23. 

b) If we increased the length of time involved then the present value would decrease. The number of years for which the discount will be applied on the original value will increase which will result in more repetitions of the discount applied on the present value leading to a decrease. 

c) Increasing the going rate of the savings certificates above 10% would lead the future value of the certificate to go beyond $100.

d) When someone uses false claims to misguide their customers then it is termed as deceptive advertising and this is one such case because there would be some customers who won’t have enough knowledge and would be deceived by such false content of advertising.

Classmate 2 Post:(Sowmya Gungur)

The concept of Time value of money is the reason behind the value of $100 being worth $9.23 today as discount rate is applied on the original value. 

2) An increase in the length of time involved would lead to a decrease in the present value reason being that the number of years on which discount applied will increase leading to a decrease in present value. 

3) If going rate of savings certificate is increased above 10% then that would result in a further increase of Future value of certificate to go beyond $100. 

4) This is a case of Deceptive advertising as when anyone uses false claims it leads to misguiding customers and deceiving them which happened in this case.

4.3 Discussion: Understanding Bonds and the Debt Markets

1. Navigate to the Discussion page and respond to the following prompts:
   1. Funding: What are the key differences between using bonds to finance capital projects and issuing stock for that purpose?
   2. Ethics Consideration:
      1. A major scandal broke in 1996 when allegations were made that Moody’s Investors Service, Inc. was issuing ratings on bonds it had not been hired to rate, in order to pressure issuers to pay for their service.
      2. In a Wall Street Journal story dated May 2, 1996, it was reported that after choosing to use rating services other than Moody’s, officials in Chippewa County, Michigan, received a letter from the executive vice president warning that the “absence of a rating … might imply that we believe that there exist deficiencies” in the financing arrangements.
      3. Further, Moody’s billed the county anyway, “as part of a long-standing policy.”
      4. Moody’s actions resulted in an antitrust inquiry by the U.S. Justice Department and the departure of several of the firm’s senior management.
   3. How do bond investors rely on bond ratings to make their investment decisions?  What is unethical in this situation? 
2. Support your position with at least one biblical principle with a specific Bible verse that you feel is relevant to the situation (explain how and why it applies).
3. Your discussion should be based on the chapter and videos, as well as other resources that can contribute to the discussion.
4. Your initial post should be 150 to 300 words in length and include at least one academic source that is properly cited.  Your initial post is due by the end of the fourth day of the workshop.

4.5 Assignment: Financing S&S Air’s Expansion Plans with a Bond Issue

1. Using a Word document, complete the requirements of the Mini-case “Financing S & S Air’s Expansion Plans with a Bond Issue”, located at the very end of Chapter 7 in your course textbook.
2. Your response should take the form of a memo, as explained in the case.
   1. For each of the ten bond features listed, briefly describe the likely impact of each of the features on the coupon rate demanded by potential bond investors when this new bond is issued.  Will it cause the required coupon rate to be higher or lower?
   2. In addition, for each of the ten bond features listed, briefly describe the advantages or disadvantages, from S&S Air’s perspective, of implementing that feature with the newly issued bond.