The Medias Dumber Democracy Essay - 1557 Words

For the average American there is no escape from mass media. It can be found within our news papers, movies, television and internet, which account for most of our news and entertainment source. In Michael Parentis book, Make Believe Media, the Politics of Entertainment, Parenti attests that this mass media clouds our societys perception of reality by propagating prefabricated images that create and validate a superficial ideological world. Unfortunately, people are denied the opportunity to obtain and interpret information, which impacts our society, by media conglomerates that wish to keep their industry profitable and on the rise. Effectively, the American publics information and entertainment sources are controlled by some ten†¦show more content†¦Thus our notion of people, places, public policy, and even the world can be shaped by the ongoing storytelling within our news and entertainment media. Both children and adults are consumed by the storytelling of those few conglomerates that make up the media industry. While much of the American public is aware of the medias influential power over our society, many believe they are immune to these influences and therefore underestimate the actual effects it can have within our lives. Parenti believes media can even influences these immune Americans through the ideal of political entertainment. This ideal embodies a media with subtle hints of various political, cultural and systematic views that are embedded with in a programs or movies characters, contents or plots. While this influence may be indirect, much of it goes undetected by the wary public who claim immunity from such media. Furthermore, Parenti argues that such critiques of influential media by the wary public are biased in themselves, stating that, this editing is itself partly conditioned by the previously internalized images fed to audiences by the same media they are now viewing. Ultimately things ranging from style and social status, to love and relationships and even to our per ception of foreign culture is all influenced by media and its conglomerates. They are the ultimateShow MoreRelatedAnalysis Of Divided We Now Stand Essay1169 Words   |  5 Pagesmindset? Democracy doesn’t. Thus, our current government hinders in growth and productivity. The government is dysfunctional because its members focus on the like-minded beliefs of their prideful groups instead of being focused on the process of fixing government issues and approving policies. Although tribalism affects government officials it affects American citizens as well. Cass R. Sunstein author of â€Å"How Facebook Makes Us Dumber† uses data from a study that proves that social media users createRead MoreThe Common Core Standards Of The United States1912 Words   |  8 Pagescountry has been meticulously shaped to provide the world with the most knowledgeable and potentially successful citizens possible. From the beginning of adulthood, which is associated with the age of eighteen an d the ability to participate in the democracy our country stands for, young people have difficulty obtaining jobs without a diploma from a university. The standards aim to fulfill the necessary prerequisites of colleges, workforce training programs, and employers (â€Å"Frequently Asked Questions†Read MoreAmerican Popular Culture and Its Impact in a Globalized World8501 Words   |  35 Pagesexplained? Popular cultures influence in the world is different depending on the region. The larger question therefore is whether Americas dominance is due to the intrinsic strength of its culture Ââ€" its sheer flair and energy, its incarnation of democracy itself as marketable entertainment, its forging of a new international language (Rockwell 1994) Ââ€" or is it merely a function of Ameri-can military and economic domination, or capitalism run amok? Certainly, some of Americas success is due to aggressiveRead MoreDeveloping Management Skills404131 Words   |  1617 PagesInterior Design: Suzanne Duda and Michael Fruhbeis Permissions Project Manager: Shannon Barbe Manager, Cover Visual Research Permissions: Karen Sanatar Manager Central Design: Jayne Conte Cover Art: Getty Images, Inc. Cover Design: Suzanne Duda Lead Media Project Manager: Denise Vaughn Full-Service Project Management: Sharon Anderson/BookMasters, Inc. Composition: Integra Software Services Printer/Binder: Edwards Brothers Cover Printer: Coral Graphics Text Font: 10/12 Weidemann-Book Credits and acknowledgments

An Aristotelian Analysis of Othello - 1922 Words

Hansen Jiang Ms. Prendi ENG3U1 July 19, 2014 An Aristotelian Analysis of Othello A tragedy is an event causing great suffering, destruction, and distress. Considering Aristotelian beliefs, a tragic hero is a great character whose character flaws eventually lead to their fall. Aristotle’s writing is indicative of what he believed to be a tragic hero, and the character Othello possesses each quality, meaning he is a successfully written tragic hero. He is of high status and nobility, both in position and character. However, this status does not make him perfect- he has flaws. As well, Othello has tragic flaws, which lead to his downfall and make it partially his fault. However, the tragedy which ensues is not entirely of loss, as the†¦show more content†¦He reveals this when Iago pushes him to believe of Desdemona’s infidelity- â€Å"Haply, for I am black and have not those soft parts of conversation that chamberers have, or for I am declined into the vale of years—yet that’s not much—† (III.iii.304-07). These inse curities prove Othello to be an imperfect character, and in his imperfections we can connect to him. As a result of these imperfections, Othello’s downfall is not entirely attributed to Iago, but also to himself. Othello’s hamartia, or tragic flaw, leads to a series of tragedies which he himself causes. The story of Othello reveals that the character has multiple tragic flaws. One of the major ones is his poor sense of judgement. Othello trusts â€Å"Honest Iago† (I.iii.336) because of Iago’s clever wording and acting. He believes Iago is telling the truth though he may not be, and trusts his word beyond his trust for others, such as Cassio, or even his love for Desdemona. As well, he constantly reminds Iago and the audience of his trust- â€Å"A man he is of honesty and trust.† (I.iii.323), â€Å"Iago is most honest.† (II.iii.7), â€Å"Thy honesty and love doth mince this matter† (II.iii.263), â€Å"And for I know thou’rt full of love and honesty† (III.iii.136), â€Å"O brave Iago, honest and just,† (V.i.34), etc . Iago explores Othello’s insecurities, and Othello’s willingness to believe Iago is, at the very least, partially his own fault. Another tragic flaw Othello suffers is a result of trusting Iago- his insecurities and hisShow MoreRelatedThe Self Defeat of Heroes in Shakespeares Tragedies: A Character Analysis of Hamlet and Othello1495 Words   |  6 PagesThe Self-Defeat of Heroes in Shakespeares Tragedies: A Character Analysis of Hamlet and Othello Introduction Aristotle asserted that all tragic heroes had fundamental flaws that were the source of their undoing, and that were typically the source of their initial success, as well. Oedipus thinks he acts with justice, wisdom, and the assurance of success, and these things also cause him to completely destroy himself when he discovers the truth of his situation, as one prominent example. TheRead MoreA Scrutiny of Othellos Character as a Tragic Hero2197 Words   |  9 PagesIn Othello, the Moor of Venice, the titular character, Othello, is the protagonist and subject to scrutiny as to whether or not he is a tragic hero in the conventional Aristotelian definition of the term. Aristotle believed a tragedy served to exercise the mature citizens moral sensibilities (Ferrari, 1999, p. 181). There are several different components of Aristotles definition of a tragic hero, which essentially serve as a set of criteria to determine whether or not Othello truly is a tragicRead MoreWilliam Shakespeare s Othello, The Moor Of Venice1776 Words   |  8 Pagesevent that alters his fortune from good too bad. William Shakespeare’s play, Othello, the Moor of Venice is classified as an Aristotelian classical tragedy based on the guidelines Aristotle sets when examining a tragedy. Othello is a general in the Venetian army, and the husband of Desdemona, and well respected by society. The play describes how Othello’s fate has an undesirable change in fortune, the reversal. In brief, Othello is portrayed as a happy, powerful man in the beginning of the play, and byRead MoreShakespeares Use of Aristotles Guidelines to Tragedy in Creating the Play Othello1572 Words   |  7 Pagesof its ability to bring the viewer into the drama and feel for the characters, especially the tragic hero. This analysis of tragedy was formed by the Greek philosopher Aristotle, and also noted in his Poetics (guidelines to drama). As a playwright, Shakespeare used Aristotle’s guidelines to trag edy when writing Othello. The play that was created revolved around the tragic hero, Othello, whose tragic flaw transformed him from a nobleman, into a destructive creature, which would inevitably bring himRead MoreAristotle And William Shakespeare1781 Words   |  8 Pagesis an Aristotelian tragedy that displays the ideal plot of murders taking place at the castle. MacBeth is the tragic hero that began as noble warrior who turned into a murderer. MacBeth’s flaw is his deceitfulness and determination of being king leads to his failure and faces death. MacBeth’s life ends just as the lives that he took by murder and deceitfulness. His evil actions destroyed him in the end. Aristotle’s work is depicted in other tragedies written by Shakespeare. Othello is anotherRead MoreThe Obsessive Nature Of The Love Felt By Othello, By William Shakespeare2617 Words   |  11 Pagesthree texts seem to contain a fundamental principle which acts as a barrier for ‘love’ – whether it be religiously, culturally or evolutionary. Firstly, it is difficult to identify the obsessive nature of the love felt by Othello, at the beginning of William Shakespeare’s Othello, as his love towards Desdemona could be interpreted as ‘agape’ or certainly be seen as unconditional since the couplet persistently demonstrate a meaningful, more philosophical love towards one another. When used by Christians

Critical Thinking Strategies in Decision Making Free Essays

Critical thinking is the mental process of actively and skillfully conceptualizing, applying, analyzing, synthesizing, and evaluating information to reach an answer or conclusion (Dictionary. com, n. d. We will write a custom essay sample on Critical Thinking: Strategies in Decision Making or any similar topic only for you Order Now ). Critical thinking has two basic components: a set of information and belief generating and processing skills, and the habit of using those skills to guide behavior. Other aspects of critical thinking include working out situations and dilemmas, answer questions, and settling issues that are essential to ones welfare and interests. Thinking happens in every situation in every aspect of life. â€Å"The best thinkers use their ability to think well in every dimension of their lives† (Paul Elder, 2006). Critical Thinking Steps Critical thinking is used in all dimensions of life whether in personal situations or work related situations. Most of the time in personal issues people are more apt to make decisions that will benefit them more in the end. In work related issues, people tend to make decisions that will benefit the majority of everyone involved. Critical thinking is vital in the decision-making process when coming up with new ideas and finding the different point of views. As a critical thinker, there are a few steps while thinking. First, is to raise important questions and issues. Second, is the assembly and evaluation of significant information. Third, is coming up with well thought out answers, analyzing the answers with different outcomes and scenarios. Lastly, a critical thinker must keep an open mind and have the ability to consider all possible conclusions. If a problem arises, a critical thinker will have the ability to communicate well with others to gain a better perspective on the situation at hand. ? Personal Experience In a personal situation where I had to use critical thinking was in regards to my divorce. I had to think about how I would be affected by the decision as well as how my children would be affected by my decision. I had to weigh out the pros and cons of staying married versus getting a divorce. Weighing out the custody was another decision I faced. I wanted what was best for my children, and these decisions were not easy. Discussing the options with my ex-husband and being able to make these decisions jointly made things easier for the both our children and us. Work Related Experience Using critical thinking in work has proven beneficial. I worked for a company a few years ago where I held a position in customer care over the telephone. This position presented me with the opportunity to apply my critical thinking skills. When I first started with the company I was responsible for billing, but I decided to apply for a position in developing and maintaining the performance and payroll reporting for the lobby locations. I had an office, independence to complete my tasks without supervision, and had a prime shift – 8 to 5 Monday through Thursday and 7 to 4 on Friday. On the home front, I was able to put dinner on the table by 6 PM, did not bring work home, and was never on call. When the billing services ‘Subscriber Management Systems Specialist’, position was posted, I was very interested, but I had to weigh the benefits of both positions. I developed a table with pros and cons in order to assist with the decision. Based on the results I outlined, I chose to apply for the new position. It meant giving up some personal time with my husband – salary of course, means 40+ hours a week, but the challenge and growth opportunity outweighed the other factors. Had I not applied critical thinking, I would have gone with my gut, which told me to stay in the lobby where I was comfortable. Being able to put emotions aside allowed me to think clearly about a very important decision in my life. Critical thinking is important in decision-making. Some people develop thinking in a â€Å"weak sense† whereas others develop thinking in a â€Å"strong sense†. â€Å"Critical thinkers strive to develop essential traits and characteristics of the mind† (Paul Elder, 2006). I believe that critical thinkers do not allow emotions or bias to determine the outcome of the situation, but will have strong facts to support their position. I believe we all must strive to think at a higher level, and recognize our biases and rise above them to become effective critical thinkers. ? References Critical Thinking. (n. d. ). Dictionary. com’s 21st Century Lexicon. Retrieved December 13, 2009, from Dictionary. com website: http://dictionary. reference. com/browse/critical thinking Paul, R. , Elder, L. (2006). Critical thinking: Tools for taking charge of your learning and your life. Upper Saddle River, NJ: Prentice Hall. How to cite Critical Thinking: Strategies in Decision Making, Papers

Lufthansa Analysis free essay sample

The offices are positioned in Deutz, Cologne and main operations are based in Frankfurt. About 2. 8 billion euro was announced for the 2010 revenues. The transport volume was about 1. 8 million tons of cargo and also 8. 9 billion revenues were from ton-kilometers. Those figures make possible the Lufthansa Cargo to be in the forefront of companies engaged in the transport of air cargo. Till now there are 4500 people worldwide that work for this company. Growth of the company As mentioned before the company was founded in 1926, when flying wasn’t even percept. However times changed and it become very important transportation method. The company started to grow too. Although, it developed with high steps the seventies announced two oil crises, which resulted in a huge economy decline. Lufthansa Group found it very difficult to gain with that kind of crisis. However, the engineers applied methods to reduce fuel consumption and succeed. In 2001, Lufthansa’s focus was on innovation and quality. Since 2001 till 2005 crises of aviation industry occurred. The program called â€Å"Future European Operation† played crucial role in the remaining Lufthansa on the ascent. The 50th anniversary of Lufthansa took place in 2005. SWISS integrated in Lufthansa Group as an independent airline to consolidate Lufthansa’s position among Europe’s leading network carriers. Three years after, Lufthansa created new prospective for Germany’s future as a business location. The Lufthansa Aviation Centre became an architectural flagship. In addition, it becomes partner of Star Alliance. Rivalry among existing firms The main competitors of Lufthansa Airlines are DAX, British Airways and Air France. The competitors to Lufthansa Technic are on the one hand the original equipment manufacturers (OEMs) of aircraft, engines and components. They are joined by other airlines that offer maintenance services, such as Air France-KLM, as well as independent contractors (e. g. ST AERO, SR Technics). This competition is getting tougher, as new  MRO  capacities enter the market and increase price pressure, while cost and margin pressure on the airlines remains high. Lufthansa Technic quickly introduced programs to counteract this, by making capacities more flexible, cutting costs and increasing efficiency. The cost advantages of emerging economies are responsible for continued price decline and thus a trend towards shifting certain activities abroad. Combined solutions like those already offered by Lufthansa Systems in the airline sector are also becoming progressively significant. Under these conditions competitive cost structures and the ability to invest in new technological developments are the key success factors. However, the industry is fragmented because the price competition is severe. Concentration The main business for Lufthansa Group is the transportation of passengers. The company concentrates its activities into five strategic business segments: 1- Passenger Airline Group 73% Strengthening the Lufthansa’s position as a leading European premium carrier is the main objective of this segment. The three pillars on which the company resets its growth strategy are: a- Lufthansa is expanding its short and long-haul network in the medium term throw organic growth. This expansion is achieved through the centers in Frankfurt, Munich etc, in interest of cost efficiency. b- Lufthansa is expanding the cooperation with partners. The key role is played by Star Alliance, which opened new market. c- Lufthansa participates in the ongoing consolidation of the airline businesses. Logistics 10% The logistic service provider in the Lufthansa Group is the Lufthansa Cargo. By offering customers time-definite transport service, it is ranked among the largest cargo carries company. The Lufthansa Cargo activities cover these three segments: a- General Cargo with its td. Pro service b- The express segment with td. Flash c- Specials segment with four competence centers It als o operates in the airport-to-airport business, serving almost 300 destinations worldwide. 3- Maintenance Repair Overhaul 10% Technical segment is very important. Lufthansa Technik Group is an independent provider of airplanes technical services. Its portfolio includes the service of maintenance, repair, overhaul, all modifications and the components for commercial passenger planes. Due to innovations it is possible to low the costs and increase efficiency. The group is well-prepared for everything and challenge caused by their competitors. 4- Catering 6% Lufthansa Service Holding AG is the provider of in-flight services. The group is made with 133 companies around the world. Its products and services covers airline catering, in-flight service, airport services, etc. he changing of business strategy was one way to response to the increasing cost pressure and strong competition. It has been achieved according to these strategies: a- Making improvements by focusing on standardization and lean processes. b- Increasing sales beyond airline catering c- Developing partnerships in order to enter in the new markets. d- Appreciating growth potential in nearby markets. About 28499 people are employed in this segment business. 5- IT Services 1% In order to have efficient process management, Lufthansa has developed integrated IT solutions. Lufthansa Systems offer solutions for industries and operators. Their products provide added value for its customers in terms of efficiency. The IT solutions address all the business processes of an airline-from the passengers to the operations. They make possible for customers to optimize the business processes quickly. Long-term project experience is the base for the continuously expansion of this segment. Substitute products Lufthansa as a company operating in the airlines industry has to consider the threat of substitute products. The availability of substitute products in this industry depends on the routes of the flights. The threat might be higher for regional airlines than for international or intercontinental carriers. For regional flights, trains can be considered as a large threat because they show diverse advantages over flying such as: cheaper prices, central location of train stations, no check-ins and more commodities. Another substitute products could be also the use of own cars, but in this case it would be more time consuming, even though it has the advantage of increasing the flexibility of the travellers, the use of buses or even the use of ships. However, for intercontinental or overseas destinations there is no real substitute to flying considering the time needed to reach the destination. In our case switching comes from technology not only from the customers’ willing to switch. Buyers bargaining power Buyers can influence the quality and customer service through; the information that they possess, the volume of the tickets purchased, the brand identity, price sensitivity, buyer’s incentive (Porter’s five forces). On the other hand, these indicate a cost to the seller. In the Lufthansa case study, buyers are not concentrated, meaning there are many buyers and with little market share. Also customers do not purchase large volume of tickets, thus they are weak in this aspect. However, since the airlines industry has experienced many technological changes due to the impact of the Internet, the costumers’ influence on the prices has relatively increased. This happened because buyers can now switch easily among other alternatives when they browse the Internet for tickets purchasing without using an intermediary. They also benefit from network connectivity and number of destinations. In addition, the effects of previous plane crashes or 9/11 has made the customers to switch in other means of transportation such as trains. The price of a plane ticket is usually much more expensive than that of a train so the demand is rather elastic for most of the buyers. In the contrary, buyers can have less power when the airlines arrange prices among each other until there is a price war. Suppliers bargaining power The supplier’s power is also known as the market of inputs because it is composed of the labor services raw materials etc. In order to analyze hether the suppliers are weak or powerful, we should study the components of Lufthansa. The manufacturers of aircraft and fuel suppliers are the main components of Lufthansa suppliers. Since April 2011 Lufthansa has used agro fuel blend by Finnish oil and Neste Oil. However Neste Oil is the only company worldwide which produces large quantities of jet fuel from plant oil, especially palm oil. This is what makes Lufthan sa special. Also, LSG Sky Chefs and Lufthansa Technik are external and internal suppliers which have been included in joint projects to cut costs. On May 2011 Fokker Airinc was awarded as the â€Å"Excellent Supplier† by Lufthansa Technik. The Fokker aircraft is characterized by advanced technologies, low noise level and durability. On one hand the suppliers are powerful, because aircraft that operate in a long distance cannot be substituted by others. On the other hand the fuel suppliers share also strong bargaining power as they can raise the fuel prices. Firm’s competitive strategy When we analyzed the industry where Lufthansa and its main rivals operate we emphasized the importance that the industry structure has over a company’s profit potential. Through the model of five forces of Michael Porter, we investigated the opportunities offered airlines industry. But the profitability of a firm is influenced not only by the structure of the industry in which the company operates, but also it is influenced by the strategy the company uses to position itself in the market. There are two main competitive strategies: 1. ) cost leadership and 2. ) Differentiation. Lufthansa’s competitive strategy is based on cost-leadership. After being privatized, they realized the pressure of competitiveness, so they focused more on the strategically cost effective even more. Therefore, Lufthansa continues this revolution stage by implementing The Strategic Cost-Management Programme ‘15’, which intended to reduce overall unit cost by 20% within five years. Lufthansa’s cost leadership strategy is based on three main pillars that leads to strategic vision: 1. ) Cost flexibility – reduces share of fixed expenses, 2. ) Responsiveness – fast capacity adjustment, 3. ) Opportunities – secure markets, deploy for the economic revival. These three pillars help to navigate successfully through crisis times. While being more concentrated on internal costs and structural redevelopment, Lufthansa has worked more on its external relationships by executing the strategy: ‘growth through partnerships’. Thus, founding the STAR ALLIANCES was a logical consequence. The purpose of this partnership is to provide higher revenues and decrease costs by exploiting synergy effects. If parts of the Lufthansa were to merge with parts of other companies under the STAR ALLIANCES name, costs would reduce persistently and they would not be just a profitable company but also very competitive. Some parts of the STAR ALLIANCES that corporates to provide a successful company, leader in the market, are: 1. Lufthansa Cargo AG 2. Camp;N Tourism 3. LH Technik AG 4. Lufthansa LSG SkyChefs 5. GlobalGround 6. Lufthansa Systems GmbH 7. In All Areas Lufthansa remains on solid strategic track, continuously struggling for efficiency and higher quality. So, it also pays attention to the differentiation its products. It tries to provide differentiated products by catering service and one specialty of this airline company is trying to be always on time, not laying-off. Until now its strategy has proven to be successful, but the future will show if changes will be necessary in its competitive strategy. The main challenge of Lufthansa is currently facing is how to maintain the awareness of the crisis and the openness for changes. Lufthansa has developed strategies to overcome threats and work on eliminating its weaknesses in order to stay ahead of competition. However Lufthansa is more based on differentiation rather than on cost leadership because its tickets’ prices are quite high compared to the low-cost airlines’ tickets. Accounting Analysis The consolidated financial statements of Deutsche Lufthansa AG, Cologne, and its subsidiaries have been prepared in accordance with the International Financial Reporting Standards (IFRS). The method applied in the consolidated financial statements is historical cost. In 2010 the company experienced some changes in the reporting standards, thus previous years’ figures have been calculated as if the amended standards had already been applied last year. The other standards and interpretations applied after 2010 did not have a significant influence on the Group’s net assets, financial and earnings position in the reporting period. Revenue and other operating income are recognized when the service has been provided or when the risk has passed to the customer. Operating expenses are recognized when the product or service is used or the expense arises. Provisions for guarantees are made when the corresponding revenue is recognized. Interest income and expenses are accrued in the appropriate period. Dividends from shareholdings not accounted for using the equity method  are recognized when the legal claim has arisen. Annual impairment tests applied to goodwill are carried out using recognized discounted  cash flow methods. This is done on the basis of expected future cash flows from the latest management planning, which are extrapolated on the basis of long-term revenue growth rates and assumptions with regard to margin development, and discounted for the capital costs of the business unit. Tests are performed at the cash generating unit (CGU) level. The annual financial statements of foreign Group companies are translated into euros in accordance with the functional currency concept. Assets and liabilities are translated at the middle rates on the balance sheet date. Income statements are translated at the average exchange rates for the year. These translation differences are recognized directly in shareholders’ equity without effect on profit or loss. Goodwill from capital consolidation of foreign subsidiaries prior to 2005 is carried at historical cost net of amortization accumulated by the end of 2004. Goodwill arising since 2005 has been recognized in the currency of the company acquired. Transaction differences, however, are recognized in profit or loss. These differences arise in the financial statements of consolidated companies from assets and liabilities based on a currency other than the company’s functional currency. Any resulting exchange rate differences are included in other operating income as foreign currency transaction gains, or in other operating expenses as foreign exchange losses. Acquired intangible assets are carried at cost, internally generated intangible assets from which the Group expects to derive future benefit, and which can be measured reliably, are capitalized at cost of production and amortized regularly using the straight-line method over an estimated useful life. Tangible assets used in business operations for longer than one year are valued at cost less regular straight-line depreciation. The cost of production includes all costs directly attributable to the manufacturing process as well as appropriate portions of the indirect costs relating to this process. In addition to amortization and depreciation on intangible assets and property, plant and equipment,  impairment  losses are also recognized on the balance sheet date if the asset’s recoverable amount has fallen below its carrying amount. The recoverable amount is determined as the higher of an asset’s fair value less costs to sell, and the present value of the estimated net future cash flows from continued use of the asset (value in use). Property held exclusively for letting to companies outside the Group is classified as investment property and recognized at amortised cost. Equity investments accounted for using the  equity method  are capitalized at cost at the time of acquisition. Financial assets are classified within the Lufthansa Group as â€Å"at fair value through profit or loss†, â€Å"loans and receivables† and â€Å"available-for-sale financial assets†. Inventories include non-repairable spare parts, raw materials, consumables and supplies, purchased merchandise and advance payments made for inventories. They are measured at cost, determined on the basis of average prices, or at production costs. Individual, formerly non-current assets or groups of assets which are expected to be sold within the next twelve months are measured at the lower of their carrying amount at the time they are reclassified and fair value less costs to sell. Liabilities in foreign currencies are measured at the exchange rate on the balance sheet date. Quality of disclosure When analyzing the quality of disclosure for Lufthansa, we can say that there is a lot of transparency in its financial statements. The company gives detailed information about its operations, products and services. In the annual report for 2010 we can find not only information about the Management and the financial performance, but also letters to the Shareholders, which clarify the company’s conditions, making a description of the actual situation and future plans. In these letters are mentioned not only the positive developments of the company, but also the negative consequences of certain phenomena; such as the world financial and economic crises or other human and natural disasters like the volcanic eruption in Iceland and the ilots’ strike, which had negative impact on the profits of the company. Their reaction to bad news and situation is reported in their sites. In order to remain in the top of airlines companies they are using strategies to overcome not only world financial crisis, but they take preliminary measures for unpleasant surprises. Important elements are also the footnotes to expl ain changes and calculations made in balance sheet and other company operations. There are footnotes about losses and revenues resulting from different expenses that this company is doing annually. Lufthansa controls air traffic operations on the basis of network results not on the base of regional earnings contributions. The same applies to the catering service. The information on the Passenger Airline Group business segment and Logistics segment in the management report includes a presentation of traffic revenue generated by traffic region, rather than by original location of sale. It provides facilities to customers to book flights throught internet with competitive prices. All this information is reflected in its official website and brochures. Red flags Lufthansa is not a large company; hence, it is not very difficult for it to maintain control over its statements. This has result in a decrease of the potential â€Å"red flags† that can arise. Moreover, it’s based on only one country making it easier to report almost all the data. However there is always room for any red flag. One of the red flags is that the tax rate has declined comparing to the previous year. It was (129. 00) in 2009 and has gone (165. 00) in 2010. However this is not something to worry, because tax rates tend to increase up to normal level in the long run. A low tax rate might result in an artificially high reported profit. Since the company offers its service in nearly all over the world, it has to work with different currencies. At the end it has to translate all the operations into the Euro. This fact may result in a risk because if the Euro has depreciated towards that currency, it looks like it has made more sales but in fact it’s the currency who has appreciated. This is a potential red flag for all the companies that have a substantial amount of their trade with other countries, and for Lufthansa is particularly true since it operates in many countries around the world. Another red flag is that the current ratio is below 2. 0, which means that the company might experience difficulty paying its bills or keeping up with its payments to vendors, suppliers and contractors. This is something to worry about because it is not a cash-and-carry company (grocery store) that held few current assets. Financial Analysis Financial analysis is the best way to understand if the Lufthansa Airline’s growth is sustainable and if that company is increasing its profits. Also we want to know if this company makes an effective use of its resources. Evaluating the performance of a company based on its goals and objectives, is the duty of financial analysis. An important element that gives us an overview of how independent items of one firm are related to each other in order to play role in the growth of the company is ratio analysis. There are several tools that mangers can use to increase profitability of the firm: * Operating management * Investment management * Financing strategy * Dividend policy In order to make those words more concrete and to understand better the ratio analysis we will compare our company â€Å"Lufthansa† with another airline company â€Å"British Airways†. We chose â€Å"British Airways† because it is one of the strongest competitors of Lufthansa. Even though Lufthansa is one of the companies that offer the best service to its customers, it is necessary for us to analyze and see whether that company is really in better situation than its competitors. Moreover we want to know if that company gives investors good reason to invest on it. 1) PROFITABILITY RATIOS Return on Equity (ROE) ratio ROE is the ratio that gives us an overview of the profitability of the company because it provides an indication of how well managers are using the funds invested by firm’s shareholders to generate returns. In order to calculate that ratio we need to have the values of â€Å"net income† and â€Å"shareholder’s equity† Lufthansa | 2009| 2010| Total Net Income| (34M)| 1. 13B| Shareholder’s Equity| 6. 202B| 8. 340B| ROE| 65%| 43%| ROE is decreased from 2009 to 2010 so we can say that the efficiency of the company has decreased. This reduction of ROE came as the result of the raised of shareholders equity, which was much higher in 2010 due to the increased retained earnings. If we make an average of ROE for at least three years we can see that it is about 44. %. On the other hand, British Airways Company has a ROE 2010=66. 39% and in 2009 the ROE was 52. 25% so it increased. Also we did an average ROE for the latest three years and we observe that it was 47. 45%. ROE is affected by the profitability of the assets that are used and by the size of the firm’s asset relative to shareholders equity. Shareholders equity=assets-liabilities, which gives us what th e firm owns including short- and long-term debt. Thus, the more debt the company has, the less equity it has, the higher will be the ROE ratio. Furthermore, we know that ROE itself can be decomposed into: * Return on Asset (ROA) * Financial Leverage ROA can be decomposed further into: * Net Profit margin * Asset turnover Net profit margin ratio Net Profit margin comes out from income statement and shows the profitability of the company’s operating activities. It indicates how much the company is able to keep as profits for each dollar of sales it makes. In order to compute Net Profit margin ratio we need figures like â€Å"total net income† and â€Å"total sales†. Lufthansa | 2009| 2010| Total Net Income | (34M)| 1. 13B| Total Sales| 22. 8B| 27. 32B| BA| 2009| 2010| Total Net Income | (86M)| 1. 27B| Total Sales| 68. 28B| 64. 31B| Net Profit Margin| Lufthansa| BA| 2009| 0. 153%| 0. 126%| 2010| 4. 14%| 1. 97%| From what we said before, for each dollar of sales Lufthansa keeps $0. 0414 as earnings. As the net profit does have high levels of differentiation we can say that the company has been using the same business strategy. It also important to keep in mind that earning of the company does not reflect the true situation in which it is positioned because an increase in earning doesn’t mean a surely increase in net profit margin. For example, if the company has costs that are greater than sales, we would have a lower net profit margin. That is an indication that costs should be under a better control. Now we did an average of net profit margin for both companies. | Lufthansa| British Airways| Average Net Profit margin| 2. 15| 0. 922| Asset turnover ratio Asset turnover is a ratio that measures the efficiency of a firm by seeing how it uses assets in generating sales or revenues. The higher that ratio is the better is the company because it means that the firm is using its resources in an appropriate way. Moreover it points out a pricing strategy since companies that have high profit margins definitely have low asset turnover and vice-versa. The key figures in computing this ratio are â€Å"total sales or revenues† and â€Å"total assets†. Lufthansa | 2009| 2010| Total Revenues| 22. 28B| 27. 32B| Total Assets| 26. 39B| 29. 32B| | Lufthansa | British Airways| Asset turnover 2009| 0. 85| 0. 86| Asset turnover 2010| 0. 93| 0. 75| As we see the asset turnover ratio in 2010 has increased different from British Airways, which shows a decreasing of this ratio. As e result we can say that Lufthansa has used its assets more efficiently. Return on Equity (ROA) ratio ROA is a ratio that indicates how much profit a company is able to generate for each dollar of assets invested. As the result the higher the level of this ratio is, the better is for the company. Lufthansa | 2009| 2010| Net Income| (34M)| 1. 13B| Total Assets| 26. 39B| 29. 32B| | Lufthansa| British Airways| ROA 2009| 1. 3%| 4. 64%| ROA 2010| 3. 85%| 2. 28%| The ROA for Lufthansa has increased in 2010, which is also an indicator that the company is doing better. British Airways has not only a lower ROA than Lufthansa but it also has fallen from 4. 64% in 2009 to 2. 28% in 2010. Gross Profit margin ratio The price premium that a firm’s products or services command in the marketplace and the efficiency of the firm’s procurement and production process, are the two important factors that influence gross margin ratio. It is the case when direct costs are linked to the sales. Consequently, if the firm has higher level of gross profit margin than its competitor, than we can say that it is doing better and is more efficient. To compute gross profit margin we need figures like â€Å"sales† and â€Å"cost of sales†. Lufthansa | 2009| 2010| (Operating) Revenue| 22. 28B| 27. 32B| Cost of Sales| 19. 85B| 23. 47B| BA| 2009| 2010| Gross profit margin| 18. 5%| 19. 36%| Lufthansa| 2009| 2010| Gross profit margin| 10. 9%| 14,1%| As we see there is a small the difference between two years. We also computed the average gross profit margin for the latest three years which is 12. 5% and indicates a stable macroeconomic environment. | Lufthansa | British Airways| Average Gross Profit margin| 12. 5%| 18. 86%| By this comparison we has achieved in the conclusion that the British Airline is doing better. Also we can understand that this company has set aside more money that can be spent on other business operations; like, marketing or Ramp;D (research and development). Moreover, if the level of gross profit margin is high, we can say that the company is efficient in using labor and supply in the production process. If the costs of producing are increased, than the gross margin would be lower. LIQUIDITY RATIOS Current ratio Current ratio is a ratio that tells us if the firm is able to cover all its current liabilities from the cash realized by its current assets. As the result, it is considered a key index of a company’s short-term liquidity. In order for a company to be efficient, the current ratio level must be no less than one. A current ratio less than one indicate that the firm has problems because it is not able to cover all its obligations. As mentioned, we need â€Å"current assets† and â€Å"current liabilities† in order to calculate Current ratio. Lufthansa | 2009| 2010| Current Assets| 8. 7B| 10. 36B| Current Liabilities| 8. 78B| 9. 83B| | Lufthansa | British Airways| Current ratio 2009| 0. 99| 0. 84| Current ratio 2010| 1. 05| 1. 07| For both companies the year 2009 has been difficult to cover their obligations, but in 2010 they have improved their abilities to pay short term obligations. As we see British Airways could raise its current rate more than Lufthansa. Quick ratio Quick ratio like current ratio explains how able the company to cover its liabilities is. However, since it is more conservative than current ratio excludes inventory from current assets, a slight difference exist among the two. In quick ratio inventory is excluded because most of the firms face difficult to turn their inventory into cash quickly. The problem is created when some obligations need to be paid very soon. Thus there is a situation where the current ratio overestimates a company’s short-term financial strength. Cash, short-term investment, account receivables and current liabilities are the key elements needed for calculating quick ratio. Lufthansa | 2009| 2010| Cash | 1. 14B| 1. 1B| Short-term investment| 3. 56B| 4. 77B| Account receivables| 2. 04B| 2. 66B| Current liabilities| 8. 78B| 9. 83B| | Lufthansa | British Airways| Quick ratio 2009| 0. 92| 0. 54| Quick ratio 2010| 0. 99| 0. 69| We can see that Lufthansa has done better in the last two years than British Airways, being also more able to turn fast its current assets into liquid cash in order to pay obligations. Debt and coverage ratios The firm’s financial leverage is affected by its debt financing policy, too. There exist some benefits from using debt financing; such as, * Debt is cheaper than equity * Interest on debt financing is tax deductible; on the other hand dividend to shareholders is not tax deductible * Debt financing impose discipline on the way of management * For non-public debt, it’s easier for managers to communicate information on company’s strategies and prospects A firm is said to be in a good position if its debt ratio is less than one, because it shows that it has less liabilities than assets. Lufthansa | 2009| 2010| Total liabilities| 16. 308B| 17. 468B| Total assets| 26. 39B| 29. 32B| | Lufthansa | British Airways| Debt ratio 2009| 41. 86%| 39. 49%| Debt ratio 2010| 40. 86%| 35. 03%| According to the debt ratios, Lufthansa shows a higher level of debt. Even though it has been reduced in the last year, it is much higher than the debt ratio of it’s rival. Liabilities-to-equity ratio This ratio shows that what percentage of equity is used by the company to finance its assets. A high level of this ratio indicates that the company has been aggressive in financing its growth with debt. As the result of the additional interest expense, that can result in a unstable earnings. Lufthansa | 2009| 2010| Total liabilities| 20. 19B| 20. 98B| Total equity| 6. 2B| 8. 34B| | Lufthansa | British Airways| Liabilities-to-equity ratio 2009| 3. 26| 2. 24| Liabilities-to-equity ratio 2010| 2. 51| 1. 77| We also should take into consideration that if we have high debt-to-equity, which means that a huge amount of debt is used to finance increased operations, the company is able to generate more earnings. If those earnings coming from that strategy would be higher, then the shareholders benefit would be higher too. However when the cost of that debt financing increases in a high level that the firm cannot effort, there are lots of chances for bankruptcy. Dividend payout ratio This ratio shows the percentage of earnings paid to shareholders in dividends. Payout ratio provides an idea of how well earnings support the dividend payments. More mature companies tend to have a higher payout ratio. Dividend payout ratio = dividends/net income Sustainable growth rate= ROE*(1- Dividend Payout ratio) | Lufthansa | British Airways| Dividend payout ratio 2009| 64. 59%| 43. 78%| Dividend payout ratio 2010| 48. 6%| 66. 39%| Cash Flow Analysis Each company generates cash from financing activities,  operating activities and investing activities. According to the Cash Flow Statement of Lufthansa Airline Company in 2010, we saw that the cash flows generated from financing activities were (300,000,000)Euro, from operating activities were 3,075,000,000Eur and cash generated from investing were (2,878,000,000). Co mparing with 2009 we can observe an increased of cash flows from operating and investing activities, whereas for financing activities cash flows have been decreased.. In 2009, the cash flows generated from investing activities were (3,563,000,000) Eur. from operating activities were 1,991,000,000 and from financial activities were 1,271,0000,000Eur. As a result we can say that the cash generated from operating activities in 2010 has increased. Concerning the investments activities, the short-term and long-term investments of Lufthansa rose in 2010. The Corporation spent (2,298,000,000) to purchase long-term investments and (580,000,000) for short-term investments. From financing activities, we can notice a decrease of the amount of cash generated. The cause which led to this decline was the financial crisis. Forecasting Forecasted income statement Income statement is that kind of financial statement which indicates how the revenues generated from the sale of goods and services before expenses are taken out is transformed into net income. Differently from the balance sheet that represents the moment of time, income statement represents a period of time. One major element that we saw as crucial when we did the forecasted income statement was net revenues. We based forecasted revenues based on the sales because they are the main contributors to the revenues. Also growth is another element that affects the company’s profits. The percentage sales grow for previous three years are as follows: | 2008| 2009| 2010| Sales Growth in %| 10. 8| (10. 3)| 22. 62| From the table we can see that it is a drastic decline of the sales from 2008 to 2009. This surely might have come due to the well known financial crisis that affected the entire world’s economy. That decrease in sales means that Lufthansa was also affected by that crisis. Since Lufthansa is a kind of company that doesn’t have so many opportunities to differentiate; like an electronic company that can offer new product, the crisis were felt very deep. Another reason is that Lufthansa offering a service rather than an actual product; it concentrates on the amount of the assets rather than inventory. However, 2010 was the most successful year. The high increase in the sales growth might have come as the result of two main factors; such as, recovery of the world economy from financial crisis and the improvements that Lufthansa did in the service quality to satisfy the customers. In order to make the forecasted income statement we were based on the three previous years. We calculated the percentage change of each data we wanted to forecast. Than we did the average of the three years and then we assumed the same value for all the forecasted years. Based on those ratios and percentage changes, we achieved to forecast income statement for the five years. Forecasted BALANCE SHEET In order to make the forecasting for 5 years we first need to use the assumptions of at least the previous three years (average) respectively 2008, 2009, 2010. We make use of the consolidated financial statements in order to proceed with the forecasted balance sheet. We used the invoices of the balance sheet of three years 2008, 2009, 2010 and then we used the turnover ratio to forecast 2011 until 2015. In order to find the turnover ratio for the projected 5 years we use an average of the three years data that we have. For instance, inventory turnover for 2008 was calculated to be 2%, for 2009 was 3% and 2% for 2010. For the proceeding years we made an average of these three numbers, which is approximately 3% and then we put this number as a constant for each of the 5 years. We did the same with Accounts receivable turnover. For 2008, 2009, 2010 the values were respectively 13%, 14%, 13% and the average for the next 5 years was 13% constant. Forecasted cash flow statement Cash flow statement consists of cash flow from operating, investing and financing activities. Thus, to make the forecasted cash flow statement we use a combination of both forecasted balance sheet and forecasted income statement. For evaluating forecasted cash flow from operating activities, it was necessary to make the difference of the balance sheet data (actual year-previous year). On the other hand, forecasted cash flow from investment activities is linked to the capital expenditures which mean funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. The amount of capital expenditures a company is likely to have depends on the industry it occupies. Some of the most capital intensive industries include oil, telecom and utilities. As in our case Lufthansa, has negative level of capital expenditure, as it is an service company and is too linked with the oil, and the oil crisis highly effect the Lufthansa’s position. Changes in account receivable To find the adjusted Account Receivable we calculated it as a change between the A/R in the next year with the A/R in the prior year in the Balance Sheet. We applied this change of two years throughout the actual and forecasted years. A/R forecasted is calculated by multiplying Net Revenue with A/R turnover which is further explained in the forecasted balan ce sheet. b- Inventories We conducted the same calculation to find the change in inventories in the forecasted cash flow statement. Thus we subtracted inventories of the next year with the inventories of the prior year. Interest expense In order to find Interest Expense adjusted we calculated it by multiplying the tax rate which is 25% with the total interest expense which can be found in the income statement. d- Cash flows from operations can be founded by summing the cash flow from operations before interest with the interest. Cash flows from investing are calculated by adding CAPEX with investing cash flow items. These items can be found in the balance sheet. The forecasted CAPEX for 2011-2015 can be found by multiplying the %of CAPEX with the Net Revenues. The % of CAPEX can be found by dividing the CAPEX by Net Revenues in the actual years and then making an average of these data find a constant data for the forecasting years. We also calculated present value of the company in order to find the market value per share. WACC We forecast the free cash flow to firms and discount them by using the weighted average of capital (WACC). The formula for the WACC is: WACC  =  rD  (1-  Tc)*(D/V) +  rE  *(E  /V). All the values for the formula are given in the financial statements of the company, expect re. Firstly, we have to calculate the cost of equity. For the purpose of calculation, we use the CAPM thus: re = rf+ ? (rm-rf). We calculated re=10. 47% or 10. 5%. Another feature of Lufthansa Company is that it does have Debt, which is7,184,000,000, while Equity is 6671603000. So, the WACC=8. 54%. This is the percentage that will be used to discount the forecasted cash flow and as a result to value the company. Valuation We can conduct Valuation of Lufthansa because we have done the forecasting of the financial statements for 5 years. The first method we use is the Discounted Cash Flow Method. Free cash flows will provide us with an estimated share price for the firm. Respectively we have to go through three steps; the first is forecast FCFEE for 5 years, the second is forecast beyond terminal value based on assumption and the third is discount FCFE with the discounting rate which in our case is WACC (weighted average cost of capital) thus 8. 61% as we already calculated. We find the value per share by estimating the future cash flows of the firm for 5 years after 2010 in order to complete the first step. The values of cash flows are as seen in the table. Basically the value of cash flows each are calculated as follows: revenues-operating costs-taxes-net investments-changes in working capital. These values are then discounted by the discount factor which is WACC 8. 61%. For the first year the discount factor will be 1/(1+0. 861) for the second 1/(1+0. 861)^2 and so on for 5 years. The total value of the company for the years 2011 until 2015 is the sum of these values of cash flows, thus Euro 83,079,531,774. 44 We assume that Lufthansa will operate even after 2015 therefore we calculate the terminal value beyond 2015 in perpetuity. This is calculated cash flow of 2015 over (1+0. 0861) whereas the discounted terminal value (in order for us to find its present value) is calculated by discounting this terminal value by its factor that is, (1+. 0861)^5. Now the value of Lufthansa will be the sum of the discounted cash flows from 2011-2015 with the discounted terminal value beyond 2015. The total value after conducting these calculations will be 226,455,658,906 Euros. The value of one stock is calculated by subtracting FCFF with the value of debt and then dividing it by the number of shares outstanding. The value of one stock is 478. 86 compared to the actual value which is 14. 57Euro. Then we use the P/E ratio compared afterwards with that of the industry since this ratio shows the price paid for a share relative to the annual net income. In order to calculate this ratio we use the formula that is: P/E=P/B*1/ROE. P/E has decreased in these past 3 years. This trend means that the lower P/E ratio the less earnings investors are expecting and they will therefore pay lower premiums for the growth. We assumed the growth is 8% since the % increase in sales was also expected to be 8%.

Ethically Conducted Business Benefit

Business ethics is concerned with moral philosophy, truth, Consultants fairness and justice pertains to the code that guides the professional conduct of aspects such as the expectations of society and customers, social responsibility, consumer autonomy and corporate behavior in global and domestic markets (Rasmusse, 2005).Advertising We will write a custom essay sample on Ethically Conducted Business’ Benefit specifically for you for only $16.05 $11/page Learn More Corporate social responsibilities mean those activities that a business does to improve the living conditions of the society that the business is conducted. With globalization and increase in people awareness of their rights, there have been calls for conducting business ethically. Pablo, in the â€Å"Journal of Business Ethics applauds the ethical behaviors within an organization; ethics in business means conducting a business in socially, economically, politically and environmentally friendly manner (Pablo, 2008). This paper discusses the relationship between law and ethical business behavior. The relationship between law and ethical behavior Ethics are moral standards code of conduct that a person or a company uphold; law on the other hand represent the legal pathway that an organization should follow to be operating within a certain economy. Just like business law, codes of ethics are not international but vary between individuals and companies. People, who uphold ethical reasoning in their actions, do not fail into transgression; they neither find themselves in the wrong side of the law. People who uphold high respect for their ethics not only do the right thing and have peace of mind; but also are also able to transform episodes of temptations to their benefit. They are also able to influence other people to an acceptable behavior. Organizations code of ethics defines how an organization responds to internal or external stimulus. In most organizations, they are in blue prints and an internal policy. They form part of organizational training needs. Organizations that uphold high respects for their code of ethics maintain good internal and external relations with their stakeholders (Kingsolver, 2008).Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Laws that operate in an economy are supposed to offer the pathway and directions of the morally and ethically accepted behavior that businesses are supposed to uphold; this does not imply that all ethical behavior have a legal backing. According to utilitarian theory of ethics, it puts weight on the individual who is undertaking a certain duty; the same way with laws, despite some laws focus a industry, they are applicable at an individual level, individual may mean natural or artificial person (Moon, 2001). The focus here is not the consequences like the case of Consequentialism theory, but on the p eople who are involved. It is based on the motive or the character portrayed by the person who has made a certain action. The most important thing in this theory is the development of the desired right virtues that an individual should have at all times. It follows the same approach as legal laws and rights that a countries constitution offers to its citizens. The virtues should dictate/influence the kind of decision that a company takes. The pleasure that a certain action is going to give, and to the number of people who are going to get the pleasure is the main concern; If an action is thought to bring more pleasure to a large group, this is the correct thing to do given the available alternatives. The value and the worthiness of the action is the most important thing. This is a theory where majority rules. This theory puts more weight on the inner feeling of the individual; the physical products are not of great essence. It is seen as the theory of quality and not quantity (Darwa ll, 2002). Another ethics theory is called norm theory; this means conducting the business in a way that the greatest majority would accept and find normal. If somebody or a company is doing something, then the entire population needs to be comfortable with the actions/decisions and the outcomes of the decisions made.Advertising We will write a custom essay sample on Ethically Conducted Business’ Benefit specifically for you for only $16.05 $11/page Learn More This theory places some relevance to the culture that a certain society holds; the business should be in line with the culture of the society. This will determine the success of the business. The set of beliefs and the way people do things is of importance to the entire performance of the business. If the society believes that doing something is right, then a wise investor is the one who does things in line with this belief. He should at all times ensure that the business is in line with th e culture. The approach taken by norm ethics theory is similar with the approach taken by laws of a country (Dobson, 1997). Can illegal behavior possibly be ethical? There cannot be right answer to the above question; the answer is always subjective to the person who is discussing and the angle at which he or she finds things; the answer is entirely subjective since ethics is a personal attribute that is special and varies with individuals. The situation of the matter can also lead to ethical actions that are illegal. For example in the case of a country that has political conflicts, that hinders the importation of medication into the country, yet the population is suffering; if in any case, someone decides to smuggle in medication, then the person has acted ethically. When smuggling the medication, he has the aim of assisting the population that is ethically accepted. On the other hand, smuggling of whichever nature is illegal and punishable by law. Another example that can assist in expanding the fact that ethical behavior can be illegal is Smuggling refugees out of war-stricken areas; the smuggler is looking forward at assisting people who might probably die, however the fact that he is assisting people with no legal permission to get to another country makes the deal illegal. In politics depending with where a certain person stands, the issue can also be seen as ethical yet illegal; for example an assassination of malevolent dictators, may be ethical from the angle of the assassinators while its unethical and unlawful on the side of supporters.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More There are sometimes that some ethical behavior has no legal baking, for example if an investor wants to set up a pork butchery and goes ahead to start one in a Muslim society, the business is more likely to fail on the basis that the residents will see it as unethical and against their cultural and religious believes. This is because the norm of the religion, which happens to go in line with their culture, does not consider the business as ethical; however the above act is legal and acceptable (Jones, Parker Bos, 2005). Examples of companies with strong corporate social responsibilities functions Mitsubishi is an international company that is respected for its value of corporate social responsibilities programs. The company established a full office to deal with corporate citizenship in April 2004; the office is called Corporate Citizenship Promotion Office: the office was given the mandate of enacting policies that the internal business a chance to improve its processes so as it r educes any adverse effect on the people. The office operates under an acronym called STEP, which means: S: Support for the next generation: the focus is on developing young people to improve their future T: Traffic safety: the company has traffic rules training programs where it teaches drivers, potential drivers and schoolchildren on how to be safe; in line with safety, the company makes reliable vehicles E: Environmental preservation; the company has embarked on some environmental conservation policies and activities P: Participation in local communities: the company has resources set aside to address some needs in the community like health promotions, schools buildings and stocking, promotion of games among others. Another company respected for its effective CSR programs is Toyota motor company: the company realizes that its success is dependent on the loyalty that they get from their customers, one of the ways of ensuring that they get customers attention and loyalty to the comp any eventually develop. The responsibilities that the company has engaged in include, building of medical centers and hospitals, building schools, scholarships to students and charity work. An example of this area the numerous projects that the company is undertaking in Kenya, Africa they include; During the tree planting season in Mau forest, Toyota Kenya played a major role in offering sponsorship. It has been participated actively in the ongoing companies to eradicate poverty. In doing so, it has offered many young Kenyan in accessing mechanic training at an affordable rate. Emirates Airline Corporation is another international company that is respected for its respect for corporate social responsibilities; the company embarks on societal improvement programs like sponsoring sports, rallies and protection of environments activities. This is in the effort of creating a good repo with customers across the globe (Goodman, 2009). A corporate social responsibility costs a company some fortune, the company have to pay for the expenditure and expect nothing more that good business environment creation. However, businesses with good corporate social responsibilities benefit in the following ways, when a business is ethical, then ethical programs start internally where employees who are respected by their employer produce more effectively and highly than those who are not respected. An organization thus gains high efficiency and effectiveness in its processes. From the external angle, the business develops good relations with its customers. When there are good relations, there is customer loyalty; loyalty of customer is a strong marketing and competitive advantage tool that leads to increased business. The close relationship between customers and businesses as created by corporate social responsibilities programs makes businesses mitigate strategic risks; they are more assured that they will make it in the fiancà © business environments of current business world (D uska, 1999). Conclusion Business ethics refers to conducting business in socially, economically and politically acceptable manner. It aims at developing good internal and external relations; they have close link with laws of a country but in some instances, it is possible to have an ethical action being unlawful. Ethically conducted business benefit an increased competitiveness and customer loyalty as well as reduced business strategic risks. For a business to have ethics in its production, it should start by developing a code of conducted to be adhered by all personnel’s in the organization, training employees on ethical codes of conducts and reviewing the ethical codes with time. References Darwall, S. (2002). Consequentialism. Oxford: Blackwell. Dobson, J. (1997). Finance Ethics: The Rationality of Virtue. New York: Rowman Littlefield Publishers, Inc. Duska, R. (1999). Employee Rights. Oxford: Blackwell. Goodman, C. (2009). Consequences of Compassion: An interpretation an d Defense of Buddhist Ethics. Oxford: Oxford University Press. Jones, C., Parker, M., Bos, R. (2005). For Business Ethics : A Critical Text. London: Routledge. Kingsolver, A. (2008). Capitalism. Encyclopedia of Race and Racism. Detroit: Macmillan. Moon, C. Et al.(2001). Business Ethics. London: The Economist. Pablo, R. et al.(2008). Business Ethics Journal Rankings as Perceived by Business Ethics Scholars. Journal of Business Ethics 95(2), pp. 227-237. Rasmussen, L. (2005). Ethics expertise: history, contemporary perspectives, and applications. Netherlands: Springer. This essay on Ethically Conducted Business’ Benefit was written and submitted by user Britney N. to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.

13 Colonies Report Essays

13 Colonies Report Essays 13 Colonies Report Essay 13 Colonies Report Essay This is a report about the 13 colonies. First I will be talking about all the 13 colonies. Then I will be talking about one specific colony, Virginia. When I talk about Virginia, I will tell you about their migration, reason for migration, Native Americans, and more. So get ready for a report about the 13 colonies. 13 COLONIES There are 3 sets of England colonies with 13 colonies in them. The first colony is the New England colony which consists of Massachusetts, New Hampshire, Rhode Island, and Connecticut. The second colony is the middle colonies which consist of New York, Delaware, New Jersey, and Pennsylvania. The final colony is the southern colony which consists of Virginia, Maryland, North Carolina, South Carolina, and Georgia. These colonies are located along the eastern coast next to the Atlantic Ocean. VIRGINIA’S MIGRATION AND REASON FOR MIGRATION Virginias earliest European immigrants were English- only a few hundred at first, but 4,000 between 1619 and 1624, of whom fewer than 1,200 survived epidemics and Indian attacks. Despite such setbacks, Virginias population increased, mostly by means of immigration, from about 5,000 in 1634 to more than 15,000 in 1642, including 300 blacks. Within 30 years, the population had risen to more than 40,000, including 2,000 blacks. In the late 17th and early 18th centuries, immigrants came not only from England but also from Scotland, Wales, Ireland, Germany, France, the Netherlands, and Poland. In 1701, about 500 French Huguenots fled Catholic France to settle near the present site of Richmond, and beginning in 1714, many Germans and Scotch-Irish moved from Pennsylvania into the Valley of Virginia. VIRGINIA’S CLOTHING The clothing illustrated in this article was worn by living people who had much in common with us. Not only did people then respond to fashion, they also varied their garments based on the activity and the formality of the occasion. The eighteenth-century words dress and undress had meanings quite different from the way we use the words today, though the basic concepts are still viable. Dress clothing meant formal clothing with a different set of conventions and accessories from undress, or informal clothing. In 1775, for example, a woman could still wear a pair of side hoops, or panniers, to support her wide skirt for a dress occasion, while her undress clothing ;although it would appear quite formal to our eyes, had a more modest skirt size that may not have needed hoops at all. Similarly, the clothes in which a wealthy planter conducted his daily business differed significantly from what he wore to a ball at the Governors Palace. The garments worn by a blacksmith or dairymaid for daily work were different from their best outfits, reserved for Sundays at church and infrequent special occasions. VIRGINIA’S HOME LIFE Within a few decades of Jamestown, Virginia was a society with slaves, but it was not yet a slave society. As late as 1640 there were more Africans in New England than Virginia. Only after the supply of European indentured servants declined in the late 1600s the tobacco planters turn increasingly to enslave Africans. In the mid-1600s, before social and racial hierarchies hardened, the slave Anthony Johnson- the black patriarch of Pungoteague Creek on the Eastern Shore- could gain his freedom, acquire a farm, and own a slave himself. But, by the late 1600s, Virginia began passing laws that made hereditary slavery binding on Africans, mulattoes, and some Indians. Virginia slaves came from many different parts of Africa, where they spoke different languages. Once in the colony, they had to learn English to communicate with each other. But they developed a distinct dialect that became the vehicle of a unique culture. By 1776, Virginians from Africa were 40 percent of the population. Various African cultural traditions, including food and cooking preferences, music, dance, vocabulary, religious and healing practices, and folklore mixed to form a new culture that strongly affected white culture as well. VIRGINIA’S RULES AND LAWS Virginia in the 1600s and through most of the 1700s was an extremely in egalitarian society like the Stuart England that produced it. This was the result of conscious choice, largely the vision of one man- Sir William Berkeley- royal governor from 1642 to 1652 and from 1660 to 1677. When he ssumed authority in Virginia, the colony was a society in flux in many ways. Sir Williams ideal society was authoritarian, like the one he had known at home. It would have a few ruling gentry families, a small class of yeomen farmers, a larger group of white tenant farmers, and at the bottom, numerous indentured servants (and eventually enslaved Africans). Social mobility would be at a minimum, and everyone would know his place. These plans were hindered by the staggering death rate in early Virginia, which made for a highly fluid, unstable society. But as death rates dropped in the late 1600s, and slaves replaced troublesome indentured servants, Berkeleys goal was largely achieved. Thereafter, the colony was run by and for a small governing elite. This class ruled Virginia until after the American Revolution. Ironically, many scions of these dynasties would be the leaders in the rebellion against King George III. VIRGINIA’S NATIVE AMERICANS All of the Commonwealth of Virginia used to be Virginia Indian territory, an area estimated to have been occupied by indigenous peoples for more than 12,000 years. Their population has been estimated to have been about 50,000 at the time of European colonization. The various peoples belonged to three major language families. The Algonquian who were on the coast, and Siouan and Iroquoian who were in the interior. In addition, about 30 Algonquian tribes were allied in the powerful Powhatan Confederacy. VIRGINIA’S REASON FOR SETTLEMENT The Jamestown Settlement Colony was the first successful English settlement on the mainland of North America. Named for King James I of England, Jamestown was founded in the Colony of Virginia on May 14, 1607. In modern times, Jamestown Settlement is also a promotional name used by the Commonwealth of Virginias portion of the historical attractions at Jamestown. It is adjacent and complementary to the Historic Jamestown on Jamestown Island which is the actual historic site where the first settlers landed and lived that is run by the National Park Service and Preservation Virginia. Jamestown was founded for the purposes of a quick profit from gold mining for its investors while also establishing a permanent foothold in North America for England. Jamestown followed no fewer than eighteen earlier ailed attempts at European colonization of the North American mainland, including the famous Lost Colony â€Å"at Roanoke Island in what is now Dare County, North Carolina. Other successful colonies in North America were in Spanish dominions such as New Spain, New Mexico, and Spanish Florida. VIRGINIA’S LAND When Christopher Columbus landed on the shores of what Europeans called the New World , or, more precisely, the West Indies, he believed he had found a new trade route to Asia. The first English colonists arrived in North America in 1584 at Roanoke Island, in what is now North Carolina. The next year, a group of these settlers explored southeastern Virginia. The first English colony in North America that managed to survive began at Jamestown in 1607. Although this settlement also ran out of supplies and nearly abandoned in 1610, it later grew as increasing numbers of colonists arrived. Led by Captain John Smith, the settlers immediately explored the surrounding country, traveling up the James, York, Rappahannock, and Potomac Rivers as far as the fall line. They observed and wrote about the many villages and natives they met. Smith published an accurate map of the Coastal Plain of Virginia, marking the villages the scouting party discovered. CONCUSION This was a report on the 13 colonies that focused on Virginia’s rules and laws, Native Americans, land, and more. I used several resources, internet based as well as books to find my information. In this process I learned how the Virginia colony was formed and about the original settlers. I chose Virginia because of the Jamestown settlement and how the colony mysteriously disappeared. This was my report about the 13 colonies and I hope you liked it.

Organisations and behaviour Assignment Example | Topics and Well Written Essays - 2500 words

Organisations and behaviour - Assignment Example The production efficiency methodology explains the method that breaks every action or small tasks into very simpler forms which can be evaluated easily and can be taught. The four principles of the theory are: 1) maximize individual skill and minimize job learning period, 2) design work, matching it to the workers, 3) monitor the performance of the worker and ensure that they are using the right method of working, 4) replace the thumb rule and in that place use the scientific method of work study (Sapru, 2013). Hawk Car Company initially adopted the Taylor method which brought them a lot of problems which are follows: The theory gave importance to productivity and profitability as a result there aroused exploitation of employees in the company. Taylor emphasized on the functional foremanship which says that one employee has to report to a number of managers and thus it loosens the unity of command which can create chaos and confusion in the organization. The employees at Hawk Car com pany suffered from the same problem The method elaborated by Taylor is mechanical in nature and it laid emphasis on efficiency of the work generated. He failed to take in to account the human element and considered workers as robots. Thus, Hawk Car Company assembly managers failed to understand the difficulties that are faced by the employees but concentrated on the efficiency of the work produced by the workers. ... This explains that the person who is at the top of the pyramid is the person to whom every person in the organization has to report (Nelson and Campbell, 2008). In case of Hawk Car Company, it used a hierarchical organizational structure where the workers on assembly line have no authority to give any suggestion to the design and running of the production line. The chain of command of the production department was such that the effectiveness of operation rested on how the people performed at each level and how they report to their assembly line managers. The scope of biasness may arise and the managers who are not open to feedback from employees create further communication gaps. As a result the workers in the Hawk Car Company lost interest in their work and were highly dissatisfied. The number of absenteeism increased as a result the production was affected. The hierarchical organizational structure can create too much distance between the leaders of the organization and the employe es. When there is too much authority in one hand, power dominates. As a result the employees feel low to work efficiently in the organization as their work is not valued by the management. The employees at the Hawk Car Company faced the same situation. The decision making process in this structure is directed from the top level as a result the employees have little say about the work they are assigned. They are not given the opportunity to express their own idea and process of doing a work. As a result they became less involved with the work they are doing. The employees of Hawk Car Company had no right to make any changes to the work process even if it is needed. Working in an assembly line is very difficult for the employees as it

The New College Try by Jerome Karabel Assignment

The New College Try by Jerome Karabel - Assignment Example He maintains in the article that these institutions serve less as vehicles of upward mobility than as transmitters of privilege from generation to generation and the argument has a national and international relevance today. According to Karabel, â€Å"Today, the competition to get into these institutions is at an all-time high, and this has led to serious problems across the socioeconomic spectrum — gnawing and pervasive anxiety among the affluent, underrepresentation among the middle classes and an almost total lack of access among the poor.† (Karabel) The author further maintains that the selective colleges serve less as vehicles of upward mobility than as transmitters of privilege from generation to generation, notwithstanding their image as meritocratic beacons of opportunity. Therefore, I agree with the author and support his argument that admission to these institutions causes a serious issue across the socioeconomic spectrum of the nation today. it is essential that determining steps are taken by the authorities to resolve this issue and to improve the image of these institutions as meritocratic beacons of opportunity. A reflective analysis of the article by Jerome Karabel confirms that the author makes a highly relevant discussion on the lack of opportunity for some sections of the society to get into our leading colleges and universities. As an individual who has witnessed such cases of the people in my friend circle, I totally agree with the author’s arguments.

Vaccination of children. The importance of parents need to vaccinate Research Paper

Vaccination of children. The importance of parents need to vaccinate their children - Research Paper Example Vaccination of children. The importance of parents need to vaccinate their children According to the U.S. Centers for Disease Control and Prevention (CDC), â€Å"Vaccinations not only protect children from developing a potentially serious disease but also protect the community by reducing the spread of infectious disease†. Vaccination can help children for the growth of their immunization system. Children during their developmental stages are vulnerable to many diseases. They may not possess adequate resistive power to counter the attacks of diseases during their infancy or early childhood period. Many children forced to suffer death before the introduction of the practice of vaccination of children. Diseases like diphtheria, small pox, measles, polio etc can cause immense problems to the children during their early developmental stages. After the introduction of vaccination for child diseases like polio, small pox, diphtheria, measles etc started to decrease or disappear from the world. In other words, vaccination of children saved millions of lives since its introduction. Today, in most of the countries vaccination of children against dreadful diseases starts immediately after the birth itself. Periodical vaccination against different diseases may continue till the child reaches his/her 15 or 16 year s of age. In short, vaccination of children can save millions of lives and therefore the parents should give more attention to the periodical vaccination of their children. This paper analyses the importance of child vaccination. Importance of Child Vaccination Up through the early 1920's, diphtheria was one of the most dreaded childhood diseases in the United States, killing over 10,000 people every year. We started vaccinating children against diphtheria in the 1930's and 40's, and today it is rare for a doctor even to see a case of diphtheria. In 1962, the year before measles vaccine was introduced; almost 500,000 cases of measles were reported in the U.S. In 1998 and 1999, only about 100 measles cases were reported each year. Until the middle of the 20th Century, smallpox was one of the most devastating diseases the world has ever known. In 1967, the World Health Organization declared war on smallpox with an intensive, worldwide vaccination campaign. Twelve years later, smallpox was wiped out - gone from the Earth forever. Parents in the 1950's were terrified as polio paralyzed children by the thousands. Now the fight against polio is nearly won, and soon it will join smallpox as nothing but a bad memory (Vaccinations for Children, Why and When, 2011) The above statistics clearly show the importance of vaccination of children. It should be noted that some of the serious diseases which hunted human for a long time, is under control at present, only because of the development of child vaccination system. It is necessary to vaccinate babies using a baby vaccination schedule. This vaccination schedule normally starts immediately after birth itself. Today, medical science has a vaccination schedule for babies and the strict observance of this schedule can help the babies to resist the attack of dreadful diseases. The normal vaccination schedule of a child is given below. AGE VACCINES Birth BCG, OPV, Hepatitis B 6 weeks DTP, OPV+IPV, Hepatitis B, Hib, PCV 10 wee ks DTP, OPV+IPV, Hib, PCV 14 weeks DTP, OPV+IPV, Hepatitis B, Hib, PCV 9 months Measles 1 year Varicella 15 months MMR, PCV Booster 16 months Hib Booster 18 months DTP Booster, OPV+IPV Booster 2 years

Importance of Corporate Governance for Fraud Prevention

Importance of Corporate Governance for Fraud Prevention In the era of globalisation, corporate scandals are no longer shocking news in corporate world. A recent corporate fraud has happened in Paris in Societe Generale Bank, where an employee committed a fraud of GBP 3.7 billions. It is not a new story for the corporate world as it has seen cases of BCCI (Bank of credit and commerce internationals), Polly Peck, Maxwell, Allied Irish Bank, Enron, Pamalat, Barings Bank, WorldCom, Xerox and many more. Frauds in Financial statements have become a common area of frauds now days. These frauds have increased the responsibility of auditors and also of government to pass effective laws so that scope of committing frauds can be reduced. Corporate Governance in any company is for that only. Companies are bounded by corporate governance guidelines and procedures, so that chances of fraudulent activities can be reduced. Meaning of Corporate Governance According Cadbury Report 1992, Companies are controlled and directed by the system of corporate governance. In companies, Corporate Governance is the responsibility of Boards of Directors. Auditors and directors are elected and appointed by the consent of shareholders, which give them the feeling of satisfaction that a suitable corporate governance system is working to reserve their rights and benefits. Corporate governance set the relationship between management, board, shareholders and other stakeholders. Corporate governance enables directors and auditors to manage their responsibilities towards shareholders and wide stakeholders of the company. In contrast , corporate governance increased the confidence of shareholders that they will get an reasonable return on their investments, whereas for the stakeholders it provide the assurance that company manages its impact on society and environment in a responsible manner. Corporate governance include the combination of various laws, regulations, listing rules and voluntary private sector practices that facilitate the company to draw more capital, execute efficiently, generate profit and meet other legal obligations and general societal expectations. Corporate governance is about commitment to values, about ethical business conduct and about making a distinction between personal and corporate funds in the management of a company. Corporations pool capital from a large investor base both in the domestic and in the international capital markets. In this context, investment is ultimately an act of faith in the ability of a corporations management. When an investor invests money in a corporation, he expects the board and the management to act as trustees and ensure the safety of the capital and also earn a rate of return that is higher than the cost of capital. In this regard, investors expect management to act in their best interests at all times and adopt good corporate governance practices. Need for Corporate Governance A corporation is a body of various stakeholders include customers, employees, investors, vendors, government and society. It is necessary for any corporation to present transparent and true pictures to its shareholders. Today, this has become essential for the business world because every company wants to enter into the global capital and also want to draw the attention and also keep hold on the top human capital from different areas of the world. Company want the partnership with different vendors on the big collaborations and want to be in harmony and peace with the rest of the community. A corporation will never succeed until and unless it demonstrate and also it embrace the ethical conduct. Corporate governance in business is in relation to the ethical conduct. Here, the ethic is very much concerned about the different codes of principles and the values which help the person to differentiate and choose between the right and the wrong and as a result, help to choose from the other alternatives. Additionally, the parties which are involved in the conflicting interest give rise to the ethical dilemmas. Therefore, keeping in mind the principles which are totally based on culture, context and the value of the company, the manager make their decisions. For a business which is running good, it is very much important that it always go in the good direction by keeping the stakeholders expectations in mind. Well, corporate governance is not just the law,it is much more than the law and it cant be imposed and run by the legislation alone because its different parts comes from the managements mindset and their culture. The affairs of the organisation are conducted by the corporate governance in order to provide the fairness for all of the shareholders which comes from these three- accountability, integrity and the openness. To certify standards, the legislation can and should put down a general framework which is the â€Å"form†. The integrity and the credibility for process will finally determined by the â€Å"substance†. The substance is inevitably connected to the managements ethical standards and mindset. The corporations should always need to identify that the prosperous development and the growth of the company require the full support and the cooperation from their stakeholders and this is possible only when the corporation is following the best practices of the corporate governance. Here for shareholders, management of the corporation needs to perform as the trustees and avoid the difference of benefits among various sections of stakeholders, particularly between the owner and the other stakeholders. Corporate governance becomes the key element in order to improve the firms economic efficiency. With the help of the corporate governance, the corporations keep in mind the interest of the ample series of constituencies, and also of community where they are operating. Additionally it ensure that the board is accountable for shareholders. As a result, it guarantees that the corporations as a whole are operating for the benefit and profit of society. Though by taking the advantage of asymmetry between the shareholders, huge amount of profit can be made in short run, and by balancing the interest of all shareholders itself guarantee the growth and the survival of the corporation in long run. Heavy cost can be incurred if there is failure to execute the good governance which can be the regulatory problems. Many proofs suggest that those corporations or companies which do not implement and follow the significant corporate governance measures can give the considerable risk premium in the public market at the time when it is competing for the limited capital. In recent times, the analysts of the stock market received a high appreciation from the market for showing the relationship between the returns and the governance. For this context, different reports do not only talk about the governance in common but they also recommend the explicit alter investment which is totally based on weakness or strength of the infrastructure of the corporate governance of the company. The best thing about the credibility which is given by the procedures of a good corporate governance is that it help to provide the confidence of clients (national international) in order to draw more ‘pat ient, the capital for the long term, and also help to cut down the capital cost. All this increased attention is because of arises of the financial crises in different parts of the world. Like, the financial crises in Asia brought the attention of the corporate governance subject in Asia. Recently, the scandals in the US also disturb the unsatisfied corporate landscape and peace which are unexpected in a sense. These scandals lead to a new set of initiatives in corporate governance in US and trigger a new discussion in the United Kingdom with European union and in the rest of the world. Meaning of Financial Statement Fraud Financial statements are the picture of financial position of a company which includes balance sheet, profit and loss accounts, and trading accounts. Frauds here, means deliberately and intentionally done activities for self interest and cheating the second party. Under the Statement of Auditing Standards (SAS) 1101, it is stated that â€Å"Auditors should plan and perform their audit procedures and evaluate and report the results thereof, recognizing that fraud or error may materially affect the financial statement†. Accounting to Benny K.B. Kwok 2005, Misstatements in financial statements can arise from either by error or by fraud. Error refers to an involuntary misstatement in financial data of a company which include omission of an amount or disclosure, such as A mistake in gathering or processing data from which financial statements are prepared; An incorrect accounting estimate arising from oversight or misinterpretation of facts; and A mistake in the application of accounting principles relating to measurement, recognition, classification, presentation or disclosure. The usage of both the dishonesty to get the financial advantage illegally and intentionally falsification also disturbing the statements, leads to fraud which can be done by any person from the management, or the employees or any third party. In fraud following things involves â€Å"Falsification or alteration of accounting records or other documents; Misappropriation of assets or thefts; Suppression or omission of the effects of transaction from records or documents; Recording of transaction without substance; Intentional misapplication of accounting policies; Wilful misrepresentations of transactions or of the organizations state of affairs. Financial reporting in the UK is based on three principles:- Companies Act 2006 Accounting standards or specifically Statements of Standard Accounting Practices(SSAP) and Financial Reporting Standards And the requirements of the Stock Exchange. Companies Act 2006 According to the Companies Act 2006, accounting records maintained by every company must: Be sufficient to show and explain the companys transactions; Disclose with reasonable accuracy at any time the financial position of the company at that time and Enable the directors to ensure that any Profit and Loss account or Balance Sheet gives a true and fair view of the companys financial position. Accounting records should contain day to day entries of all transactions, full record of companys assets and liabilities and full information regarding companys stock. According to Companies Act 2006 under section 145(B), if the financial statements of a company do not meet the requirements of the Act, the court may ask for revised financial statements and the cost of re- preparing financial statements would be bear by the party in abuse of preparing defective or false financial statements. Accounting Standards In UK, all accounting standards till 31 July 1990 used to be called Statements of Standards Accounting Practice (SSAP) which was formulated by the Accounting Standard Committee (ASC). SSAP was then gradually replaced by Financial Reporting Standards (FSA) produced by the successor to the ASC, the Accounting Standards Board (ASB). UK Accounting Standards laid down the guidelines regarding how particular types of transaction should be reflected in the financial statements of a company to present true and fair picture of companys financial position. The stock exchange listing requirements-Yellow Book Rules which governed the listing of securities of the stock exchange in the UK are known as the Yellow Book. According to Yellow Book, listed companies are required to publish their financial statements within six months of their financial year end. Most of the listed companies however, publish their financial statements quarterly. It is necessary from the point of view of shareholders because shares of companies are in the hands of general public and they need continuous information regarding firm financial position so that they can take right investment decision. According to SSAP December 1999, â€Å"the objective of financial statements is to provide information about an organizations financial performance and financial position that is useful to a wide range of readers for assessing the stewardship of the organizations management and for making economic decisions†. For the purposes of this discussion, we are talking about financial statement fraud in a major public company context; a context that can affect confidence in the financial system. We are not talking about what might be called internal fraud or a great many other types of dishonest conduct in corporate life. This is about projecting a false state of affairs on a large scale and in a very public context. DEFINITIONS Corporate governance is about promoting corporate fairness, transparency and accountability Wolfensohn, president of the Word bank, June 21, 1999. Corporate governance is the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance, OECD April 1999. OECDs definition is consistent with the one presented by Cadbury [1992]. According to Elliot and Willingham, â€Å"financial statements fraud is management fraud, the deliberate fraud committed by management that injures investors and creditors through materially misleading financial statements†. Key words used in the research: Currency option: In this option the possessor has the right to sell or buy the currency at a particular phase of the time at a particular price. In this the possessor doesnt have the obligation. Currency forward: The prices are locked in this contract so that the counterparties can sell or buy the currency on the upcoming or future date. Here the possessor who holds the contract are obliged to sell or buy the currency at a particular future date, at the particular quantity and on a particular price. These transactions are also called as outright forward currency transactions. Option: when the option is exercised to earn profit then it is known as in- the-money option. Call option: In this type of option, the buyer who wants to buy any assets, commodities etc. has the right to buy at a particular period of time but he is not obliged, whereas the seller is highly obliged to sell the assets etc. at a particular time to the buyer. A premium has to be paid by the buyer to hold this right. This option is carried out when the strike price is below the price of the market of the agreed commodities. Put option: In this option, the seller has obligations to buy the commodities, assets etc. from the buyer whereas the buyer has the right, but there is no obligation, to sell the agreed commodities, assets etc. at a particular period of time for a particular price. This option is carried out when the strike price is more than the price of the market of the agreed commodities. Prime broker: The person who settle down the cash and security for their clients in the financial market by charging them fees is known as the prime broker. They manage the money of their clients by using different strategy in the market. Research Questions and Objectives Research Questions Financial statements frauds -ethical or technical issue? How firms manipulate their financial statements? What are the motives of financial frauds other than monetary? What is the role of corporate governance in controlling these frauds? Research Objectives: To analyse the major areas of frauds. To examine role of top management in fraudulent practices. To analyse the efficacy of various acts and rules passed for enhanced corporate governance. To analyse the importance of financial statements in investment decision making. To explore the causes and consequences of financial statements frauds. Scope of study: Research study will be restricted to European countries financial statement frauds as US market is more explored than European market. Research will examine and critically analyse the case study of Ireland based bank named Allied Irish Bank. Remaining chapter shall follow the following planned strategy: Chapter Two: Literature review: It will cover 3000 words and include journals and articles citation. Chapter Three: Research Methodology: It will cover 1500 words. This section will give idea of data collection and also briefly explain limitation attached to it. Chapter Four: Data Analysis: This section will evaluate and analyse the data and follow the discussion. Chapter Five: Conclusion and Recommendations: This section finally concludes the research and provides recommendations. CHAPTER TWO Literature Review 2.1.1. Agency problem and Corporate Governance 2.1.1.1 Separation of ownership -origin of agency problem Agency problem resulted from separation of ownership from control (Berge Means 1932; Jensen Meckling 1976) is still prevailing around the world. Findings have proved that firms having weaker corporate governance policies and structure face greater agency problems; which allow senior managers to cook their recipe of extracting more private benefits and finally firm perform worse at all levels (Core at al. 1999). Evidence for such a weak corporate governance structure and higher agency problems can be found from Asian Financial Crisis in 1997. At the time Asian Crisis 1997, firms which had good corporate governance structure provided better protection to shareholders especially to minor shareholders and performed better during the crisis (Joh 2003 and Mitton 2002). In countries like USA and European countries especially UK, agency problems are higher as evidenced from corporate scandals in USA and UK for example Maxwell Corporation (1991), Polly Peck (1991), BCCI (1991), Enron (2001) , Barings Bank (1995), Parmalat (2003) and many more. The recent scandal happened in Societe Generale Bank of Paris 2008, in this also agency problem was the main reason for the frauds committed by the employer of the Societe Generale Bank of Paris. An Agency problem is very crucial problem which had taken birth during 19th century. Agency theory is defined as a â€Å"contract under which one party (the principal) engages another party (the agent) to perform some service on their behalf† (Jensen and Meckling 1976). The problems arises when the agent do not work in the welfare of principal. More cases of frauds, where involvements of companys top management were high, coming into light and the simple reason is principal agency problem. In the case of HealthSouth, CEO Richard Scrushy had instructed senior managers to show fraudulent income of $2.5 billion in order to meet Wall Street expectation. 2.1.1.1.1 Agency Cost Agency costs are another issue which is bear by the principal for the frauds committed by the agent. The result of agency problem is reflected in companys share price which can be seen as the loss to shareholders in terms of declined in the price of shares in stock exchange.Jensen and Meckling (1976) explained agency costs as the sum of monitoring costs, bonding costs, and residual loss. Monitoring cost:- In UK companies are required to follow Cadbury (1992) and Greenbury (1995) reports for corporate governance. Monitoring cost are paid by the principal to monitor the behaviour of agents. Monitoring cost generally include costs of conducting auditing, writing executive compensation contracts and sometimes cost of firing the fraud employees and other top managers or executives. All these costs are paid by the principal, but Fama and Jensen (1983) argued that these agency costs which are initially born by the principal, ultimately borne by the agents as the compensation of agents are adjusted to cover these costs. Some researcher further argued that monitoring will restrict the managerial initiative (Burkart, Gromb and Panunzi 1997). Criticisers of Cadbury Report (1992) have argued that high level of monitoring may restrict the managerial entrepreneurship. Bonding Costs As argued by Fama and Jensen( 1983), monitoring cost ultimately bear by agents which need to set up structure that will act in interest of shareholders or principal , the cost of establishing these set up or system is known as bonding costs. These costs are not always financial in nature; it may include additional information provided to shareholders. Denis (2001) further argued that â€Å"the optimal bonding contract should aim to entice managers into making all decisions that are in the shareholders best interests†. In UK, bonding structure which is imposed on closely held companies management, require companies to distribute all income after meeting all business expenses. Earning retention is big problem in UK; the mechanism of bonding may reduce the scope of this problem. Residual Loss â€Å"Residual loss arises because the cost of fully enforcing principal-agent contracts would far outweigh the benefits derived from doing so. Since managerial actions are unobservable ex ante, to fully contract for every state of nature is impractical. The result of this is an optimal level or residual loss, which may represent a trade-off between overly constraining management and enforcing contractual mechanisms designed to reduce agency problems.† (Patrick McColgan 2001:8). 2.1.1.2 Stewardship theory Agency theory is more dominant in the perspective of corporate governance mechanism, but this view has been criticized by many writers (Hoskisson et al. 2000; Blair 1995; Perrow 1986). Agency theory had limitation in explaining sociological and psychological involved in principal agent conflicts (Davis Thompson 1994; Davis et al.1997). Stewardship theory assume mangers as good stewards of the firms. Managers act diligently in order to attain high corporate profits and shareholders returns (Donaldson Davis 1994). In an empirical study performed by Tian and Lau 2001 in Chinese shareholding firms, they find stewardship theory has received strong support in comparison to agency theory. Further Phan 2001 explained that â€Å"whether the assumptions of Agency Theory can be generalised to emerging markets, with their different sociological, economic, and developmental fundamentals, remains an important research question†. In summary, agency theory has its roots in industrial and organisational economics. Agency theory assumes that behaviour of human being is opportunistic and selfish. Therefore, the theory recommends strong director and shareholder control. It suggests the fundamental function of the board of directors is to control managerial behaviour and try to ensure that managers act in the best interests of shareholders. 2.1.2 Review of Corporate Governance reports In this section, international reports on corporate governance will be critically reviewed which were published in last decades. The international reports considered in this section are as follows: â€Å"Report of the Committee on the Financial Aspects of Corporate Governance† (Cadbury Report, 1992) â€Å"Where were the Directors? Guidelines for Improved Corporate Governance in Canada† (Dey Report, 1994) The General Motors Corporation Guidelines (GMC, 2001) â€Å"Committee on Corporate Governance† (Hampel Report, 1998) â€Å"OECD Principles of Corporate Governance† (OECD Report, 1999) Sarbanes- Oxley Act 2002 After the unexpected corporate scandals of renowned companies like Maxwell (1991), Polly Peck (1991), and BCCI (1991) among others in the UK, the committee for corporate governance under the guidance of Sir Adrian Cadbury along with Financial Reporting Council (FRC), the London Stock Exchange (LSE), and the other accountancy profession has been formed to address corporate governance issues. This report was known as Cadbury report which was first report in UK focused on the aspect of corporate governance such as financial reporting and reviewed the role of boards and auditors. This report was published in 1992. The Cadbury committee report finally draw two major recommendation for the structure of UK corporate board. Cadbury report suggests at least three non executive directors in the board and two of them should be independent from management. The positions of chairman and CEO should not hold by the same person. The purpose behind this set up was to reduce the individual dominance a nd ensuring higher level of monitoring for corporate board by introducing more independence. Beasley (1996) and Dechow et al. (1996) found that â€Å"firms with more independent boards are significantly characterised by a lower likelihood of financial statement fraud and earnings management†. In Canada, during 1994 Dey report was published. This report was the first fully fledged report on corporate governance which a company should follow in order to list on stock exchange. Toronto stock exchange (TSE) adopted these guidelines in 1995 which were laid down by the Dey report. All TSE listed companies required to provide the difference in their corporate governance guidelines and guideline laid down by the Dey report. After Dey Report 1994, other similar reports in other jurisdiction have been published. General Motors Corporation (GMC) in USA published its own corporate guidelines in 1994 after criticising by the shareholders regarding poor company performance and doubtful board practices. These guidelines were developed with consent of GMC board, its shareholders and other activists for corporate governance. These guidelines were welcomed by the institute California Public Employees Retirement System (CalPERS) and by the industry. GMC guidelines become the benchmark in USA for corporate governance. In UK, during 1998, Hampel Committee was formed to review the recommendations of Cadbury report (1992) and the Greenbury report (1995) relating to executive remuneration. The Hampel committee was also formed to cover some gaps by these two reports i.e. Cadbury report and Greenbury report. Hampel report suggests that good corporate governance goes beyond prescribed corporate structures. According to Hample Report (1998:15) on Corporate Governance Sir Hample â€Å"recommend that companies should include in their annual report and accounts a narrative statement of how they apply the relevant principles to their particular circumstances. Given that the responsibility for good corporate governance rests with the board of directors, the written description of the way in which the board has applied the principles of corporate governance represents a key part of the process†. Hampel report drew attention for the approach of box ticking which is a serious issue for corporate governance . It also examined the implementation of Cadbury and Greenbury report and suggested more clear recommendations on policies of remuneration, accountability and auditing. During 1999, Organisation for Economic and Co-operation Development (OECD) laid down principles of corporate governance for the listed companies of member countries of OECD. It cover main subjects areas like rights and equitable treatment of shareholders, role of stakeholders in corporation structure, disclosure and transparency of financial facts and figures and majorly role and responsibilities of board. OECD guidelines become starting point for local policy makers of corporate governance. After the ,shocking scandals of Enron and WorldCom, US congress along with NYSE (New York Stock Exchange) passed the reforms to address conflicts of interest and redefined relationship between companies and auditors. This reform was known as the Accounting Industry reform Act 2002 which is widely known as Sarbanes Oxley Act 2002. The main purpose of this act was to enforce the independence of external auditors. The act also reinforced duties and responsibilities for CEOs and CFOs by imposing strict penalties for misrepresenting companys quarterly and annual reports. The penalty for misrepresentation was personal fines of US$ 1 million or imprisonment up to 10 years or both. Sarbanes Oxley Act has intense effect on the corporate governance policies on US and rest of the world. NYSE also imposed additional requirement for listed companies, under which listed companies must have independent directors in majority and must disclose business code of conduct and ethics for directors, office rs including managers at all level, and employees. Whittington(1993) and Melis, (2004a) argued that â€Å"corporate financial reporting and corporate governance systems are highly correlated, with any improvement in either system having a positive influence on the other, and vice versa† Combined code issued in 2006 replaces the combined issued in 2003. Financial service authority of UK, require listing companies to be obliged by the combined code 2006 and carry out consultation before listing. This new code contains main principles and provisions. Combined code 2006 asks listed companies to make a disclosure statement for code and that should be in two parts. Some of the provisions are not or less relevant for small or new listed companies. Also some provisions do not apply to companies below FTSE 350. 2.1.3 Global findings for adoption of corporate governance guidelines According Stephanie Maier (EIRIS 2005:1) findings, â€Å"Only 25% of US companies separate the roles of chairman and CEO compared with at least 50% forcompanies in other developed economies. Swiss boards have the highestpercentage of independent directors(81%) Germany, Austria and Japanall have less than 10%. Only 4% of companies in Japan haveaudit committees comprising amajority of independent directorscompared to over 95% in the USA,Canada, the Netherlands,Luxembourg, the UK and Ireland†¢ Only 22% of companies in Singaporeand 25% of companies in Hong Konghave meaningful codes of ethics†. Board size: According to EIRIS 2005, average board size is minimum in New Zealand (7.2) and maximum in Germany (22.8). USA and UK comes at rank 7th and 8th with average board size of 10.7 and 11.4 respectively ( see appendices for details). Higgs Review (2003) suggested â€Å"An effective board should not be so large as to become unwieldy. It should be of sufficient size that the balance of skills and experience is appropriate for the requirement of the business and that changes in the boards composition can be managed without undue disruption†. Separation of ownership and CEO According to findings by EIRIS 2005, in UK nearly 97% separate the ownership under unitary board structure whereas in US only 25% companies separate the ownership under the unitary board structure. In Ireland and Luxemb Importance of Corporate Governance for Fraud Prevention Importance of Corporate Governance for Fraud Prevention In the era of globalisation, corporate scandals are no longer shocking news in corporate world. A recent corporate fraud has happened in Paris in Societe Generale Bank, where an employee committed a fraud of GBP 3.7 billions. It is not a new story for the corporate world as it has seen cases of BCCI (Bank of credit and commerce internationals), Polly Peck, Maxwell, Allied Irish Bank, Enron, Pamalat, Barings Bank, WorldCom, Xerox and many more. Frauds in Financial statements have become a common area of frauds now days. These frauds have increased the responsibility of auditors and also of government to pass effective laws so that scope of committing frauds can be reduced. Corporate Governance in any company is for that only. Companies are bounded by corporate governance guidelines and procedures, so that chances of fraudulent activities can be reduced. Meaning of Corporate Governance According Cadbury Report 1992, Companies are controlled and directed by the system of corporate governance. In companies, Corporate Governance is the responsibility of Boards of Directors. Auditors and directors are elected and appointed by the consent of shareholders, which give them the feeling of satisfaction that a suitable corporate governance system is working to reserve their rights and benefits. Corporate governance set the relationship between management, board, shareholders and other stakeholders. Corporate governance enables directors and auditors to manage their responsibilities towards shareholders and wide stakeholders of the company. In contrast , corporate governance increased the confidence of shareholders that they will get an reasonable return on their investments, whereas for the stakeholders it provide the assurance that company manages its impact on society and environment in a responsible manner. Corporate governance include the combination of various laws, regulations, listing rules and voluntary private sector practices that facilitate the company to draw more capital, execute efficiently, generate profit and meet other legal obligations and general societal expectations. Corporate governance is about commitment to values, about ethical business conduct and about making a distinction between personal and corporate funds in the management of a company. Corporations pool capital from a large investor base both in the domestic and in the international capital markets. In this context, investment is ultimately an act of faith in the ability of a corporations management. When an investor invests money in a corporation, he expects the board and the management to act as trustees and ensure the safety of the capital and also earn a rate of return that is higher than the cost of capital. In this regard, investors expect management to act in their best interests at all times and adopt good corporate governance practices. Need for Corporate Governance A corporation is a body of various stakeholders include customers, employees, investors, vendors, government and society. It is necessary for any corporation to present transparent and true pictures to its shareholders. Today, this has become essential for the business world because every company wants to enter into the global capital and also want to draw the attention and also keep hold on the top human capital from different areas of the world. Company want the partnership with different vendors on the big collaborations and want to be in harmony and peace with the rest of the community. A corporation will never succeed until and unless it demonstrate and also it embrace the ethical conduct. Corporate governance in business is in relation to the ethical conduct. Here, the ethic is very much concerned about the different codes of principles and the values which help the person to differentiate and choose between the right and the wrong and as a result, help to choose from the other alternatives. Additionally, the parties which are involved in the conflicting interest give rise to the ethical dilemmas. Therefore, keeping in mind the principles which are totally based on culture, context and the value of the company, the manager make their decisions. For a business which is running good, it is very much important that it always go in the good direction by keeping the stakeholders expectations in mind. Well, corporate governance is not just the law,it is much more than the law and it cant be imposed and run by the legislation alone because its different parts comes from the managements mindset and their culture. The affairs of the organisation are conducted by the corporate governance in order to provide the fairness for all of the shareholders which comes from these three- accountability, integrity and the openness. To certify standards, the legislation can and should put down a general framework which is the â€Å"form†. The integrity and the credibility for process will finally determined by the â€Å"substance†. The substance is inevitably connected to the managements ethical standards and mindset. The corporations should always need to identify that the prosperous development and the growth of the company require the full support and the cooperation from their stakeholders and this is possible only when the corporation is following the best practices of the corporate governance. Here for shareholders, management of the corporation needs to perform as the trustees and avoid the difference of benefits among various sections of stakeholders, particularly between the owner and the other stakeholders. Corporate governance becomes the key element in order to improve the firms economic efficiency. With the help of the corporate governance, the corporations keep in mind the interest of the ample series of constituencies, and also of community where they are operating. Additionally it ensure that the board is accountable for shareholders. As a result, it guarantees that the corporations as a whole are operating for the benefit and profit of society. Though by taking the advantage of asymmetry between the shareholders, huge amount of profit can be made in short run, and by balancing the interest of all shareholders itself guarantee the growth and the survival of the corporation in long run. Heavy cost can be incurred if there is failure to execute the good governance which can be the regulatory problems. Many proofs suggest that those corporations or companies which do not implement and follow the significant corporate governance measures can give the considerable risk premium in the public market at the time when it is competing for the limited capital. In recent times, the analysts of the stock market received a high appreciation from the market for showing the relationship between the returns and the governance. For this context, different reports do not only talk about the governance in common but they also recommend the explicit alter investment which is totally based on weakness or strength of the infrastructure of the corporate governance of the company. The best thing about the credibility which is given by the procedures of a good corporate governance is that it help to provide the confidence of clients (national international) in order to draw more ‘pat ient, the capital for the long term, and also help to cut down the capital cost. All this increased attention is because of arises of the financial crises in different parts of the world. Like, the financial crises in Asia brought the attention of the corporate governance subject in Asia. Recently, the scandals in the US also disturb the unsatisfied corporate landscape and peace which are unexpected in a sense. These scandals lead to a new set of initiatives in corporate governance in US and trigger a new discussion in the United Kingdom with European union and in the rest of the world. Meaning of Financial Statement Fraud Financial statements are the picture of financial position of a company which includes balance sheet, profit and loss accounts, and trading accounts. Frauds here, means deliberately and intentionally done activities for self interest and cheating the second party. Under the Statement of Auditing Standards (SAS) 1101, it is stated that â€Å"Auditors should plan and perform their audit procedures and evaluate and report the results thereof, recognizing that fraud or error may materially affect the financial statement†. Accounting to Benny K.B. Kwok 2005, Misstatements in financial statements can arise from either by error or by fraud. Error refers to an involuntary misstatement in financial data of a company which include omission of an amount or disclosure, such as A mistake in gathering or processing data from which financial statements are prepared; An incorrect accounting estimate arising from oversight or misinterpretation of facts; and A mistake in the application of accounting principles relating to measurement, recognition, classification, presentation or disclosure. The usage of both the dishonesty to get the financial advantage illegally and intentionally falsification also disturbing the statements, leads to fraud which can be done by any person from the management, or the employees or any third party. In fraud following things involves â€Å"Falsification or alteration of accounting records or other documents; Misappropriation of assets or thefts; Suppression or omission of the effects of transaction from records or documents; Recording of transaction without substance; Intentional misapplication of accounting policies; Wilful misrepresentations of transactions or of the organizations state of affairs. Financial reporting in the UK is based on three principles:- Companies Act 2006 Accounting standards or specifically Statements of Standard Accounting Practices(SSAP) and Financial Reporting Standards And the requirements of the Stock Exchange. Companies Act 2006 According to the Companies Act 2006, accounting records maintained by every company must: Be sufficient to show and explain the companys transactions; Disclose with reasonable accuracy at any time the financial position of the company at that time and Enable the directors to ensure that any Profit and Loss account or Balance Sheet gives a true and fair view of the companys financial position. Accounting records should contain day to day entries of all transactions, full record of companys assets and liabilities and full information regarding companys stock. According to Companies Act 2006 under section 145(B), if the financial statements of a company do not meet the requirements of the Act, the court may ask for revised financial statements and the cost of re- preparing financial statements would be bear by the party in abuse of preparing defective or false financial statements. Accounting Standards In UK, all accounting standards till 31 July 1990 used to be called Statements of Standards Accounting Practice (SSAP) which was formulated by the Accounting Standard Committee (ASC). SSAP was then gradually replaced by Financial Reporting Standards (FSA) produced by the successor to the ASC, the Accounting Standards Board (ASB). UK Accounting Standards laid down the guidelines regarding how particular types of transaction should be reflected in the financial statements of a company to present true and fair picture of companys financial position. The stock exchange listing requirements-Yellow Book Rules which governed the listing of securities of the stock exchange in the UK are known as the Yellow Book. According to Yellow Book, listed companies are required to publish their financial statements within six months of their financial year end. Most of the listed companies however, publish their financial statements quarterly. It is necessary from the point of view of shareholders because shares of companies are in the hands of general public and they need continuous information regarding firm financial position so that they can take right investment decision. According to SSAP December 1999, â€Å"the objective of financial statements is to provide information about an organizations financial performance and financial position that is useful to a wide range of readers for assessing the stewardship of the organizations management and for making economic decisions†. For the purposes of this discussion, we are talking about financial statement fraud in a major public company context; a context that can affect confidence in the financial system. We are not talking about what might be called internal fraud or a great many other types of dishonest conduct in corporate life. This is about projecting a false state of affairs on a large scale and in a very public context. DEFINITIONS Corporate governance is about promoting corporate fairness, transparency and accountability Wolfensohn, president of the Word bank, June 21, 1999. Corporate governance is the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance, OECD April 1999. OECDs definition is consistent with the one presented by Cadbury [1992]. According to Elliot and Willingham, â€Å"financial statements fraud is management fraud, the deliberate fraud committed by management that injures investors and creditors through materially misleading financial statements†. Key words used in the research: Currency option: In this option the possessor has the right to sell or buy the currency at a particular phase of the time at a particular price. In this the possessor doesnt have the obligation. Currency forward: The prices are locked in this contract so that the counterparties can sell or buy the currency on the upcoming or future date. Here the possessor who holds the contract are obliged to sell or buy the currency at a particular future date, at the particular quantity and on a particular price. These transactions are also called as outright forward currency transactions. Option: when the option is exercised to earn profit then it is known as in- the-money option. Call option: In this type of option, the buyer who wants to buy any assets, commodities etc. has the right to buy at a particular period of time but he is not obliged, whereas the seller is highly obliged to sell the assets etc. at a particular time to the buyer. A premium has to be paid by the buyer to hold this right. This option is carried out when the strike price is below the price of the market of the agreed commodities. Put option: In this option, the seller has obligations to buy the commodities, assets etc. from the buyer whereas the buyer has the right, but there is no obligation, to sell the agreed commodities, assets etc. at a particular period of time for a particular price. This option is carried out when the strike price is more than the price of the market of the agreed commodities. Prime broker: The person who settle down the cash and security for their clients in the financial market by charging them fees is known as the prime broker. They manage the money of their clients by using different strategy in the market. Research Questions and Objectives Research Questions Financial statements frauds -ethical or technical issue? How firms manipulate their financial statements? What are the motives of financial frauds other than monetary? What is the role of corporate governance in controlling these frauds? Research Objectives: To analyse the major areas of frauds. To examine role of top management in fraudulent practices. To analyse the efficacy of various acts and rules passed for enhanced corporate governance. To analyse the importance of financial statements in investment decision making. To explore the causes and consequences of financial statements frauds. Scope of study: Research study will be restricted to European countries financial statement frauds as US market is more explored than European market. Research will examine and critically analyse the case study of Ireland based bank named Allied Irish Bank. Remaining chapter shall follow the following planned strategy: Chapter Two: Literature review: It will cover 3000 words and include journals and articles citation. Chapter Three: Research Methodology: It will cover 1500 words. This section will give idea of data collection and also briefly explain limitation attached to it. Chapter Four: Data Analysis: This section will evaluate and analyse the data and follow the discussion. Chapter Five: Conclusion and Recommendations: This section finally concludes the research and provides recommendations. CHAPTER TWO Literature Review 2.1.1. Agency problem and Corporate Governance 2.1.1.1 Separation of ownership -origin of agency problem Agency problem resulted from separation of ownership from control (Berge Means 1932; Jensen Meckling 1976) is still prevailing around the world. Findings have proved that firms having weaker corporate governance policies and structure face greater agency problems; which allow senior managers to cook their recipe of extracting more private benefits and finally firm perform worse at all levels (Core at al. 1999). Evidence for such a weak corporate governance structure and higher agency problems can be found from Asian Financial Crisis in 1997. At the time Asian Crisis 1997, firms which had good corporate governance structure provided better protection to shareholders especially to minor shareholders and performed better during the crisis (Joh 2003 and Mitton 2002). In countries like USA and European countries especially UK, agency problems are higher as evidenced from corporate scandals in USA and UK for example Maxwell Corporation (1991), Polly Peck (1991), BCCI (1991), Enron (2001) , Barings Bank (1995), Parmalat (2003) and many more. The recent scandal happened in Societe Generale Bank of Paris 2008, in this also agency problem was the main reason for the frauds committed by the employer of the Societe Generale Bank of Paris. An Agency problem is very crucial problem which had taken birth during 19th century. Agency theory is defined as a â€Å"contract under which one party (the principal) engages another party (the agent) to perform some service on their behalf† (Jensen and Meckling 1976). The problems arises when the agent do not work in the welfare of principal. More cases of frauds, where involvements of companys top management were high, coming into light and the simple reason is principal agency problem. In the case of HealthSouth, CEO Richard Scrushy had instructed senior managers to show fraudulent income of $2.5 billion in order to meet Wall Street expectation. 2.1.1.1.1 Agency Cost Agency costs are another issue which is bear by the principal for the frauds committed by the agent. The result of agency problem is reflected in companys share price which can be seen as the loss to shareholders in terms of declined in the price of shares in stock exchange.Jensen and Meckling (1976) explained agency costs as the sum of monitoring costs, bonding costs, and residual loss. Monitoring cost:- In UK companies are required to follow Cadbury (1992) and Greenbury (1995) reports for corporate governance. Monitoring cost are paid by the principal to monitor the behaviour of agents. Monitoring cost generally include costs of conducting auditing, writing executive compensation contracts and sometimes cost of firing the fraud employees and other top managers or executives. All these costs are paid by the principal, but Fama and Jensen (1983) argued that these agency costs which are initially born by the principal, ultimately borne by the agents as the compensation of agents are adjusted to cover these costs. Some researcher further argued that monitoring will restrict the managerial initiative (Burkart, Gromb and Panunzi 1997). Criticisers of Cadbury Report (1992) have argued that high level of monitoring may restrict the managerial entrepreneurship. Bonding Costs As argued by Fama and Jensen( 1983), monitoring cost ultimately bear by agents which need to set up structure that will act in interest of shareholders or principal , the cost of establishing these set up or system is known as bonding costs. These costs are not always financial in nature; it may include additional information provided to shareholders. Denis (2001) further argued that â€Å"the optimal bonding contract should aim to entice managers into making all decisions that are in the shareholders best interests†. In UK, bonding structure which is imposed on closely held companies management, require companies to distribute all income after meeting all business expenses. Earning retention is big problem in UK; the mechanism of bonding may reduce the scope of this problem. Residual Loss â€Å"Residual loss arises because the cost of fully enforcing principal-agent contracts would far outweigh the benefits derived from doing so. Since managerial actions are unobservable ex ante, to fully contract for every state of nature is impractical. The result of this is an optimal level or residual loss, which may represent a trade-off between overly constraining management and enforcing contractual mechanisms designed to reduce agency problems.† (Patrick McColgan 2001:8). 2.1.1.2 Stewardship theory Agency theory is more dominant in the perspective of corporate governance mechanism, but this view has been criticized by many writers (Hoskisson et al. 2000; Blair 1995; Perrow 1986). Agency theory had limitation in explaining sociological and psychological involved in principal agent conflicts (Davis Thompson 1994; Davis et al.1997). Stewardship theory assume mangers as good stewards of the firms. Managers act diligently in order to attain high corporate profits and shareholders returns (Donaldson Davis 1994). In an empirical study performed by Tian and Lau 2001 in Chinese shareholding firms, they find stewardship theory has received strong support in comparison to agency theory. Further Phan 2001 explained that â€Å"whether the assumptions of Agency Theory can be generalised to emerging markets, with their different sociological, economic, and developmental fundamentals, remains an important research question†. In summary, agency theory has its roots in industrial and organisational economics. Agency theory assumes that behaviour of human being is opportunistic and selfish. Therefore, the theory recommends strong director and shareholder control. It suggests the fundamental function of the board of directors is to control managerial behaviour and try to ensure that managers act in the best interests of shareholders. 2.1.2 Review of Corporate Governance reports In this section, international reports on corporate governance will be critically reviewed which were published in last decades. The international reports considered in this section are as follows: â€Å"Report of the Committee on the Financial Aspects of Corporate Governance† (Cadbury Report, 1992) â€Å"Where were the Directors? Guidelines for Improved Corporate Governance in Canada† (Dey Report, 1994) The General Motors Corporation Guidelines (GMC, 2001) â€Å"Committee on Corporate Governance† (Hampel Report, 1998) â€Å"OECD Principles of Corporate Governance† (OECD Report, 1999) Sarbanes- Oxley Act 2002 After the unexpected corporate scandals of renowned companies like Maxwell (1991), Polly Peck (1991), and BCCI (1991) among others in the UK, the committee for corporate governance under the guidance of Sir Adrian Cadbury along with Financial Reporting Council (FRC), the London Stock Exchange (LSE), and the other accountancy profession has been formed to address corporate governance issues. This report was known as Cadbury report which was first report in UK focused on the aspect of corporate governance such as financial reporting and reviewed the role of boards and auditors. This report was published in 1992. The Cadbury committee report finally draw two major recommendation for the structure of UK corporate board. Cadbury report suggests at least three non executive directors in the board and two of them should be independent from management. The positions of chairman and CEO should not hold by the same person. The purpose behind this set up was to reduce the individual dominance a nd ensuring higher level of monitoring for corporate board by introducing more independence. Beasley (1996) and Dechow et al. (1996) found that â€Å"firms with more independent boards are significantly characterised by a lower likelihood of financial statement fraud and earnings management†. In Canada, during 1994 Dey report was published. This report was the first fully fledged report on corporate governance which a company should follow in order to list on stock exchange. Toronto stock exchange (TSE) adopted these guidelines in 1995 which were laid down by the Dey report. All TSE listed companies required to provide the difference in their corporate governance guidelines and guideline laid down by the Dey report. After Dey Report 1994, other similar reports in other jurisdiction have been published. General Motors Corporation (GMC) in USA published its own corporate guidelines in 1994 after criticising by the shareholders regarding poor company performance and doubtful board practices. These guidelines were developed with consent of GMC board, its shareholders and other activists for corporate governance. These guidelines were welcomed by the institute California Public Employees Retirement System (CalPERS) and by the industry. GMC guidelines become the benchmark in USA for corporate governance. In UK, during 1998, Hampel Committee was formed to review the recommendations of Cadbury report (1992) and the Greenbury report (1995) relating to executive remuneration. The Hampel committee was also formed to cover some gaps by these two reports i.e. Cadbury report and Greenbury report. Hampel report suggests that good corporate governance goes beyond prescribed corporate structures. According to Hample Report (1998:15) on Corporate Governance Sir Hample â€Å"recommend that companies should include in their annual report and accounts a narrative statement of how they apply the relevant principles to their particular circumstances. Given that the responsibility for good corporate governance rests with the board of directors, the written description of the way in which the board has applied the principles of corporate governance represents a key part of the process†. Hampel report drew attention for the approach of box ticking which is a serious issue for corporate governance . It also examined the implementation of Cadbury and Greenbury report and suggested more clear recommendations on policies of remuneration, accountability and auditing. During 1999, Organisation for Economic and Co-operation Development (OECD) laid down principles of corporate governance for the listed companies of member countries of OECD. It cover main subjects areas like rights and equitable treatment of shareholders, role of stakeholders in corporation structure, disclosure and transparency of financial facts and figures and majorly role and responsibilities of board. OECD guidelines become starting point for local policy makers of corporate governance. After the ,shocking scandals of Enron and WorldCom, US congress along with NYSE (New York Stock Exchange) passed the reforms to address conflicts of interest and redefined relationship between companies and auditors. This reform was known as the Accounting Industry reform Act 2002 which is widely known as Sarbanes Oxley Act 2002. The main purpose of this act was to enforce the independence of external auditors. The act also reinforced duties and responsibilities for CEOs and CFOs by imposing strict penalties for misrepresenting companys quarterly and annual reports. The penalty for misrepresentation was personal fines of US$ 1 million or imprisonment up to 10 years or both. Sarbanes Oxley Act has intense effect on the corporate governance policies on US and rest of the world. NYSE also imposed additional requirement for listed companies, under which listed companies must have independent directors in majority and must disclose business code of conduct and ethics for directors, office rs including managers at all level, and employees. Whittington(1993) and Melis, (2004a) argued that â€Å"corporate financial reporting and corporate governance systems are highly correlated, with any improvement in either system having a positive influence on the other, and vice versa† Combined code issued in 2006 replaces the combined issued in 2003. Financial service authority of UK, require listing companies to be obliged by the combined code 2006 and carry out consultation before listing. This new code contains main principles and provisions. Combined code 2006 asks listed companies to make a disclosure statement for code and that should be in two parts. Some of the provisions are not or less relevant for small or new listed companies. Also some provisions do not apply to companies below FTSE 350. 2.1.3 Global findings for adoption of corporate governance guidelines According Stephanie Maier (EIRIS 2005:1) findings, â€Å"Only 25% of US companies separate the roles of chairman and CEO compared with at least 50% forcompanies in other developed economies. Swiss boards have the highestpercentage of independent directors(81%) Germany, Austria and Japanall have less than 10%. Only 4% of companies in Japan haveaudit committees comprising amajority of independent directorscompared to over 95% in the USA,Canada, the Netherlands,Luxembourg, the UK and Ireland†¢ Only 22% of companies in Singaporeand 25% of companies in Hong Konghave meaningful codes of ethics†. Board size: According to EIRIS 2005, average board size is minimum in New Zealand (7.2) and maximum in Germany (22.8). USA and UK comes at rank 7th and 8th with average board size of 10.7 and 11.4 respectively ( see appendices for details). Higgs Review (2003) suggested â€Å"An effective board should not be so large as to become unwieldy. It should be of sufficient size that the balance of skills and experience is appropriate for the requirement of the business and that changes in the boards composition can be managed without undue disruption†. Separation of ownership and CEO According to findings by EIRIS 2005, in UK nearly 97% separate the ownership under unitary board structure whereas in US only 25% companies separate the ownership under the unitary board structure. In Ireland and Luxemb