The US and UK takeover regulations

The US and UK takeover regulations A takeover of a public company is the purchase of one company whose shares are listed on a stock exchange by another. Empirical evidence on takeovers suggests that they generally create value. The question is why have the UK and U.S- two countries with ostensibly similar systems of corportate governance taking different routes when it comes to regulating takeovers. A rich analysis draws from each countrys historical development, focusing on the shareholder-oriented regulations in the UK and the defence managerial tactics employed in the U.S. This paper would critically analyse the views of the writers of the Divergence of U.S and UK Takeover Regulation written by Armour and Skeel JR, both well seasoned Professors of Law, a thorough analysis would be made of hostile takeovers and the reasons why takeover tactics in the UK is regarded as a better option. An analytical framework would be used explain the diversity in the systems of takeover in the UK and the U.S. subordinate lawmakers such as Judges have had the herculean task of filling the unintended vacuum and consequences of legislation in the two countries that had other objectives at the time of enactment. An examination of the way regulations took shape in the UK and the U.S as the goal is to gain an understanding of the defensive tactics adopted and used frequently in the U.S but is frowned at and has dire consequences if adopted in the UK. Earlier case examples from each jurisdiction would be analysed to gain understanding of why different takeover regulations are used. In the UK, defensive tactics by target managers are prohibited, whereas in the U.S, Delaware law gives managers a good deal of room to manoeuvre  [1]  . The primary focus of this essay is to provide a simple yet thorough framework to understanding defence tactics, what it is; why it is so successful in the U.S and is prohibited in the UK. Clearly the two ways of takeover regulations appear to work fairly well in each jurisdiction and despite the authors of the articles view one must never forget that because the UK methods seem more share holder oriented and works very well, it does not mean there is any anything wrong with the method used in the U.S. In a takeover bid, accounting and law firms are hired to conduct Due Diligence- Lawyers review contracts, agreements, leases, current and pending litigation and all other outstanding or potential liability obligations so that the buyer can have a better understanding of the target companys binding agreements as well as overall legal related exposure. The facilities in the company and capital equipment also need to be inspected so as to avoid unreasonable expenditures in the first few months of acquisition  [2]  . The first section of the essay would look at an overview of the history of business law development and corporate governance in the UK and the U.S. the takeover development and institutional responses to them. The second part looks at the US and UK takeover regulations and their differences. Also legislation that have been implemented and the fact that despite legislation, subordinate lawmakers make rules that govern the process of takeovers. Who are these subordinate lawmakers and why do they appear to have so much discretion as to what becomes a rule? They include a diverse range of characters from Judges to interest groups (Institutional investors). The identity of the subordinate lawmaker, in turn has major consequences for both the substance and the enforcement of the regulatory rules  [3]  . Various case examples would be used to explain the difference in takeover methodology in the UK and the U.S, objectives of takeovers, the disciplinary hypotheses of the importance of ta keover regulations. Finally, proposed reforms in the US and UK and a conclusive summary on the issues of hostile takeover tactics. History The UK and the US are distinguished from other jurisdictions based on their high levels of takeover activities; in contrast Europe has a little or no market for corporate control (Franks and Mayer, 1996). The UK does not have the federalist structure of the U.S which does not allow room for corporate managers to exert influence. In the U.S the Delaware jurisdiction became the sole source of rules on takeovers more so, hostile takeovers. The U.S takeover regulations give target managers discretion to defend a bid whereas in the UK the shareholders make the decision. Delaware have a monopoly and is home to about 60% of the largest corporations in the country. Due to the amount of tax and other benefits that Delaware State enjoys from these corporations the State is attentive to the managers needs and the state lawmakers have an incentive to keep the managers content. The Legal rules have to be amenable so that unprecedented cases can be brought cheaply and quickly after has been a chan ge in business practices so as to allow the precedent cases to be developed and updated. The Delaware takeover doctrine was firmly established in the 1990s- that US institutional investors became a significant force in corporate governance  [4]  unlike their UK counterparts that embraced the importance of the concept of institutional investors. Corporate takeovers tend to improve not only the stock prices of the companies involved but also the stock market overall. Although there is a substantial increase in the targets companys stock price, the outcome for the acquirer and the market over time however is considerably negative. Also some ill-fated takeovers turn into an embarrassment for the parties involved for example the merger in 1996 of San Francisco banking giant Wells Fargo and its Los Angeles rival First Interstate Bancorp in an $11.6bn hostile takeover, the merge led to many of the latter companies executives leaving, account errors appeared in the companys account and the problems were visible to the customers. In the UK, lawyers play a relatively little role in takeover bids, complaints and law suits are made to the Takeover Panel located in the London Stock Exchange building. The Takeover Panel includes representatives from the Stock Exchange, the Bank of England, major merchant banks and institutional investors  [5]  . The Takeover Panel is a body that administers a set of rules known as the City Code on Takeovers and Mergers. The Panel and the rules were self-regulatory until around 2007 when the EU directives have been implemented into the UKs regulations and have a statutory underpinning designed with the objective of maintaining the characteristic features of the Panels approach, which is based on self-regulation. In the U.S however, takeover regulations are moderated principally by the Securities and Exchange Commission which ensures that disclosure and process rules are adhered to. A managers response to a takeover bid in the U.S is regulated primarily by the Delawares Chancer y Judges and Supreme Court- the key players here are lawyers and judges. U.S takeover Takeover offers are regulated under the Williams Act Amendments to the Securities and Exchange Act (SEC) 1934. The act was created to provide governance of securities exchange in the stock market, all the companies listed on the stock exchange must follow its requirements. The SEC is regarded as relatively share-holder friendly, however managers are known to sometimes adopt a hostile approach to takeovers and they adopt defence mechanisms such as poison pills or shareholder right plan which are designed to ward off a hostile bidders stake particularly if the bidder acquires more than a specified proportion of target stock, usually 10-15 percent. The poison pill is a defence tactic that allows companies to thwart hostile takeover bids from other companies, examples of the poison pill include Flip-over Rights Plan, Flip-in Rights Plan, poison debt, voting poison pill plan etc. The managers of a company that use the poison pill defence and a staggered board of directors have almost complete discretion to resist an unwanted takeover bid, the poison pill is a method that is slowly declining in the last couple of years. The U.S tender offers are generally not share holder friendly, in the case of Atmel Corp a maker of microchips used in video game controllers, successfully defeated a challenge by investors using the poison pill tactic. Some shareholders who sued over the failed buyout by Microchip Technology Inc stated that the revisions made by Atmel were vague, a Delaware state judge rules in Atmel Corps favour. State statute such as Section 203 of the Delaware General Corporation Law furthers the federal policy of investor protection. It was enacted to protect shareholders from the coerciveness of two-tier offers by preventing the offer unless the targets board of directors and in some instances the shareholders approves, the legislation has been successful in stopping such coercive practices. Section 203 also gives target boards some authority in resisting unwelcome, under priced tender offers that are not beneficial to shareholders. In the BNS Inc v Koppers Co., the U.S District Court explained that Section 203 does not stop the aims of the William Act even though it may give target boards significant advantage in preventing un-solicited takeovers. To the contrary, the statute may have substantial deterrent effects on tender offersà ¢Ã¢â€š ¬Ã‚ ¦so long as hostile offers which are beneficial to target shareholders have a meaningful opportunity for success. Section 203 does not have to let bad offers succeed to be constitutional, and in fact, if it did let bad offers succeed, it would frustrate, and not further, the Williams Acts purpose of investor protection. In BNS , the district court concluded that, on this record, the statute appears to offer hostile bidders the necessary degree of opportunity to effect a business combination and upheld the statute  [6]  . Another example is the recent April 2011 hostile takeover battle in the U.S between Tenet a hospital chain resisting a $7billion takeover by rival Community Health Systems. Tenet filed a lawsuit stating serious allegations that Community Health Systems is an unfit acquirer because the company has been systematically defrauding Medicare, evidence to support Tenets claim was provided. Not only is this allegation posed to resist a takeover, it can also potentially damage the reputation of Community Health Systems. This case ranks high in the pantheon of aggressive counter punches. The health care in the U.S remains the most targeted industry since 2009 with $179.1bn; accounting for 22.9% of total U.S targeted volume  [7]  . Another case example was AOLs purchase of Time Warner for $164bn at the height of the internet mania; it remains the largest corporate merger in American history  [8]  . Bidders are more likely to enter into negotiations with the targets board which results in a friendly transaction than them making a hostile offer directly to the shareholders. UK Takeover In contrast to the U.S, the UK takeover regulation is shareholder oriented. Managers in the UK are not permitted to make use of any frustrating defence tactics when there is a takeover bid without the shareholders permission unlike their U.S counterparts. The Takeover Code only becomes relevant when there is a bid therefore managers can take advantage of less stringent ex ante regulations well before any takeover bids come to light  [9]  . J.Armour, D.A. Skeel, JR, in their article; The Divergence of the U.S. and UK Takeover Regulation state that the UKs ban on defensive tactics by managers clearly makes it easier for hostile bids to succeed. It is bewildering to find that while the U.S adopts defence tactics measures, figures show that hostile takeovers are less likely to succeed there than in the UK. Case Examples in the UK In Jan 2010, Cadbury ended its nearly 200 years of independence after it was acquired by Kraft, a U.S food giant for 11.9bn pounds. The acquisition led to media frenzy and revived concern over the UK slowly becoming a so-called branch office for foreign companies, the UK Government was powerless to protect Cadbury, a heritage and one of the oldest companies in the country from foreign investment. The financial times stated in a article that erecting barriers is not the answer, the key to solving the problem of foreign business moving their head offices to more favourable jurisdictions is to make Britain an appealing business location, with a skilled workforce and a predictable tax regime. Another case example is the Vodafone-Mannesmann acquisition in 2002 which is still referred to a lot by economists and critics. There have been concerns that hostile takeovers can take place provided that there is a simple majority vote from shareholders. The Government wants reforms to change this to two-thirds of shareholders and the bidders must be subject to the same rules. Figure 1 below shows that the performance effects of takeovers differ by industry, some industries such as insurance companies have a higher number of takeover bids as opposed to banks that have a lower number. Figure 1 Beneficial Ownership of UK shares end-2008 (Source: Office of National Statistics, Share Ownership 2008) Difference between the US and UK takeover regulations The most significant difference between the two countries is not the substance but the mode of regulation. The U.S depends on formal law such as the Delaware law while self-regulation is the norm in the UK. In the Kraft-Cadbury takeover in the UK there was an outcry for change in the regulation as Cadbury was unable to defend itself to the same extent as a US company in similar circumstances, control decisions were made not by the directors but by short term investors. Leading U.S law firms such as Wachtell, Lipson and Cravath that specialise in Mergers and Acquisition (Hereafter MA) oriented practice generate significantly more revenue per lawyer than their UK counterparts. Importance of Takeovers- Disciplinary Hypothesis A takeover is sometimes used as a measure to restructure poorly performing companies. Critics and economics have long argued that the likelihood of competition in capital markets and the threat of a takeover is an incentive to discipline self-interested managers. Many writers have suggested a ban on the defence takeover tactics used in the U.S, such as the poison pills, golden parachutes and white knights- stating that these tactics more often than not are used purely for the managers/directors self interest. There have been numerous attempts by the Congress to set up legislative measures to prevent this out right abuse of power by the company managers and to protect the interests of the shareholders. There are however two hypotheses for the purpose of these defences: the shareholder hypothesis (SIH) and the management entrenchment hypothesis (MEH). The SIH is used purely to keep and satisfy the interests of shareholders whilst the MEH is used by the managers/directors of the company intended to be takeover to act in the interest of the shareholders for fear of losing their jobs if the takeover is successful, the end result of the MEH is usually that the shareholders would lose out on takeover premiums that the offeror would have paid. This leads one to question whether the managers pursuing their self interests is a breach of their fiduciary duties to the company and its shareholders, as they have a duty to act in the best interest of the company first and foremost. The managers may use the argument that the two hypothesis work together and that the main reasons for the defence tactics is not for their self interest but to maximise the wealth of the shareholders, a valid argument I daresay, both conflicting views are obviously utmost in the strategies of the management in a takeover power tussle. In the U.S the courts when determining whether a company management is in breach of its fiduciary duties look at the Business Judgement Rule- which provides that a court should evaluate decisions by directors to employ an anti-takeover defence in the same way as they would evaluate any other business judgement  [10]  . Basically anti-takeover defence tactics must be reasonable in relation to the threat posed and made in good faith. If the companys corporate value or shareholders interest could be harmed due to the acquisition of its shares by a specific person or group, the company needs to take substantial measures to raise corporate value and secure shareholders interests to the extent permitted by laws, regulation, and the companys Articles of Incorporation  [11]  . In the UK, the takeover code states in Rule 19.1 that public criticism is one of the disciplinary measures available to the Panel. Rule 19.1 states that each document or advertisement published or statement made, during the course of an offer must be prepared with the highest standards of care and accuracy and the information given must be adequately and fairly presented  [12]  . For example in the Kraft takeover case of 2010, the company promised to keep operational some Cadbury factories, but failed to do so, this led to a public criticism from the press and the Takeover Panel. OBJECTIVES OF TAKEOVER Takeover or merger, in practice, depends upon the motives of the persons behind such move. Generally, the following types of decision limit their choice for a particular firm in which takeover or merger activity could be organised: (1) Acquisition of shares in the target company; (2) Acquisition of the assets of the target companys undertaking; (3) Acquisition for full or part ownership of the target undertaking; (4) Acquisition for cash or for shares or other securities of the Offeror Company or combination of cash and variety of securities; There is not one single reason for a takeover but a multiple of reasons cause which are precisely discussed below: Synergistic operating economies: It is assumed that existing undertakings are operating at a level below optimum. But when two undertakings combine their resources and efforts they with combined effort produce better result than two separate undertakings because of savings in operating costs, combined sale offices, staff facilities, plant management etc which lower the operating costs. Thus the resultants economies are synergistic operating economy. These gains are most likely to occur in horizontal mergers in which there more chances for eliminating duplicate facilities, vertical and multinational mergers do not offer these economies. Diversification: Takeover are motivated with the objective to diversify the activities so as to avoid putting all the eggs in one basket and obtain advantage of joining the resources for enhanced debt financing and better service it shareholders. Such takeovers result in conglomerate undertakings. But critics hold that diversification caused takeover of companies does not benefit the shareholders as they can get better returns by having diversified portfolios by holding individual shares of these companies. Taxation advantage: Takeover take place to have benefit of tax laws and company having accumulated losses may merge with profit earning company that will shield the income from taxation. Growth advantage: Takeovers are motivated with a view to sustain growth or to acquire growth. To develop new areas becomes costly, risky and difficult than to acquire a company in a growth sector even though the acquisition is on premium rather than investing in a new assets or new establishments. (http://jurisonline.in/2011/03/takeover-a-critical-analysis/ Assessed 12th April 2011) Reforms in the UK There was an urgent need for reforms in the UK takeover regulation after acquisition of Cadbury by Kraft. The following are some of the proposed reforms. Proposals to give target companies more protection under the Takeover Code The Government wants the simple majority vote by shareholders to be changed to a two-thirds of shareholders in other to ensure that as many shareholders as possible are supportive of the takeover. The prohibition of any offer related arrangement e.g implementation agreements Reducing the put up or shut up deadline from 2months to 28days- This means that a potential bidder must announce a firm intention to make an offer, declare no intention or ask for an extension of the deadline. If no bid is announced the bidder is excluded out of the market for six months. There have been criticisms that the 28day period is not enough time for bidders to undertake due diligence and arrange financing. Detailed disclosure of advisory fees- there is no requirement at the moment under the Takeover Code for advisory fees to be disclosed. It is intended that any offer-related fees be disclosed in the offer document and targets response. This includes legal advice, accounting and consulting advice, broking advice etc. The proposal disclosure changes are not controversial and in fact tally with the current system in the U.S. Greater disclosure of debt facilities and other instruments to finance an offer- a bidders financing arrangements should be disclosed in any offer documents. This need for transparency and accountability may be prompted due to the recent financial crisis in the UK Provision of better protection of the interests of employees of the target company These proposals were made in March 2011 and a consultation period is open until the 17th of May 2011 after which the UK Panel will then issue a statement with the final version of the amendment, the amendments will be adopted into the UK Takeover Code later in the year  [13]  . Conclusion Even before the financial crisis there have been fundamental reassessments of the value of takeovers in the UK and the U.S. Since the financial crisis most board of directors and managers have been more concerned with running their businesses and staying afloat than with chasing expansion through takeovers. This factual point is true when the probability of a successful merger is far less certain, as in hostile takeover attempts. A hostile takeover presents executive board leaders with unique organisation and people challenges. It is often very difficult to overcome the challenges of acquiring and integrating an organisation and people especially after a hostile takeover. Times like this need a higher level of strategic thinking, flexibility and innovative problem solving  [14]  . This paper finds that the UK takeover regulation despite its numerous advantages is prone to hostile takeovers due to its compliance with upholding the interests of shareholders, while this hostile takeovers act as a form of disciplinary function by restructuring poor performing companies and improving their performance, evidence above stated shows that hostile targets in most cases experience a significant decline in profits and share returns in the first year of acquisition. Despite the criticisms of the U.S system of regulation, hostile takeovers are in decline due to the level of discretion given to the executive directors and managers by the legislation that provides antitakeover regulations that are enshrined in the corporate charters and/or state legislation. Also in a self regulated system like the UK, institutional investors who own majority of the shares in UK quotes companies shaped the Takeover Code. BIBLIOGRAPGHY http://www.guardian.co.uk/business http://www.mallesons.com/MarketInsights/marketAlerts/2011/UKPanel-Takeover-Code-Reforms/Pages/default.aspx John Armour, Jack B. Jacorbs Curtis J. Milhaupt, The Evolution of Hostile Takeover Regimes in Developed and Emerging Markets: An Analytical Framework, 52 Harv. Intl L.J. 219 (2011) J Coffee. Regulating the Market for Corporate Control: A Critical Assessment of the Tender Offers Role in Corporate Government, 84 Columbia Law Review 1145 (1984), copyright Columbia Law Review Association, Inc. T I Ogowewo. The inequality in takeovers, Journal of International Banking Law and Regulation 178 (2008), reproduced by permission of the publishers, Sweet and Maxwell Ltd Dolbeck, A. Hard to Swallow: Poison Pills on the Decline Weekly Corporate Growth Report, 22nd March 2004, 1-3 Hermalin, B.E Weisbech, M.S., 1991. The Effects of Board Composition and Direct Incentives on Firm Performance, Papers 91-02, Rochester, Business-Financial Research and Policy Studies. J.H.Farrar, Business Judgement and Defensive Tactics in Hostile Takeover Bids (1989) 15 Can. Bus. L.J. 15 at 22 http://www.complianceweek.com/s/documents/DealogicGlobalReview.pdf (assessed 18th April 2011) Does Delaware Law Improve Firm Value? by Robert Daines. Journal of Financial Economics, Vol. 62 (2001) http://www.investopedia.com/articles/stocks/07/buyside_m_and_a.asp (Assessed 18th April 2011) Morck,R., Shleifer, A., Vishny, R., 1990. Do Managerial Objectives drive bad acquisitions? Journal of Finance, 31-48 http://www.cbr.cam.ac.uk

The Racial Debate of Mark Twains The Adventures of Huckleberry Finn Es

The Racial Debate of The Adventures of Huckleberry Finn      Ã‚  Ã‚  Ã‚  Ã‚   The Adventures of Huckleberry Finn, throughout the years, has provoked many debates pertaining to racism. A variety of individuals believe that Mark Twain expressed apparently racist ideas. The reason being, this novel shows the relationships between blacks and whites in the nineteenth century and all the ugliness that accompanied these associations. However, this novel is not a racist novel; it shows these situations not to promote racism, but to bring a better understanding of the subject and how one can overcome individual prejudices and grow from these experiences.   This novel shows Huck Finn, a product of this insufferable society, coming to the realization of how uncivilized and ignorant his white peers have become.   By showing these situations and the transformations Huck goes through, the reader sees racism and its effects in real life settings.   It is imperative for the reader to recognize the ideas and repulsiveness of the South at that time in history; and Twain with his writing of The Adventures of Huckleberry Finn attempts to challenge these ideas throughout the novel. Twain shows the irony and hypocrisy of treating people as property through Huck's eyes, and uses Huck to educate us in the immorality of this practice.   Ã‚  Ã‚  Ã‚   For many of Twain's critics, this novel is racism with a face on it and for the most obvious reason; the word "nigger" is used throughout.   But seeing the novel takes place in the Deep South about twenty years before the Civil War, it would be highly unusual if they didn't use this word. James M. Cox wrote, The language is neither imprisoned in a frame nor distorted into a caricature; rather, it becom... ...laude M Simpson. Englewood Cliffs,N.J. 1968. Fishkin, Shelley Fisher, Phd. "Teaching Mark Twain's Adventures of Huckleberry  Ã‚  Ã‚  Ã‚   Finn", 1995, July Summer Teachers Institute, Hartford, Connecticut @1995 http://www.pbs.org/wgbn/cultureshorck/teachers/huck/essay.html Leavis, F.R. "Introduction to Pudd'nhead Wilson". (London: Chatto and   Windus, Ltd., 1955) Rpt. Twentieth Century Interpretations of Adventures of Huckleberry Finn Ed. Claude M Simpson. Englewood Cliffs,N.J. 1968. Twain, Mark. The Adventures of Huckleberry Finn. Berkeley: University of California Press, 2001. Zwick, Jim. "Civil Rights or Book Banning? Three New Approaches to Huckleberry Finn" http://www.boondocksnet.com/twainwww/essays/civil_rights9809.html Hentoff, Nat. "Expelling Huck Finn". Jewish World Review   29 Nov. 1999. www.Jewishworldreview.com/cols/hentoff/12999.asp

Pros and Cons of Alternative Work Schedule

Many people are now opting to find work schedules that would best fit their lifestyles and suit their needs in doing other tasks. Some people are having a difficult time adhering on the traditional work schedules or the work schedules as prescribed by their company. That is why they look for schedules that will best suit their needs and allow them to manage their time on their own. Everyone has their own perception of flexibility and work. Such perceptions may greatly depend on the personal needs, educational background, skills and the type of work that you are about to pursue.Alternative work schedules refer to the type of schedule that is not based on the conventional work schedule. Types of alternative work schedules include part-time employment, flexible leave and subcontracting. Part-time employment has the advantage of doing many jobs effectively; however, employing two part-timers may cost more than employing one full-time employee. However, part-time employment may be a bette r option than lay-offs (Rogovsky, Ozoux, Esser, Marpe & Broughton, 2005). On the other hand, subcontracting is the type of alternative work schedule that is detaching some of the employees in period of time.The employees still belong to the company but they will work for another company. Flexible leave allows the employees to avail limited leave that is agreed by the company and the employee (Rogovsky et al. , 2005). Flex-time is a growing idea in the business industry and becoming a popular option in the workplace’s work arrangements. The idea that the employees should not be tied on to their desks the whole week emerged in the 1990’s. Today, flexibility is an integral part of business. This is expected already as the new generation enters the workforce (Bitti, 2008).The inception of new technology, especially the use of computers, changed the landscape of work arrangements. It allows employees to be more present or attend to their work anytime and anywhere if their w ork is accessible in the internet. That is why more companies are embracing flexi-time work schedules for their work arrangements (Bitti, 2008). Compressed work week is becoming an option for the company to attract more employees and increase their productivity. Compressed work week means that you will work for the same number of hours as they would work for regular week but in fewer days (MacKillop, Geddie & Miedema, 2003).Compressed work week may be in the form of flexible work arrangement in order to maintain balance between work and family. Alternative work schedules provide options for the employees that have other responsibilities – either at home or at school – as most of the people that seek for alternative work schedules are mothers who are engaged in household activities and students who seek job opportunities while studying. The alternative work schedule has its own advantages and disadvantages. Flexible work arrangement is a type of alternative work schedul e that renders benefits to the employees.One of the advantages it renders is allowing employees not to commute on the rush hour that is less stressful on the part of the employees (Katepoo, 2008). Alternative work schedule also improve the morale of the employees and considerably reduce the stress experienced of the employees. Alternative work schedule can lower the absences of the employees and can contribute greatly in productivity. In addition, the overtime pay for the employees is reduced, thus lowering the costs for the employers (Beierlein & Van Horn, 1995).Moreover, there is an enhancement in the aspect of recruitment as well as for the people who may be unavailable for the traditional work schedule. The business hours are also extended due to flex-time and compressed work week options. The equipment and facilities are also economically used in alternative work schedules (Beierlein & Van Horn, 1995). One of the advantages of the flexi-time is that it allows the employees to j uggle different things while receiving a regular payment. They are able to attend to other things without sacrificing their work (Bitti, 2008).Alternative work schedule also has its own share of disadvantages. This includes mentally and physically stressful or draining for the employees working in the compressed work week arrangement. This may also become the onset of chronic fatigue due to work and family conflict time pressures in some types of alternative work schedule. The compressed work schedule may render difficulty especially for mothers who are attending household responsibilities (Katepoo, 2008). Furthermore, supervisors and subordinates may not work on the same schedule making it hard for the management to effectively manage the company.Problems may also arise in the areas of timekeeping and how benefits are distributed (Beierlein & Van Horn, 1995). There is also the possibility of lower workforce on peak days that require the managements to establish efficient cross and back-up training and good communication system to ensure high productivity. In compressed work week arrangement, people with young family members spend longer hours in the office in some days and experience difficulty in their day care obligations (MacKillop, Geddie & Miedema, 2003).The alternative work schedule is a growing trend in the business industry and slowly gaining popularity in some companies. It renders advantages not only for the employees but also for the employer and the company. However, the alternative work schedule has its own set of disadvantages for both parties.References Beierlein, J. G. & Van Horn, J. E. (1995, June). Alternative Work Schedule. National Network for Child Care. Retrieved November 12, 2008, from http://www. nncc. org/EO/emp. alt. work. sched. html.Bitti, T. (2008, July 14). What are the pros and cons of flex time?. Financial Post. Retrieved November 12, 2008, from http://www. financialpost. com/small_business/businesssolutions/story. html? id=645 783.Katepoo, P. (2008). Compressed Workweek: Pros & Cons as a Flexible Work Arrangement. WorkOptions. com. Retrieved November 12, 2008, from http://www. workoptions. com/compros. htm.MacKillop, M. , Geddie, J. & Miedema, A. (2003). Legal Terms for Human Resources Professionals. Canada: CCH Canadian Ltd. Rogovsky, N. , Ozoux, P. , Esser, D. , Marpe, T. & Broughton, A. (2005). Restructuring for Corporate Success: A Socially Sensitive Approach. Geneva: International Labour Organization.

Torque physics lab report Essay Example

Torque physics lab report Essay Example Torque physics lab report Paper Torque physics lab report Paper The purpose of this experiment was to help understand torque by not only measuring it but also by manipulating and adjusting the weights experimentally. Procedure In order to perform all the procedures a few instruments were required a meter stick, a triple beam balance, suspension clamps and their stirrups, a knife edge, as well as weights of 50 and 100 grams and a spring scale. The meter stick was weighed (without the clamp), and its center of gravity was found (its not usually exactly at 50cm), the 6 clamps were weighed as well. For the first part the meter stick was put on 35cm and a 100g weight was adjusted until the center of balance was found, the position was recorded, this was than done with 150g and 50g. Once the values were recorded the weight of the bar was calculated and the average was found. For the next part of the experiment three weights were attached anywhere on the bar, the center one was adjusted till there was equilibrium and than the force was measured with a spring scale. The numbers were recorded and the weights of down and upward forces were measured as well as the clockwise and counter clockwise torques. For the last part of the experiment six clamps were arranged on the bar( with weights on them ) so that one was at 10cm and one at 90cm and the rest were spread in between , one end was supported by the knife edge and the other by the spring scale. The forced shown by the scale was recorded, the ends were than switched and the force was once again recorded. Calculations were than done to verify the sum of the torque was that of the reading on the spring scale as well as that the total sum of the weights was compared via calculation to the upward force shown. Data/Analysis Part I: Prep Part II: Calculating the weight of the meter bar by balancing torque (mb): (mc= mass of clamp, g = acceleration due to gravity) Table 1: Determination of Meter Weight by Balancing to Torque (Experimental) m= mass of weights (g) x= Clamp Position from knife edge (cm) mb= Weight of Meter Bar from Balancing Torque (g) Position on meter stick (cm) r= position from axis of rotation (m) (N*m)96 Questions: The motion of the rigid system will move up in the counter clockwise direction if the condition for equilibrium is not satisfied in which the spring has greater force. The opposite will happen if the meter bar and weights have a greater force than the spring. The same goes for the Torque. If the second condition for equilibrium is not satisfied and there is greater torque of the spring, the system will move in the counter clockwise motion and will move clockwise if the Torque is greater for the meter bar. The motion of the rigid system will move in the same fashion as described above if neither of the conditions for equilibrium are satisfied. If there are equal numbers of suspension clamps on each side of the support with the same weight, their weights can be omitted from the calculations because the weights can be factored out and be eliminated from the way the force and torque equations are set-up. Regardless, they should total to zero. When the center of gravity of the meter bar was determined in Part I, the bar was supported at a point coinciding with the center of gravity. If the clamp were to have been inverted, where the bar is supported at a point above the center of gravity, you wouldnt een be able to balance the meter bar because it is not in the center of gravity it would just be slack and hang down. Therefore you wouldnt even find the accurate position where it is level. This would have skewed the results, making inaccurate readings and calculations. In part IV, if the meter bar were to be held at an incline of 30 degrees angle above the horizontal by the spring balance, the spring balance reading would remain the same because the force of the spring is just m*g, which remains the same even if you change the angle. The mass and acceleration due to gravity remains constant. However, Torque changes (t=r(F*sin(? )) since angle comes into account. Figure: Conclusion In the study of this lab, torque was observed by measuring, manipulating, and adjusting the weights on the meter bar. The weight of the meter bar was found by experimentally calculating the torque. Comparing the actual weight of the meter bar and the experimental values, the percent error was only 5. 96%-14. %. This percent error is low enough to be negligible and to confirm the equation used for Part II. In Part III and IV, the forces acting on the meter stick are in the vertical direction. Since the meter stick was level, the angle was 180 degrees meaning the force acted on the axis on either side of the center of balance. The experiment should have observed that the net force and net torque acting on the meter stick is equaled to zero. However, experimental results show that the net force is not zero. The net torque is not zero as well. However, the net torque value approaches zero more than the experimental values do. Therefore, the torque equation may be confirmed in this experiment, but the force equation cannot because the values are too far from zero. This may be because the presence of error in this lab is high. Errors occurred in this lab are due to inaccurate measurements of position. It was difficult to keep the meter bar steady to find where the stick is level. Also, there may have been something wrong with the balance and springs because they are very old, rusted equipment and may not work as accurately as they did when they were new. Overall, we were able to understand the concept of torque, even if there were errors in our experiment.

Agency cost and ownership structure in aim traded companies The WritePass Journal

Agency cost and ownership structure in aim traded companies Introduction Agency cost and ownership structure in aim traded companies IntroductionOverview of Alternative Investment MarketCorporate governance in AIM companies The causes of agency problemThe measurement of agency costConclusion ReferencesRelated Introduction The aim of this chapter is to explain and discuss a number of prior researches that have been developed in relation with agency cost. The literatures are grouped into four parts based on their different research area. The first part gives the overview of Alternative Investment Market (AIM). Subsequently, the issue of corporate governance in AIM companies will be discussed. The next part will focus on the causes of agency problem. Both direct and indirect measurement of agency cost, include asset utilisation, operating expense and the firm’s performance, will be detailed analysed in the final part. Overview of Alternative Investment Market Alternative Investment Market (AIM) is the world’s leading market for smaller and growing companies. It helps them to raise new capital and allowing their shares to be traded widely. Since it was launched in 1995, over 3000 companies  from across the world have joined AIM and a large proportion of them are in oil and gas industry. Its admission requirement and on-going rules are less onerous. For example, there is no requirement on prior trading, minimum public float or market capitalization. In fact, to be admitted to AIM, a firm is only required to have the support from a nominated advisor (Nomad). Subsequently, the only disclosure obligation for the firm is the general duty of disclosure requiring information which is reasonably considered to be necessary by the issuer which will enable investors to have a full understanding of the applicant’s financial position. AIM membership roles were thus kept simpler for encouraging a wide variety of companies to join, keepin g capital rising and reducing membership cost. However, a SEC commissioner, Roel Campos likened AIM as a casino, and he stated that 30% of the issuers that list on AIM are gone within one year (Bawden Waller, 2007). This comment has aroused great amount of abjections and London Stock Exchange (LSE) claimed that the only 2% companies go into liquidation each year. Corporate governance in AIM companies AIM is crucial for investor’s confidence to the market and companies’ significant failures on AIM market would have a negative effect on the overall confidence in the UK market. A consequence of the deliberately light regulatory burden placed in AIM companies means that they are not obliged to abide the UK’s Combined Code (2006). However, based on the UK’s Combined Code, the Guidelines on the Quoted Corporate Governance for AIM companies have been produced by Companies Alliance (QCA). According to the wide range of interviews and detailed analysis of the corporate governance statements in the annual report and accounts, Mallin and Kean (2008) found the majority of their sample AIM companies disclose some basic elements of good governance practice, such as including a corporate statement, identifying the directors and their responsibilities, and splitting the role of chairman and the CEO, and the presence of board sub-committees. However, their sample of AI M companies did not disclose as much corporate governance practice as they were expected by the QCA Guidelines’ recommendations. Some interesting results were given by the regression of the firm and market related factors on the disclosure score. Firstly, the young AIM companies tend to disclose more of their governance practices than the older ones. Secondly, larger companies disclose more than smaller ones. Thirdly, by the presence of the institutional investors has influence on the disclosure levels. Subsequently, the higher gearing ratio of the company, the lower disclosure level there will be. It also suggested that the AIM companies with no long-term debt may be required better governance structures to protect the claims of equity investors, because there are no debt holders to monitor the companies. In addition, the board size has positive impact on the reporting of governance practice and the companies with small board are less likely to obey to the QCA Guidelines. Th erefore, the efficiency of corporate governance in AIM companies is related to the age of companies, size, gearing ratio, debt, as well as board size. The causes of agency problem When discussing the ownership of an organization, ‘agency problem’ is an inevitable vocabulary. According to Jensen and Meckling (1976), the agency relationship is defined as a contract between the principal(s) and the agent who is given some decision making authority to run the firm on the behalf of principal(s). In fact, for majority of companies, both agent and principals are utility maximizes. Consequently, the agent will not always act in the interest of principal. To mitigate the conflict in interest between both parties is a big issue in corporate governance. Besides establishing appropriate incentives for the agent, monitoring cost will be designed to limit the aberrant activities of the agent. In some situations, the agent needs to pay to expend resources (bonding costs) to guarantee he/she will not take the actions that will harm the principal’s interest or to ensure that the principal will be compensated if the agent does take such actions. Additionally, there will be some divergence between the agent’s decisions and those decisions which would maximize the principal’s welfare. The reduction in the principal’s welfare caused by thus divergence is also a cost of agency relationship which is referred by Jensen et al. (1976) as ‘residual loss’. They also stated that the costs of deviation from value-maximization decline as the management ownership rises. As their stakes rise, managers pay a larger part of these costs and are less likely to squander corporate wealth. However, limited direct evidence exists on the magnitude and extent of the actual costs with the agency problem. The measurement of agency cost Direct measurement Ang et al. (2000) analyzed the how agency cost is affected by the firm’s ownership structure, number of outsider managers and non-manger shareholders and external monitoring by banks. They measured firm’s agency cost with two measures, sales to asset ratio and expense to sales ratio. They argued that agency cost can be directly measured by assets-to-sales ratio as it measures the efficiency with which management uses the firm’s assets to generate sales. A high ratio reflects that the assets are generating significant sales and therefore indicates low agency cost. Conversely, a low ratio shows that manager makes poor investment decisions, exerts insufficient effort, resulting in low revenues, and consumes excessive unproductive assets, such as automobiles, fancy office space and resort properties. The expense ratio is the operating expense scaled by annual sales. It is a measure of how effectively the firm’s manager controls operating cost, including excess ive perquisite consumption and other direct agency cost. In contrast to the sales-to-asset ratio, agency cost is in line with the expense ratio. Banks usually require managers to report results regularly and honestly; consequently, managers may be forced to run the business efficiently. Thus, bank monitoring complements the monitoring of managers by shareholders, thereby reducing owner-manager agency cost indirectly. Ang et al. (2000) utilized a sample of 1708 small corporate from the National Survey of Small Business Finances (NSSBF) database and found agency costs are significantly higher when an outside manager manages the firm and when there are more non-manager shareholders. In this situation, managers’ ownership share and monitoring by banks may be a helpful corporate control mechanism that can decrease agency costs. Singh and Davidson (2003) adopted the approach used by Ang, Cole, and Lin to study large firms and sales, general, and administrative expenses were applied to measure agency cost instead of total operating expenses. Moreover, they analysed the role of corporate leverage in influencing the agency cost experienced by the large corporations instead of the banking relationship because large firms have larger access to the public debt market and therefore less depend on bank financing. They found that higher managerial ownership does positively influence asset utilization efficiency which was in line with result of Ang, Cole, and Lin. However, excessive discretionary expenses cannot be decreased by such ownership. Additionally, larger board size and outside block ownership does not improve the efficiency of a large corporation. However, this measure has three potential drawbacks. As McKnight and Weir (2009) suggested, sales may not actually come from profitable activities so sales may not be consistent with shareholders welfare. Secondly, cash flows that generated by the sales may being expropriated instead of being distributed to shareholders. Thirdly, as Coles et al. (2005) stated, productivity can vary even between firms within the same industry. Generally speaking, Ang et al. (2000) and Singh and Davidson (2003) provided a useful indicator of agency costs. Jacky Yuk-Chow So (2005) noticed that in Ang, Cole, and Lin’s study, ownership variables and external monitoring variables are highly significant statistically when a single regression is applied. However, some of these variables, such as family ownership and a banking relationship become insignificant when they are regressors of the multiple regressions. Therefore, he focused on the combined effect of expense ratio and asset-to sale ratio to measure agency cost using the NSSBF database from 1993 survey. This combined effect was analysed using both internal and external control variables. Debt-to-asset ratio and ownership variables were applied to study the impact of internal corporate control and the firm’s relationship to its bank was as proxies for external corporate control. Additionally, a dummy variable was also employed to capture the industry effect. Jacky Yuk-Chow So proposed that, the ‘combined effect’ approach implies that cash flow is a more app ropriate measure of managerial performance since it captures not only efficiency, but also leverage, which is measured by the debt-to-asset ratio. The ordinary least squares (OLS) method and seemingly uncorrelated regression (SUR) were used to test his hypotheses and found out firms in manufacturing industry tend to have the highest agency cost; family ownership more appropriately resolves the agency problem; cash flow reflect the joint impact of agency cost and efficiency; agency cost increases when there are more non-shareholder managers; the number of banks involves and the length of the bank relationship do not have significant impact to the agency cost. Indirectly measurement Jensen (1986) paid attention to the conflicts of interest between shareholders and managers over payout policies when the organization generates large free cash flow, which is the cash flow in excess of that requires to fund all projects that have positive net present value when discounted at the relevant coat of capital. He stated that agency costs will increase when high free cash flows are combined with poor growth opportunities and hence large free cash flows suggest greater managerial discretion and higher agency costs. Therefore, motivating managers to disgorge the cash rather than investing in low-return project or wasting it on organization inefficiencies is a puzzle of many firms. This theory explains the benefits of debt in reducing agency cost of free cash flows and how debt can substitute for dividends. Managers may increase dividends or repurchase stock or even announce a ‘permanent’ increase in dividend to control the use of free cash flow. However, such pr omises are weak since the dividends can be reduced in the future. In fact, the organization will be punished if dividend is cut with significant stock price reduction is consistent with the agency of free cash flow. Debt enables managers effectively bond their promise to pay out future cash flows. Thus debt reduces the agency cost of free cash flow by reducing the cash flow available for spending at the discretion of managers and can be an effective substitute for dividends. The interaction of free cash flow and growth prospects are used to measure of agency cost in many previous literatures. Opler and Titman (1993) stated that firms that have good growth prospects are more likely to be better managed. They are also less likely to have excess free cash flows because the available cash will be spent on positive net present value projects. Thus, as Jenson (1986), Doukas, Kim, and Pantzalis (2000) argued, agency costs may be regarded as a function of the interaction of growth opportunities and free cash flow. Firms that combine high free cash flow and low growth prospects can be regarded as suffering from high agency costs. Therefore, control function of debt is more important in thus organizations. Acquisitions are one way in which funds can be spent by managers rather than distributed to shareholders. Free cash flow theory (Jensen, 1986) predicts acquisitions decrease, rather than increase, shareholder wealth, particularly from the perspective of the acquirer’s shareholders. There is a significant literature which is in consistent with this theory. Servaes (1991) and Houston, James and Ryngaert (2001) have found significant negative short run returns to acquirers. Agrawal, Jaffe Mandelker (1992) undertook a thorough analysis of the post-merger performance of acquiring firms, measured by the stock market performance of a large number of acquiring firms over a long period of time. They concluded there is a strong evidence of long term underperformance following merger and this result is supported by Kohers and Kohers (2001). Accounting studies such as Sharma and Ho (2002) also show poorer post-acquisition performance. Finally, the survey done by Kelly, Cook, and Spitzer (1999) provide evidence that 53% of acquisitions were believed to have destroyed value. Given the extensive evidence that indicates a lack of positive returns to acquiring firms’ shareholders, it can be concluded that acquisitions can represent agency costs as directors use funds on negative net present value projects. Demsetz (1983) recognized, when a manager owns a small stake, market discipline may still force him toward value maximization. In contrast, a manager who controls a substantial fraction of the firms equity may have enough voting power or influence more generally to guarantee his employment with the firm at an attractive salary. In this case, manager may indulge his preference for non-value-maximizing behaviour. This Entrenchment hypothesis predicts the agency may increase and corporate assets can be less valuable when managed by an individual free from checks on his control. Morck et al. (1988) investigated the relationship between management ownership and the market value of the firm which is measured by Tobin’s Q. They found that Tobin’s Q increases as the board ownership increases from 0% to 5%, declines as the ownership rises further to 25%, and then continues to rise slowly when the board ownership rises beyond 25%. The increase of Tobin’s Q with ownership can be explained the convergence of interests between managers and shareholders, while the decline reflects entrenchment of the management team. The results confirm the conclusion that imposing a linear relationship between profit and the ownership by large shareholders is not appropriate. They also found that the presence of the founding family adversely affects Tobin’s Q in older firms, where the entrepreneurial of the founder might be less valuable. Conclusion The perspective of the development of AIM is optimistic. Mitigating the agency cost is a core part in corporate governance. Based on previous study, agency costs are higher when an outside manager manages the firm and when there are more non-manager shareholders. Managers’ ownership share and monitoring by banks may be a helpful corporate control mechanism that can decrease agency costs. However, imposing a linear relationship between profit and the ownership by large shareholders is not appropriate. The decrease of free cash flow will also decrease the agency cost. References Agrawal, A., Jaffe, J.F. Mandelker, G.N., 1992. The Post-Merger Performance of Acquiring Firms: A Re-Examination of an Anomaly. Journal of Finance, 47, 1605-1621. Ang, J., Cole, R., Lin, J., 2000. Agency Costs and Ownership Structure. The Journal of Finance, 55(1), 81–106. Bawden, T. Waller, M., 2007. London vs. New York: top US regulator attacks AIM ‘casino’. http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article1490202.ece (accessed: 14 Jan 2011). Coles, J., Lemmon, M., Mescke, J., 2005. Structural Models and Endogeneity in Corporate Finance: The link between managerial ownership and corporate performance. Arizona State University working paper. Demsete, H., 1983, The Structure of Ownership and the Theory of the Firm. Journal of Law and Economics, 26, 375-390. Doukas, J., Kim, C., Pantzalis, C., 2000. Security Analysts, Agency Costs, and Company Characteristics. Financial Analysts Journal, 56(6), 54–63. Houston, J., James, C., Ryngaert, M., 2001. Where do merger gains come from? Bank mergers from the perspective of insiders and outsiders. Journal of Financial Economics, 60, 285–311. Jacky Yuk-Chow So, 2005. Agency Costs and Ownership Structure: Evidence from the Small Business Finance Survey Data Base. Texas AM International University working paper. Jensen, M., Meckling, W, 1976. Theory of the Firm: Managerial Behaviour, Agency Costs and Ownership Structure. Journal of Financial Economics, 3, 305–360. Jensen, M. C., 1986. Agency Costs of Free Cash Flow, Corporate Finance and Takeovers. American Economics Review, 76, 323–339. Jensen, M. C., 1993. The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems. Journal of Finance, 43(3), 831–880. Kohers, N., Kohers, T., 2001. Takeovers of technology firms: Expectations vs. reality. Financial Management, 30, 35–54. Kelly, J., Cook, C., Spitzer, D., 1999. Unlocking Shareholder Value: The Keys to Success. New York: KPMG LLP. McKnight, P. J. Weir, C., 2009. Agency Costs, Corporate Governance Mechanisms and Ownership Structure in Large UK Publicly Quoted Companies: A Panel Data Analysis. The Quarterly Review of Economics and Finance, 49, 139–158. Opler, T., Titman, S., 1993. The Determinants of Leveraged Buyout Activity: Free Cash Flow vs. Financial Distress Costs. Journal of Finance, 48, 1985–1999. Servaes, H., 1991. Tobin’s Q and the gains from takeovers. Journal of Finance, 46, 409–41. Sharma, D., Ho, J., 2002. The Impact of Acquisitions on Operating Performance: Some Australian Evidence. Journal of Business Finance and Accounting, 29, 155–200. Singh, M., Davidson, W. A., 2003. Agency Costs, Ownership Structures and Corporate Governance Mechanisms. Journal of Banking and Finance, 27, 793–816. Morck, R., Shleifer, A. Vishny, R. W., 1988, Management Ownership and Market Valuation. Journal of Financial Economics, 20, 293-315. Mallin, C. Kean Ow-Yong, 2008. Corporate Governance in Alternative Investment Market. The Institute of Chartered Accountants of Scotland.

Based on the IBM Social Computing guidelines, create a social Essay

Based on the IBM Social Computing guidelines, create a social computing guidelines blog for your company - Essay Example Hence, Heavy Machine Enterprise Co. must make it mandatory that each staff member participates in such interaction and exchange of ideas, on global basis. Being an innovation based company, Heavy Machine Enterprise Co. must stress that each employee participates in the continuous learning process. Accoringly, the company should emphasize that social computing can contribute largely towards the growth of an individual and organization. Another important aspect of IBM computing guidelines deals with the tool of contribution, among the staff and all concerned, worldwide. IBM has the vision of contributing to the world as an innovator and corporate citizen, with a view to provide government and non-governmental organizations, health care industry and businesses, the necessary innovations by sharing the knowledge with all concerned. Acknowledging the importance of social computing, Heavy Machine Enterprise Co. must recommend to its employees using internet, which has been the policy of IBM since 1997. Therefore, Heavy Machine Enterprise Co. should encourage all staff members to participate actively in the blogosphere for learning and sharing their knowledge. The staff member is responsible for any document published by him or her. The company should stress the importance of on-line content, which everyone must use in a responsible manner, while respecting rules of the particular website and protecting the privacy of publisher. In addition, any staff member of Heavy Machine Enterprise Co. can declare his or her role in the company while publishing any content or discussing company related products and services. However, any published material shall be the personal responsibility of the individual. While respecting copyright laws of the land, no staff member can disclose any propriety information. Similarly, discussing the business plans and other related

Countrywide Financial Assignment Example | Topics and Well Written Essays - 500 words

Countrywide Financial - Assignment Example Role in the Subprime Mortgage Meltdown Countrywide’s original creation of the practice of service oriented architecture (SOA) was heralded as revolutionary and became an industry standard (Gruman, 2005). The company was the leader in loan origination with others in the industry following suit, however what is unclear and unknown is when the company’s internal operations began to deviate from sound business practices (Jacobs, 2009; Mokhiber & Weissman, 2007). Gearino (2011) uses the example of the chaos theory to describe the affect and the influence Countrywide had on the subsequent mortgage meltdown (p. 40). He summarizes the chaos theory as â€Å"small deviations from the original intent or purpose of something causing varying results† (2011, p. 40). Subsequently, Countrywide’s business practices were small deviations from the standard ways in which mortgages were created and sold as mortgage backed securities (Jacob, 2009, pp. 17-25). What began as a re volutionary way of originating, underwriting, funding, and packaging mortgage loans for sale became the uncertainty of the deviations as hypotheized by Gearino (2011, p. 40).