Principles of Business Research Paper Example | Topics and Well Written Essays - 1000 words

Principles of Business - Research Paper Example The company also encourages its employees to volunteer in community outreach activities. The foundation supports Grace Foundation, World Vision and Asia Society in China, Taiwan and Hong Kong respectively. Hong Kong Council of Social Service awarded JP Morgan Chase foundation â€Å"The Caring Company†. Apart from external undertakings, CSR is also concerned with improving organizational management, mitigating overall risks facing the organization and stress proper use of company’s resources. Therefore, it is an activity meant to support company’s positioning to enable it take advantages of both foreseen and unforeseen opportunities. Connection between CSR program and its importance to bank According to Werther and Chandler (2010), CSR is an activity performed by banks and other companies to the community and environment to impact positively to the society and increase their overall competiveness. It integrates legal, ethical, economic and discretionary actions th at affects overall economic performance of the company. CSR seeks to provide the bank with sustainable competitive edge as it improves the reputation of the bank in the eyes of the governments and societies. Financial contracts and agreements executed by banks are characterized by uncertainty and asymmetrical information that makes good reputation and trust condition for conducting business. Therefore, CSR improves banks reputation and increases the level of trust. How does the CSR program apply to today’s trends and current issues in the global marketplace? Customers are increasingly getting versed with the need for investment in societies. Therefore, such customers are less likely to be customers of companies that exploit employees or that pollute the environment or those that are corrupt or carrying out illegal activities. Therefore, it is important for companies to maintain good relationship with the community in which it operates. Whom is the company responsible to? The company is responsible to the society in which it operates. Therefore, it must ensure that it operates business that improves lives of the people. Why a company implements a CSR program First, CSR protects shareholders and improve relationships with banking and investors. Shareholders understand that their investments gain better values not only through profit maximizing behavior but also operating in a responsible manner. CSR encourages companies to appoint board of directors who will deliver exemplary returns according to expectations of shareholders as well as protect company’s wealth and investments. With CSR programs, activities will contribute to bank’s strategic plan and shareholders will be assured of increased wealth emanating from steady dividends. CSR program demonstrates improved organizational management as well as improved processes in the bank. It also acts as channel of communication and reinforces relationships between shareholders and bankers as well as bankers and the community at large. Companies that have good reputation have undisputed advantage in convincing investors and other company stakeholders to support the company achieve its objective. Most investors prefer companies with strong CSR programs. Secondly, CSR improves stakeholder perceptions. Company’s stakeholders are many and varied. It is necessary to portray a good name for the company so that stakeholders of the company could be respected, trusted and liked. When stakeholder

The Nexus between agency theory and corporate governance Essay

The Nexus between agency theory and corporate governance - Essay Example This essay tries to explain the agency theory and corporate governance in the present day environment. Economists recently are more diverted to the phenomenon of organisation. The recently formulated organisation theory agency theory is different from the ones which existed in the past. Fama (1980) focused at the possible managerial labour market to restrain and guide individual decision-making expedience. In essence all these various statements are construed based on a few simple assumptions. These assumptions according to Donaldson (1990) are construed as a 'theory of interest, motivation and compliance'."Specifically, agency theory is directed at the ubiquitous relationship, in which one party (the principal) delegates work to another (the agent), who performs that work. Agency theory attempts to describe this relationship using the metaphor of a contract" (Eisenhardt, 1989: p58).The neoclassical school analyses the individual who tries to maximise or in the least to satisfy their utility between work and time off. This combination of assumed independence and selfish enthusiasm that is problematic within the relationship of agent and principal. In terms of corporate governance the shareholder is the principal. The problem arises due to the separation of ownership and control.According to Jill Solomon (2007) the failure to corporate governance and corporate crumple can take place in the firmest company. It is possible to seduce the Investors, creditors and employees through a company's repute and achievement. This can even throw caution to the wind. If the agents of economic accountability were intellectuals, as it is a must based on the economic and finance theory, this form of sightlessness could never occur. But the problem is that it does happen, investors behave rationally not always, and the factors of human behaviour and psychology are tricky to fit in a finance framework or an economic hypothesis. Cases of irrational behaviour in the UK during the 198 0s were that of Polly Peck and Coloroll. This was a case when the capitalist found very important information relating to contingent liabilities were missing from the accounts of these companies (Smith et all, 1992). Differences between managers and shareowners Agency theory brings up a basic problem in organizations and that is self-interested conduct. The managers of a corporation normally have their own goals which often cross roads with the proprietor's goal of maximising shareholder wealth. As it is the shareholders who give power to the managers to manage the firm's wealth, a prospective difference of opinion arises between the two groups. Agency Cost How does the agent that is the company directors serve the principal that is the shareholders is the question. The solution lies in accepting certain agency costs. These costs involve either in producing incentives or approve which adjust executive egoism with the concerns of shareholders. Or else they may be involved in supervising executive behaviour in order to restrain their self-interest. This led to the development of the number of non-executives on the company boards. Also it resulted in augmented arrangement of their function and considerations of freedom, leading to reforms all over the world. The separation of the part played by the chief executive and that played by the non-executive has been made a part of this reform. The establishment of audit, compensation, and recommendations committees is actually independent non-executives appointed to assure the proper use of the incentives and also to check the performance of the executives. These internal controls