Identify a party (other than stockholders) that can be classified as a stakeholder for a corporation. What obligation does the corporation have to this party? Describe a situation where stockholder claims on the organization might conflict with the claims of this stakeholder group. If you were CEO, how would you resolve these conflicts?

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Patrina SchowalterLv2

28 Sep 2019

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Over the past few years, the number of start-up companies attracted to either doing business themselves in the cloud, or specifically creating applications for others to use in the cloud, has grown significantly. A few but very promising enterprises have launched applications in âcontainerâ technology, which enables companies, programmers, or other enterprises to both launch and run applications solely in the cloud. There is still a lot of room in this emerging marketplace, and you are diving in. The product youâve developed has a unique angle to tap into the local-grown/local-made/local-paid movement thatâs also growing larger every day. Your initial market is your own small city, which operates independently but which is linked economically and via public safety provision to another small city sitting directly across a river separating the two. Once youâve been able to launch your company in your city, you plan to approach the âsister cityâ leaders, then the county, state, and eventually go national. Itâs too soon now, but your future plans entail an IPO offering to accomplish all this. Eventually, you hope to be able to re-imagine your product to go global. You have big plans, are close to being tapped out financially and you now need to plan for additional investors. Address the following considerations as they apply to your product launch. Describe an agency relationship and how it may/will take shape for your small company. As the sole employee and investor in your startup, what agency conflicts might arise? Six months have transpired, and youâve been able to add two employees. In this new arrangement, what agency disputes might now develop that need to be addressed, and how might you address them? What resources do you need to use or consider? Another three months have passed. You are now ready to expand to your sister city and you need more capital. You decide the wisest path is to sell some stock to outside investors, but you will maintain control over your company by holding onto the majority of the stock. In this new scenario, what type of agency conflict might occur? How can you address this in advance? The IPO was a success, and you have a robust number of shareholders. With board support, you determine it is time to hire a financial manager to help your firm achieve current goals and set new ones appropriate to the firmâs growth strategy. What professional strengths and skills will an individual seeking this position need to possess? Another consideration you feel you need to address at this point, now that your firmâs stock is publicly traded, is how to sustain the high ethical standards youâve fostered thus far as you move into the firmâs future. What strategies can your management team implement to conduct your business with both personal and professional integrity? What steps can you take to ensure that ethical considerations for financial and other management decisions are embedded into the firmâs culture? Congratulations - you are now at Year One, and everything is moving along faster than you anticipated. While this is great, you are at the point where you need to raise additional capital from outside lenders. With this decision, what type of agency costs might the company incur? How might a lender mitigate any agency costs? Year Two rolls around. Your company has been able to expand beyond your local communities and into to localities and governments in half the counties of the state. The stakes are getting bigger and you welcome the idea of high-level input to ensure the company keeps growing and expanding. You cash out the majority of your stock and turn the company over to an elected board of directors. Neither you nor any other stockholders own a controlling interest (which is also the situation at most public companies). List six potential managerial behaviors the new board might take that could harm your companyâs value, and what steps overall can put into place to avoid or mitigate these.

Over the past few years, the number of start-up companies attracted to either doing business themselves in the cloud, or specifically creating applications for others to use in the cloud, has grown significantly. A few but very promising enterprises have launched applications in âcontainerâ technology, which enables companies, programmers, or other enterprises to both launch and run applications solely in the cloud. There is still a lot of room in this emerging marketplace, and you are diving in. The product youâve developed has a unique angle to tap into the local-grown/local-made/local-paid movement thatâs also growing larger every day. Your initial market is your own small city, which operates independently but which is linked economically and via public safety provision to another small city sitting directly across a river separating the two. Once youâve been able to launch your company in your city, you plan to approach the âsister cityâ leaders, then the county, state, and eventually go national. Itâs too soon now, but your future plans entail an IPO offering to accomplish all this. Eventually, you hope to be able to re-imagine your product to go global. You have big plans, are close to being tapped out financially and you now need to plan for additional investors. Address the following considerations as they apply to your product launch. 1.Describe an agency relationship and how it may/will take shape for your small company. As the sole employee and investor in your startup, what agency conflicts might arise? 2.Six months have transpired, and youâve been able to add two employees. In this new arrangement, what agency disputes might now develop that need to be addressed, and how might you address them? What resources do you need to use or consider? 3.Another three months have passed. You are now ready to expand to your sister city and you need more capital. You decide the wisest path is to sell some stock to outside investors, but you will maintain control over your company by holding onto the majority of the stock. In this new scenario, what type of agency conflict might occur? How can you address this in advance? 4.The IPO was a success, and you have a robust number of shareholders. With board support, you determine it is time to hire a financial manager to help your firm achieve current goals and set new ones appropriate to the firmâs growth strategy. What professional strengths and skills will an individual seeking this position need to possess? 5.Another consideration you feel you need to address at this point, now that your firmâs stock is publicly traded, is how to sustain the high ethical standards youâve fostered thus far as you move into the firmâs future. What strategies can your management team implement to conduct your business with both personal and professional integrity? What steps can you take to ensure that ethical considerations for financial and other management decisions are embedded into the firmâs culture? 6.Congratulations - you are now at Year One, and everything is moving along faster than you anticipated. While this is great, you are at the point where you need to raise additional capital from outside lenders. With this decision, what type of agency costs might the company incur? How might a lender mitigate any agency costs? 7.Year Two rolls around. Your company has been able to expand beyond your local communities and into to localities and governments in half the counties of the state. The stakes are getting bigger and you welcome the idea of high-level input to ensure the company keeps growing and expanding. You cash out the majority of your stock and turn the company over to an elected board of directors. Neither you nor any other stockholders own a controlling interest (which is also the situation at most public companies). List six potential managerial behaviors the new board might take that could harm your companyâs value, and what steps overall can put into place to avoid or mitigate these. 8.You are also aware from your prior career and from your research, that corporate governance can affect shareholder value. This greatly concerns you, as you still have lofty plans for your companyâs growth and eventual global trajectory. Questions youâve identified that need to be addressed at this stage include: a) What is corporate governance?; b) What five corporate governance provisions are internal to a firm and are under its control?; c) What characteristics of the board of directors usually lead to effective corporate governance?; d) What characteristics of the board of directors signal ineffective or problematic governance practices?; e) How can regulatory agencies and legal systems affect corporate governance? If there are differences in local versus national levels, expand upon these. 9.Lastly, one of your new board members is very concerned with âblockholders.â What is block ownership? How does it affect corporate governance? Explain the pros and cons.

Question:

Identify the ethical dilemma in this scenario:

Comment 1:

Sarah Potterman- Accepting a grant to research the company to which you are evaluating is a conflict of interest. It is difficult to be impartial toward the company that is paying the bills.

Jim Hopler- Changing the rules and omitting the facts to fit the desired outcome is essentially lying no matter how unintentional.

What are the undesirable consequences?

Sarah Potterman- Sarah may feel compelled to do less rigorous research, spin the results to look better for the software company, or just not publish the results if they reflected poorly on the software company. Even if her research was impeccable, she may be accused of partiality by the software company's competitors.

Jim Hopler- If Jim's leaders or customers found that he had skewed the data to improve his results, he could lose face, lose the company customers, or he could lose his job. Additionally, the company would not be making the necessary improvements to reach the goals they set.

Propose an ethical solution that considers the welfare of all the stakeholders.

Sarah Potterman- Ideally, her research would be funded by a non-benefiting party. She could also request the backing of all areas of intervention to see if there would be a way for the funding to be made across the different interventions so as to give the same advantage to all. This would have to be an all or none though.

Jim Hopler- Though the findings that Jim presented to his corporate office were not accurate, they were not using the same criteria to make the evaluation, and they did not meet the goals set by the company, they were still positive findings. Jim would have demonstrated better judgment and integrity by presenting the whole truth. Though the percent of "outstanding" did go down, the rating of "poor" had a significant improvement from 20% down to just 5%. Presenting that the "outstanding" percent went down but overall customer service rating went up would have been honest and potentially impressive enough.

Comment 2:

For the Sarah Potterman case and questions, the ethical dilemma is that Sarah's results may be biased because one firm is giving funds for her to compare it with other firms. The pay, whether or not it could be seen as a gift or not, is still a benefit to Sarah, and could be viewed as bias if she reviews RSPT Inc. more favorably than the other companies. Even if Sarah attempts to not be bias, she may still, unconsciously, choose RSPT Inc. over their competitor. The undesired consequences may be that RSPT Inc. receives an unfair advantage over the competitors and/or the competitors argue that Sarah's review is bias and cause her research to become rejected. Sarah should deny the gift/offer of funding and or request the same amount of funding from the competitors to make sure that the review is fair across the board.

For the Jim Hopler case and questions, the ethical dilemma lies with the changing of facts and numbers. If the company wanted to reduce the number of options, then it would have to reevaluate the initial score keeping procedure, or start from the beginning and scrap the old evaluations. By shrinking the chart, it skewed the information in the favor of the company, but it did not improve overall performance. The inaccuracy that the new numbers negate the reason for creating the survey in the first place. The undesirable effects are that the survey is not compatible with the previous surveys, which should have been kept consistent or re-evaluated accurately. Since it is difficult to go back and re-evaluate accurately, it would be highly recommended to stay with the original survey. By staying with the original survey, the company will be able to change and improve their customer relationships. If the company has decided that they do not want to change any further, than a survey will not make a difference.

Comment 3:

Sarah is researching the effectiveness of various intervention methods, one of which is the interactive system from RSPT. However, different from her sources for the other methods she is researching, RSPT is offering to fund her entire research as well as offering her an unsolicited grant for her data collection expenses. This creates an ethical dilemma as none of her sources for her research should receive any âdifferentâ treatment from the others. All sources should feel that they are being treated equally. Even though Sarah might have good intentions and use the money without warranting any favors to RSPT, the credibility of her results might be questionable. Also, if she uses the funds from RSPT Sarah might find herself being biased in her approach and this might affect her results. A suggested ethical approach could be that Sarah does not accept any funding from all of her sources for her research, or she requires each source to contribute the same amount towards her research. At least either way no one source seems to be getting any preferential treatment and Sarahâs research is convincingly transparent to all parties involved.

Part 2

The ethical dilemma that is presented in Jimâs case is that Jimâs team decided to select the statistical analysis that gave them their âexpectedâ results. Submitting the results to corporate portrays success of the changes implemented by Jim and his team, however it is not an accurate representation of the achievement of the goal the team had initially set out to attain. Ignoring the initially computed results prevents Jimâs team from further analyzing their data to obtain a clearer representation of the situation at hand and the problem to be solved. A suggested more ethical approach would be for Jimâs team to adjust their goal so that they aim to improve the ratings of each category, that is, decrease ratings in less favorable categories and increase ratings in more favorable categories. Since the number of ratings for each of the categories are dependent on each other, decreasing the less favorable categories would inherently increase ratings in the more favorable categories.

Comment 4:

In the first scenario the ethical dilemma is that RSPT is going to fund the expenses Sarahâs research. Since RSPT is funding the research project, the consequences could be that there is some bias when it comes to the data that is revealed. Another consequence could be possible manipulation being that they are funding the research. This consequence creates the question of RSPT being allowed to manipulate the data in favor of their product and strategy. My proposal for an ethical solution would be to accept the free software, which Sarah was originally requesting and deny the offer for the funding for the research. That way any possible negative consequences are removed regarding possible bias coming from Sarah or misreporting of the data and if RSPTâs software is the best strategy.

In the second scenario the ethical dilemma scenario is that Jim changed the way the data was calculated in order to make it more favorable for his officeâs stats. The consequences are that if the company sees the raw data and how Jim manipulated the data for his benefit, he could be fired. Another consequence could be if there is a problem area that the original data is showing, then that problem will not get solved to increase the numbers, instead Jim will have to continue to figure out ways to manipulate the numbers.

My proposal is to combine poor and below average as below average and then combine above average and outstanding as above average and see the how the numbers have changed from there. If you do that youâll receive this:

1^st survey â Below Average â 25%, Average â 15%, Above Average â 60%

2^nd survey â Below Average â 10%, Average â 20%, Above Average â 70%

Now you can see from the changes that Jim has implemented that he has made improvements without unethically manipulating the data.

PLEASE GIVE YOUR VIEW ON BOTH SCENARIOS BASED ON THE COMMENT POSTED ABOVE

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