Aig Case Solution

[pic] LEADERSHIP AT AIG: DOES STYLE MATTER? Case Overview This case deals with executive leadership styles. In particular, this case deals with American International Group, the world’s insurance company, and its CEO Maurice â€Å"Hank† Greenberg. Greenberg, an autocratic leader, was recently deposed by his board of directors after problems emerged regarding possible earning manipulation. It describes his leadership style, reasons his two sons (former employees) left the company, and Martin Sullivan, Greenberg’s successor. Like his former boss, Sullivan micromanages the organization, but is well liked by employees. Teaching Objectives ) To show students the impact of autocratic leadership style on employees. 2) To distinguish between micro and participative management in an organization. 3) To introduce the concept of leadership succession and its effects on organizations. Purpose This case presents various leadership styles used by CEOs. It suggests that executi ves who uses a more participative leadership style are more likely to create an effective employee workplace. Relationship to Part 4 The relationship of this case to part 4: leadership and its styles, possible motivation of employees through style, the encouragement of team work and communication.This case can draw on various theories in all four chapters of Part 4. Questions Question 1. AIG Chairman and CEO Maurice â€Å"Hank† Greenberg was considered an autocratic leader and a micromanager by many employees; yet the company grew dramatically during his reign as CEO. Does leadership style matter as long as the company performs well and shareholders are satisfied with their return on investment? Answer Leadership does matter. A company may perform well, and shareholders may be satisfied with their return on investment, but on another level this style of leadership may do irreparable hard to employee effectiveness and morale.Eventually autocratic leadership will take it toll o n the organization and its ability to operate effectively. Question 2. AIG’s new CEO Sullivan has been labeled a micromanager, but with a more pleasant personality. Can he, as a micromanager, develop a more participative leadership style? How? Answer It may be very difficult for a manager/leader to change his management and leadership style. There is indeed a time and place for autocratic leadership (e. g. , when time is limited), but we know that participative leadership often produces better results.While it is often difficult for executives (managers) to let go and delegate more to underlings, AIG’s new CEO Sullivan can learn to develop a more participative leadership style. He must begin to create more teams, motivate more employees to participate in corporate activities, and communicate more effective. In part, his micromanagement style may be a result of following Greenberg’s lead. As Sullivan becomes more comfortable in his new role, he should be able to delegate more effectively, especially if he is to deal with more strategic corporate issues. Leadership is a very important aspect that is prominent in our professional life.If a team is led by an effective good leader, the team is more likely to perform well as per the expectations of the project. On the other hand, if the leader is a person who just issues orders and commands the tasks to be done, the team is demotivated and does tend to perform less than they actually can. If you are a working professional, you might have got an idea about the types of leadership styles and techniques. The working and managing style of a leader plays a very important part in making the leadership role effective. There are various managers who adopt different leadership styles and methods for employee and process management.Each leadership style has its own methods, behavior, effects, and aspects. Participative leadership is a very significant leadership style that is most beneficial to employees, managers alike. What is Participative Leadership Style? As the name suggests, this leadership style relates to a method of having things done by involving team members in goals setting and decision making. Since there is an involvement of team members and employees in being a part of the management, this is by far the most useful management style in the business world.Though there is employee participation, the leader is handed over the responsibility of taking the final decision. In this corporate leadership style, the manager works with the team and not over the team, which is why he can determine even the minutest errors of the processes that have to be executed. Advantages of Participative Leadership Style There are many apparent and proven advantages of the participative leadership practice. A very important advantage is that employees and team members are motivated to work, because they realize that the management is ready to consider their suggestions and viewpoints.And if t here is such employee motivation, the team members happen to work more effectively than expected. This eventually has a good effect on the company's revenue. Secondly, since the manager becomes like a team member and takes part in the decision-making process, it has a good impact on teamwork. Thirdly, as more than one minds are working on goal setting and decision making, there is an all-round analysis of the possibilities of failures. Therefore, the manager can majorly rule out any errors and possibilities of failures in the project.You can say that there is a broader assessment of the situation which is to be worked upon. The result of participative leadership can also be effective decisions suggested by experts in the respective field. In this kind of business leadership, the manager does not only involve team members, but can also take guidance from his peers. One of the most suitable participative leadership examples can be when a manager divides project work in his team member s including himself, discusses the project requirements and expectations with the team leader and other members, and then they work on it collectively.Participative leadership surely increases employee satisfaction, reduces the workload of managers, and creates better teamwork; with all this eventually contributing to good worLeadership is a very important aspect that is prominent in our professional life. If a team is led by an effective good leader, the team is more likely to perform well as per the expectations of the project. On the other hand, if the leader is a person who just issues orders and commands the tasks to be done, the team is demotivated and does tend to perform less than they actually can.If you are a working professional, you might have got an idea about the types of leadership styles and techniques. The working and managing style of a leader plays a very important part in making the leadership role effective. There are various managers who adopt different leaders hip styles and methods for employee and process management. Each leadership style has its own methods, behavior, effects, and aspects. Participative leadership is a very significant leadership style that is most beneficial to employees, managers alike. What is Participative Leadership Style?As the name suggests, this leadership style relates to a method of having things done by involving team members in goals setting and decision making. Since there is an involvement of team members and employees in being a part of the management, this is by far the most useful management style in the business world. Though there is employee participation, the leader is handed over the responsibility of taking the final decision. In this corporate leadership style, the manager works with the team and not over the team, which is why he can determine even the minutest errors of the processes that have to be executed.Advantages of Participative Leadership Style There are many apparent and proven advant ages of the participative leadership practice. A very important advantage is that employees and team members are motivated to work, because they realize that the management is ready to consider their suggestions and viewpoints. And if there is such employee motivation, the team members happen to work more effectively than expected. This eventually has a good effect on the company's revenue. Secondly, since the manager becomes like a team member and takes part in the decision-making process, it has a good impact on teamwork.Thirdly, as more than one minds are working on goal setting and decision making, there is an all-round analysis of the possibilities of failures. Therefore, the manager can majorly rule out any errors and possibilities of failures in the project. You can say that there is a broader assessment of the situation which is to be worked upon. The result of participative leadership can also be effective decisions suggested by experts in the respective field. In this kind of business leadership, the manager does not only involve team members, but can also take guidance from his peers.One of the most suitable participative leadership examples can be when a manager divides project work in his team members including himself, discusses the project requirements and expectations with the team leader and other members, and then they work on it collectively. Participative leadership surely increases employee satisfaction, reduces the workload of managers, and creates better teamwork; with all this eventually contributing to good wor Question 3. Greenberg named his son Evan as the heir apparent. Yet, Greenberg never set a departure date.Should a good leader set a date for departure once a successor is named? Why? Why not? Answer Most of the time succession in organizations creates a host of problems. On the one hand, incumbent CEOs are less than willing to give up the power and prestige that accompany their position. On the other hand, the successor (heir ap parent) may be eager to assume the top position. If the successor has to wait too long for the top leadership position, he may decide to seek out a top level position in another company, and the company may lose a unique opportunity for a smooth leadership transition.CEOs should set a deadline for their departure so that all stakeholders are informed which can facilitate a change in leadership. LEADERSHIP AT AIG: Does Style Matter Question 1: AIG Chairman and CEO Maurice â€Å"Hank† Greenberg was consider an autocraticleader and micromanager by many employee, yet the company grew dramaticallyduring his reign as CEO. Does leadership style matter as long as the company  performs well and shareholders are satisfied with their return on investment?Leader is a person who led people towards to the common goal. In the process of managing anorganization, I believe leadership style is the one of important factor in deciding the performanceof the company. Leader’s style of lea dership changes according to the situation of the company. Based on managerial grid concept by Robert Blake and Jane Mouton, there are five style of  leadership that combine different degrees of concern for production and concern for people andthis five styles of leadership is shown in figure 1 below.In the case study, CEO Maurice â€Å"Hank†was more concern of production compare to the concern for people and of course, this kind of  leadership will produce good performance. That is why Maurice â€Å"Hank† able to bring thecompany from midlevel insurance company becomes the international company and give thesatisfaction towards the shareholders. However, to sustain the company at the same level,Maurice â€Å"Hank† kinds of leadership will causes the performance of the company to be declined  because lack of concern for people will affect the workers performance and this result would notsatisfy the shareholders.The workers in AIG will become less motivated due the pressure given  by the management practice by Maurice â€Å"Hank†. This style of leadership by Maurice â€Å"Hank† fallunder style of leadership â€Å"produce or perish† as shown in figure 1. As conclusion, the style of  leadership is the key player in determine the successful of a company. Question 2: AIG’s new CEO Sullivan has been labeled a micromanager, but with a more  pleasant personality. Can he as a micromanager, develop more participativeleadership style?How? Participative leadership style is defined as  leader  who involves his subordinatesin the process of   making decision such as setting goal, solving  problemand others, but retains the final  decision making  authority. By referring the case study, CEO Sullivan can develop more participative style leadership by segregating the works to his subordinates in order to enabling his subordinate to  play their role in the organizations and indirectly developing the trust between himself with his subordinate.This action will enable the workers especially his subordinate to create a feeling of  self-belonging towards the company. Once the trust is there, he should implement groupdiscussion or brainstorming before making any decision but while conducting the groupdiscussion, he should be the person who get all the buy-in from the group members. In the groupdiscussion, he should use his authority in deciding the decision and this kind of ways in making decision helps his subordinate to accept and thus implement the action with full enthusiasm.Besides that, he should often communicate with his workers through out the three layer of  management such as having chitchat with the workers during teatime in order to understand the needs of workers in the company and thus raise his level of concern towards people. As he developing his understanding towards his workers, he can easily delegate the works that suit the workers best and as the result, company p erformance increases and building the security towards the investor and the people in the company especially shareholders. Question 3:Greenberg named his son Evan as the heir apparent. Yet Greenberg never set adeparture date. Should a good leader set a date for departure? When should hename a successor? Every thing that starts must have an end. Leaders also have his own starts and ends in hisera of leadership. For my point of view, a good leader should set a date for his departure. This is  because a leader knows better his own limitation and capabilities. A leader should alsounderstand his abilities and weakness in managing the organization as the time passes by.I  believe that every leader would like to leave his position without tarnishing his reputation andintegrity. However, it is not wise action to take if he announced his name of successor long  before his departure date for the position. This is because the successor required a time for him toadapt with the changes in role and the leader himself required time to hand over and coaching hisnew successor to take over his positions but how long is the duration for the this process, it alldepends on the successor himself.Normally, a leader had already started to look for hissuccessor long before he announced his departure date. This is because to identify a good leader  does not happen in a single day. It will consume so much time and effort for leader to be bornand as been mention by Richard Arvey, a human resources and industrial relations professor inthe Carlson School of Management, â€Å"While environmental influences determine many of our  leadership behaviors and the roles we obtain, our genes still exert a sizable influence over  whether we will become leaders. That is why, I do believe that leadership is both inherited andacquired. As conclusion, a good leader always think three steps ahead, that’s why it is importantfor a good leader to prepare for his succession plan American International Group From Wikipedia, the free encyclopedia Jump to: navigation, search â€Å"AIG† redirects here. For other uses, see AIG (disambiguation). |American International Group, Inc. |[pic] | |Type |Public | |Traded as |NYSE:  AIG | | |S&P 500 Component | |Industry |Insurance, Financial services | |Founded |Shanghai, China (1919)[1] | |Founder(s) |Cornelius Vander Starr | |Headquarters |American International Building, New York City, | | |New York, United States | |Area served |Worldwide | |Key people |Bob Benmosche | | |(President & CEO) | | |Robert Miller (Chairman)[2] | |Products |Insurance annuities, mutual funds | |Revenue |[pic]US$ 77. 301 billion (2010)[3] | |Operating income |[pic]US$ 17. 936 billion (2010)[3] | |Net income |[pic]US$ 7. 786 billion (2010)[3] | |Total assets |[pic]US$ 683. 443 billion (2010)[3] | |Total equity |[pic]US$ 113. 239 billion (2010)[3] | |Employees |96,000 (2010)[3] | |Website |AIG. com | American International Group, Inc. NYSE:  AIG) or AIG is an American multinational insurance corporation. Its corporate headquarters is located in the American International Building in New York City. The British headquarters office is on Fenchurch Street in London, continental Europe operations are based in La Defense, Paris, and its Asian headquarters office is in Hong Kong. According to the 2011 Forbes Global 2000 list, AIG was the 29th-largest public company in the world. [4][5] It was listed on the Dow Jones Industrial Average from April 8, 2004 to September 22, 2008. AIG suffered from a liquidity crisis when its credit ratings were downgraded below â€Å"AA† levels in September 2008.The United States Federal Reserve Bank on September 16, 2008 created an $85  billion credit facility to enable the company to meet increased collateral obligations consequent to the credit rating downgrade, in exchange for the issuance of a stock warrant to the Federal Reserve Bank for 79. 9% of the equity of AIG. The Federal Re serve Bank and the United States Treasury by May 2009 had increased the potential financial support to AIG, with the support of an investment of as much as $70  billion, a $60  billion credit line and $52. 5  billion to buy mortgage-based assets owned or guaranteed by AIG, increasing the total amount available to as much as $182. 5  billion. [6][7] AIG subsequently sold a number of its subsidiaries and other assets to pay down loans received, and continues to seek buyers of its assets. Contents | |  [hide]   | |1 History | |2 Business | |2. 1 Holdings | |2. 2 Auto insurance | |2. 3 Travel Insurance | |3 Financial crisis | |3. 1 Chronology of September 2008 liquidity crisis | |3. 2 Federal Reserve bailout | |3. Additional bailouts of 2008 | |3. 4 Counterparty controversy | |3. 5 Post-bailout expenditures | |3. 6 Settlement of credit default swaps | |3. 7 Sales of assets | |3. 8 Record losses | |3. 2009 employee bonus payments | |3. 10 Manchester United Sponsorshi p | |3. 11 Share buyback | |4 Litigation | |4. 1 Accounting fraud claims | |5 Corporate governance | |5. Board of directors | |6 See also | |7 Notes | |8 References and further reading | |9 External links | [edit] History [pic] [pic] The American International Building in Lower Manhattan. AIG history dates back to 1919, when Cornelius Vander Starr established an insurance agency in Shanghai, China.Starr was the first Westerner in Shanghai to sell insurance to the Chinese, which he continued to do until AIG left China in early 1949—as Mao Zedong led the advance of the Communist People's Liberation Army on Shanghai. [8][9] Starr then moved the company headquarters to its current home in New York City. [10] The company went on to expand, often through subsidiaries, into other markets, including other parts of Asia, Latin America, Europe, and the Middle East. [11] In 1962, Starr gave management of the company's lagging U. S. holdings to Maurice R. â€Å"Hank† Greenberg , who shifted its focus from personal insurance to high-margin corporate coverage. Greenberg focused on selling insurance through independent brokers rather than agents to eliminate agent salaries.Using brokers, AIG could price insurance according to its potential return even if it suffered decreased sales of certain products for great lengths of time with very little extra expense. In 1968, Starr named Greenberg his successor. The company went public in 1969. [12] Beginning in 2005, AIG became embroiled in a series of fraud investigations conducted by the Securities and Exchange Commission, U. S. Justice Department, and New York State Attorney General's Office. Greenberg was ousted amid an accounting scandal in February 2005; he is still fighting civil charges being pursued by New York state. [13][14][15] The New York Attorney General's investigation led to a $1.   billion fine for AIG and criminal charges for some of its executives. [16] Greenberg was succeeded as CEO by Martin J. Sullivan, who had begun his career at AIG as a clerk in its London office in 1970. [17] On June 15, 2008, after disclosure of financial losses and subsequent to a falling stock price, Sullivan resigned and was replaced by Robert B. Willumstad, Chairman of the AIG Board of Directors since 2006. Willumstad was forced by the US government to step down and was replaced by Edward M. Liddy on September 17, 2008. [18] AIG's board of directors named Robert Benmosche CEO on August 3, 2009 to replace Mr. Liddy, who earlier in the year announced his retirement. [19] [edit] Business [edit] HoldingsFurther information: Holdings of American International Group In the United States, AIG is the largest underwriter of commercial and industrial insurance, and AIG acquired American General Life Insurance in August 2001. [20] [edit] Auto insurance AIG sold auto insurance policies through its subsidiary unit, AIG Direct (aka aigdirect. com). The policies they offered included insurance for private au tomobiles, motorcycles, recreational vehicles and commercial vehicles. AIG purchased the remaining 39% that it did not own of online auto insurance specialist 21st Century Insurance in 2007 for $749  million. [21] With the failure of the parent company and the continuing recession in late 2008, AIG rebranded its insurance unit to 21st Century Insurance. 22][23] In April 2009 it was announced that AIG was selling the 21st Century Insurance subsidiary to Farmers Insurance Group for $1. 9  billion. [24] [edit] Travel Insurance Main article: AIG Travel Guard AIG sells travelers insurance internationally through Travel Guard, headquartered in Stevens Point, Wisconsin. [edit] Financial crisis Further information: Subprime mortgage crisis,  Financial crisis of 2007–2010,  and  Liquidity crisis of September 2008 [edit] Chronology of September 2008 liquidity crisis On September 16, 2008, AIG suffered a liquidity crisis following the downgrade of its credit rating. Industry p ractice permits firms with the highest credit ratings to enter swaps without depositing collateral with their trading counter-parties.When its credit rating was downgraded, the company was required to post additional collateral with its trading counter-parties, and this led to an AIG liquidity crisis. AIG's London unit sold credit protection in the form of credit default swaps (CDSs) on collateralized debt obligations (CDOs) that had by that time declined in value. [25] The United States Federal Reserve Bank announced the creation of a secured credit facility of up to US$85  billion, to prevent the company's collapse by enabling AIG to meet its obligations to deliver additional collateral to its credit default swap trading partners. The credit facility provided a structure to loan as much as US$85  billion, secured by the stock n AIG-owned subsidiaries, in exchange for warrants for a 79. 9% equity stake, and the right to suspend dividends to previously issued common and preferre d stock. [17][26][27] AIG announced the same day that its board accepted the terms of the Federal Reserve Bank's rescue package and secured credit facility. [28] This was the largest government bailout of a private company in U. S. history, though smaller than the bailout of Fannie Mae and Freddie Mac a week earlier. [29][30] AIG's share prices had fallen over 95% to just $1. 25 by September 16, 2008, from a 52-week high of $70. 13. [citation needed] The company reported over $13. 2  billion in losses in the first six months of the year. 31][32] The AIG Financial Products division headed by Joseph Cassano, in London, had entered into credit default swaps to insure $441  billion worth of securities originally rated AAA. Of those securities, $57. 8  billion were structured debt securities backed by subprime loans. [33] CNN named Cassano as one of the â€Å"Ten Most Wanted: Culprits† of the 2008 financial collapse in the United States. [34] As Lehman Brothers (the largest bankruptcy in U. S. history at that time) suffered a catastrophic decline in share price, investors began comparing the types of securities held by AIG and Lehman, and found that AIG had valued its Alt-A and sub-prime mortgage-backed securities at 1. 7 to 2 times the values used by Lehman which weakened investors' confidence in AIG. 31] On September 14, 2008, AIG announced it was considering selling its aircraft leasing division, International Lease Finance Corporation, to raise cash. [31] The Federal Reserve hired Morgan Stanley to determine if there are systemic risks to a financial failure of AIG, and asked private entities to supply short-term bridge loans to the company. In the meantime, New York regulators allowed AIG to borrow $20  billion from its subsidiaries. [35][36] At the stock market's opening on September 16, 2008, AIG's stock dropped 60 percent. [37] The Federal Reserve continued to meet that day with major Wall Street investment firms, hoping to broker a deal for a non-governmental $75  billion line of credit to the company. 38] Rating agencies Moody's and Standard and Poor downgraded AIG's credit ratings on concerns over likely continuing losses on mortgage-backed securities. The credit rating downgrade forced the company to deliver collateral of over $10  billion to certain creditors and CDS counter-parties. [39] The New York Times later reported that talks on Wall Street had broken down and AIG may file for bankruptcy protection on Wednesday, September 17. [40] Just before the bailout by the US Federal Reserve, AIG former CEO Maurice (Hank) Greenberg sent an impassioned letter to AIG CEO Robert B. Willumstad offering his assistance in any way possible, ccing the Board of Directors. His offer was rebuffed. [41] [edit] Federal Reserve bailoutOn the evening of September 16, 2008, the Federal Reserve Bank's Board of Governors announced that the Federal Reserve Bank of New York had been authorized to create a 24-month credit-liquidity faci lity from which AIG could draw up to $85  billion. The loan was collateralized by the assets of AIG, including its non-regulated subsidiaries and the stock of â€Å"substantially all† of its regulated subsidiaries, and with an interest rate of 850 basis points over the three-month London Interbank Offered Rate (LIBOR) (i. e. , LIBOR plus 8. 5%). In exchange for the credit facility, the U. S. government received warrants for a 79. 9 percent equity stake in AIG, with the right to suspend the payment of dividends to AIG common and preferred shareholders. [17][27] The credit facility was created under the auspices of Section 13(3) of the Federal Reserve Act. 27][42][43] AIG's board of directors announced approval of the loan transaction in a press release the same day. The announcement did not comment on the issuance of a warrant for 79. 9% of AIG's equity, but the AIG 8-K filing of September 18, 2008, reporting the transaction to the Securities and Exchange Commission stated t hat a warrant for 79. 9% of AIG shares had been issued to the Board of Governors of the Federal Reserve. [17][28][44] AIG drew down US$ 28  billion of the credit-liquidity facility on September 17, 2008. [45] On September 22, 2008, AIG was removed from the Dow Jones Industrial Average. [46] An additional $37. 8  billion credit facility was established in October.As of October 24, AIG had drawn a total of $90. 3  billion from the emergency loan, of a total $122. 8  billion. [47] Maurice Greenberg, former CEO of AIG, on September 17, 2008, characterized the bailout as a nationalization of AIG. He also stated that he was bewildered by the situation and was at a loss over how the entire situation got out of control as it did. [48] On September 17, 2008, Federal Reserve Board chair Ben Bernanke asked Treasury Secretary Henry Paulson join him, to call on members of Congress, to describe the need for a congressionally authorized bailout of the nation's banking system. Weeks later, Congress approved the Emergency Economic Stabilization Act of 2008.Bernanke said to Paulson on September 17, â€Å"We can’t keep doing this. Both because we at the Fed don’t have the necessary resources and for reasons of democratic legitimacy, it's important that the Congress come in and take control of the situation. â€Å"[49] [edit] Additional bailouts of 2008 From mid September till early November, AIG's credit-default spreads were steadily rising, implying the company was heading for default. [50][51] On November 10, 2008, the U. S. Treasury announced it would purchase $40  billion in newly issued AIG senior preferred stock, under the authority of the Emergency Economic Stabilization Act's Troubled Asset Relief Program. 52][53][54] The FRBNY announced that it would modify the September 16 secured credit facility; the Treasury investment would permit a reduction in its size from $85  billion to $60  billion, and that the FRBNY would extend the life of the facility from three to five years, and change the interest rate from 8. 5% plus the three-month London interbank offered rate (LIBOR) for the total credit facility, to 3% plus LIBOR for funds drawn down, and 0. 75% plus LIBOR for funds not drawn, and that AIG would create two off- balance-sheet Limited Liability Companies (LLC) to hold AIG assets: one to act as an AIG Residential Mortgage-Backed Securities Facility and the second to act as an AIG Collateralized Debt Obligations Facility. [52][54]Federal officials said the $40  billion investment would ultimately permit the government to reduce the total exposure to AIG to $112  billion from $152  billion. 52] On December 15, 2008, the Thomas More Law Center filed suit to challenge the Emergency Economic Stabilization Act of 2008, alleging that it unconstitutionally promotes Islamic law (Sharia) and religion. The lawsuit was filed because AIG provides Takaful Insurance Plans, which, according to the company, avoid investments a nd transactions that are†un-Islamic†. [55][56] As of January 2012, TARP had about $50 billion invested in AIG according to one report. Break even for the government was figured at $28. 73 a share v. then-current share price of about $25. [57] [edit] Counterparty controversy AIG was required to post additional collateral with many creditors and ounter-parties, touching off controversy when over $100  billion was paid out to major global financial institutions that had previously received TARP money. While this money was legally owed to the banks by AIG (under agreements made via credit default swaps purchased from AIG by the institutions), a number of Congressmen and media members expressed outrage that taxpayer money was going to these banks through AIG. [58] In January, 2010, a document known as â€Å"Schedule A – List of Derivative Transactions† was released to the public, against the wishes of the New York Fed. It listed many of the insurance deals tha t AIG had with various other parties, such as Goldman Sachs, Societe Generale, Deutsche Bank, and Merrill Lynch. 59][60] Had AIG been allowed to fail in a controlled manner through bankruptcy, bondholders and derivative counterparties (major banks) would have suffered significant losses, limiting the amount of taxpayer funds directly used. Fed Chairman Ben Bernanke argued: â€Å"If a federal agency had [appropriate authority] on September 16, [2008], they could have been used to put AIG into conservatorship or receivership, unwind it slowly, protect policyholders, and impose haircuts on creditors and counterparties as appropriate. That outcome would have been far preferable to the situation we find ourselves in now. â€Å"[61] [edit] Post-bailout expenditures The week following the September bailout, AIG employees and distributors participated in a California retreat which cost $444,000 and featured spa treatments, banquets, and golf outings. 62][63] It was reported that the trip was a reward for top-performing life-insurance agents planned before the bailout. [64] Less than 24 hours after the news of the party was first reported by the media, it was reported that the Federal Reserve had agreed to give AIG an additional loan of up to $37. 8  billion. [65] AP reported on October 17 that AIG executives spent $86,000 on a previously scheduled English hunting trip. News of the lavish spending came just days after AIG received an additional $37. 8  billion loan from the Federal Reserve, on top of a previous $85  billion emergency loan granted the month before. Regarding the hunting trip, the company responded, â€Å"We regret that this event was not canceled. [66] An October 30, 2008 article from CNBC reported that AIG had already drawn upon $90  billion of the $123  billion allocated for loans. [67] On November 10, 2008, just a few days before renegotiating another bailout with the US Government for $40  billion, ABC News reported that AIG spent $34 3,000 on a trip to a lavish resort in Phoenix, Arizona. [68] [edit] Settlement of credit default swaps On October 22, 2008, those creditors of Lehman Brothers who bought credit default swaps to hedge them against Lehman bankruptcy settled those accounts. The net payments were $5. 2  billion[69] even though initial estimates of the amount of the settlement were between $100  billion and $400  billion. 70] By December 2008, AIG had paid at least $18. 7  billion to various financial institutions, including Goldman Sachs and Societe Generale to retire obligations related to credit default swaps (CDS). As much as $53. 5  billion related to swap payouts are part of the bailout. [71] On March 15, 2009, under mounting pressure from Congress and after consultation with the Federal Reserve, AIG disclosed a list of major recipients of collateral postings and payments under credit default swaps, guaranteed investment agreements, and securities lending agreements. [72] Below is data fr om one of the charts AIG released, representing only a portion of the total payouts, over a period of a few months. AIG collateral postings to credit default swap counterparties, from the period September 16, 2008 to | |December 31, 2008[73] | |Counterparty |US $ posted |Counterparty |US $ posted | |Societe Generale |$4,100,000,000 |Deutsche Bank |$2,600,000,000 | |Goldman Sachs |$2,500,000,000 |Merrill Lynch |$1,800,000,000 | |Calyon |$1,100,000,000 |Barclays |$900,000,000 | |UBS |$800,000,000 |DZ Bank |$700,000,000 | |Wachovia |$700,000,000 |Rabobank |$500,000,000 | |KFW |$500,000,000 |JPMorgan |$400,000,000 | |Banco Santander |$300,000,000 |Danske Bank |$200,000,000 | |Reconstruction Finance |$200,000,000 |HSBC Bank |$200,000,000 | |Corporation[74] | | | |Morgan Stanley |$200,000,000 |Bank of America |$200,000,000 | |Bank of Montreal |$200,000,000 |Royal Bank of Scotland |$200,000,000 | |Other (unknown) |$4,100,000,000 | | | [edit] Sales of assets AIG since September 2008 has ma rketed its assets to pay off its government loans. A global decline in the valuation of insurance businesses, and the weakening financial condition of potential bidders, has challenged its efforts. If the U. S. government decides to continue to protect the company from falling into bankruptcy, it may have to take the assets itself in exchange for the loans, or offer further direct financial support. 75] As of September 6, 2009, The Wall Street Journal reported that Pacific Century Group had agreed to pay $500  million for a part of American International Group's asset management business, and that they also expected to pay an additional $200  million to AIG in carried interest and other payments linked to future performance of the business. [76] Also in 2009, AIG sold its operations in Colombia to Ecuador's Banco del Pichincha. On March 1, 2010, insurance company Prudential confirmed that it was in advanced negotiations to buy the Asian operations of AIG. [77] Prudential was to buy the pan-Asian life insurance company, American International Assurance (AIA), for approximately $35. 5  billion. 78] On June 1, 2010 the deal failed because AIG would not accept the $30. 5  billion after Prudential lowered the amount by $5  billion from the originally planned $35. 5  billion after Prudential shareholder discontent. [79] AIG agreed on March 8, 2010, to sell its American Life Insurance Co. unit (ALICO) to MetLife Inc. for $15. 5  billion in cash and stock by November 1, 2010. Alico has annuities, life and health insurance operations in Japan, Middle East (including Nepal, Bangladesh and Pakistan), Western and Eastern Europe, Latin America and the Caribbean. AIG said it will sell Alico for $6. 8  billion in cash and the remainder in MetLife equity.The deal leaves AIG as the second-largest shareholder of MetLife, with a stake of more than 20% in the company. On March 29, 2010, Bloomberg L. P. reported that after almost three months of delays, AIG had com pleted the $500  million sale of a portion of its asset management business, branded PineBridge Investments, to the Asia-based Pacific Century Group. [80] On September 30, 2010, AIG announced an agreement to sell two of its life insurance companies in Japan, AIG Star and AIG Edison, to Prudential Financial for $4. 2  billion in cash and $600  million in the assumption of third party debt to help repay some of the money owed to the U. S. government. 81] On November 1, 2010, AIG announced it had raised $36. 71  billion from the sale of ALICO and an initial public offering for AIA. The company will use the proceeds Federal Reserve Bank of New York credit facility and make payments on other interests owned by the government. [82] On September 2, 2011, AIG filed with the SEC to spin off their aircraft leasing firm, International Lease Finance Corporation (ILFC), in an initial public offering. [83] [edit] Record losses On March 2, 2009, AIG reported a fourth quarter loss of $61. 7 bn (? 43bn) and revenue of ? $23. 7bn ( 16. 2bn) for the final three months of 2008. This was the largest quarterly loss in corporate history at that time. 84] The announcement of the loss had an impact on morning trading in Europe and Asia, with the FTSE100, DAX and Nikkei all suffering sharp falls. In the US the Dow Jones Industrial Average fell to below 7000 points, a twelve-year low. [85][86] The news of the loss came the day after the U. S. Treasury Department had confirmed that AIG was to get an additional $30  billion in aid, on top of the $150  billion it has already received. [87] The Treasury Department suggested that the potential losses to the US and global economy would be ‘extremely high' if it were to collapse[88] and has suggested that if in future there is no improvement, it will invest more money into the company, as it is unwilling to allow it to fail. 89] The firm's position as not just a domestic insurer, but also one for small businesses and many list ed firms, has prompted US officials to suggest its demise could be ‘disastrous' and the Federal Reserve said that AIG posed a ‘systemic risk' to the global economy. [84] The fourth quarter result meant the company made a $99. 29  billion loss for the whole of 2008,[88] with five consecutive quarters of losses costing the company well over $100  billion. [89] In a testimony before the Senate Budget Committee on March 3, 2009, the Federal Reserve Chairman Ben Bernanke stated that â€Å"AIG exploited a huge gap in the regulatory system,† †¦ and â€Å"to nobody's surprise, made irresponsible bets and took huge losses†. [90] [edit] 2009 employee bonus paymentsMain article: AIG bonus payments controversy In March 2009, AIG announced that they were paying $165  million in executive bonuses. Total bonuses for the financial unit could reach $450  million and bonuses for the entire company could reach $1. 2  billion. [91] President Barack Obama, who vo ted for the AIG bailout as a Senator[92] responded to the planned payments by saying â€Å"[I]t's hard to understand how derivative traders at AIG warranted any bonuses, much less $165  million in extra pay. How do they justify this outrage to the taxpayers who are keeping the company afloat? † and â€Å"In the last six months, AIG has received substantial sums from the U. S. Treasury.I’ve asked Secretary Geithner to use that leverage and pursue every legal avenue to block these bonuses and make the American taxpayers whole. â€Å"[93] [pic] [pic] Protester outside 60 Wall Street Deutsche Bank's US main office in the wake of the bonus controversy is interviewed by news media. Politicians on both sides of the Congressional aisle reacted with outrage to the planned bonuses. Senator Chuck Grassley (R-Iowa) said â€Å"I would suggest the first thing that would make me feel a little bit better toward them if they'd follow the Japanese example and come before the Americ an people and take that deep bow and say, I'm sorry, and then either do one of two things: resign or go commit suicide. [94] Senator Chuck Schumer (D-New York) accused AIG of â€Å"Alice in Wonderland business practices† and said â€Å"It boggles the mind. † He has threatened to tax the bonuses at up to 100%. [95] Senator Richard Shelby (R-Alabama) said â€Å"These people brought this on themselves. Now you're rewarding failure. A lot of these people should be fired, not awarded bonuses. This is horrible. It's outrageous. â€Å"[96] Senator Mitch McConnell (R-Kentucky) echoed his comments, saying â€Å"This is an outrage. â€Å"[97] Senator Jon Tester (D-Montana) said â€Å"This is ridiculous. † and AIG executives â€Å"need to understand that the only reason they even have a job is because of the taxpayers. â€Å"[98] Senator Dick Durbin (D-Illinois) said â€Å"I've had it. and â€Å"The fact that they continue to do it while we pour in billions of doll ars is indefensible. â€Å"[99] Representative Barney Frank (D-Massachusetts), Chairman of the House Financial Services Committee, said paying these bonuses would be â€Å"rewarding incompetence†[98] and â€Å"These people may have a right to their bonuses. They don't have a right to their jobs forever. â€Å"[96] Representative Mark Kirk (R-Illinois) said â€Å"AIG should not be on welfare from Uncle Sam, and yet paying bonuses and transferring a considerable amount of taxpayer funds to entities overseas. â€Å"[99] Federal Reserve Chairman Ben Bernanke said â€Å"It makes me angry. I slammed the phone more than a few times on discussing AIG. [96] Lawrence Summers, Director of the National Economic Council, said â€Å"The easy thing would be to just say, you know, ‘Off with their heads,’ and violate the contracts, but you have to think about the consequences of breaking contracts for the overall system of law. †[100] Austan Goolsbee, of the Council of Economic Advisers said â€Å"I don't know why they would follow a policy that's really not sensible, is obviously going to ignite the ire of millions of people. † and â€Å"You worry about that backlash. â€Å"[101] Political commentators and journalists expressed an equally bipartisan outrage. [94][102][103][104][104][105][106][107][108][109][110] On March 24, 2009, The New York Times printed the resignation letter of Jake DeSantis, executive vice president of AIG's financial products unit, to Edward M. Liddy, the chief executive of AIG.DeSantis stated he had nothing to do with the credit default swaps, he lost much of his life savings in the form of deferred compensation invested in the capital of AIG Financial Products; he had agreed to work for an annual salary of $1 out of a sense of duty, that he was assured many times the bonuses would be paid in March 2009, and that he believed he and others were let down by Liddy's lack of support. He also stated he was going to donate his bonus to those suffering from the global economic downturn. [111] It was reported that Senator Christopher Dodd (D-Con) (who first denied, then admitted to amending the legislation to allow the AIG bonuses), received $160,000 from employees of AIG. [112][113][114][115] A memo issued in 2006 by Joseph Cassano, AIGFinancial Products chief executive, urged AIG employees to donate to Dodd, saying that as â€Å"next in line to become chairman of the Senate Banking, Housing, and Urban Affairs Committee†¦ Senator Dodd will now have the opportunity to set the committee's agenda on issues critical to the financial services industry. â€Å"[116] [edit] Manchester United Sponsorship AIG was the principal sponsor of English football club Manchester United from 2006–2010, and as part of the sponsorship deal, its logo was prominently displayed on the front of the club's jerseys and other merchandise. The AIG deal was announced by Manchester United chief executive David G ill on April 6, 2006, for a British shirt sponsorship record ? 56. 5  million, to be paid over four years (? 14. 1  million a year).The deal became the most valuable sponsorship deal in the world in September 2006, after the renegotiation and subsequent degrading of the ? 15  million-a-year deal Italian team Juventus had with oil firm Tamoil. During AIG's sponsorship, Manchester United enjoyed one of its most successful periods in history, winning the Premier League three consecutive years, two Football League Cups, and the UEFA Champions League. [citation needed] On January 21, 2009, it was announced that AIG would not be renewing its sponsorship of the club at the end of the deal in May 2010. It is not clear, however, whether or not AIG's agreement to run MU Finance will continue.American risk consulting firm Aon Corporation was named the club's new principal sponsor on June 3, 2009, with its sponsorship of the club taking effect from the beginning of the 2010–11 seas on. The terms of the deal were not revealed, but it has been reported to be worth approximately ? 80  million over four years. [citation needed] [edit] Share buyback Due to the Q3 2011 net loss widened, so on November 3, 2011 the AIG shares has plunged 49 percent year to date. The insurer's board has approved the share buyback of as much as $1 billion. [117] [edit] Litigation |[pic] |This section needs additional citations for verification. Please help improve this article by adding citations to reliable | | |sources.Unsourced material may be challenged and removed. (September 2008) | In November 2004, AIG reached a US$126  million settlement with the U. S. Securities and Exchange Commission and the Justice Department partly resolving a number of regulatory matters, but the company must still cooperate with investigators continuing to probe the sale of a non-traditional insurance product. [118] On June 11, 2008, three stockholders, collectively owning 4% of the outstanding stock of AIG, delivered a letter to the Board of Directors of AIG seeking to oust CEO Martin Sullivan and make certain other management and Board of Directors changes.This letter was the latest volley in what the Wall Street Journal deemed a â€Å"public spat† between the Company's Board and management, on the one hand, and its key stockholders, and former CEO Maurice â€Å"Hank† Greenberg on the other hand. [119] Death Bet Circa 2010 the WSJ reported that a family sued AIG for alleged complicity in a ‘stranger-originated life insurance' scheme, whereby AIG managers allegedly welcomed people without an insurable interest to take out life insurance policies against others. The case involved JB Carlson and Germaine Tomlinson, and was one of many similar lawsuits in the US at the time. [120] [edit] Accounting fraud claimsOn October 14, 2004 the New York State Office of Attorney General Eliot Spitzer announced that it had commenced a civil action against Marsh & McLennan Companies for steering clients to preferred insurers with whom the company maintained lucrative payoff agreements, and for soliciting rigged bids for insurance contracts from the insurers. The Attorney General announced in a release that two AIG executives pleaded guilty to criminal charges in connection with this illegal course of conduct. In early May 2005, AIG restated its financial position and issued a reduction in book value of USD $2. 7  billion, a 3. 3 percent reduction in net worth. On February 9, 2006, AIG and the New York State Attorney General's office agreed to a settlement in which AIG would pay a fine of $1. 6  billion. [121] [edit] Corporate governance [edit] Board of directors

Joint Venture of the France Based Company Alcatel

A joint venture, according to Adler and Graham (1989),along with mergers and acquisitions, licensing and distribution agreements, and sales of products and services – critical aspects of all such interorganizational relationships, are face-to-face negotiations. This would mean the interaction between people. In today’s society, as the world becomes much more globalized than we could ever think of, with the fast growth of the internet industry, we are connected with people from another country at an instant. However, business to business deals and negotiations are still at a stage where face-to-face communication is still required. As interpersonal communication is brought onto the table, with the clash of different cultures as companies today all have the tendency to become globalizes and multi-nationalized, the understanding of another’s culture and cultural values plays an important role in the negotiation, and the interactions thereafter. As the proportion of foreign to domestic trade increases, so does the frequency of business negotiation between people from different countries and cultures. To successfully manage these negotiations, businesspeople need to know how to influence and communicate with members of cultures other than their own (Adler and Grahamd (1989)). Through the analysis of the case study on the joint venture of the France based company Alcatel and the U. S. based company Lucent Technologies, issues of cross-cultural management, the weakness and strength of an international joint venture, including the rights and wrongs of the particular case study will be discussed. As Shenkar (2001)said in an article, establishing a measure gauging the â€Å"distance† between cultures has understandably presented an even greater challenge. At the end, recommendations will be provided for future companies seeking joint ventures. Body The major differences between the initial negotiation in 2001 and the final successful negotiation in 2006 was the division of power. In 2001, in the original negotiation, the base company was Lucent, which was based in the US. Because it was a joint venture, the amount of power on Alcatel cannot be decided. Due to this inequality, the joint venture was called off in 2001. In 2006, as this inequality no longer stands between the two companies, it established the final negotiation of the joint venture, and at least in the beginning, both companies were satisfied with the negotiation. According to Barkema and Vermeulen (1997), differences in uncertainty avoidance and long-term orientation cause problems. Differences in how IJV partners perceive and adapt to opportunities and threats in their environment are more difficult to resolve. Cultural differences regarding power distance, individualism and masculinity are more easily resolved because they are mainly reflected in different attitudes towards the management of personnel, something firms can make explicit agreements about before entering the partnership. As Berkema and Vermeulen (1997) already said, issues on power distance, individualism and masculinity are considered to be more easily resolved cultural issues, and realizing the fact that if the joint venture between Alcatel and Lucent Technologies could not even solve the more easy problems, it is pointless to say the success of the negotiation. Since the merger in 2006, it is now the fifth year for the joint venture to be in business. With the resignation of Russo, the company is now led by The company is under the leadership of Chief Executive Officer Ben Verwaayen and the non-executive Chairman of the Board is Philippe Camus. Verwaayen and Camus joined the company in the third quarter of 2008 after Alcatel-Lucent's first CEO Patricia Russo and first Chairman Serge Tchuruk resigned. For 2008, the company posted revenues of â‚ ¬16. 984 billion and a net loss of â‚ ¬5. 215 billion (Alcatel-Lucent (2009)). As Powell and Dent-Micallef (1997) found in their article, ITs alone have not produced sustainable performance advantages in the retail industry, but that some firms have gained advantages by using ITs to leverage intangible, complementary human and business resources such as flexible culture, strategic planning–IT integration, and supplier relationships. The results support the resource-based approach, and help to explain why some firms outperform others using the same ITs, and why successful IT users often fail to sustain IT-based competitive advantages. Alcatel-Lucent has done what it was suppose to do a long time ago, which was to appoint leaders based on expertise, and not nationality. As the entire industry was going downhill during 2006, for the past few years, with the correct leadership of Verwaayen and Camus, the joint venture is in much better shape than it was before. As Tchuruk commented initially that the merger is â€Å"a giant transatlantic experiment in multicultural diversity,† the company has run into some major cross-cultural problems since its merger in 2006. One major issue is the fact that the appointed CEO of the joint venture could not effectively run the business, resulting in six quarterly losses, which led to the restructuring of the company, and a cut of 16,500 jobs in total. As the case study states, it was a poor decision to appoint leaders based on their nationality rather than skills. For the time that Russo was CEO, she struggled greatly to bring together a company that consisted of two entirely different cultures, especially when she has no background knowledge of any French language at all. In addition, because there was a lack of understanding between the cultures, the two companies, although formed as a joint venture, were literally pushed into each other out of desperation because of the down sliding industry. However, more importantly, it was the cultural clash that brought the JV into a poor state initially. As Adler, Doktor, and Redding (1986) wrote in their article, with the growing shift of business from the Atlantic to the Pacific Basin, East-West cultural differences are becoming increasingly significant. Research in developmental psychology, sociology, and anthropology shows that there are major differences among the cognitive processes of people from different cultures. In the era of the global corporation, cultural diversity has to be recognized, understood, and appropriately used in organizations. It is suggested that cross-cultural management would greatly benefit from comparative studies considering the impact of the cognitive aspects of culture on managerial practice. Moving forward as a combined company, the JV faces great competition from low-cost Chinese rivals, and as the internet technology is increasingly changing the industry, Alcatel-Lucent is faced with much deeper challenges as demand in the entire industry is decreasing tremendously. Yet one challenge would also be the challenge to integrate the French culture with that of the American Culture. As Shenkar (2001) pointed out, establishing a measure gauging the â€Å"distance† between cultures has understandably presented an even greater challenge. With the globalization of the firm into the Eastern side of the world, and with the JV servicing clients all over the globe, it is not hard to imagine the importance of cross-cultural management as the firm takes its role onto the global stage. In Ralston et al. (1993)’s research on onvergence/divergence of managerial values, the four Western-developed measures (Machiavellianism, locus of control, intolerance of ambiguity and dogmatism) and the four dimensions of the Eastern-developed Chinese Value Survey (Confucian dynamism, human-heartedness, integration, and moral discipline) were used to find that often times both culture and the business environment interact to create a unique set of managerial values in a country. It is the values of the management, the values of a company, that makes up the success of an industry. Conclusion Soderberg and Holden (2002) defines cross cultural management as a discipline of international management focusing on cultural encounters between what are perceived as well-defined and homogeneous entities: the organization and the nation-state, and offering tools to handle cultural differences seen as sources of conflict or miscommunication. However, in the business world today, with its transnational companies that face the challenges of the management of global knowledge networks and multicultural project teams, interacting and collaborating across boundaries using global communication technologies. There is the need for an alternative approach which acknowledges the growing complexity of inter- and intra-organizational connections and identities, and offers theoretical concepts to think about organizations and multiple cultures in a globalizing business context. Today’s world has become a big clash of all different types of culture. Not only it is seen in the business world, but this clash of cultures has become part of today’s society, and the whole world. This phenonmenon not only suggests more research topics for scholars, as Thomas and Mueller (2001) said in their study, that the relationship between culture and four personality characteristics commonly associated with entrepreneurial motivation. By demonstrating systematic variation in entrepreneurial characteristics across cultures, we raise important questions about the boundaries of international entrepreneurship research and the challenges of transcending them, in the real world, cross-cultural management is also becoming more important and is discussed and faced by many entrepreneurs in the business world. With the case study of Alcatel from France and Lucent Technologies from United States as an example, it has proven the fact that the importance of understanding the different cultures that one’s engaging in, and the importance of acknowledging cross-cultural management has become a requirement for any company leading to a JV or entering into a foreign country. Everyone country has its own unique culture, and every country has its own set of rules. In order to gain profit, in order to become globalized, one must take the time to learn about the culture, and go by their rules, because ultimately, in the business world, you are never alone.

History and Description of a Subordinate Group Member Essay

Throughout the history of North America, there has been one ethnic group who has given up almost everything to the European settlers. Land, home, resources, and dignity were stolen from Native Americans. The long history of the American Indian is being written, even today. Approximately forty thousand years ago, the earliest ancestors of Native Americans migrated across the Bering Strait from Asia on pack ice (Hoerder, 2005). The population rose steadily, and by the time the first substantial settlement of Europeans was established in the New World, Native Americans lived throughout the continent. In the search for more farmland, European immigrants quickly pushed the native population out of their traditional homelands. This migration began the crowding of other native bands, forcing eastern natives to move beyond the Ohio River, thus starting a series of relocations for the Native Americans that continued through the next two centuries. Less than fifty years after the end of the American Revolution, many of the tribes in the northeastern United States sold their land under pressure from the newcomers. Before 1850, these natives migrated west of the Mississippi River. If you traveled to Oklahoma today you would find the same bloodlines that once roamed the New England hills (â€Å"Indians† The Reader’s Companion to American History, 1991). Wanting to live apart from the natives and expecting them to remain controlled, reservations were established, including an Indian Territory (est. 1825) in present-day Oklahoma. The Indian Removal Act of 1830 was enacted to populate these newly established areas. President Jackson ordered the forced migration of Native Americans from multiple southeastern tribes. Approximately 4,000 Cherokee Indians perished in 1838-1839 on their 800-mile march, or during their succeeding internment. This tragic event has become known as the â€Å"Trail of Tears†. (American Indian Policy, 2002) Trying to â€Å"Americanize† instead of segregate the Indians, in 1887, Congress passed the Dawes Act, which broke up reservations and gave land to individual Indian families. The idea of the Dawes Act was to assimilate Indians by giving them land from which they could profit. What followed were laws, over the next few decades, which dissolved tribal governments and placed Native Americans completely under the jurisdiction of U.  S. laws (American Indian Policy, 2002). The reservation system is one distinctive aspect of the Native American culture that materialized from their relationship with other Americans. The United States has 310 reservations within its borders. The federal government owns 298 reservations and 12 belong to the states in which they are located. A total of 437,431 Indians resided on reservations or trust lands. That is approximately 22 percent of the Native Americans defined by the 1990 census (Shumway & Jackson, 1995). The United States has proven itself unreliable on its policies and treatment of Native Americans. The government teeters between a policy of segregation, under which Indians are treated as a self-sustaining culture, and assimilation policies, which try to integrate Indian and European cultures. The United States acknowledged Indian sovereignty and established treaties with them. Unlike foreign nations, Indians shared the continent with the quickly growing nation who needed resources, and were quick to form treaties, giving Indians land rights and territorial sovereignty but repeatedly found ways to revoke those privileges.

Trus Essay Example | Topics and Well Written Essays - 500 words

Trus - Essay Example There is quite a conflict in determining how trust comes into existence and how one may end up being confident about another person. For trust to exist, it is very important for two or more parties to exist. Trust is an outcome of hard work, persistence and dedication. In order to trust come into existence one individual needs to be confident about another individual. An individual can only show confidence in another individual if previously an individual has performed certain actions. For example: a student can only trust a teacher if the teacher has previously proved that whatever the teacher is teaching is actually real. This means that an individual has to perform certain activities in order to ensure that others trust them. Trust is a very important element of society and has various functions. It is one of the most important elements of any relationship that is taking place between two or more individuals or parties. Trust is the knot that keeps people attached with each other. Without trust relationships cannot take place and if trust is broken, relationships come to an end. Trust is a very important element in leadership. Leaders are those who influence others to work in a certain direction and others only work in the direction provided by the leader if others trust them. Trust is used in various contexts and may have different meanings. But the trust that is referred to the confidence that individuals have in each other is the most common way the term trust is used in the society. Trust is a term used in the context of real estate in which an individual may transfer his/her property to another individual on the basis of trust (Bellairs 99). Trust is used in the context of blind following that individuals have in the context of their religion and god. The most common definition of trust is the confidence that two individuals have in each other or one

Does the EU have negative impacts on small states in the EU Does it Research Paper

Does the EU have negative impacts on small states in the EU Does it fringe them The divide between the north and the south - Research Paper Example It is to assess the impact of EU policies on the economic performance of small market economies within the EU, with special emphasis on Cyprus’s economy. Overall, there is a wealth of solid scientific research into the problem. Whereas books provide a comprehensive analysis of the relevant data and newspaper articles enlighten the reader on the latest developments in the region. Though the literature on the subject is abundant, there are some limitations in research too. A common thread from all sources reviewed suggests that EU policies have had an ambiguous effect on the economic performance of different small EU member-states. It would be wise to start this literature review by looking at how experts determine which EU economies are small and which are not. Today, there are as many approaches to defining small economies as there are scholars researching the problem. Indeed, there is no single yardstick by which to measure whether or not a particular economy is small. Some researchers look at the geographical area of the country and the amount of natural resources it has (Castello & Ozawa, 2014). It is with the believe that those factors are inexorably linked to the economic ability of a country. Others determine the country’s affiliation with a particular pool of economies by simply looking at its GDP (Gal, 2009). For example, Castello and Ozawa (2014) classify Belgium and the Netherlands as â€Å"small economies† (p. 29), even though the two countries have relatively competitive macroeconomic indicators. Ronald Schettkat (1999) broadens the list to include Ireland, Denmark, and Austria. Alt hough the number of EU member-states was smaller in 1999 and the economies of Austria and the Netherlands were weaker, they could be hardly classified as small. One plausible explanation for regarding these states as small economies is that some of their industries are characterized by concentrated market structures, which is a criterion of a small economy

Recuitment and Selection Process Essay Example | Topics and Well Written Essays - 1000 words

Recuitment and Selection Process - Essay Example The new employees must be able to meet the standards for innovation in law enforcement (Ackerman, 2009). Special Agents To achieve its objectives, the FBI looks for highly motivated men and women who posses the intelligence, skills and integrity necessary to be a special agent. Special Agent candidates are required to have a Bachelor’s degree in any discipline and three years of full-time work experience. In addition, citizens can also qualify to be an FBI agent with a degree in law, accounting, engineering, computer science, or any 4-year degree and fluency in a foreign language needed by the FBI. The main languages that are considered include: Spanish, Russian or Chinese (Fbijobs.gov, 2012). Qualification Requirements for Police Officers The FBI recruits any US citizen of 21 years and above. In addition, the prospective agents must have a valid driver’s license as well as pass the FBI background investigation. The candidates are then required to receive a top secret s ecurity clearance. There are various requirements to qualify as an FBI police officer. However, there are educational and job related experience that is needed in every position. Experienced police officers are allowed to join the FBI at grade GS6, GS 7 or GS 8 grade levels. Other police officer who do not have specialized work experience can only join the FBI at grade GS 5. ... In addition, the FBI allows police officers to submit their resumes directly to the police recruiters. After the application process, the recruits are then subjected to a written test and panel interview (Fbijobs.gov, 2012). 2. Phase I Testing After the best candidate for the position has been selected, they are then contacted and scheduled for testing. Written tests are given to the successful applicants. In addition, panel interview is also conducted on the applicants. The writing test normally takes place at the FBI facility. Tests consist of two processes. The first process involves a written and video portion. Process two involves a panel interview which is conducted by active duty FBI police officers. Candidates who qualified through foreign language requirements are given additional test to determine their proficiency in the foreign languages (Fbijobs.gov, 2012). 3. Phase II testing A candidate must be selected based on their competitiveness, and the requirements of the FBI. T hese candidates also qualify for a conditional Job offer. The FBI selects candidates based on their budgetary constraints and skills required to perform the duties. The FBI officers ensure that successful applicants know the job title, GS law enforcement pay grade and salary (Fbijobs.gov, 2012). 4. The FBI Background Investigation Successful candidates who have been able to get a conditional job offer at the FBI are required to provide their personal information to the Equip system. In addition, the candidates are required to have a Top secret clearance before they begin the background investigation. During the background test, candidates are expected to go through a polygraph investigation procedure as well as through credit

Technical Review 2 Research Paper Example | Topics and Well Written Essays - 1000 words

Technical Review 2 - Research Paper Example This paper is a technical analysis of a new technology referred as Bitcoin. The paper seeks to discern how Bitcoin can support cyber security challenges already in place. At the very end, the paper will analyze potential loopholes for exploitation and misuse and give a way forward. Of late there has been a lot of buzz concerning electronic currencies and other virtual monies. According to (Kregel, 2010) there is great potential in shifting towards electronic funds or web cash. The web cash system is at the inception stage and given the level of activity accompanying it, it is expected to reach the maturity phase in a couple of years. JPMorgan has already submitted a patent which seems to set new stage for competition among the already well known players such as Bitcoin (Reardon, 2012). The patented technology referred as JPMorgan Chase, is a new paradigm that facilitate the creation of a new virtual cash accounts with real time digital exchange value. It works by exchanging real time digital exchange information without the involvement of third parties such as banks. The structural components of the system include a Payment Portal Processor or a digital wallet, an Internet Pay Anyone IPA account, a virtual private Lockbox, EFT network, a cash card and an Accou nt Reporter (Reid, 2013). It works by exchanging digital information in a real time basis with capabilities to archive all the transactions in a personal digital wallet. With advanced built in security features involving crypto-currency models, transactions are safeguarded against vulnerabilities and attacks (Verme, 2013). According to the International Journal of Community Currency and Research, other electronic digital monies and crypto-currencies have emerged over time since the turn of the decade (Ryan, 2012). Infinitecoin hit the market in 2013 and though it offers an easy adjustment rate, it offers a broad spectrum. Quark coin launched almost the same time and

Edward Hopper Style Essay Example | Topics and Well Written Essays - 4000 words

Edward Hopper Style - Essay Example The essay "Edward Hopper Style" discovers the application of Edward Hopper’s painting style to digital image manipulation. It was a time in which the people of France were attempting to gain a better lifestyle for themselves by demanding rights for the ‘common’ man as had been accomplished in America less than a generation earlier. In attempting to ‘accurately’ reflect life in all of its objective detail, French artists adopting a Realist approach worked to find the most ‘common’ examples of French life. They sought the people of the fields and villages and then depicted them in their most humble and mundane activities. The major ideas that fueled French realism are discussed within the writings of two different but influential artists of the period, Gustave Courbet and Ferdnand Leger. Only by understanding the principles of realism as they were developed in this first wave of artistic endeavor can one can begin to understand how they app lied to the world of America as it emerged from the bloodiest war fought on American soil and became the hallmark of one of America’s favorite artists, Edward Hopper. French artist Gustave Courbet (1819-1877) asserted that â€Å"painting is an essentially concrete art and can only consist in the representation of real and existing things†. In his art and in his philosophy, Courbet’s chief technical concern seems to be an abandonment of the ‘rules’ of art, at least to some degree, in favor of a more natural flow in both line and form. Courbet felt such rough elements.... In his art and in his philosophy, Courbet's chief technical concern seems to be an abandonment of the 'rules' of art, at least to some degree, in favor of a more natural flow in both line and form. Courbet felt such rough elements of the painting were more accurate in attempting to represent the moment as it existed as well as the emotion of the moment in which the piece was created or the scene was witnessed. His close association with the 'realism' of life as it was experienced by the humble peasantry as well as in his own careful observation of it helped Courbet develop a more intense identification with his subject. By 1850, his ideas regarding what was real in the world and in art were becoming more defined. This is clear in a letter he wrote to a friend, "' in our so very civilized society it is necessary for me to live the life of a savage. I must be free even of governments. The people have my sympathies, I must address myself to them directly" (cited in Insecula, 2008). With in the philosophy of his Realist Manifesto, Courbet states the goal of Realist art is "to translate the customs, the ideas, the appearance of my epoch according to my own estimation" (cited in Finnochio, 2004). Within this approach, it is clear that Courbet held a concept of the real that was based almost exclusively upon the previously unrepresented classes of society and their unreported and unknown daily experiences. Approaching art from this perspective, though, Courbet was equally guilty of making decisions regarding what to paint based upon his own inner conceptions of what was 'common' and 'unrepresented'. As a result, he was essentially making up his own definition of society and presenting this

Business acquisitions are among the most important strategic Essay

Business acquisitions are among the most important strategic investment decisions - Essay Example The location of businesses in other countries, either in the form of greenfield FDIs, crossborder M&As or other forms of direct investment, entails a set of challenges and risks which impact on the business that seeks to gain entry into another country. One of this is the risk associated with currency exchange rates, which will be discussed in the succeeding section of this report. At this point, more attention shall be devoted to discussing the other sources of organisation risk. Economic nationalism. In a report by the Economist Intelligence Unite (Chance, 2006), certain events the author chose to call â€Å"backlash† after decades of liberalisation and openness to FEI and crossborder M&As (more pronounced against M&As). Recent resurgence in protectionism against FDIs and M&As, for instance, is seen in the attempt to block the acquisition by Lenovo (China) of the personal computer (PC) division of IBM (US), and the takeover bid by Mittal Steel (Netherlands) for Arcelor (Luxembourg). Both of these deals, despite the attempts to prevent them, were consummated. Some deals, however, failed because they were successfully blocked by the local elements: CNOOC (China) of Unocal (US); Dubai Ports World of P&O Steam Navigation Company (UK), and Pepsi (US) of Danone (France). Behind some of these cases is the negative sentiment with which developed countries perceive takeover bids by companies in emerging markets, because of the impression (not necessarily just ified) that these less-developed countries were more prone to undesirable behaviour such as poor standards of governance and less socially responsible behaviour. The shock of seeing Chinese and Asian companies, for instance, take control of prominent brand names, acquire technology, or securing natural resources has prompted a German politician to compare such investors to â€Å"the biblical plague of locusts† (Chance,

Assignment Example | Topics and Well Written Essays - 2500 words - 5

Assignment Example This means that when a company makes an agreement, they must honor this agreement even if the terms are beyond the constitution. In this case, the cat contract with Feline Fertility Pty Ltd is enforceable since company willing entered the contract while understanding that the their constitution did not allow them to trade in cats. Lassie Ltd argues that since the company constitution does not allow the company to trade cats, the contract was invalid and unenforceable. However, going by the law, the fact that the company entered the agreement with Feline Fertility Pty Limited, it remains valid even if this goes beyond the constitution. Therefore, Feline Fertility can move to the court to have the contract enforced and to avoid termination. Alternatively, Lessie Ltd should finance any losses that the other company may incur as a result of this termination. The Company act of 2001 states that a director of the company must act within the constitution while conducting business on behalf of the company. Since the director of the company conducts the business on behalf of the stakeholders, the constitution limits their actions.5 However, this must be in tandem with the requirements of the constitution. In this case, Willy Woof has the power to make decisions regarding the business process, as long as these decisions do not infringe the constitution. The company current constitution allows the director to enter the lease with Hot Ltd.6 However, the other company directors intends to include a new clause that requires that â€Å"the establishment of any store outside the state of Western Australia requires the approval of all the directors.† If the amendment is successfully integrated in the constitution, Lessie will not be able to enter into the agreement with Hot Ltd since the constitution will empower other directors to object suc h a move7. Therefore, changes in the constitution will help

The Spirit and Personality of Man Essay Example for Free

The Spirit and Personality of Man Essay The Spirit and Personality of Man In your opinion, how is the spirit and personality linked? Where does the idea of a spirit fit within your own theory of personality? What is the spirit of a man? Where did our personalities come from? What influences our personality? We know that our environment which includes our family, culture and communities’ influence us but what is behind our personalities? Should we think of the self as a complex chemical substance or as a spirit? We find ourselves identified with God in Genesis 1:26 (New International Version) in this book the Lord God is found speaking to other members of the Godhead and says, â€Å"Let us make mankind in our image, in our likeness, so that they may rule†, in Genesis 2:7 (NIV), he continues to tell us about our creation in the next chapter by saying, â€Å"the LORD God formed a man from the dust of the ground and breathed into his nostrils the breath of life, and the man became a living being. This tells us that our personality comes from God and that it is he that has made us and not we ourselves† Psalms 100: 3 (NIV). From a biblical standpoint of view it tells us that we come from God and that our personality is mostly spiritual since Adam had no life until God breathed into him and we likewise. When people die the body is lifeless and is returned to the ground. The Jewish, Christian and Muslim communities believe in the God of heaven (who is a Spirit, John 4:24) and that we took our personalities from him. On the flip side of that Satan worshipers believe that Satan (who is a spirit) is greater than God and they devoutly worship him and are lead by his Principalities, Power and Rulers in their everyday life. That seems to be about or close to half of the world’s population which believes that a spirit being controls their mind, will, and emotions. This informs us of where (I believe) we come from and where our personalities come from. No one, or no thing, is an island unto itself (Hoffman, 1993). Many people believe that we are sovereign unto ourselves, and that there is God’s ways (personality), my ways, and the Devils ways and that is not true. When Adam sinned against God, he gave authority over to Satan which allowed the kingdom of darkness a legal obligation to oppress, and possess me when they sin. Although we did not see happen physically nor do we see it reoccurring physically today, we see the result of the relationship between sin, personality and evil spirit. Every week or two I log on to scoan. org to watch Christian services by Prophet T. B. Joshua. Prophet T. B. Joshua is a Christian, minister, televangelist and faith healer. He is leader and founder of the ministry organization The Synagogue, Church of All Nations (SCOAN) located in Lagos, Nigeria. Most of time during his services before he begins to pray he says, â€Å"Whatever your situation is, whatever your problem is, it might be sickness, disease, cancer, bad luck; whatever your problem, a Demon is behind it†. Then when he begins to lead his congregation in prayer people who are possessed or oppressed by demons began to crawl, slither, gag, spit, and sometimes even want to fight him. What about these people’s personality causes them to behave inhumanly? I would say they are faking but I grew up around the same church environment, plus it is common to read about Demons reacting to Jesus the same way in Mark 9:14 – 20 (New International Version), the man with a deaf and dumb spirit, Mark 1:23-24, King James Version, a man with an unclean spirit in the synagogue, and the man with a legion of demons (Mark 5:15 NIV). When the man with the legion of demon had them cast out he was instantly changed from being a savage, into a man of solitude, a sound mind and peace. I do not understand how our spirit and personality actually connected but I do understand that the kingdom of heaven and the kingdom of darkness are in a war to save or destroy the spirit and personality of man. The bible says that our struggle is not against flesh and blood, but against the rulers, against the authorities, against the powers of this dark world and against the spiritual forces of evil in the heavenly realms.

Early Marriage Essay Example for Free

Early Marriage Essay Why do Americans get married so early? Growing up in Germany I’ve been living in America for one and a half year and I honestly have to say that I got used to the culture, values and traditions pretty quickly. But one thing I never understood and I’m still doubting about is why Americans get married with an age of 21 or even younger. In European countries and many other ones like China and Japan the average age of marriage is 30. There is a world out there, new things to experience and people to meet – so why settle down so early? All of the American couple friends I made dated in High School and got married after College. They have been together for a couple of years and seem very happy with what they have in each other. They know each other well, enjoy their comfort in consistency and have history together. I personally doubt if they are just staying together because they are afraid of the unknown or do they think they’ll never find somebody better? In my opinion you haven’t really experienced life when you go and settle down with somebody you met in High School. In the High School age you are still trying to figure out who you are in life, develop characteristics and are very influential of others. So is it a good idea to decide who you are gonna spend the rest of your life with in a stage of age you are still trying to find yourself? The twenties are dedicated to just you. You go out and travel, explore what you ever dreamt of and live your own life. Of course it is always challenging to be single and go on dates. No doubt about that! But being single and not â€Å"tied down† offer you experiences which enlarge your personal horizon immense. The kinds of different people you meet and experiences you’ll have, if bad or good, will help you figure out who you are and what you want in life and certainly in a relationship. The biggest fear I had if I were married with 21 is what happens if you get divorced. You don’t know a life without the person you met as a teenager and probably can’t imagine anything like that. My personal conviction of not getting married at an early age doesn’t result of that, but it’s definitely scary to devote yourself to somebody in an age where you haven’t explored yourself. I’m personally convinced that I’ll find the right person to marry after intensely living my twenties. And that doesn’t mean that I just want to sleep around 😉 I hope by that time I’ll definitely know what to expect from my partner and be mature enough to decide who is the right one for me. The intention of my opinion is definitely not to disrepect anybody’s lifestyle or marriage. If two people love each other and get married it is one of the most beautiful things! I personally doubt that it is a good decision to get married in an early age, but this is up to everybody themselves of course.

Effectiveness of CSR in Achieving Sustainable Development

Effectiveness of CSR in Achieving Sustainable Development CHAPTER I 1. Introduction Corporate social responsibility (CSR) is a concept that has acquired a new character in the global economy. â€Å"With the advent of globalization, managers in different contexts have been exposed to the notion of CSR and are being pressured to adopt CSR initiatives† (Jamali and Sidani, 2008; 330). Therefore, even more corporations are increasing conscience about the importance of matching their own interests and the interests of society by taking responsibility for the impact of their activities on employees, suppliers, customers, communities and other stakeholders as well as the environment. Although, this is an obligation that goes beyond economics or law, and in which companies have to act ahead in pursuing long term goals that can also be good for the society and the environment as a whole. Intrinsically related to the topic of CSR is the protection of the environment for future generations through Sustainable actions. Not only because there has been an enormous technological progress that means we are not as much dependent as decades ago of a wide range of natural resources such as air, energy, land, and minerals. On the contrary, driven by the growth of the population and the hectic globalization, competition for those natural resources has been intense. As a result, this competition also brought a powerful driver for both environmental conflicts and damage to our fragile, life-supporting environment. A range of environmental disasters, such as climate change, ozone layer depletion, and soil contamination, have been occurring along the past decades and which turned organizations and society more aware of practice such as recycling, energy consumption, preservation, among others. â€Å"Evolving from an attitude of simply reacting to such disasters and their effects on the physical environment, corporate concerns now include strategic planning and looking at the environment in its multiple social, cultural, political, and institutional dimensions† (Enriquez and Drummond, 2007; 75). Therefore, the instruments of corporative citizenship turned also to the preservation of the environment as a strategic element for enterprises in the whole world. Along with the development for part of the organizations of clean technologies, there is also the concern in getting a green image, which put organizations’ sustainable activities into practice calling for an Ecobusiness. Especially in the past two years, 2008 and 2009, the world was marked by a financial crisis that had an impact in economies of organizations in general. Nevertheless, the financial crisis is not causing firms or governments to abandon sustainable development. In fact, many business and government suggest that a ‘green solution’ can be found to both economic and ecological challenges, creating new jobs and markets by investing in new forms of energy, redesigning or retrofitting buildings and equipment, and managing forests and other ecosystems sustainably. Mineral industries, for example, are using the actual crisis on their own benefit, attempting to identify domains where actions are required and trying to shape a different future to this industry, taking advantage of the actual scenario. To achieve that they make use of available data and information to appreciate the mining sector’s impact, giving support to decision makers in their strategic choices. The actions of Alcoa Inc., for example, are impressive and unique, the company interplays among intangibles as leadership and innovation as well as a strong CSR strategy, wisingly aligning society, workplace and environment, productivity, and financial performance in the context of a traditional manufacturing company. This project research examines the existing literature in an attempt to create a more comprehensive perspective of what has been written about the topic of Corporate Social Responsibility and Sustainable Development. The project’s approach was qualitative in nature and focused on discovering what researchers and authors have explored and understand about this complex subject. Besides, it looks at some of the principal favourable and unfavourable arguments to the social responsibility of enterprises, especially when they are being considered by multinational enterprises interested in initiating activities into developing countries, with focus into Brazil. We also propose some alternatives of acting in the area of Social Responsibility made by Alcoa Inc., considering the current Brazilian reality, with the aim of achieving Sustainable Development. This dissertation is divided in two parts. Part one will be based in secondary data and involves: Chapter II, which comprises the literature review that examines existent work in current trends involving the subject of CSR as well as paradigms as SD in order to help establish what values associated indicators could contain. Chapter III, the explanation of the methodology used along the development of the project. Part two, comprises Chapter IV, which examines factors involving Alcoa Inc., taking into account its current CSR and SD actions and strategies, making use of a questionnaire, answered by some of the organization’s managers, in relation to the issues encountered in the literature. Chapter V, will draw conclusions, make future recommendations and points out gaps for future research. 1.2 Research Title The Effectiveness of Corporate Social Responsibility as a means of achieving Sustainable Development: a case study of Alcoa Incorporation. 1.3 Research Background In the modern complex and dynamic business environment, most organizations are adopting a global attitude making sure that they are geared for being global. Furthermore, it is common knowledge that the world is constantly developing and changing and no change is permanent because any change is about to be further adjusted in the short or long run to suit the environment and the challenges they face. Organizations are now more powerful and have more influence in the society. Therefore, â€Å"The notion of corporate social responsibility today functions as an emblem, that the company themselves rise towards a consensual â€Å"social revolution† that will eventually benefit all the stakeholders of our society† (Habish et al, 2005; 271). Corporate social responsibility intrinsically relates to environmental issues faced globally, especially in the early stages of the twenty-first century and sustaining in a particular industry has become very difficult task for many businesses. â€Å"Employees, investors and consumers are becoming increasingly more aware of the social and environmental impact to people and planet that a company produces, which are both positive and negative. As consumers become even more aware of sustainable practices, there will be even greater demands for business communities to do the right thing, requiring enhanced ethical leadership and CSR to drive profits, and brand loyalty† (Mamic, 2004; Leffel, Sweeney, 2007 cited by Maass, 2007; 36) Alcoa is â€Å"the worlds leading producer and manager of primary aluminium, fabricated aluminium, and alumina facilities. In the framework of sustainability, Alcoa is considered one of the top three companies in the world in terms of commitment to sustainable development and has made use of an environmental strategy associated with a truthful social responsibility in order to gain competitive advantage and success in the marketplace. For example, for three years the Company has been sponsoring the Internethos program, directed at the development of Corporate Social Responsibility for Sustainability (www.alcoa.com). Moreover, â€Å"Recognition from the Covalence Ethical Ranking drives the company to intensify actions of engagement of strategic publics. In 2006, the company was indicated as world leader in ethics, in the mining and metallurgical Industry, according to Covalence Ethical Ranking† (Alcoa annual report, 2006/2007; 41) 1.4 Research Aims Analyse how corporate social responsibility can ensure competitive advantage and success in achieving sustainable development. To explore, analyze and identify the use of environmental strategy as a tool of achieving global success. Analyse the importance of achieving sustainable development in today’s global environment. 1.5 Research Objectives To evaluate, in an environmental perspective, the effectiveness of corporate social responsibility in today’s global business. To evaluate, in an environmental perspective, the effectiveness of corporate social responsibility on achieving sustainability. To establish the feasibility of using corporate social responsibility within the industry to align strategic planning with sustainable development. To analyse and find out the implications of corporate social responsibility in Alcoa’s Inc. environmental management. To identify the extent to which the environmental management is involved in strategic planning at Alcoa Inc. To identify how important is environmental sensitivity to a company that extracts natural resources. To analyse in depth the integration of sustainability to Alcoa’s overall business giving emphasis to Brazil. To investigate practices used by Alcoa Inc. in its implementation of corporate social responsibility as a means of achieving sustainable development. 1.6 Rationale of the project The objective of this project was to gather information that could be useful and benefit different organizations in engaging in environmental strategies by the concept of corporate social responsibility. Moreover, data collected can also guide corporations by providing them with an understanding of sustainable development and the resources they can make use of to establish a sustainable future for society and the environment. The information gathered for this present work was collected through an extensive literature review as well as the use of different sources of information, such as videos. In addition, a questionnaire was used in order to collect insight information on the organization’s management perspectives and its corporate social responsibility strategies for a sustainable development and prosperous business. CHAPTER II LITERATURE REVIEW 2.1 Introduction Social Responsibility actions are examples of a phenomenon of great proportions, which have been taken into more consideration in the business world, and reflect a new world-wide configuration. Historical recent events, in special environmental catastrophes around the globe, developed the academic discussion on the social paper of organizations, public and private, in the construction of the called sustainable development. Investors originated from richest countries have been realizing that economical survival and social balance is a long-term phenomenon more and more dependent of a constant preoccupation with levels of development of the least favoured areas of the globe (Parker, 1998). In the context of globalization, Social Responsibility has started to be understood as an essential instrument to be considered by organizations’ strategists in the sense of paying attention to the social demands of several economical agents involved. Apart from the internationalization strategy adopted, multinational enterprises installed in developing countries are under pressure in adopting an ethical and responsible posture. Meantime, many actions carried out by multinational enterprises, through their own foundations or partnerships with local agencies, have been questioned for disregarding the participation of local actors in the decision processes, in the resource allocation and in the evaluation of results. 2.2 Business Ethics and Corporate Social Responsibility â€Å"Some vigorous critics and Marxists tend to dismiss the link between business and ethics† (Shaw, 2009; 2). For example, â€Å"It was widely assumed that business and ethics were radically different and that ethical behaviour had little or no return on investment† (Brenkert, 2004; 188). However, on current days, ethical issues are being one of the most important subjects concerning organizations across the world, which now view business ethics not only in terms of administrative compliance with legal standards, rules or regulations as they used to do in the past. Some corporations are even creating their own written and formal ethical codes in addition with the use of different systems, like corporate social responsibility, to help them to create and maintain an ethical organization culture. Accordingly, Shaw affirms, â€Å"Business ethics thus involves studying the ways to refine and reinforce the implicit norms of the business system† (Shaw, 2009; 3). Nevertheless, Corporate Social Responsibility is topic of great value in business ethics, as reinforced by Ghauri and Cateora (2006; 468): â€Å"Ethics and social responsibility go hand in hand†. Organizations are increasing conscience about the importance of matching their own interests and the interests of society by taking responsibility for the impact of their activities on employees, suppliers, customers, communities and other stakeholders as well as the environment. Kotler and Lee (2005; 161) argue, â€Å"The first ethical duty of business is to do not harm. Companies are responsible for minimizing stakeholder’s risks. This is the heart of business ethics.† In fact, when ethical issues come to the organization field, a question is raised: â€Å"Of all these stakeholders, which should or will have the most or least influence over the ‘ethical’ rules that will be applied by the organization?† (Buhalis and Laws, 2001; 88) Despite of all the suggestions given in relation to CSR and business ethics, Jones et al (2005; 19) points out the fact â€Å"†¦ whether business ethics will actually make business more ethical.† In a current globalized environment, companies play an important role in the social structure and more than ever before, are being encouraged to improve their business practices by emphasizing ethical behaviour, not only through the development of new technologies but also through social and environmental initiatives. Companies are increasingly being held accountable for their actions, especially with the growth in demand for higher standards of corporate social responsibility. Sims (2003; 8) links the concept of ethics and social responsibility saying that: â€Å"Being socially responsible, ethical, and a good corporate citizen is important to meeting and exceeding the expectations for any organization’s stakeholders†. And affirms: â€Å"Organizational management that truly cares about business and corporate social responsibility is proactive rather than reactive in linking strategic action and ethics†. The structure of society has changed due to globalization changes, and the importance of businesses impact in society forced organizations to rethink their actions towards profitability, also promoting the development of concepts like sustainability. Nisberg (1988; 43 cited by Kilcullen and Kooistra, 1999; 158) gives an important definition of business ethics, which according to the author â€Å"can be defined as a set of principles that guides business practices to reflect a concern for society as a whole while pursuing profits†. However, with the relentless pursuit of profit in this actual globalized situation, how to maximise profit and act as an ethical company at the same time? A good understanding of what exactly is the term Corporate Social Responsibility is essential in order to answer and explain this question through different perspectives and theories. 2.3 History and Definitions of Corporate Social Responsibility The history of Corporate Social Responsibility can be compared as being as old as the history of business; however, its concept has not been fully formulated until now (Asongu, 2007; 28; Crane et al, 2008). May et al (2007; 4) also adds â€Å"Questions regarding the nature, scope and impact of organizations have been present into various forms for centuries ranging across the ‘classical’, ‘medieval’, ‘mercantile’, ‘industrial’ and ‘corporate eras’†. Taking into consideration only the period after the Industrial Revolution, or better saying the 20th century, the first author who directly contributed to the responsibility issue was Clark (1916; 210 cited by Secchi, 2007; 351) when he affirmed that â€Å"The old idea of free will is giving way to determinism, individualism to public control, personal responsibility to social responsibility.† During the period of 1930s and 1940s, called as the ‘corporate period’ references about social responsibility can be found, for example: Chester Barnard’s, ‘The functions of the Executive’ (1938) and Theodore Kreps’s ‘Measurement of the social performance of business’ (1940). (Crane et al, 2008). Murphy (cited by Crane et al, 2008), on the other hand classified Corporate Social Responsibility in four eras as follows: Philanthropic era (up to 1950s), awareness era (1953 to 1967), issue era (1968 to 1973) and awareness era (1974 until now). According to Secchi (2007; 348), however, â€Å"One of the first attempts at classifying theories on CSR (business and society issues) was made by Preston (1975).† This shows that the concept of CSR has been discussed for long but in fact, has not yet been fully understood and placed among organizations. Recently, empirical research about Corporate Social Responsibility and its relation to Corporate Social Performance and Sustainability provokes many contradictions in the literature. Due especially to the occurrence of different scandals among enterprises as well as the movement towards an environmentalist society rather than materialist, competitive labour market and shrinking role of government, there were a rise of interest in Corporate Social Responsibility in the past decades (Carrasco and Yakovleva, 2007; 15-16). Many authors affirm that business and society are interrelated entities rather than being distinctively separated (Kotler, 2005; Wood, 1991 cited by Moir, 2001). According to Watts et al (1998; 3 cited by Yakovleva, 2005; 12) â€Å"Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well of the local community and society at large†. Corporate Social Responsibility, thus, reflect the responsibility or accountability of organizations in pro not only of its stakeholders but also of its surrounding environment, taking into consideration the various practices that can affect those. Carroll (1979), on the other hand, proposed a four-layered concept, which was the most accepted model, suggesting four corporations’ responsibilities related to their economical, legal ethical and philanthropic aspects. All those four aspects are of great meaning to the CSR concept, however, our current work focuses more on the top of the pyramid, which encompasses the philanthropic responsibilities. â€Å"Philanthropic responsibility: Interest in doing good for society, regardless of its impact on the bottom line is what is called altruistic, humanitarian or philanthropic CSR. â€Å"giving back† time and money in the forms of voluntary service, voluntary association and voluntary giving – is where most of the controversy over the legitimacy of CSR lies† (Shahin and Zairi, 2007; 755) According to Carroll, the philanthropic responsibilities are discretionary being, therefore, less important than the other categories; on the other hand, as said before, is the one that brings the most controversial issues. The definition proposed by Gauri and Cateora (2005) follows the same idea, where the role of a company in the society goes beyond its economic goals. As we can see, definitions relating CSR are various and contradictory among the literature which makes its study more exciting. 2.4 Corporate Governance and Corporate Social Responsibility Governance is defined by Dam et al (2007; 1333) as â€Å"the set of informal arrangements that are used in handling the consequences of these unforeseen states of the world†. As a result of globalization, different global governance structures have emerged, transforming the CSR concept more difficult to be understood. This new global governance brought about the participation by firms in tasks that used to be the government’s domain. (Cutler et al., 1999; Scholte, 2001 cited by Albareda, 2008). Corporate Social Responsibility, therefore, â€Å"can be seen as a new governance arena† (Haufler, 1999; Scholte, 2001 cited by Albareda, 2008; 434). Castka et al (2004 cited by Shahin and Zairi, 2007; 761) proposed a useful framework, based on three major assumptions: â€Å"(1) The CSR framework should be integrated into business systems, objectives, targets, and performance measures. (2) The governance system, whose purpose is to control, provide resources, opportunities, strategic direction of the organisation and be held responsible for doing so, is an integral part of business hence CSR system. (3) Central to the CSR framework is the transformation of stakeholders’ needs and expectation into business strategy, where the organisation has to balance the need for CSR from their key stakeholders with entrepreneurship.† Corporate Social Responsibility is considered deliberate governance, however, influenced directly or indirectly by demands from global civil society, Non Government Organizations, or even the government itself. Thus, Corporate Social Responsibility plays a major role in the global economic and political activities of corporations. â€Å"To exercise this political power in international society, companies as private authorities have adopted different mechanisms. The most important of these have been inter-firm cooperative instruments, fundamentally through the creation of CSR business associations† (Albareda, 2008; 434). The implications of poor corporate governance for people’s lives are tremendous, either in a developed or in a developing country, like Brazil for instance. Most of the Brazilian corporations are still dominated by a family-owned management, who are therefore, the main, if not the only shareholders of the company. This fact can interfere severely in the potential of corporate governance. â€Å"Brazil is a country with strong authoritarian traditions, and inadequate corporate governance laws make it possible to perpetuate authoritarian and concentrated influence over governance structures† (Oman, 2003; 35). Nevertheless, especially in the past decades, there has been intensification of businesses in relation to governance and sustainability in countries like Brazil. Paro and Boechat (2008; 533-534) illustrate it: â€Å"One of the most significant Brazilian non-governmental organizations with the specific mission to mobilize companies around this issue – the Ethos Institute of Business and Social Responsibility, founded in 1998 – had 1,266 member companies in November 2007. Around 74 Brazilian companies have published reports based on the Global Reporting Initiative guidelines (GRI, 2007), and the Sao Paulo Stock Exchange (Bovespa) launched in 2005 its own Corporate Sustainability Index (ISE), which now has 32 companies listed†. Well-managed corporate governance can have positive effects on socio-economic development; it also hence sustained productivity growth and reforms on regulatory practices, although its benefits cannot be taken into consideration without strengthening the examination of business practices and the government environment as a whole. 2.5 Building Corporate Social Responsibility into Strategy Corporate and business strategy according to Foss (1997) has different meanings in relation to the kind of decisions to be made. The first relates to decisions that determines the company’s goals and objectives, the latter though, determines how the company will position itself in relation to its competitors, defining its business and resources. McManus (2008; 1069) affirms: â€Å"The term strategy is derived from the Greek Strategia or generalship, sometimes translated as the art of war. The metaphor of business as war, a competition to be won, is pervasive.† The first author who actually exposed the link between strategy and Corporate Social Responsibility was Michael Porter. He argues that â€Å"corporate social responsibility can be a source of innovation and competitive advantage if incorporated into the framework of analysis that companies use to guide their business strategy† (Porter and Kramer, 2006 cited by McManus, 2008; 1077). Corporations have now added value-creation to their core business always considering its stakeholders’ needs to develop a strategy that is going to keep the company in a competitive advantage position. This is what drives a company to strive in management initiatives, especially if those initiatives are driven towards the achievement of sustainable development. Lee (2008, cited by McManus, 2008; 1075) argues, â€Å"There has been an evolution in CSR from the macro-societal level to the organizational level, with a greater emphasis on managerial, strategic, and ultimately financial issues to the point that the key issue in 2008 is how to integrate CSR into one’s core business.† Organizations integrated to societal aspects are trying to be aware of the implications of the environment they are in and building, therefore, its strategy based in a social/environmental mission and vision. On the other hand, â€Å"recent reports reveal that almost six out of ten organizations have no strategy for CSR while many companies are unclear as to how to adequately anticipate which social issues will affect their overall strategy† (The Work Foundation, 2002; McKinsey and Company, 2006 cited by Galbreath, 2009; 109) The importance of keeping the integration of a company’s core business and its strategy according to the society’s (stakeholders) needs determine the effectiveness of a business and its position in the marketplace. Galbreath (2009; 122) also draws a model of corporate strategy in relation to the society as follows: [image] Figure 2 Source: Strategy in the context of society (Galbreath, 2009; 122). Not only the strategy itself, but also a change on the decision-making framework plays an important role. The use of the classical American pragmatic decision-making is one example. â€Å"The use of pragmatic decision making would inherently lead to the consideration of ecological issues within the decision-making process while fostering competitive advantage† (York, 2009; 102) In conclusion, as McManus (2008; 1068) says, â€Å"Perhaps, the greatest contribution of the mash-up CSR and business strategy will be, not in the details of particular approaches to its realization, but rather the change in consciousness of individual business people its emergence may signal.† 2.6 Leadership and Corporate Social Responsibility The first important point in the leadership context is to understand that ethics is not something we born with. Many authors say that along the years we are taught by the community conventions, norms, and regulations that guide our ethical behaviours (Trevinâ‚ ¬Ã¢â‚¬ ¢o and Nelson, 2004). The same occurs with an organization, where norms, regulations, and values are drawn along the years, guiding their employees and creating its culture, but in this case, the founder has a crucial position, being the one who first underlie most of the organization’s ethics code. Another important issue consists in how hierarchy of power is distributed in the organization; this is explained because the flow of integrity and moral actions always comes from the top to the bottom of the organization hierarchy and this explains why the founder plays a key role in creating the culture and guiding decisions. This relates to the called learning theory, where leaders are perceived as role models. (Hind et al, 2009) Daboub et al (1995 cited by Hind et al, 2009; 8) â€Å"developed a model which suggested a relationship between the characteristics of an organization’s top management team and corporate irresponsibility, even criminality. The model holds that, other variables being equal, the greater the proliferation of formal management qualifications (e.g. MBA’s) in a top management team, the higher the chances of corporate criminality. The implication of this is that management educators do not seem to be addressing the current and future developmental needs of managers who are required to respond to changing social norms for higher ethical, accountable, and sustainable standards in business.† 2.7 Voluntarism and Accountability of Companies There are two contradicting views in the role of voluntarism in CSR: The first view is supported by Carrol and Buchholtz, (1999 cited by Yakovleva, 2005; 14) and suggests that â€Å"CSR refers to both types of corporate operations: operations towards compliance with legislation requirements and voluntary operations towards social benefit not stipulated by law or economic requirements†. The second view, however, suggests that the firm itself should call for the stakeholder’s interest voluntarily and â€Å"considers that CSR starts when law ends† (Yakovleva, 2005; 14). All those contradictions are part of the inconsistency in defining the term CSR. Corporate Social Responsibility according to Keinert (2008) is concerned to how corporations tackle external pressures responding to them accordingly. Moreover, she adds â€Å"It does not question the ‘rightness’ of social expectations from an ethical, theoretical point of view, but seeks way of implementing them† (Keinert 2008; 45) Apart from this point of view, corporations are responsible, nowadays, alongside the government, to the interests of its employees and society as a whole being also accountable for its actions. Thus, accountability is another important feature of Corporate Social Responsibility. Zadek (2007; 10) argues: embracing accountability for their actions, corporations â€Å"contribute to addressing societal needs and challenges in ways that could also deliver economic value and success.† According to the IPEA (Instituto de Pesquisa Econà ´mica Aplicada), â€Å"Social Accountability 8000 is the first norm turned to the improvement of the conditions of work, including the principal labour rights and certifying the fulfilment through independent auditors. The Social Accountability International LEAVES-, a non-government organization created in 1997 in USA, developed it and which has its action turned to the preoccupation of the consumers for the conditions of work in the world. The norm follows the standard of the ISO 9000 and of the ISO 14000, which makes its introduction easier for enterprises that already know this system†Ã¢â‚¬  (www.ipea.gov.br). â€Å"One of the basic propositions from social accountability favourable to the contemporary point of view is based on Keith Davis’ ideas† (apud Certo Peter, 1993; 281 cited by Souza, 2004; 31). According to them, â€Å"enterprises must operate as an opened system with two hands, with information reception from society and opened advertisement about their operations with the public.† (Souza, 2004; 31) In agreement with this proposition, the enterprise must be disposed to hearing the society and working in the construction of its well-being. 2.8 Corporate Social Responsibility and Profitability Whilst some authors defend Social Responsibility as a solution for organizations and society’s sustainability issues in the long-term, others are emphatic, affirming that it is not reasonable to imagine that the