Commitments
Humman wealth, community values, economic, Environmental and social Responsability. Long term values and culture.
Methology
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ECONOMIC AND FINANCIAL RISKS. Identify key areas of uncertainty related to level of economic development, infrastructure, and changing economic conditions in the country being considered for business operations. (A weak infrastructure or volatile currency increases the risk of doing business in a foreign market.)
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SOCIAL AND CULTURAL RISKS. Discuss customs, traditions, and social values in your proposed location that could create risks for the enterprise. (Religious beliefs or the role of family can affect uncertainty when starting and implementing an international business operation.)
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POLITICAL AND LEGAL RISKS. Analyze the uncertainty that might be created by political stability, corruption potential, and business regulations. (Required labeling, tariffs, or ownership restrictions may be encountered in various nations.)
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RISK MANAGEMENT TECHNIQUES. Compare various risk reduction strategies available when doing business in local country or other countries. (Common risk management methods include insurance, diversification of product line, strategic alliances with local partners, and employing local managers.)
Another Perspective Stakeholders vs Shareholders
Shareholders and Stakeholders and the Environment:
As an example of a Shareholders and Stakeholders and interest in the Environment we choose NEC. NEC's primary focus is on the creation of solutions based on IT/network integration. They intend to place increased emphasis on the creation of intellectual assets, and formally registering and putting them into practice, in Japan as well as overseas.
Hence, their global slogan "Empowered by Innovation" represents our relentless desire to innovate not only the lives and businesses of our customers, but also society as a whole.
They developed an Annual Environmental Report in which they explain the importance and how they take into account the impact for the Environment by Shareholders and Stakeholders.
Shareholers Rol
Stakeholders Rol
An Unfolding Crisis in Business Ethics – Some examples?
The unfolding Parmalat scandal in Italy is just the latest in a series of incidents that have shone a spotlight on the behaviour and ethics of top business leaders. Founder Calisto Tanzi is currently in jail, accused of having falsified the company's accounts for many years. This follows on the heels of Enron, WorldCom, Global Crossing, Equitable Life and several other sorry tales. In Germany, several business leaders have appeared in court in connection with bonus payouts during the $180bn Mannesmann takeover by Vodafone, including Deutsche Bank's Chairman, Josef Ackermann and former Mannesmann Chief Executive Klaus Esser. In America, the media is warming up for a whole series of celebrity business leader trials. Martha Stewart, America's lifestyle queen, is already in court facing charges of insider dealing. In February, Scott Sullivan, WorldCom's former Chief Financial Officer, is in court charged with accounting fraud. Also in February, John Rigas, the founder of Adelphia Communications, will be one of several appearing charged with illegally removing one billion dollars from the company. In March, Frank Quattrone, formerly of Credit Suisse First Boston, returns to court to face charges of obstructing justice.
Some might argue that such scandals are nothing new, and that there have always been business leaders who have failed in their ethical duties towards shareholders and other stakeholders in order to enrich themselves. One can go back to the Dutch East India Company of 1622 (which can be viewed as the prototype of the modern international company), to find protesting shareholders on the dockside of Copenhagen, handing out leaflets complaining about management secrecy and self-enrichment at the expense of shareholders. Their campaign did lead to action by the government of the day, who moved swiftly to ban such pamphleteering, but they also pledged to improve information for shareholders and strengthen shareholder influence over public companies. Recent events suggest that perhaps not as much has changed in the past few hundred years in the field of corporate governance as might have been hoped.
The US government and others have sought to downplay the seriousness of recent events by presenting them as isolated incidents, at odds with the vast majority of businesses that are well-run by responsible and ethically-minded individuals. There is some research evidence to support such an argument. Eighty percent of 1,498 managers surveyed categorised their firms as highly ethical (Posner and Schmidt, 1987), and most people reported themselves as unlikely to engage in unethical activities at work (Eastman, et al., 1996). However, such self-reporting is not necessarily conclusive. Survey respondents consistently perceive their own ethical standards to be higher than those of their peers or others in their immediate working environment (e.g. Cole and Smith, 1996; Ford and Richardson, 1994).
Even if unethical behaviour is confined to a minority of companies, this argument does not appear to be reassuring the general public. A 2002 CNN/Time survey revealed that 72 % of US adults did not believe that recent business scandals are isolated incidents, but viewed them as evidence of a systematic pattern of deception among those running major companies. Such findings have potentially serious ramifications. Trust is a vital component of a healthy economy and business culture. If investors cannot trust the information they are given by companies, it will hamper investment. This could contribute further to the emerging pensions crisis, if people do not believe that such financial investments are secure, because they fear being left in the same situation as those pensioners depending on Enron, Global Crossing or Equitable Life. If consumers do not believe the information that is provided for them on issues relating to the socio-environmental performance of business, this will also cause problems. It will hold back the development of markets for more ethical and environmentally sustainable goods and services. This is something that governments around the world are depending upon to act as a spur for the development of fairer and more sustainable economies and societies. If a culture of cynicism about the conduct of business continues to develop, it may also create a vicious circle of lowered expectations about the ethical conduct of business, which in turn leads to less ethical conduct amongst those running companies.
In the wake of the recent generation of business scandals, there has been a wide-ranging search for solutions. Tougher laws on corporate governance, greater independence for auditors, wider adoption of codes such as the Global Reporting Initiative or GoodCorporation’s guidelines, greater powers for non-executive directors, harsher penalties for corporate wrong-doing and more corporate ethics officers are among the solutions that have been suggested. All of these can play a valuable part, but none of them addresses the question of why senior business leaders are drawn into unethical behaviour in the first place. Research into why people engage in unethical activities often cites factors such as time pressure, or pressure to achieve demanding targets. Such factors hardly seem explanatory since they would appear to face most people in business situations, only a minority of whom respond with unethical behaviour. Other factors cited include the influence of the company’s leadership and its corporate culture, group dynamics and norms.
The importance of leadership is a recurring theme within the business ethics literature, and top executives have been shown to have a great impact when it comes to establishing the ethical tone of an organization (Wiley, 1998). However, if ethical leaders help to inspire ethical organisations, who will inspire those leaders ? How can we develop business leaders for this new millennium who can embrace and demonstrate an ethical approach to running businesses, and help to turn the tide of dwindling trust in business ? These are important issues, that may require some original and imaginative approaches if “business ethics” is to avoid becoming regarded by the general public as nothing more than an oxymoron
Enron
Enron was one of the world's leading energy, commodities and services companies.
Enron Corp. reached a settlement with stakeholders of Osprey Trust, an affiliate of the bankrupt energy trader. The settlement, which must win approval from Enron's bankruptcy judge, will allow the collapsed trading giant to move forward with its reorganization plan and sell some of its remaining properties, which range from South American pipelines to an Oregon utility. Stake holders will receive a cash payment of $75 million from Houston-based Enron, which filed for bankruptcy in December 2001, the second largest in U.S. history.
The disclosure earlier this year of accounting irregularities led to the collapse of Enron's stock value, the evaporation of about $60 billion in market capitalization, the biggest bankruptcy filing in corporate history, the dissolution of a planned merger with shareholders and employees, and investigations by the Securities and Exchange Commission and Congress
Enron's financial troubles stemmed from the discovery a few weeks ago of off-balance-sheet transactions that led to a $1 billion charge and write-down of shareholder equity.
Employees have lost much of their retirement money because their pension accounts were built around Enron stock; stock that once sold for $85 a share now is selling for less than a dollar a $3.6 billion claim against it in bankruptcy court
The shareholders who held Enron stock - many of whom were or are Enron employees - have suffered serious economic injuries. Their pensions were basically tied up in a stock whose value has plummeted. Moreover, they have apparently suffered these injuries as a result of wrongdoing.
WorldCom
Which will downwardly restate financial results in one of the biggest accounting scandals in history, joins Enron, Global Crossing and Tyco International among the tarnished success stories of the 1990s.
Shareholders and bondholders who lost money in WorldCom would receive $250 million of common stock in the reorganized company.
Employee retirement funds heavily to company stock; let misled employees take the fall when the stock tanks while executives diversify their holdings and cash out before the bad news goes public
The five stakeholders representing consumers, labor, shareholders and Congress agreed on the need for tougher action to be applied against WorldCom-MCI, which has admitted to committing more than $11 billion worth of accounting fraud
Enron and WorldCom are just two companies whose ‘bad business’ has recently created a high-profile stir. Smaller companies, the backbone of the world economy, also play an important role in fostering a climate of ethical business practices.
Directors have a responsibility to shareholders and stakeholders and must be vigilant in understanding all company activities, in particular accounting issues, to ensure that company business is carried out in an informed and honest fashion.
Parmalat
What is Parmalat's problem?
Paramlat, an Italian company specialising in long-life milk, has sought protection for its creditors after being hit by a major fraud. Billions of euros have gone missing from its books in a scandal that has drawn parallels with the collapse of Enron, the US energy giant.
How did Parmalat's crisis start?
The questions began about two weeks ago when Parmalat had difficulty in making a €150m (£108m) bond payment. The company was supposed to be sitting on €3.95bn in cash, so Italian bankers were puzzled by the company's predicament. Parmalat's founder, Calisto Tanzi, brushed bankers' concerns aside by saying that the company had a bit of a liquidity problem.
How did the crisis escalate?
Parmalat's problems reached epic proportions last Friday, when it made the extraordinary admission that €3.9bn it thought it had in the bank did not exist. The money supposedly was in a Bank of America account held by Bonlat, a subsidiary based in the Cayman Islands. But last week, Bank of America said there was no such account.
Where were the auditors?
Parmalat's primary auditor was Deloitte & Touche, but the Milan branch of Grant Thornton dealt with some of the company's subsidiaries, including Bonlat. When Grant Thornton checked with Bank of America, the auditor received a letter on Bank of America letterhead confirming the existence of the account. However, Bank of America subsequently said the letter was forged.
Did the money exist in the first place?
Investigators are trying to sort this out. There are now suspicions that company executives invented contracts that were shown to the banks to raise cash that was then used to cover up day-to-day losses.
"The money was there in the first place, but it got lost along the way," a US analyst said. Some press reports say as much as €10bn has disappeared from the company's accounts.
Did anybody harbour suspicions about Parmalat?
Some analysts did voice concern about Parmalat's rapid expansion. The company started as a peddler of prosciutto in a small northern Italian hamlet, but grew into a dairy giant selling long-lasting milk and other milk products in 30 countries, and employing 36,000 people. The global expansion started with an acquisition in Brazil in the mid-1970s
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Did the expansion run into trouble?
As the company grew, so did its debt. It was bailed out in 1990, with the Tanzi family giving up 49% of its control of the company.
Parmalat returned to the acquisition trail a few years later and bought US food giant Beatrice Foods in 1997. Other deals followed, taking the company into China, Australia and Mexico.
In the process, Parmalat's debts grew to €6bn, but investors kept buying the company's bonds on the strength of its supposed cash pile. But at least one analyst thought the bonds too risky, describing them as "junk bonds in drag" two years ago.
Who were the architects of Parmalat's growth?
The company was founded by Calisto Tanzi, a university dropout, who transformed a family business, Calisto Tanzi & Sons - Salamis and Preserves, into an organisation hailed as one of Europe's biggest corporate success stories.
Along the way, he relied on Fausto Tonna, who was the company's finance director for 16 years. "Tonna was a bit of a peasant in his manners but had an extremely sharp mind for finances," said a banker who met him. If anyone has the answers it will be Mr Tanzi and Mr Tonna, who have both stepped down.
What happens to Parmalat now?
The company has sought protection from its creditors after the Italian government rushed through an emergency decree that would allow companies to apply to the industry ministry to appoint an administrator with immediate powers.
Enrico Bondi, Parmalat's new chairman and chief executive, is expected to be appointed special administrator of the company. Mr Bondi won acclaim for handling the break-up of the Ferruzzi family's business empire, Italy's biggest corporate crisis of the 1990s.
Will Parmalat survive?
Parmalat will probably have to sell off many of the companies it has acquired over the years. Analysts say the company was quietly seeking to offload assets in Mexico, Brazil and the US a year ago to reduce its debts. But it was asking prices nobody wanted to pay.
It will be different now, with Parmalat in a much weaker bargaining position. Global players such as Nestle and Danone would be the most likely candidates to pick up some of the Parmalat pieces. Parmalat will probably survive, but in much shrunken form.
What financial impact will Parmalat have?
Shares in the company once with a market value of €1.8bn are worthless, so millions of investors are out of pocket. The bonds are now worth only 19% of their face value, but analysts say the debt is spread around to such an extent that the pain will be diffuse.
Bank of America is thought to have provided between $150m(€120m) to $250m in loans to Parmalat, but that is a trivial amount for America's third biggest bank.
Consequences of this scandal
When multinational companies such as Italy’s Parmalat crash into the financial buffers, the consequences are first felt by the employees around the world.
The 36,400 employees of the crippled Italian-based dairy group deserve every sympathy. It is also right that the Italian government is looking to see if the company can be helped to survive and many jobs saved. The request that EU anti-competition rules be suspended so that premier Silvio Berlusconi’s government can bail out Parmalat has produced mutterings of outrage from other member states. Nevertheless this is largely hypocritical.
France and Germany and even the avowedly free-market UK have at various times insisted that the application of free competition rules be waived to protect their own national firms. But where Berlusconi and his administration are entirely wrong has been in the way that they have changed the law in Italy in such a way as to encourage the very sort of wrong-doing that appears to have taken place at Parmalat. The effect of this change is that if the senior management at the firm were seeking to cover up a major loss by pretending there were $5 billion in an offshore subsidiary, they are no longer committing an offence under accounting legislation watered down by the Berlusconi.
Italy has accounting regulations as tough as any other European jurisdiction — auditors for instance are rotated meaning that no one accountancy firm should be in the position to form a corrupt long-term relationship like Andersen’s formed with their client Enron. The problem lies partly in the way in which these rules are enforced and partly in the relaxed view toward the weak role of independent directors on Italian company boards. These people are supposed to stand back from the top management and observe the company’s affairs dispassionately. It is a tough job, especially if executive directors are setting out to deceive as seems to be the case at Parmalat. It is however an essential job, not just for the protection of shareholders, whom the non-executive directors represent, but also for the thousands of employees.
That Parmalat’s non-executive directors failed to spot wrong-doing on such a gigantic scale probably has a lot to do with the business climate in Italy at the moment, the tone for which has been set by a prime minister who is content to use his parliamentary majority to drive through laws which will protect his own business interests from prosecution. If the leader of the country can behave with such signal disregard for probity and standards, why should any other businessman seek to hold to once accepted norms of proper corporate behavior? Governments don’t simply make laws; they also set tones. The Parmalat scandal thus reflects the cynical, cavalier tone set by the Berlusconi government.
Critical Process
A broader business approach
- Need society’s trust to earn freedom to operate and innovate
- Need to attract and retain the most talented people
- Need to understand signs from our stakeholders
- Be part setting the new global agendas
- ”Ethical” investment is becoming mainstream.
- Corporate Social Responsibility: A Threat to Shareholders
Balancing the triple bottom line
Conclusions
In the old times companies are created to produce and to sell, in other words to create money. As a result of this many companies had on their ideals the simple porpuse of do business that can generate money and with this acomplish its compromise to satisfy the needs of its shareholders and provide them with money. In these old times the companies where totaly focused on this objective. In reasent times the companies have change. The new style of companaies have to have a different perspective, they need to be aware of the importance of have the stakeholders also satisfied with the performance of the company.
The new generation of managers are aware of the importance of both parts the shares and the stake holders. There are some companies that are taking a very focused position on one of this two posibilities. As an example, in recent years there have been a wave of companies that have been created under the old stily of administration.
An example of a company that is completely focused to the share holders situation is
Nike, nike is a company that has been implicated, as many others, in serius problems about unfair treatment towards its workers. As well the company is know as a company that only cares about producing cheeo and sellinng as high as posible. The company in this aspect is very concernd about the economy of its share holders mean while its socal responsability is very low. This is an example of the old model that a company can have and specialy here we can see a very important fact. The CEO of the company has much to do with this, the company can modiffy its view and the focuse that they have acording to the perspective of the CEO. In this case the CEO is obviously focused on the money and not on the health of the stake holders.
The other extrem of thes rope are the companyes that are created to satisfy the comunity and the stake holders in general. This companies are the social companies as the NGO’s. An NGO is created no to generrate money, they are created to help the comunity on some important aspect of the life. These companies are such as Greenpeace which is a company dediicated to preserve the planet and the nature. The founds of these organization are donations that people give to them in order to support their acciions. And the GP just give them back the satisfaction of suport an effort to preserve the planet where we live. This organizations are created since the begining by people that has no other comitment than satisfy the stake jholders of the organization. And the people who manage this caind of organizations, that share a vision of global welth and the compromise of be a support for the people that cant figth their figths.
In the midle of this two cainds of organizations exists the new model of global companies. Companies that have a very important stockholder orientation, but at the same time dont forget about the stakeholders. Companies that where created to produce money but htat have adapted as much as possible to the new demands of the society. This companies have a comitment to the shareholder to give them as much money as they can. At the same time the company is very concerned to the wel being of the comunity and have a compromise to give back to the society what the society have give to them. An example of this company is Xerox.
Xerox is a company that is highly compromised with the shareholders of its company but it is also very interested on the part of the company that has to do with its stake holders. The company has inside it a code of conduct that stablish the conduct of the people that work inside it, from the general managers to the lowets employee. Also the company has shown their comitment towards the comunity by instaling a ISO 14000 program to asure the environment preservation on every country where they are. This is an action that this company is taking in order to respond to the new demands of the society.
In nowadays the companies that want to succed in the new market have to take in to account two important factors. One is tehir economical welth and the second one is their implication towrds the society. The new generations of Companies and CEO’s are aware of these facts and they are taking mesures to arrange this situation. The companies in some time form now will suffer a down hill fall if they do not start to do some serius revolution insede them to be in a good realtion wiht their internal and external stake holders.
