Boeing has had issues with reporting their complaints to the United States federal labor regulator because it does not understand how the labor laws operate and it miscommunicated within the company. Boeing lost their trust with their shareholders, board of directors, investors, and the audit committee because of the cancellation of programs and mishandling of supply chain operations. Boeing involves management and employees on issues that are going on and come up with strategic approaches to resolve their issues. Boeing, Wal-Mart, Pizza Hut, and GAP Inc. are more focused on following SOX compliance and protecting their employees, consumers, shareholders and management team from being put in a risky situation. The CEO is involved in all company issues and has better teamwork than Barnes & Nobles Inc., HP, and McBride Financial Services. HP and Barnes & Nobles are still searching for answers on how to improve their company and keep up with other competitors.
Barnes & Nobles and GAP Inc. rely on investors to make their financial decisions, which result in many lawsuits with investors and other companies with which it shares stock. Investors put more pressure on the management team to resolve their issues. Barnes & Noble’s investor, William Ackman, had a bad reputation with other company investors because he was known for not complying with the state labor laws and not following SOX compliance. The company had a competitive advantage over other bookseller companies but did not realize the potential the management team had on dealing with corporate governance. CEO, Leonard Biggio tired to buy out the company instead of fixing the issues and negotiating with other investors that would finances the company.
McBride Financial Services and other companies have faced many challenges such as lawsuits, unethical practices in the workplace, violation of labor laws and SOX compliance, and inaccurate financial report, and etc. Companies learn from their mistakes and have remain successful in their competitive market, although shareholders, and investors had file lawsuits and complaints against companies resulting for business to shutdown or sell their companies to other companies. Corporate governance, SOX compliance, and other labor laws have play an important role on how many companies operate their business and how successful that companies have remain on top of their competitors. Many companies will have a promising future if a CEO, management teams, and other staff members use the valuable resources, research companies that face financial crisis and unethical practices, and rely on each other to make important decisions not just for their company but for their investors, employees, and etc.
Company Synopses
Alison Doepping – E*TRADE Financial Corporation
“Any incentive plan, even a well-designed EVA plan, is not a stand-alone management tool. It must be designed to fit the company’s general compensation architecture, one that rewards managers in a variety of ways—base salary, cash incentive plans, equity programs, pension benefits, perquisites, promotions, and so on. “ Changing the incentive plan alters the overall risk-reward dynamics of the compensation structure” (Chew & Gillian, 2005, p. 254). McBride Financial Services (MSF) must implement an incentive plan that supports the company’s goals and avoids financial risk. Douglas Masters, III of Principle Beltway Investments stated, “We are thus open to the board directorate and the management and board structure, including any equity-based compensation plans you feel appropriate to properly pursue your objectives (University of Phoenix, 2012). However, MFS CEO Hugh McBride dismissed the importance of an effective incentive system by stating to Betty Williams, Human Resources Manager, “I’ve thought over our discussion re: incentive compensation and have decided to hold off on stock options altogether…at this time I’m not interested in diluting my shares, nor is Larry. We’ll also hold-off on options for the new directors…same reason” (University of Phoenix, 2012).
McBride Financial Services would benefit from the implementation of specific guidelines for all compensation policies. MFS CEO Hugh McBride should not determine the company’s incentive benefits or be able to dictate the company’s compensation structure. E*TRADE Financial Corporation has implemented a Compensation Committee, created by the Board of Directors of the Company to oversee the company's compensation and benefits policies, evaluate senior executive performance, oversee and set compensation for the company's senior executives, including matters relating to participation in stock option plans, stock purchase plans, profit sharing plans, employee stock purchase plans, 401(k) plans and similar plans, as well as establishing the base salary, incentive bonuses and other forms of compensation of senior executives (E*TRADE Financial Corporation, 2012). The Compensation Committee also is responsible for the preparation and report on executive compensation that the Securities and Exchange Commission rules require to be included in the Company's annual proxy statement (E*TRADE Financial Corporation, 2012).
The incentive strategy of E*TRADE Financial Corporation has been successful in implementing a general compensation structure that rewards employees in a variety of ways. If McBride Financial Services could implement a similar organizational structure, they would be able to reduce their risk while supporting company goals.
Alison Doepping – JP Morgan Chase & Co
According to Chew and Gillian (2005), acceptable surrogates for direct observation of effective behavior by professional boards include: “independent board leadership, whether through a non-executive chair or a lead director, so that directors are able to act without relying solely on initiatives from a management chairman; periodic meetings, without management, of the independent directors to provide the opportunity for the directors to evaluate management against the strategic plan for corporate performance; and formal rules or guidelines establishing an independent relationship between the board and management” (p. 182). McBride Financial Services (MFS) has not implemented an independent or effective professional board system. Currently, President, CEO, and CFO of MFS Hugh McBride, is also acting as board chairman thus decreasing the independence and effectiveness of the board. In an email from McBride Financial Services, Inc. CEO, Hugh McBride to the prospective board, he states, “I hope you are each really considering my offer to join the board of MFSI. As a reward for your support, I’d simply like you to be a part of the company but, as your Chairman, I’ll handle the real work and you can reap the benefits of placing “Board Director” on your resumes (University of Phoenix, 2012, p. 5).
McBride Financial Services could benefit from the implementation of a committee similar to JP Morgan Chase & Co.’s Corporate Governance & Nominating Committee (the “Committee”), which determines criteria for composition of the board and the selection of new directors. JP Morgan Chase & Co.’s strategies also determine their level of Independence. The Board determines a director to be independent, if they have “affirmatively determined that the director has no material relationship with the firm, either directly or as a partner, shareholder or officer of an organization that has a relationship with the firm” (JP Morgan Chase & Co., 2012). Furthermore, the members of the Corporate Governance & Nominating Committee will be directors for whom the Board has made an independence determination. If McBride Financial Services is able to implement similar board strategies as JP Morgan Chase & Co., they will be able to improve upon their board independence as well as their comprehensive effectiveness in
future initiatives.
Alicia Dudley – Barnes & Noble Inc.
Barnes & Noble Inc. is the largest bookseller of a variety of books and products in retail stores throughout the United States and eBook marketplace. However Barnes & Noble faces stiff competition from non-traditional retailers who are increasing the market share in book retailing (Datamonitor, 2010).
Barnes & Noble Inc. faces issues such as legal issues with other investors, financial issues, and leadership. An investor named William Ackman was meant to present his incentive plan on financing Borders Group Inc. and Barnes & Nobles Inc. to the Board of directors to expand in the bookseller industry. Ackman did not present these issues because he earned a reputation for making investments in companies at a low price, and then pressure the management team to make changes to turn the companies around (Duggan, 2010). The issues are important not just for corporate governance purposes, but also for ensuring the hiring of independent directors (Nytimes, 2010). In the last 4 years, Ackman lost $150 million in his investment in the Ann Arbor based bookseller. Barnes & Nobles’ director had a complaint file against him from five shareholders that accuse him of not complying the California Labor Code. The complaints generally allege breach of fiduciary duty, waste of corporate assets and unjust enrichment in connection with the adoption of a Shareholder Right Plan on November 7, 2009 (Datamonitor, 2010).
Barnes & Noble Inc.’s outcome was to explore other alternative solutions such as CEO, Leonard Biggio becoming a buyer because he owned 33 % of company stock or selling the company to the highest bidder. The management team can use its position to influence the sale process or use its own inside information to take advantage and at the expenses of shareholder (Nytime, 2010). Barnes & Noble has not followed the proper procedures and the appointment of a legal adviser that will keep the company on track. Independent directors will have to work extra hard to manage the process of drawing other bidders and to avoid court issues with shareholders.
Alicia Dudley – Boeing Company
Boeing Company has strong competition, which involve the design, sale, and the development of military aircraft, jetliners, missiles and launch services. It is the largest aerospace company in the world (Boeing Homepage, 2010).
Boeing has, on a number of accounts, has accused U.S federal labor regulators for misleading their executive team to labor retaliation against the company (Hananel, 2011). This incident was caused by not communicating with the company and its request to withdraw its’ complaint. Boeing Company had a reputation on not being loyal to its’ investors because of program delays and the mishandling of supply chain operations. Boeing managers maintain preference for a riskier but potentially much more rewarding move (Anselmo, 2011). In 2006, plaintiffs in a derivative class action suit against the directors of The Boeing Company (“Boeing”), led by their counsel, Labaton Sucharow LLP, achieved a landmark settlement. The lawsuit established unique and far-reaching corporate governance standards relating to ethics compliance, provisions that will also obligate Boeing to contribute significant funds over and above base compliance spending to implement the various prescribed initiatives. (Labaton Sucharow LLP Homepage, 2012). Boeing Company has realized the consequences of their actions and has implemented strategic approaches to focus on the company’s long-term goals. The company has also immediately responded to the problem of their customers, shareholders, employees and suppliers. Additionally, the board has adopted a Code of Ethical Business Conduct to focus the board and directors on areas of ethical risk, provide guidance to help them continue to effectively recognize and deal with ethical issues, enhance existing mechanisms to continue the reporting or unethical conduct, and help to continue to foster and sustain a culture of honesty and accountability (Boeing Homepage, 2012).
SOX mandated changes that will affect executive compensation, shareholder, monitoring, and particularly board monitoring (Chew & Gillian, 2005). Boeing Company has been very cautious of their actions. SOX compliance has helped the board of directors to stay focused on their actions and comply with the SEC, EPA, and OSHA. Boeing hired an outside consultant and audit committee to specialize in SOX policy. Boeing has gained the trust of their suppliers and was able to protect their shareholders from potential risks in the future. The Board of directors and the Boeing management team are more responsible on handling financial issues and reporting accurate information on their financial report.
Chevelle Gaines – Gap Inc.
Gap Inc. (Gap), a popular retailer, was once under scrutiny for conducting unethical practices in the creation of their clothing line. Controversy also surrounded the company for employing minors in outlets labeled as “sweatshops”. Workers as young as the age of 8 were found to be responsible for supplying the retailer with fashionable brands. Since the scandal hit the news, the company has turned the negative publicity into a positive change that prohibits minor workers from working in any environment within the company. The company’s current mission is to conduct business in an honest, respectable, and ethical manner. To Gap, good corporate governance means going beyond compliance. It means taking a leadership role in instituting and maintaining practices that represent strong business ethics — and ensuring communication consistently with shareholders, customers, and neighbors around the world (Gap, 2012).
Gap Inc.’s board of directors has placed corporate governance practices in place in the effort to fulfill the company’s obligation to shareholders. The company’s board is responsible for making decisions that are unrelated to the company’s management team. They continuously evaluate the expertise level of all board members to determine if the skill level is in line with organizational needs and that organizational standards are in compliance with regulations to ensure that all laws are in compliance with shareholders and investors best interest.
Chevelle Gaines – Wal-Mart
Within the past decade, Wal-Mart has been in the spotlight for unethical issues relating to gender discrimination, wages, health insurance, labor issues, and policies against employees joining labor unions. The company is responsible for abiding by all laws and has an effective board of directors in place to ensure all rules and laws are abided by.
In response to the above issues, Wal-Mart’s CEO implemented changes, along with court findings that would turn the company around and bring in positive publicity. In responding to wage allegations, the company decided to distribute pay increases set at 6%, beginning with new hires. In answering the health insurance coverage issue, Wal-Mart enhanced their current policy to allow part-time and full-time employees eligible for coverage after a specified length of service. Wal-Mart has been highly criticized for their policies against labor unions. In 2006, Wal-Mart made an announcement that it would allow workers to become part of a union in which all employees can come together to attain mutual goals.
The company’s board of directors helped the company to turn their negative publicity into positive strategies. Wal-Mart’s board of directors is responsible for oversight of the business, affairs and integrity of the company, determination of the company's mission, long-term strategy and objectives, and oversight of the company's risks, while evaluating and directing implementation of company controls and procedures (Wal-Mart, 2012). Wal-Mart’s board of directors plays an active part in keeping managers and leaders under control and set high expectations for managers and leaders to reach targeted organizational goals. Targeted goals are the factors that the Wal-Mart board of directors evaluates, in deciding incentives for company leaders. The board is included in all major decisions that are made and that will impact investors and their investments.
Unlike McBride Financial Services, Wal-Mart has incentive plans that are based on employee performance. The board of directors has the task of overseeing the company’s standings in regard to assets. McBride Financial Services would benefit from starting an incentive plan that is performance-based in any case; low performers will not benefit from profits and therefore should not expect anything. The boards’ impact on corporate performance lessens the risk of unethical behavior performed by managers.
Ashley Nixon – Pizza Hut
Pizza Hut, founded by Dan and Fran Carney in 1958, is one of America’s first and famous restaurant chains that serve different styles of pizza, side dishes, and garlic bread. According to Pizza Hut’s website, there are more than 6,000 Pizza Hut restaurants located in The United States and more than 5,600 store locations in different countries (PizzaHut.com).
Like several companies trying to stay afloat in this economy, problems can arise. Pizza Hut is dealing with the unfair treatment to their employees. “Companies demonstrate their good ethics to employees primarily through fair treatment. If a company passes the “fair treatment test,” employees are more likely to be open to ethics and legal compliance initiatives and to cooperate in making them successful” (Hartman 2005).
Selina, a Pizza Hut employee in the Kissimmee, Fl. location has been working there for 10 years and describes her experience as horrible. According to her, the mangers were shifty, played favoritism, and racially discriminated against people who were not from the same background as them. Some employees were allowed to talk on their cell phones for the whole shift while others would have someone call the store to pretend that there was an emergency (Ripoff Report, 2011).
This issue with Pizza Hut was not resolved and the end result was losing most employees. According to Selina, the National Labor Relations Board was unable to do anything because of the article she had written about the mistreatment. To this day, the Pizza Hut location in Florida still remains the same (Ripoff Report, 2011).
When it comes to Hugh McBride and McBride Financial Services, Inc., the tone of power is apparent with some of the employees. The company’s incentive plan, for example, has been simply said it will be discussed later. There are certain ways to treat a staff so that they feel a part of a great company. Treating employees unfair can result in losing a manager, staff, or creating a bad reputation for that company (University of Phoenix, 2012).
Ashley Nixon – Hewlett Packard
Hewlett-Packard (HP), a massive computer and electronics company, has grown into a multi-billion dollar company. No matter how successful a company can be, they can always face tough times. In the early 2000’s some of Hewlett-Packard’s important information was leaked to the press. The company’s chairperson Patricia Dunn, investigated to determine what the cause was for the leaked information. During the investigation, she found that everything the company was doing was legal, therefore unaware of why there was leaked information (Sims, 2009).
HP is still unaware as to whether or not Dunn was fully aware of the process used for gaining private information had been illegal. Her unwillingness to release information to the Security and Exchange Commission is what could have made this a difficult circumstance. Dunn was charged with four felony counts, and her conduct was brought into question. Part of Hewlett-Packard’s code of conduct states that “we work together to create a culture of inclusion built on trust, respect, and dignity for all” (Hewlett-Packard, 2012).
Once the news of Patricia Dunn had gone public, she stepped down as chairman and resigned from being a board member. Most of the other board members were replaced as well (Stewart, 2007). Hewlett-Packed lost their way from their corporate missions and lost the value of having a code of conduct. Before articulating the culture through a code of conduct or statement of values, a firm must first determine its mission (Hartman, 2004).
In the McBride Financial Services scenario, Hugh McBride conduct was questionable when asking staff to make the resumes of potential board members more attractive. Beltway Investments is expecting Hugh’s conduct to be trustworthy as they stated, they believe in McBride Financial Services. They also stated their expectations are high for sound corporate governance exercised by the team (University of Phoenix, 2012).
After all of the commotion, HP was stabilized and their stock rose to its highest point in several years. Hewlett-Packard regained a hold on their mission and improved the code of conduct throughout the company.
Conclusion
McBride Financial Services and other companies have faced many challenges such as lawsuits, unethical practices in the workplace, violation of labor laws and SOX compliance, and inaccurate financial reporting. Some companies learn from their mistakes and have remained successful in their competitive market. Corporate governance, SOX compliance, and other labor laws have an important role in how companies operate their business and how successful those companies can be in the future. Many companies will have a promising future if the CEO, management teams, and other staff members use the valuable resources and research to develop organizational strategies. Companies that face financial crisis, unethical practices must learn to rely on each other to make important decisions, not just for their company but for their investors, customers, and employees.
References
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Boeing Homepage (2010) Retrieved from .
Chew, D.H. & Gillian, S.L. (2005). Corporate governance at the crossroads: A book of readings. McGraw-Hill Companies (1e).
DATAMONITOR: Barnes & Noble Inc. (2010). Barnes & Noble, Inc. SWOT Analysis, 1-15. Retrieved from EBSCOhost databases.
Davidoff, S (2010). The next steps for a buyout of Barnes & Noble. Retrieved from NY Times Homepage.
Duggan, D. (2010). Borders investor's next chapter targets Barnes & Noble. Crain's Detroit Business, 26(51), 1. Retrieved from EBSCOhost databases.
E*TRADE Financial Corporation. (2012). Compensation committee. Retrieved from .
Hananel, S. (2011). Boeing Co. fighting back in labor retaliation case. Buffalo Law Journal. p. 14. Retrieved from EBSCOhost databases.
Hartman, L.P. (2005). Perspectives in Business Ethics (3e). New York: McGraw-Hill.
Hewlett-Packard. (2012). Hewlett-Packard. Retrieved from http://www8.hp.com
JP Morgan Chase & Co. (2012). Corporate governance principles. Retrieved from .
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Pizza Hut. , (2005)
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Sims, R. L. (2010). A study of deviance as a retaliatory response to organizational power. Journal of Business Ethics
Stewart, J. B. (2007). The Kona Files. New Yorker
The Gap. (2012). Guidelines. Retrieved from
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Wal-Mart. (2012). Corporate Governance. Retrieved from
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andudley22 (student)
