Stakeholder Theory is a view of capitalism that stresses the interconnected relationships between a business, its customers, suppliers, employees, investors, communities and others who have a stake in the organization. Traditional accounting fails to adequately represent the risk and returns of stakeholder activities — i.e. the net value created by ‘stakeholders’. Stakeholders include customers, employees, […]
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Theoretically, deferred compensation should keep executives from leaving the firm. One way to defer compensation is through unvested equity pay. After four or five years, the pay is vested. This deferred compensation plan punishes managers who leave early: they lose any unvested pay. Whether such programs actually help retention has been unclear. Some studies show […]
Employees can impact a company’s brand equity. A friendly clerk in a store or an effective IT project team that delivers to the satisfaction of the customer are two positive examples. Employees, of course, can also impact a brand’s equity negatively. In the age of social media, for example, companies have had to quickly fire […]
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When overseas earnings by U.S. multinationals are brought back to the U.S., those earnings are taxed as income. However, multinational companies have the option of leaving those earnings abroad and for accounting purposes may designate all or some of those earnings as Permanently Reinvested Earnings or PRE. Tax policy makers and the U.S. Securities and […]
Read More… from The Good and Bad Reasons Corporate Cash Is Trapped Overseas
For the past 20 years, like a herd of stampeding buffaloes, companies have been moving en masse their manufacturing to low-labour-cost countries. Despite the occasional bad publicity as working conditions in some of these countries become known, the tidal wave of offshoring seems to make financial sense: companies save money on wages, which are reflected […]
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New research, focusing on accounting ethics and using a carefully controlled experiment, reveals the power of social influence on the ethical standards of managers. After seeing honest budget reporting from another manager — a peer — a manager is more likely to be honest: despite an incentive to inflate costs to secure a bigger budget, […]
Read More… from How Peers Influence Ethics: Good Eggs and Bad Apples
Corporate social responsibility and sustainable development are increasingly linked to competitive advantage and innovation. Harvard’s Michael E. Porter and Mark R. Kramer have, in recent years, ‘reframed’ CSR as ‘shared value’, pointing to the business opportunities in ‘unmet social needs’. Meanwhile, the external pressures for responsible business — from governments and regulators and from shareholders […]
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Decision-making on the financial markets is driven by information and by trust. But trust can be flagrantly abused. This was amply demonstrated by the Bernard Madoff scandal, considered to be the biggest fraud in American history. Madoff, a former non-executive chair of the NASDAQ stock exchange, used a ‘Ponzi scheme’ to defraud investors, paying returns […]
In recent years, the trust afforded to senior management has eroded significantly, particularly for those executives in finance-related positions. The demise of certain companies sent shockwaves across industries; successful covering up of the actual financial situation a company was in meant regulators, employees and the general public remained unaware till it was too late. Going […]
Read More… from How to Recognize Managements With Something to Hide
For big corporations, regardless of industry, making disruptive changes is not a question of money: many have substantial budgets. It is a question of mind set and how you position the innovative disruption on the balance sheet – and that can be the downfall of many innovations. Giles Hilary in his paper ‘Does accounting Conservatism […]
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