MGMT 320 Final Exam Study Material by Ruth Huwe

Reasons for business regulation

Market failure

Negative Externalities

Natural monopolies

Ethical arguments

Types of Regulation

direct and indirect

Economic

social

anti-trust

direct regulation

Government regulation targeted at a specific firm or industry

indirect regulation

government regulation that applies to all businesses/industries

Examples of economic regulation

Control prices or wages

Allocate public resources

establish service territories

set the number of participants

ration resources

economic regulations

attempt to modify the free market by controlling the forces of supply and demand

Dodd-Frank Act

a law enacted in the aftermath of the financial crisis of 2008-2009 that strengthened government oversight of financial markets

Antitrust laws

laws that prevent monopolies and promote competition

predatory pricing

selling a product below cost to drive competitors out of the market

Two main antitrust enforcement agencies

Antitrust Division of the U.S. Department of Justice and the Federal Trade Commission

price fixing

collusion between industries

social regulations

aimed at protecting consumers, the environment, and human rights (safe working conditions)

costs and benefits of regulation

benefits outweigh the costs

most onerous regulations

taxes, then health, then labor, then environment is the least onerous

Corporate governance

process by which company is controlled internally

why was AIG an example of corporate governance failure?

Feb 10, 2017 Ex-ceo Hank Greenberg paid 9.9mil settlement for fraud

March 9, 2017 company lost appeal against gov charging interest on bailout was too high

Two types of shareholders

individual shareholders ( like me)

institutions - pension funds, mutual funds

rights of shareholders

Receive dividends

vote on - Board members, mergers and

acquisitions, charter and bylaw changes,

proposals by stockholders

Receive annual financial reports

file lawsuits against the company

sell their shares

Board of directors

elected group who manage and run a corporation, averages 12 members

Who proposes board members

the nomination committee working with the ceo and chairman choose candidates

responsibilities of board members

Establish corporate objectives

develop broad policies

select top level personnel to carry out objectives

reviews mgmt performance

Types of Directors

inside directors - managers within the company

outside directors - people from outside the company

independent directors- no financial ties with company

Executive Committee

composed of top executives

meets regularly with the CEO/top managers to review strategic plans

compensation committee

composed of only outside directors, this committee reviews salary and benefits for high lvl managers (required by law)

audit committee

made up of outside directors, they must be financially literate, they review financial documents, recommend audits, and are responsible for the integrity of financial controls within the company

strike price

The set price of a stock option

Securities and Exchange Commission

created in 1934 in response to the stock market crash and the great depression - its mission is to protect shareholders to make sure the stock exchange is run fairly and transparently

SEC is likely to catch

insider trading - capitalizing on information about business deals that will affect stock prices prior to the information being available to general public

Fraudulent accounting - cooking the books

anti-trust laws

Sherman act 1890 - no collusion to fix prices

clayton ac 1914 - preventing mergers and acquisitions that would prevent competition

FEDEral trade commission

oversees businesses to prevent anti-competition and unfair practices

why were boards created

arose in the age of managerial capitalism to keep managers in check

nationalist

focus on our own nation

globalist

in favor of free trade across national borders

anit-globalist

anti corporate power

corporate political strategy

strategy meant to influence laws or public opinion in company's favor

financial, constituency building, informational

Iron Triangle

The three-way alliance among legislators, bureaucrats, and interest groups to make or preserve policies that benefit their respective interests.

Norman Borlaug

Father of the Green Revolution, won nobel price for creating a high yield disease resistant wheat strain

Green Revolution

Rapid diffusion of new agricultural technology, especially new high-yield seeds and fertilizers through mexico, china, and india, but not africa

reasons green revolution didn't make it to africa

micro climates inappropriate for new seeds, but also government corruption, poor infrastructure

key US food aid restrictions

75% of all ships carrying food aid had to be US

cannot donate money as aid that would be used to buy wheat that competed with american farmers

major issue with foreign debt

african countries that received $ aid during the time of the green revolution racked up huge bills. Paying on the interest crippled their ability to build infrastructure that would have allowed them to grow their economy long term.

who controlled development funds for Africa

Midwest senators concerned about their farming districts (lobbying, protectionism)

energy independence and security act of 2007

Legislation signed by pres bush to move towards using more renewable fuels (ethanol)

Anti-globalists

Believe corporations have too much power

Globalization

is a trend/ a process

TNC (Transnational Corporation)

A firm that controls assets abroad

Anti-Americanism

Resentment at the dominance of American values

FDI (Foreign Direct Investment)

Investment made by a foreign company in the economy of another country.

vulture funds

Hedge funds who invest in "distressed" debt

Distressed Debt

debt of companies who are in or near bankruptcy

Inversion

Moving headquarters to a country with lower taxes

Calculating Transnationality Index (TNI)

jobs overseas/total jobs

Levels of Globalization

Sell: Export to other countries

Make: make in other countries

Source: subcontractors make in other countries

World Bank

An IFTI, offers loans to member countries to build infrastructure

IFTI international financial trading institution

banks and such that offer financial services between countries

IMF (International Monetary Fund)

financial institution who lends to recovering economies to help stabilize, but imposes strict conditions as part of terms.

WTO (World Trade Organization)

the third major IFTI , successor to GATT, establishes rules for international trade

objective is to promote globalization and reduce barriers such as tariffs

(does not lend money)

Benefits of Globalization

Increased economic efficiency

reduces prices for consumers

Transfer Technology

Gives foreign countries access to FDI which

can help their country develop

spreads democracy, freedom, and reduces military

conflict

Costs of Globalization

Causes job insecurity

Weakens environmental and labor standards

Prevents individual nations from adopting policies promoting environmental or social objectives, if these discriminate against products from another country

Erodes regional and national cultures and undermines cultural, linguistic, and religious diversity

Is compatible with despotism

Four defining features of democracy

Fair elections

Independent media

Separation of powers

open society where groups can form

Communnism

all property is owned by government

four communist countries:

North Korea

Vietnam

China

Cuba

Republic

supreme power is held by the people and their elected representatives, have elected president

Russia is a federal, semi-presidential republic

Military Dictatorships

Zimbabwe

Mixed examples

Nigeria

Gini Index

a mathematical formula that measures the amount of economic inequality in a society

Wealth vs. Income

Wealth- the value of financial assets such as savings, real estate, stocks, and bonds, minus any outstanding debts

Income- money received from sources such as wages and salaries as well as from the interest, dividends, and rent generated by wealth

Microfinance

small loans and other financial services to individuals and small businesses in developing countries (loans of about $300)

lead bank in microfinance

Grameen Bank Bangladesh

Global Action Networks (GANs)

Partnerships that address social issues in global economy (double bottom line)

Alliances of organizations from the three separate sectors, civil society, bus, and gov

Three sectors

Government, business, civil society

What is civil society?

Civil society comprises non-profit, education, religious, community, family, and non-commercial or non-government interest groups

why couldn't intel eliminate conflict minerals from its supply chain on its own

due to the length and complexity of the supply chain it would be very difficult and expensive to eliminate conflict minerals on its own. Minerals change hands and are smuggled and so on, so getting rid of conflict minerals requires voluntary efforts on the parts of individuals within the supply chain. due to a lack in regulation or enforcement (not sure which) requires voluntary support.

Where do conflict minerals get their name?

they get their name from the conflicts that some mines support. these mines use forced labor and poor health conditions to squeeze more money from these mines

What further steps can be taken to reduce or stop the use of conflict minerals?

tariffs/taxes on those who use conflict minerals

form industry alliance against them

society could stop buying products that use them

Global impact categories

Human rights

Environment

anti-corruption

Labor

1894 New York crisis thought to be the end of urban civilization

horse manure

sustainable development

Meets needs of present without depleting resources and screwing us and future generations

resilience

ability to bounce back after crisis or dmg has been done

natural capital

Assets of the natural world, ex: air, water...etc

Ecosystem

single, unified, natural system

system theory:

suprasystem

system

subsystem

open system

open system has

inputs => [throughputs] => outputs (outputs cycle back as feedback to inputs)

Why must sustainable development address poverty?

because those in poverty use resources inefficiently, they are concerned with survival

What is Anthropocene?

When human activities are dominate effects on the planet

Forces that have accelerated the ecological crisis facing the world

Population explosion

Income inequality

Rapid industrialization of developing nations

Climate change denial

Ecological footprint

The amount of land and water a human population needs to produce the resources it consumes and absorb its wastes given prevalent technologies

Three major ways to save the earth

Technology, Change consumption Patterns, get prices right (cost of externalities)

Forces that affect population

Healthcare

immigration

Dominant religion (birth rates)

Where is there the most extreme poverty

the outskirts of major cities in developing countries

Where in the world is climate change denial most common?

U.S.

Weather vs. Climate

weather is the temporary/immediate atmospheric conditions

climate is the average conditions

Major causes of climate change

Pollution of fossil fuels

Black Carbon

Deforestation

Beef Production

PETM

Paleocene - Eocene Thermal Maximum

Rapid increase in temperature globally shift in carbon cycle; Frozen methane in the ocean and in frozen soil — methane hydrates

EPA criteria pollutants

Nitrous oxide

Carbon monoxide

Sulfur dioxide

Particulate matter

Lead

mix of nitrogen and VOCs

Greenhouse gases

Nitrous oxide

Carbon dioxide

Methane Gas

Ozone depleting chemicals: CFC, HFC,

Carbon dioxide and carbon monoxide come from

vehicle exhaust mostly

sulfur dioxide comes from

mostly electric utilities burning coal and oil

Coal burning power plants produce what pollutants

diesel exhaust, dust, particulate matter

Nitrous oxide comes mostly from ....

high temp combustion, industry and vehicle

VOCs volatile organic compounds come from

solvents, paints, pesticides, (household items)