International Trade (Macroeconomic Policy)

Jenna Doucet (2010).

International Trade (Macroeconomic Policy)

International trade influences global and national economies most directly by contributing to the gross domestic product and the budget surplus or deficit of a country. One of the advantages of international trade is the stability and interdependence it creates amongst countries, while one of the significant disadvantages is that “the more globally connected a country is the less flexibility it has with its monetary and fiscal policy” (Uhlhaas, 2001, p.1). The country’s exchange rate is important to international trade as higher domestic dollars make foreign investments more expensive and imports cheaper and vice versa. The policies that facilitate international trade directly impact the investment industry by influencing which countries an organization chooses to invest its capital in. International trade also influences the investment industry indirectly with complementary monetary policies such as the exchange rate.

Many industrial economies are dependent on international trade. For example in 2005, Canada’s exports of goods and services totaled 38% of GDP (CSI, 2008) A country’s GDP is made up of consumption + investments + government spending + (exports – imports). If net exports are positive, the countries GDP will increase. A negative net export number results in a trade deficit in the current account, which must be financed by the government either by borrowing funds internationally or by selling more capital assets than it purchases (Gorman, 2003). Furthermore, the growth of the Canadian economy is not only dependant on it’s domestic performance but on the growth and performance of international countries that import Canada’s goods and services (CSI, 2008). “A number of factors influence the performance of Canada’s trade. The most important is the relative pace of demand in foreign and Canadian economies. Strong growth in U.S. demand for automobiles, raw materials and other products made in Canada boosts exports”(CSI, 2008, p.17). This was obvious during the 2008-2009 recession in the U.S, one of Canada’s most important trading partners. As the U.S economy worsened, there was less demand for Canadian imports, which affected Canada’s economy.

The interdependence between foreign countries trading with one another leads to cooperation between countries and is helps support stability, prosperity and peace (Uhlhaas, 2001). Some countries are better at producing certain goods and services more efficiently than others. Cooperating with other countries allows a country to focus its resources on producing the goods it is most efficient at producing. In this way the country does not have to sacrifice resources that are better utilized for one product on other products the economy needs, as these products are easily imported into the country. Furthermore, a country can maximize the production of products their economy is best suited to produce and export a portion of those products for a profit. The country can then use this revenue to fund the purchase of importing goods its economy cannot produce efficiently. This interdependence between countries motivates foreign governments to promote political stability in their countries’ to attract investors and to create a demand in imports of their goods. The prosperity of many countries is correlated with the amount of products and services they are able to export. Furthermore, countries that are rich in scare resources attract the aid of stronger more economically and politically sound countries. In the past the U.S. and Canada have been more prone to send peace troops in countries that they had scare resources their countries were dependant on. For example, U.S and Canadian troops were sent to Iraq, where there is an abundance of oil, however, little help was offered to promote peach in Rwanda during the genocide. Unsurprisingly, Rwanda is not an important source of goods and services for North America.

On the flip side one of the disadvantages of being so connected to other countries is the impact it has on a country’s ability to effectively implement fiscal and monetary policy (Uhlhaas, 2001). For example, if a country’s exchange rate regime is fixed for international trade purposes that country’s monetary and fiscal policies will be more restricted than countries with flexible exchange rates. Generally, a country’s foreign exchange reserve is limited and in order to keep this exchange rate fixed it must do so by adjusting the economy to the desired rate. Much of the country’s monetary policies will be adjusted to meet international trade goals potentially at the expense of other economic goals. According to Uhlhaas (2001) “ This means that if monetary and fiscal policies are being used to achieve exchange rate goals, they cannot also be used to achieve domestic goals” (p.1).

Exchange rates politics are of great importance for domestic policy-makers because they affect the demand of exports from foreign countries. “ In an economy as dependent on trade and open to international capital flows as Canada’s, the behavior of the exchange rate is vitally important. The value of the Canadian dollar relative to other currencies influences the economy in a number of ways. The most important influence is through trade” (CSI, 2008 p. 16). Higher dollars in a country, make that country’s exports more expensive in foreign markets, and make imports in foreign markets cheaper. A country with a higher number of exports than imports, such as Canada benefits from a lower exchange rate, while country’s that are more dependant on imports such as the U.S benefit from a higher exchange rate.

International trade policies directly affect organizations that invest in foreign countries. For example, prior to the Investment Canada Act (ICA), the Foreign Investment Review Act (FIRA) regulated foreign domestic investments (FDI) in Canada. FIRA exerted more control over FDI’s and investments were subject to a longer process of approval. After ICA, foreign investments in particular sectors were no longer reviewed. The loosening of international trade policies resulted in a bigger demand for FDI’s in Canada (Wallace, 2002). Similarly, the relative ease with which an investor can purchase a foreign government bond from a particular country is important in determining if he or she will invest in that country. Some countries impose taxes on foreign investments, which impact the return on investment and discourage investors from purchasing foreign bonds. Governments normally issue taxes on investments as a protectionist measure to prevent too much investment in the country, which could lead to a potentially unwanted appreciating dollar. International trade indirectly affects the investment industry as complementing monetary policies influence the price of and return of investments. For example, the exchange rate is an important to many bond investors purchasing foreign bonds.

International trade is an important economic factor in many countries as it is a large contributor of GDP. Today, many countries are interdependent on one another for the specialization of products, and production efficiency globalization gives them. However, the more globally interdependent the country the more restraint is placed on the country’s ability to implement domestic monetary and fiscal policies. The exchange rate plays an important role in attracting foreign exports and dictates the price at which a country can import goods. International trade is also a big player in the investment industry as direct trade policies and complementing policies dictate which countries attract an investors’ capital.

References

Canadian Securities Course Volume 1 (2008). Economic policies. Toronto: The Canadian Securities Institute.

Gorman, T. (2003) The complete idiot’s guide to economics. Penguin Publishing.

Wallace, C. (2002). The multinational enterprise and legal control: host state sovereignty in an era of economic globalization. Springer.

Uhlhass, A. (2001). What are the main advantages and disadvantages of global free trade? Does it exist in practice? University of Leeds. Retrieved on February 22, 2010 from: http://www.grin.com/e-book/11518/what-are-the-main-advantages-and-disadvantages-of-global-free-trade-does

Ethics in Law and Business

Jenna Doucet (2010).

Ethics in Law and Business

The subject of ethics is an important topic in the legal system, one that highlights duty and obligation, and one that comes with consequences in the event of non-compliance. These days businesses are making big headlines for subjecting themselves to unethical behaviour. The regulations, standards and consequences surrounding legal practice and fair representation differ from those that surround businesses. When it comes to business and law, aspiring for a more just system requires individuals to understand the business client’s and the lawyer’s duties as well as the ramifications of both.

As stated by Yates, Bereznicki-Korol and Clarke (2008) the issue with ethics is that they are not always governed by law, but often by our own convictions and personal values. Simply stated “ When a person breaks the law, he has also acted unethically. However, if a person acts unethically, he may not have broken the law” (p.14). How then can one expect individuals to display ethical behavior in situations that offer no repercussions to the unethical act? A compelling paper written by McGraw (2004) offers some insight into the psychology behind man’s conflict with ethics. McGraw’s (2004) paper highlights Thomas Hobbes’ social contract theory of ethics, which states that individuals are motivated by self-preservation and self-interest. Hobbes theory proposes that in the absence of societal rules and consequences, man would behave in a fashion that served his own best interest and not necessarily act ethically. Hobbes attributes the rules of society and government to “ individuals’ self-interest and fear” (p.236). In order for individuals to survive and attain their desires, they must co-operate with one another, this is achieved by way of social contract. McGraw writes that “ because individuals cannot trust each other to keep their promises a powerful government is necessary in order to enforce the social contract” (p.236).

Following Hobbs logic, the reasons for which a lawyer should practice good ethics are simple. Unethical behaviour can lead to the loss of credibility among clients and more importantly disbarment. It is in the lawyer’s best interest to follow their professional code of ethics. One of the complexities surrounding a lawyer’s duty is that their professional obligations may pose a conflict with their personal duties in fulfilling their social contract with society at large. Protecting the client’s best interests, no matter how unethical the client, is the lawyer’s responsibility. Furthermore, a lawyer’s non-compliance with the standards of the profession are not taken lightly. In Canada, the Canadian Bar Association, the Minister of Justice and Attorney General are responsible for ensuring that lawyers are in compliance with the ethics and responsibilities of the profession. When probable cause that a lawyer has committed a criminal offense or acted unethically, the lawyer is subject to a complaint resolution procedure and upon investigation can be given penalties ranging from suspension to disbarment (Yates, Bereznicki-Korol and Clarke, 2008).

One of the main differences between the lawyer’s duty of ethics and the business client’s  is that the client as the face of a corporation has a moral duty to act ethically in order to protect the interest of society at large. Again, it is in the businesses best interest to uphold a positive public image, especially in an increasingly competitive industry. Business like law, is highly regulated by a number of different regulating bodies. The consequences for unethical behaviour in business are also increasing in severity as more and more cases of unethical behaviours are being publicized and scrutinized. The consequences of unethical behaviour in business has a greater number of negative outcome ranging from a loss in customer support, decline in sales and revenue, bankruptcy, forced resignations, loss of employment, large fines and even jail.

In conclusion, ethics play a large role in law and business. As long as ethics and are regulated and valued by society, both lawyers and businesses will be motivated to follow good ethical behaviour- if not by moral choice at least by Hobbes’ self-preservation and social contract theory.

References

Yates, A., Bereznicki-Korol, T. & Clarke, T. (2008). Business law in Canada (8^th ed). Canada: Pearson Education Canada.

McGraw, D. (2004). A social contract theory critique of professional codes of conduct. Info, Comm & Ethics in Society (2), 235-243. Retrieved on December 18^th 2009 from Ebsco database.

Legal, Social and Ethical Responsibilities in Business

Jenna Doucet (2009).

Legal, Social and Ethical Responsibilities in Business

In the past decade, individuals have been questioning legal, social, and ethical issues concerning organizations closer than ever before. With the aid of the media, business practices have become more transparent. Bateman and Stair (2007) State, “ There’s an increased readiness to believe negative things about corporations today, which makes it a dangerous time for companies ” (p.150). In order to remain credible in the public’s eye, it is imperative that companies keep good moral ground. Examining the pitfalls of organizations, such as Hollinger International (HII), that have been scrutinized for engaging in legal, social and ethically unsound behaviours, can set organizations on the right path.

Background

Hollinger International Inc. (HII) is a public newspaper publishing company (Boritz and Robinson, 2004). The controversy surrounding HII surfaced in 2003, while the company was under the management of Conrad Black. An article appeared in the Star reporting that Black and his associates faced a total of 42 charges relating to an alleged $US 60 million in theft, as well as charges of receiving unauthorized bonuses and other perquisites (Westhead and Doolittle, 2007).

Legal responsibility

All companies are subject to legal responsibilities and are required to follow the law, which impact organizations planning process. In order to operate soundly, a company must familiarize itself with external factors that govern the industry that the company operates within. A legal issue presented in the HII case revolved around Black’s breeching of fiduciary and contractual duties  by “diverting to another company a valuable opportunity that properly belonged to the corporation (Delaware, 2004, p.1) Black and his associates had received much of their ill-gotten gains from “so-called non competition payments related to Hollinger International’s sale of newspapers from 1998 to 2002” (Westhead and Doolittle, 2007). It was reported that in order to transfer HII corporate assets, Black and his associates “failed to disclose material information in required filings with the SEC, that they “falsified corporate books and records” (p.4), and “failed to accurately reflect transactions”. Securities legislation requires the disclosure of certain prescribed information concerning the business and affairs of public companies. This includes periodic financial statements, insider trading reports, an annual information form (AIF), press releases and material change reports (Canadian Securities Institute, 2008).

Social responsibility

In order to thrive in the public’s eye, a company must meet certain social responsibility requirements, thus in the planning stages it must consider where it can provide value beyond its products and services. For example, a company can meet it’s social responsibilities by supporting important causes and making charitable donations (Bateman and Stair, 2006). HII made several charitable donations while under Black’s management, however, the chief executive’s motives are questionable as he was embezzling funds from the very company he was making contributions with (Fabrikant, 2004).

Ethical responsibility

In the planning process, organizations must think about setting guidelines in order to govern their business’s practices and to protect the company, it’s employees and shareholders; this is usually done by establishing ethical codes of conduct. The Caux ethics is a system of principles designed to help organizations establish ground rules for ethical practice. The first principle is to the responsibility of businesses beyond shareholders toward stakeholders and states that “Businesses have a role to play in improving the lives of all their customers, employees, and shareholders by sharing with them the wealth they have created” ( Bateman & Stair, 2006, p. 175). Black failed to honor the first principle of HII’s ethical responsibility by selling one of it’s assets, the American Trucker, to another corporation and transferring the US$ 2 million non-competition agreement payment to a related entity, therefore directly benefiting from the transaction at the expense of HII’s shareholders (Boritz and Robinson, 2004).

HII had a legal and ethical code of conduct in place, however, it did not provide adequate protection for the organization and it’s shareholders. The code of conduct was amended on November 29, 2004 and “provides greater detail to employees, officers and directors on the company’s ethical guidelines in a number of areas” (para 2, SEC). Some of the amended guidelines include, related party transactions, protection and proper use of assets, and public company reporting. The new amendment addresses unethical behavior in such that it is difficult to manipulate the law in order to behave unethically.

Conclusion

Under Black’s management, HII has been subject to legal, ethical and social responsibility issues. The poor legal and ethical code of conduct, established by HII, has no doubt played a role in facilitating Black’s unethical practices. The downfall of HII is an example of the devastating effects unethical behaviour can have on a company.

References

Bateman, S. & Snell, A. (2007). Management: Leading and collaborating in a competitive world (7^th ed.). New York: McGraw-Hill.

Boritz, J. & Robinson, L. ( May, 2004). Hollinger International Inc. Center for accounting ethics: University of waterloo.

Canadian Securities Course Volume 1 (2008). The Canadian Regulatory Environment. Toronto: The Canadian Securities Institute

Fabrikant, G. (2004, September 2). Charity Begins at home? Perhaps Not at Hollinger. New York Times. Retrieved from http:www.nytimes.com

Hollinger International Inc code of ethics. ( 2004, November 29). Securities and

Exchange commission. Washington, DC. Retrieved August 4, 2009 from: http:www.secinfo.com

Mergers and Acquisitions Corporate Opportunity Breach of Duty of Loyalty Injunctive Relief Hollinger International, Inc. v. Black. (March 17, 2004). Delaware Law Weekly, 7(11) n.p. Retrieved August 3, 2009 from Gale database.

Westhead, R. & Doolittle, R. ( 2007, July 11). Black jury deadlocked. The Star. Retrieved from: http:www.thestar.com

Petro Canada vs. British Columbia Workers Compensation Board Case Summary

Jenna Doucet (2010).

Petro Canada vs. British Columbia Workers Compensation Board Case Summary

The case of Petro-Canada vs. British Columbia (Workers Compensation Board) is of complex nature because it involves three distinct parties. The plaintiff, the Workers Compensation Board of British Columbia, was seeking justice from Petro-Canada for a breach in the Health and Safety Standards Act and the Workers Compensation Act. Petro Canada argued that they should not be held responsible for the breaches and further contended that the franchise owner should carry the liability. The dispute questions whether Petro-Canada should carry liability as the “employer” of the franchise operated business or whether the franchise owner should carry the liability as a “contract” worker (Rogers & Otto, 2009).

The legal issue in the Petro-Canada vs. British Columbia (workers Compensation Board) case is one in which there was a breach in the health and safety standards act and negligence in the prevention of future incidents. The Workers Compensation Board (WBC) clearly states that it is the responsibility of the employer to ensure the safety of all employees and minimize hazards within the establishment. The complaint from WBC resulted after a robbery toke place in one of Petro Canada’s service stations. A Prevention Officer of WBC subsequently inspected the franchise and noted that no changes in the layout of the cash register had been made in order to prevent future incidents from occurring. The Prevention Officer’s complaint was aggravated by the fact that newer Petro Canada stores employed safer layouts and designs. One of the Key components in the contract between “franchisor” and “franchisee” that upheld the court’s decision to hold Petro Canada liable was the provision that “ Petro- Canada retained the right to inspect the service station for safety concerns and to dictate safety policy. Petro-Canada’s Retail License Agreement and Site Operating Procedure outlined safety expectations and empowered Petro-Canada to conduct inspections and demand remedies” (Rogers and Otto, 2009, p. 2).

The dispute process began with the plaintiff WCB, filing a complaint with Petro Canada. The legal dispute was brought before the court system opposed to being resolved by negotiation, mediation or alternative dispute resolution.

The legal process is composed of three key components, the law, the courts, and litigants. “ In a legal dispute, litigants present their competing claims to the court, and the judge who hears the matter applies the law to the facts of the case and makes a decision ending the dispute” (Boyd 2010, p. 1). The British Columbia court structure is divided into three categories, the Provincial Court, the Supreme Court, and the Court of Appeal. The case of the British Columbia (Workers Compensation Board) vs. Petro Canada was first brought to the Supreme Court of British Columbia, as the jurisdiction of the Provincial Court is fairly narrow. The Supreme Court’s decision was appealed by Petro Canada and brought before the Court of Appeal for British Columbia.

The legal issue is considered to be of civil nature because it involves a dispute between two parties, neither of which were found guilty of crime nor were subject to incarceration. The case brought before the Supreme Court and Court of Appeal of British Columbia found Petro-Canada acted as an “employer” of the franchisee’s employees and to be in violation of the Workers Compensation Act. A fine payable to WCB was awarded to Petro-Canada to rectify the dispute.

Had another violent incident resulted because of the poor layout of the service station, especially where a person was injured or killed as a result, Petro Canada could have been prosecuted for violations. Some jurisdictions have “extended liability to make directors of corporations personally responsible for harmful and dangerous practices” (Yates, Bereznicki-Korol & Clarke, 2008, p. 404). The difference in the outcome if the case was heard as both a criminal and civil law would have been the possibility of imprisonment, discharge or community order among reward for damages, injunction, fines and special remedies.

Had the case been heard as a criminal dispute instead of as a civil dispute, it would have been handle differently. The major difference in the two types of disputes is that the purpose of criminal law is to maintain law and order, and the purpose of civil law is to uphold the individual right. Thus, if this case resulted in a criminal law, the issue would rest in the protection of society against negligence contributing to criminal activity and not simply on the individual’s right to safety in the workplace. Furthermore, the trial would have had to decide if one party was “guilty” instead of deciding whether there was a breach in an individual’s or the plaintiff’s rights. Furthermore, the hearing would have most likely taken place in the Supreme Court of Canada, and not the Supreme Court of British Columbia, and there would have been the option for a ruling made by a judge and or jury. In addition the rule of the standard of proof beyond reasonable doubt instead of on a balance of probabilities would have applied (Yates, Bereznicki-Korol & Clarke, 2008).

In order for the plaintiff, WBC, to present the dispute as criminal instead of civil, WBC would have had to involve the authorities. This would have resulted in an investigation performed by the Crown and the findings of WBC would not have mattered. Choosing criminal law over civil law would have made the satisfactory resolution by WBC’s standards more difficult to attain. Furthermore, in choosing to pursue a dispute as criminal or civil it is important to establish what the plaintiff’s desired outcome is and what the likelihood of the case being heard, as criminal would be. WBC’s purpose was not to incriminate any one individual, or to have any members of the Petro-Canada board removed, and the case did not cause involve injury or death. WBC was simply performing their duties to the public by ensuring the Health and Standard’s Act, and the Worker’s Compensation Act were being upheld by Petro-Canada and prevent future violent incidents, potentially involving injury or death.

In summary, franchisors in Canada that exert considerable control over a franchise are considered “ employers” under the Health and Safety and Workers Compensation Acts and are liable for ensuring that their franchises meet the standards set by the acts. Furthermore, any breach in contract can result in disputes being brought to court and they can be subject to fines and other resolutions.

References

Boyd, J. (2010) The Legal System. Family Law Resource. Retrieved February 13, 2010 from:http://www.bcfamilylawresource.com/01/0100body.htm.

Rogers, J. & Otto, I. (October, 2009). Vicarious liability franchisor as “employer”. Franchise and Distribution Law Bulletin. Vol. 1 (1-3). Retrieved February 10, 2010.

Yates, A., Bereznicki-Korol, T. & Clarke, T. (2008). Business law in Canada (8th ed). Canada: Pearson Education Canada.

A Business Model of the functions of Management

Jenna Doucet (2009).

Abstract

The purpose of this paper is to define the four classic functions of management. To better illustrate the implementation of the functions of management, examples will be applied to a business context from RSC Business Group.

A Business Model of the functions of Management

With old companies, once the cornerstone of the economy, dying, and new companies struggling to emerge , the survival of business is more than ever dependent on strong applications in management . In the new economy, arrogance, risk taking, and casual management are not enough to promote success.Understanding the classic concepts of management are the key to a successful company. This paper defines the functions of management: planning, organizing, leading, and controlling, and illustrates them through examples of their implementation inside a business culture ; in this case I will be using RSC Business Group as a model.

RSC Business group is a business consulting firm which offers professional consulting services and executive training. The company focuses on entrepreneurs and business owners  to promote success, grow, and add value totheir companies.

Planning

In his book Management: Leading and Collaborating in a competitive world, Bateman (2007) describes planning as defining business goals and the actions required for achieving them. Bateman (2007) writes that the historical views of the top down approach, where plans where established at the executive level and passed down, are not effective in delivering strategic value or competitive advantages. Bateman (2007) writes, “Now and in the future, delivering strategic value is a  continual process in which people throughout the organization use their brains and the brains of customers, suppliers, and other stakeholders to identify opportunities to create, seize, strengthen, and sustain competitive advantage” (p.17). RSCBG has adapted to this model and engages in dynamic interactions withemployees and customers in order to identify new opportunities. Part of RSCBG planning process is to deliver preliminary business assessments to companies, the gathering of information about all functions and aspects of the customer’s organization, in which RSCBG gains understanding of their customer’s needs. The Information is turned into value as RSCBG designs and offers solutions on its basis.Bateman (2007) summarizes this process as the need for creating more and more value for the customer.

Organizing

0rganizing is coordinating all functions in relation to business. It covers human, financial, and informational resources and includes defining organizational structure , attracting customers, appointing responsibilities, and allocating resources to maximize efficiency inside the organization. Historically, organizations limited themselves to charts that identified business functions, personnel reporting systems, and rigid plans (Bateman, 2007). 0rganizations like RSCBG understand that today, adaptability does not fall into the category of “cookie cutters.” Bateman (2007) states that effective managers implement new forms of organizing and view people as their most valuable resources. RSCBG has adapted to Bateman’s notion of creativity and innovation. RSBG does not constrain itself to geographical limits and takes  advantage of globalization by employing and serving individuals around the world. Furthermore, RSBG invite their employees to create their own niches within the  organization and are thus able to attract diverse and leading- edge individuals. In Managing by values, Dolan and Garcia (2002) write that self-organizing chaos is a key  component of creativity and innovation. The ability to establish organization within chaos depends on a free flow of values and principles for action within the company’s management. Dolan and Garcia (2002) explain that when individuals are not confined to narrow roles, they are able to grow in potential.

Leading

Leading is the stimulation of the workforce within an organization to meet high standards (Bateman, 2007). Thomas (1999) states that leading activities include decision- making, communicating, motivating, aligning, and developing individuals within the organization. Bateman (2007) further notes, “Today and in the future, managers must be good at mobilizing people to contribute their ideas, to use their brains in ways never needed or dreamed of in the past” (p. 17). RSBG understands the importance of mobilizing individuals and emphasize developing and training their employees.

Controlling

The controlling function is responsible for establishing performance standards, measuring, evaluating and finally correcting performance (Thomas, 1999). Controlling is what ensures the organization’s success (Bateman, 2007). RSCBG implements many standardization charts to monitor the company’s performance and administer changes if needed. Adapting in the new economy and ensuring an organization’s success depends on the understanding of the four functions of management, how they have been utilized in the past and how they are implemented today.

References

Bateman, T. (2007).  Management: Leading and collaborating in a competitive world. New York: McGraw- Hill.

Thomas M. (1999). Mastering people management. Retrieved on July 9^th, 2009 from: http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=24876675&site=ehost-live

Dolan, S. & Garcia, S. (2002). Managing by values: Cultural redesign for strategic organizational change at the dawn of the twenty-first century. Retrieved on June 9^th, 2009 from: http://swtuopproxy.museglobal.com/MuseSessionID=4fa6641b7f21 8303a69d5ecaaad42c1/MuseHost=www.emeraldinsight.com/MusePath/Insight/ViewContentServlet?contentType=Article&Filename=Published/EmeraldFullTextArticle/Articles/0260210202.html

Organizational Behavior

Jenna Doucet (January, 2010).

Organizational Behavior

One of the most important success factors for an organization is the management’s ability to successfully apply organizational behavior theories and practices. Organizational behavior is about understanding the needs of individuals.  Within the modern concept of organizational function, new trends and terms are beginning to emerge to describe how organizations achieve their goals. The concepts of organizational culture, diversity, corporate social responsibility, organizational effectiveness and efficiency, and organizational learning are terms receiving much attention in the corporate world (McShane, 2006).

Many organizations rely on their corporate culture to stay ahead of competition. Pool (2000) proposes that an organization’s culture can positively reinforce the practice of optimal praxis and behaviors within an organization. One of the responsibilities of management is to maintain and establish a positive culture. A good leader establishes a positive and healthy organizational culture by motivating his or her subordinates to perform at a high- level, by promoting open communication, and establishing positive authority. ‘‘Management is about human beings. Its task is to make people capable of joint performance, to make their strengths effective and, their weaknesses irrelevant. This is what an organization is about, and the reason which management is the critical, determining factor’’(Drucker, 1990, p. 221).

Diversity is another large success driver in a company. Diversity is about more than race and gender; it is about differences in religions, cultural beliefs, capabilities, individual needs, and more. Bazile-Jones (1996) notes, “ In the past, many have considered diversity issues to be the domain of politicians and social engineers who have focused on legal and regulatory solutions to ensure workplace diversity and enhance social welfare” (p. 9). The author argues that today diversity is the prerogative of all organizations. The author also explains that globalization has shifted our entire views on organizations. If Canadian firms and individuals, “ are to achieve sustainable commercial advantage domestically and globally, we must understand how diversity, as one of our intellectual assets, can contribute to long-term organizational health and survival” (p.9). Incorporating diversity as an organizational value can make an organization attractive to others that value diversity, can provide new business opportunities, can create added value to customer support and can foster flexibility and innovation (Bazile-Jones, 1996).

To thrive in the public’s eye, a company must meet certain social responsibility requirements; the organization must consider where it can provide value beyond its products and services (Bateman & Snell, 2007). Consumers and employees want to work for and buy products and services they can feel good about. When an individual works for an organization that does good for the world, he or she is more motivated to perform in the best interest of the company. When a consumer purchases a product or a service from a company that promotes social responsibility, he or she will feel better about their purchase and will want to support the organization with his or her business.

Globalization is not only a driving force in diversity issues but it also plays a big role in an organization’s effectiveness and efficiency. Because more organizations are going global, being efficient and effective for a customer base is critical in staying ahead of the competition. One of the Key ways to take advantage of the global market is to embark in new initiatives through the optimization of how and where products are built. Another area that contributes to effectiveness and efficiency is an organizations willingness to be flexible with their employment and the employee’s willingness to manage his or her own career and develop new competencies. This concept is known as employability (McShane, 2006).

One of the most important aspects in an organization is the interaction of knowledge within the company. Today companies make use of knowledge management to structure their organization’s ability to acquire and share knowledge. An organization depends on human capital; the knowledge held by employees, structural capital; the knowledge attained within an organization’s structure, and relationship capital; the value knowledge gained from an organization’s outside relationships and influences from customers, suppliers and others. An organization that has adapted to a learning approach has the ability to create a flow of information and communication between each source of knowledge (McShane, 2006).

An organization can achieve great success by balancing both internally and externally the components above. Whether the organization is creating value by ensuring employees are striving to reach the organization’s goals, or promoting diversity, and learning to ensure employees are educated with the knowledge to address the needs of each customer.

References

Bateman, T. & Snell, S. (2007). Management: Leading and collaborating in a competitive world (7^th ed.) New York: McGraw-Hill.

Bazile- Jones, R. (1996, June). Diversity in the workplace: why should we care. CMA Magazine 70(5), 9-12. Retrieved January 27, 2010 from Ebsco-Host database.

Drucker, P. (1990). The New Realities. Mandarin: London. Retrieved January 26, 2010 from Ebsco-Host database.

McShane, L. (2006). Canadian organizational behavior (6^th ed.). Canada: McGraw-Hill Ryerson

Pool, S. (2000). The learning organization: motivating employees by integrating TQMphilosophy in a supportive organizational culture. Leadership & Organization Development Journal. 21(8), 373-378. Retrieved January 27, 2010 from General OneFile via Gale.

Sale and Leaseback

Jenna Doucet (March 2010).

Sale and Leaseback

The U.S. economy is slowly recovering from a credit crisis that has gravely impacted the housing market. Although, the recession take took place through most of 2008 and 2009 is now mostly over, the devastating consequences it has had for many homeowners will not be soon forgotten. Before the recession began the housing market was booming, individuals’ were borrowing more money than they could afford to finance homes that were grossly overpriced. As the recession made way, individuals’ were losing their jobs, forgoing mortgage payments and forced to sell their homes or undergo foreclosure. The possibility of losing their homes, sparked creativity in some individuals and a new trend in sale- and leasebacks emerged. The article Homeowners should steer clear of sale-leasebacks, provides valuable insight into this new trend, the intended purpose of the sale-leaseback, and on the legal implications of going from homeowner to tenant.

Traditionally, sale and leasebacks have been used in commercial real-estate as a way for businesses to generate capital to fund expansions or to take advantage of tax deductibles. For one lease payments are one-hundred percent tax deductable and renting instead of owning assets impacts the company’s balance sheet as those assets are converted into contingent liabilities (Lecky, 2009). Large corporations such as the New York Times, Bank of America, SunTrust and Citibank have all benefited from multi-billion-dollar sale and leaseback agreements says the article, however it is a completely different ball game in residential real-estate.

The article quotes, Steve Goddard, an experienced realtor in California who says “ These deals are pretty complex things” (Para, 3), “ And even people that have some expertise or real estate acumen call attorneys before signing anything, much less homeowners” (Para, 3). As the purpose behind the sale-leaseback, is often to give desperate homeowners a way to stay in their homes, it is unlikely that the homeowner will have the resources to pay for a proper leaseback agreement. According to the article the supposed win-win of the homeowner receiving capital to pay his or her bills, and the buyer’s built-in tenant is just a façade for bigger risks. Accordingly, if the buyer runs into his or her own financial potholes, the original homeowner, now tenant will have little legal recourse of staying in their home. Furthermore, in residential real estate sale-leasebacks “ often end up costing more money in the long-term: the seller becomes a renter and losses the chance to built equity in their home” (Para, 5).

The individuals rights also change when becoming a tenant. For example, the tenant is now expected to comply with the requirements of the lease contract and has less flexibility once the title of the property changes and is registered in the name of the new owner. Perhaps one of the most significant changes is that the owner, now tenant can no longer use the property as a security for financial loans. Another important matter is that as the tenant is both the seller and occupant, he or she cannot expect the new landlord to guarantee the building or its conditions. As a result, it is often stipulated in lease agreements that the tenant is fully responsible for maintaining the property and assuming the capital costs. The tenant will not benefit from the capital expenses he or she assumed while occupying the premise once the contract is over (Hahn, 2007). Additionally, all changes, improvements or modifications of the premise will have to be approved by the landlord and not subject to the original owners taste as it was previously.

Sale-leaseback is a very versatile arrangement as it fits into any property type. In conclusion a sale-lease back agreement can be quite an attractive alternative when a individual is faced with the possibilities of losing their property. The advantages can be interpreted to both buyer and seller. The buyer gets a built-in tenant, and the original owner gets to retain his or her property on the terms outlined in the agreement.

However, there is a good chance of disappointment and entering into a residential sale-leaseback arrangement as varying un-foreseen circumstances may arise in which the original owner now the tenant will have little or no recourse in a court of law to stay in their home.

References

Anonymous (March, 2009). Homeowners should steer clear of sale-leasebacks.

LexisNexis. Retrieved on March 1, 2010 from: http://www.allbusiness.com/real-estate/commercial-residential-property-commercial/11913434-1.html

Hahn, T. (2007). Sale-Leaseback transactions. Blakes. Retrieved on March 1, 2010 from:http://www.blakes.com/english/view.asp?ID=1897

Lecky, J. (2009). Demand increases for sale/leaseback transactions. Retrieved on March 1, 2010 from: http://www.avisonyoung.com/…/AY_Sale_leaseback_article_no_blue.pdf

Extracting Tacit Knowledge in the Financial Services Industry

Jenna Doucet (September, 2009).

Extracting Tacit Knowledge in the Financial Services Industry

The financial services industry directly affect a country’s economic integrity and is thus a highly regulated industry where organizations and professionals alike are confronted with a continuous flow of complex rulings and must successfully implement compliance systems in order to report relevant information back to regulatory agencies. Much of the information that is reported back from agency to industry and industry to agency is in the form of explicit knowledge which is often articulated through formal documentation. However, both the financial services industries and their regulatory agencies are often confronted with issues regarding the sharing and communication of tacit information. The tacit information that is relevant to the financial investment services industries are generally related to undocumented knowledge of the ins and outs of approval processes or the best methods to resolve issues in different provinces or states (Andrews, 1998). Another form of tacit information in the investment industry are the closely guarded secrets of trading platform technologies and more specifically algorithm or black-box trading. Not only is technology in organizations a large function that contains much tacit information, but technology itself can play a role in decoding tacit information. Lastly, the present state of the economy is causing many financial services companies and investment companies to merge, which renders the transfer of tacit knowledge between individuals from institution to institution crucial.

The first example of tacit knowledge involved in the financial services industry occurs in the investment banking sector whereby an employee maintains knowledge and understanding of a firm’s approval process for taking risks and regulatory issues across different provinces and states. The types of firm-specific skills required to successfully function as an investment banker require that an individual not only be familiar with explicit knowledge of trading policies and underwriting risks, but a thorough grasps of the firms communication policies, that is one must come to understand how to communicate to executives why a particular investment is worth risking the firm’s capital over. As Morrison and Wilhelm (2007) state, much of these skills are tacit and may require “ an understanding of a private company language” (p.285), and that “ this type of knowledge is hard to acquire, and is notoriously hard to write down. We refer to it as the firm’s culture” (p.285). The best way to extract this type of tacit information is through mentorship, the most effective way to gain from the experience of a mentor in a firm is from participating in an internship, which in itself is a competitive task.

The importance technology plays for financial institutions cannot be overemphasized. A good trading platform is one of the core components of any successful investment firm. While some Banks such as BMO Financial Group choose to licence their software from companies like Bloomberg, other financial institutions such as First New York Securities develop their own trading platforms internally. The key to their competitive advantages rest in closely guarding trade secrets so to speak. Many papers have been published about trading algorithms, time series and other relevant material that expert developers and programmers can use and refer to in developing complex trading platforms, however successfully combining efficient market hypothesis, market heterogeneities, forecasting, data filtering, scaling laws, time series, volatility models, Bayesian estimation theories, distributed processing, and other complex processes into meaningful software that allow traders to accurately interpret market information involves a great deal of tacit information. Extracting tacit information from professionals in the field of technology requires a great deal of technical knowledge to begin with and individuals who have achieved such levels of expertise are not eager to give it away.

Although there is a great deal of implicit information in the creation of technology, some technologies exist specifically to help organizations extract tacit information and record it for the internal use of employees. An example of such technology is the Knowledge Management (KM) System. These systems privately track the expertise of individuals within the organization and conveniently store the information into a database or a “network of experts”, who can later be probed (Boghani, Long, and Jonash, ( ).

Mergers render the transfer of tacit information important because each of the different companies undergoing the process have accumulated different expertise and tacit employee knowledge over the years. In order to benefit from each other’s areas of expertise such information needs to be transferred to and from each organization. There is no protocol manual on how to best accomplish this task, however it certainly requires the willingness of key employees to share information and collaborate with others to take effect. A Knowledge Management System would certainly be an asset.

Conclusion

In conclusion the financial services industry is very complex and involves many facets of tacit information. In some instances organizations and individuals benefit from protecting the knowledge they have require, but at the expense of their competitors or others seeking to enter the workforce. In some instances, for example with mergers, the extracting of tacit information is crucial and can be accomplished through networking, the willingness of employees to share information and with the aid of a Knowledge Management System.

References

Andrews, L. (November, 1998). Regulatory Information Overload. KM World Magazine. Retrieved on September 8^th 2009 from: http://www.kmworld.com

Ashok, B. & Boghani, D. & Jonash, R. ( ). Technology intelligence and monitoring System (TIMS). Retrieved on September 9^th 2009 from ProQuest database.

Morrison, A. &Wilhelm, W. (2007). Investment banking: institutions, politics, and law,Volume 10. New York: Oxford University Press.

Unemployment Rate as a Key Identifier to National Economy

Unemployment Rate as a Key Identifier to National Economy

The unemployment rate is useful in describing the state of the national economy as it clearly identifies the “amount of people that have lost their jobs or have quit their jobs to look for other work. (Lovati,1976) With such a large amount of individuals out of work at this time there is a definite decreased amount of liquid funds in circulation thus lowering the amount available to spend on goods and services. Not only does a high un-employment rate relate directly to funds not available to spend, but also has a direct cost to the government in the form of unemployment benefits.  If one is on a government benefit then there is a cost associated in carrying them as well a “loss in tax earnings, which is a double whammy that can cause serious consequences on the rest of the economy”(Jones,2009)

Monetary Policies effect on Unemployment

The Central Bank can affect the national unemployment rate by sliding the prime lending rates charged to financial institutions. Interest rates charged to the public will change as they slide up or down, thus causing a slow down on the economy or stimulating the economy by simply increasing or decreasing available cash flow.  In most cases this prime rate change switches the financial institutions direction with respect to the reserve ration they are willing to hold. One example to this slide would be if unemployment were at the high end, then the Central Bank may lower the prime rate and in tale cause banks to lower the interest rate.  The end consumer will typically like this lowering of rates because it allows individuals to borrow, thus allowing for more spending allowing banks to write more loans. Once that cash is in the system, it can be spent on goods and services. Simply put an increase to individuals spending means more job creation to manage the increase in demand to goods and services this spending brings.

Fiscal Policies effect on Unemployment

Fiscal policy of the central banks is adapted by adjusting the prime rate in conjunction with taxation changes by the federal government.  This adjustment along with an increase in capital spending is what solidifies the bond between the two. The federal government has the ability to increase spending in two ways; increase taxes and increasing the amount of money available.  By increasing taxes, this increased taxation revenues. By increasing the amount of money available to spend allows more money circulating and lower interest rates. Whether it be good or bad,  the Central Bank has the monopoly on government financing by way of raising or lowering the prime rates therefore directly impacting  the governments’ ability to stimulate the economy and effect unemployment. Looking at present state in Canada, it is clear that in Canada the federal government has opted to create stimulant packages that will create over 400,000 jobs spanning a one year period. By investing $33 billion to boost employment, insurance benefits, municipal infrastructure, training and post secondary opportunities(Beauchesne,2009).  There is a simply thought process behind this strategy, and that is by creating more employment, more money made, therefore more money will be spend with the hopes of kick starting the circular flow of money.

Housing as a Key Identifier to the National Economy

This next identifier in housing and by using  tools such as the changing of the prime lending rates, engaging in open market operations and modifying margin requirements all impact ones division to buy or hold off on that large investment. Not unlike unemployment rates and Federal Government and the Central Banks , housing also holds the same power with respect to controlling.  The housing market is a key indicator to the national economy as homes tend to be considered a luxury item and because it is generally the largest single investment that anyone can make, in times of low economy, individuals become leery.  Due to the economic un-rest, not knowing what the future holds people become more reserved in there spending habits.

Monitory Policies effect on Housing

By looking at the Central Banks ability to raise and lower the prime lending rate the impact to the housing Market can be huge.  Simply when the economy is good, interest rates are higher thus allowing for the banks to make more.  The opposite applies however.  When the economy is weaker, interest rates are lower which means the banks are hoping for people to spend on a house or these larger purchases to stimulate spending even though there is fear in the uncertain markets.   Based on the adjustment of interest rates alone individuals that would normally not spend for these large purchases might as they might have some sense of false security. In Toronto Ontario Canada new homes sales are up by 2.5% over last year October, this a direct link to the lower prime lending rate and the lowering of interest rates by all other financial institutions. The bank of Canada clearly identifies that its monetary policy is to “set a target for the overnight rate, the Bank of Canada influences short-term interest rates to achieve a rate of monetary expansion consistent with the inflation-control targets…”(Bank of Canada, 2009)

References:

Monitary Policy Report . Ottawa: Bank of Canada, 2009. Web. 20 Nov. 2009. <http://www.bankofcanada.ca/en/mpr/pdf/2009/mpr230709.pdf&gt;.

James, Jones. Impact of unemployment on our Society. N.p.: Helium, 2009. Web. 18 Nov. 2009. <http://www.helium.com/items/23934-the-impact-of-unemployment-on-our-society&gt;.

Beauchesne, Eric. Stimulus Package to Create 400,000 Jobs. N.p.: Canwest News Service, 2009. Web. 18 Nov. 2009. <http://www.canada.com/topics/news/story.html?id=1145083&gt;.

Power and Politics

Jenna Doucet (March, 2010).

Power and Politics

Power is commonly given a negative connotation. For example, the color red, which is a symbolism for power, is much less frequently used in advertisements than the color blue because of its obtrusiveness. Furthermore, a popular political slogan during the cold war days was “better dead than red” (Pigments through the ages, 2009, n.p). The meaning of power has been misunderstood because of abuses made by individuals in positions of authority and power. However, according to McShane (2006) the true meaning of power is simply the ability of an individual or organization to influence. Although power and influence can be exercised positively or negatively and for both positive and negative outcomes, it would be a mistake for organizations to allow negative connotations to limit the benefits of power within an organization because. Rather, organizations should avoid promoting and instead condone political behavior. Organizational politics is an influence tactic exercised at the expense of one’s coworkers, and the entire organization (Gilmore, Ferris, Dulebohn, & Harrell-Cook, 2010). Power and organizational politics, frequently intertwined, make drawing the line between the two a difficult task. A throughout understanding of both, however, may serve as an important first step.

Organizational power

One of the most important factors to bear in mind is that power is a two-way relationship. To this effect Ambur (2009) states: “ Power and authority come from the person being influenced- not the person in the more powerful position. If the follower chooses to not follow them, they are no longer leaders. Leadership is really followership” (p. 3). Furthermore, McShane (2006) believes that “ The most basic prerequisite of power is that one person or group believes it is dependent on another person or group for something of value” (p. 345). Interdependence between parties forges the relationship of power and hierarchy in organizations. Power can only really exist in relationships in which each individual has something of value to offer. Five categories make up organizational power, which identify the various ways individuals extrude and perceive power. The key to organizational power is the perception of others as legitimate, reward, coercive, expert, or referent power. It is important to note that the perception of power extends beyond the individual’s position of authority within an organization (McShane, 2006). In evaluating the bases of social power identified by French and Raven (also depicted above by McShane) Ambur (2009) illustrates the relationships between the various expressions of power. Ambur (2009) says that:

“Reward power results from the ability to provide reinforcement for desired behavior. Conversely, coercive power reflects the potential to inflict punishment. In a sense these are not so much two different types of power as they are opposite ends of a continuum. The common and essential element for both reward and punishment is that they are controlled by the superior person and are conferred upon subordinates based upon relationships that are less than perfectly aligned with their behaviors. Referent power is a function of the respect and esteem accorded to an individual by virtue of personal attributes with which others identify. By contrast, legitimate power is based upon authority recognized in accordance, with position in an organizational structure. Referent power is person oriented, while legitimate power is depersonalized. Expert power is a form of referent power resulting from recognized expertise” (p. 1).

Organizational politics

Within any organization there is bound to be a struggle between the power of individuals to influence positively the organization and self-serving politics played around situations or people for selfish reasons. Organizational politics are influence tactics exercised at the expense of one’s coworkers, or the entire organization (Gilmore, Ferris, Dulebohn, & Harrell-Cook, 2010). McShane (2006) states that, “organizational politics is either supported or punished, depending on team norms and the organization’s culture” (p. 345). An important question is to consider why an organization allows such behavior if research shows that it has negative consequences. Political tactic are attributed to conflicts in the workplace, stress, and job dissatisfaction, to name a few (McShane, 2006 and Gilmore, Ferris, Dulebohn, & Harrell-Cook, 2010). The answer can be found by a combination of the following. A work environment with scarce resources will support political behavior if it allows individuals to pursue their goals. A lack of clear structure and decisions may leave more room for ambiguity in political power. Furthermore, team leaders who value personal power have higher propensities to use and support political tactics (McShane, 2006). Gilmore, Ferris, Dulebohn, and Harrell-Cook (2010) state, “ the political environment is created by the actions of organizational members and is influenced by the policies, practices, and culture of the organization” (p. 482). “ Organizational politics can be minimized by providing clear rules for resource allocation, establishing a free flow of information, using education and involvement during organizational change, supporting team norms and a corporate culture that discourage dysfunctional politics, and having leaders who role model organizational citizenship rather than political savvy” (McShane, 2006, p. 347).

Real life applications of power and politics

Conflicts of interest and the use of political tactics to influence individuals within an organization or society make headlines in business on a regular basis. Take for instance the U.S. propaganda of the Bush administration and voting machines controversy. The chief executive officer of the machines manufacturing company at the time, Wally O’Dell, openly declared that he would “deliver” Bush as president. Over the years, there has been much controversy surrounding the public support of political campaigns from influential individuals living public lives. One article devoted to the Winfrey and Obama controversy questions if Oprah is misusing her power and influence to sway the political campaign in her own favour. To this effect, Kohut (2007) says “ there is no telling whether Winfrey can do for Obama what she has done for the countless books and products she’s endorsed over the years” (p. 1). What is unique in the O’Dell and Bush controversy is that O’Dell had the potential to ‘fix’ the election. Although never charged with fixing the election, O’Dell’s actions had significant consequences on the company he was working for. In other words, O’Dell was displaying a classic political stunt, in which he was exercising his influence and power for his own self-serving purposes at the expense of the company’s well being. Further complications aroused when O’Dell openly declared upon investigation of his company’s stock performance by the SEC “ There is a lot of pressure in the corporation to make the numbers: We don’t tell you how to do it, but do it” (p. 1). In response, Byrne (2005) states “O’Dell is probably the number culprit putting pressure on people” (p. 1). This type of behavior occurs more often than one wants to believe. Political pressures and power struggles can be found in almost any industry and if the appropriate guidelines in the use of power are not well defined it becomes easy for individuals to abuse their influence.

Power plays an important role in organizations. The consequences can yield positive results or if used in conjunction with political tactics can yield negative results. In practice, power is a two-way relationship in which parties interact accordingly to the resources or values they hold or control. Conflicts arise when resources are scarce, and when there is pressure to achieve goals that may not be realistic. To compensate individuals often manipulate their power to jockey for position and serve their own needs at the expense of others.

References

Ambur, O. (July, 2000). Bases of social power. University of Maryland. Retrieved on March 9, 2010 from: http://www.slideshare.net/viteriange/bases-of-social-power-2009.

Bryne, J. (2005) Diebold CEO resigns after reports of fraud litigation, internal woes. The raw story. Retrieved on March 11, 2010 from: http://www.rawstory.com/news/2005/Diebold_CEO_resigns_after_reports_of_12 12.html.

Gilmore, C., Ferris, G., Dulebohn, J., & Harrell-Cook, G. (2010). Organizational politics and employee attendance. Group & Organization. Retrieved on March 9, 2010 from: Sage database.

Kohut, A. (September, 2007). The Oprah factor and campaign 2008. The Pew Research Center. Retrieved on March 11, 2010 from: http://people-press.org/report/357/the-oprah-factor-and-campaign-2008

McShane, S.L. (2006). Canadian Organizational Behaviour (6th ed). McGraw-Hill: Ryerson.

Pigments through the ages. (2009). Retrieved on March 9, 2010 from: http://www.webexhibits.org/pigments/.