MGT 400 Quiz 2

Major Legal Rights of Stockholders

- To receive dividends, if declared - To vote on 'Members of board of directors 'Major mergers and acquisitions 'Charter and bylaw changes 'Proposals by stockholders - To receive annual reports on the company's financial condition - To bring shareholder suits against the company and officers - To sell their own shares of stock to others They have the right to share in the profits of the enterprise if directors declare dividends. They have the right to receive annual reports of company earnings and company activities and to inspect the corporate books, provided they have a legitimate business purpose for doing so and that it will not be disruptive of business operations. Many of these rights are exercised at the annual shareholders' meeting, where directors and managers present an annual report and shareholders have an opportunity to approve or disapprove management's plans. Typically only a small portion of shareholders vote in person, however

Stages of Corporate Environmental Responsibility

1. pollution prevention: minimize waste before it is create 2. product stewardship: managers focus on all environmental impacts associate with the life cycle of a product 3. clean technology: businesses innovate new technologies that support sustainability

Technology

A broad term referring to the practical applications of science and knowledge to commercial and organizational activities. Change is the dominant feature of technology The dominant feature of technology is change and then more change. Sometimes the pace of change is so fast and furious that it approaches the limits of human tolerance. Technology's effects are widespread reaching far beyond the immediate point of technological impact in unpredictable ways Ripples through society until every community is affected. Technology is self-reinforcing Acts as a multiplier to encourage its own faster development. It acts with other parts of society so that an invention in one place leads to a sequence of inventions in other places. Thus, invention of the microprocessor led rather quickly to successful generations of the modern computer, which led to new banking meth- ods, electronic mail, bar-code systems, global tracking systems, and so on.

Stock Screening

A growing number of mutual funds and pension funds use social screens to select companies in which to invest Most evidence shows that socially screened portfolios provide returns that are competitive with the broad market Growth has been driven, in part, by government rules requiring pension funds to disclose the extent to which they use social, environmental, or ethical criteria in selecting investments. It has also been influenced by growing demand by inves- tors who want to align their investment choices with their values

Environmental Auditing and Reporting

A way for leading companies to track their progress toward meeting sustainability goals companies that proactively manage environmental issues will tend to be more successful than those that do not. Effective sustainability management confers a competitive advantage in five different ways, as follows. Cost Savings Brand Differentiation Technological Innovation Reduction of Regulatory and Liability Risk Strategic Planning

Advantages and Disadvantages of Alternative Policy Approaches to Reducing Pollution: Market-based mechanisms

Advantages Cap-and-trade systems • Gives businesses more flexibility • Achieves goals at lower overall cost • Saves jobs by allowing some less-efficient plants to stay open • Permits the government and private organizations to buy allowances to take them off the market • Encourages continued improvement Emissions fees and taxes Taxes bad behavior (pollution) rather than good behavior (profits) Government incentives • Rewards environmentally responsible behavior • Encourages companies to exceed minimum standards Disadvantages Cap-and-trade systems • Gives business a license to pollute • Permit levels are hard to set • May cause regional imbalances in pollution levels • Enforcement is difficult. Emissions fees and taxes Fees are hard to set• Taxes may be too low to curb pollution Government incentives Incentives may not be strong enough to curb pollution

Advantages and Disadvantages of Alternative Policy Approaches to Reducing Pollution: Environmental standards

Advantages • Enforceable in the courts • Compliance mandatory Disadvantages • Across-the-board standards not equally relevant to all businesses Requires large regulatory apparatus Older, less-efficient plants may be forced to close Can retard innovation Fines may be cheaper than compliance Does not improve compliance once compliance is achieved

Chief Sustainability Officer (CSO)

An emerging role at many leading firms is the Interpersonal skills—being able to work effectively with people across the organization—are critical to success.

Shareholder Activism - Rise of Institutional Investors

As shown earlier, holdings have increased significantly; have become more assertive in promoting interests of their members Have large blocks of stock not easy to sell if become dissatisfied strong incentive to work to change management policy Research shows involvement of institutional investors can improve company performance.

Transforming Prevailing Business Models

As technology changes the shopping experiences for customers, businesses, too, must understand how they need to change to accommodate and better serve their customers. Ethical Challenges Involving Technology 71 percent of shoppers expect to view in-store inventory online 50 percent want to be able to buy online and pick up at a brick-and-mortar store Smartphones are also changing how businesses must accommodate consumers. According to a Forrester Research survey, 38 percent of consumers used their mobile devices to check inventory availability while on their way to a store and 34 percent used a mobile device to research products while in a store. These new trends gave rise to the notion of omnichannel, the idea that every distribution channel must work together to deliver a unified and consistent customer experience. Busi- nesses are adjusting and attempting to serve the multiple needs of their consumers.

Right to be forgotten

Ask to remove from internet search results some personal information which is believed was damaging. Governments have stepped in to protect individuals and their personal information. Ex) google - EU Privacy Removal request

Alternative Policy Approaches: Market-based mechanisms

Based on the idea that the market is a better control than extensive standards that specify precisely what companies must do. Cap-and-trade: allows businesses to buy and sell the right to pollute, a process. →Example: European Union's tradable permits Emissions charges or fees→Example: green taxes or eco-taxes Each business is charged for the undesirable waste that it emits, with the fee varying according to the amount of waste released. The result is, "The more you pollute, the more you pay." In this approach, polluting is not illegal, but it is expensive, creating an incentive for companies to clean up. Government incentives

Investors may receive an economic benefit from the ownership of stock by receiving: Interest Dividends Capital Gains Both B and C, not A

Both B and C, not A Dividends Capital Gains

The role of the Chief Information Officer (CIO)

Businesses often entrust the responsibility for managing information technology and its many privacy and security issues to the _______________ or individuals with other similar titles such as chief security officer or chief technology officer. Many firms have elevated the role of their data processing managers by giving them the title of chief information officer. Recently this role has expanded even more to include broader responsibilities and greater influences on corporate policies and practices. In today's technology driven world, the CIO plays a critical role. Along with reporting to the highest levels within the business came additional responsibilities. The CIO's role was changing dramatically, becoming more integrated into the overall strategic direction of the firm. "CIOs themselves are in the midst of a make-or- break personal change-management project: CIOs who can only take orders, who can't speak the language of the business, who can't step out of the proverbial back-office and into the front lines of customer service, social media or supply chain management will soon go the way of the ancient tech gear," warned Thomas Wailgum of CIO Magazine. Whether businesses have adequately built protections against unwanted invasions of cyberattacks on their stakeholders' privacy remains to be seen. Clearly efforts are being made given the increasing costs of cyberattacks and the growing amount of information being collected and used by business organizations. almost half (47%) of the CIOs surveyed reported that they have broadened their responsibilities beyond the traditional CIO-only role a job title commonly given to the most senior executive in an enterprise responsible for the information technology and computer systems that support enterprise goals.

Alignment of rewards and incentives

Businesspeople are most likely to consider the environmental impacts of their actions when their organizations acknowledge and reward this behavior. The most sustainable organizations tie the compensation of their managers, including line managers, to environmental achievement and take steps to recognize these achievements publicly.

Cost Savings

Companies obtain significant cost savings by reducing pollution and hazardous waste, recycling materials, and operating with greater energy efficiency. Many companies have found they are able to obtain significant cost savings by more efficiently managing their real estate portfolios.

Reduction of Regulatory and Liability Risk

Companies that are proactive with respect to their environmental impacts are often better positioned than their competitors to respond to new government mandates. Similarly, proactively managing for sustainability can avoid expen- sive fines and lawsuits

Strategic Planning

Companies that cultivate a vision of sustainability must adopt sophisticated strategic planning techniques to allow their top managers to assess the full range of the firm's effects on the environment If managing for sustainability confers a competitive advantage, it follows that it should have a measurable impact on financial performance.

Brand Differentiation

Companies that develop a reputation for environmental excellence distinguish their brand and attract like-minded customers. Sustainable products and services can attract environ- mentally aware customers. In general, promoting particular products or services based on their environmental attributes, a practice sometimes known as green marketing, has not been particularly effective. No specific eco-labeled product has captured more than 2 percent of its market. what consumers do respond to is a company's over- all reputation for environmental responsibility and the credibility of its communications with stakeholders.

E-business

Consists of buying and selling goods and services between businesses, organizations, and individuals electronically via Internet- based systems. electronic business exchanges between businesses and between businesses and their customers emerged. E-business revenue has increased at a faster pace than that of traditional, or non-electronic, business. E-business has become a way of life, from large compa- nies and smaller start-up businesses to individuals interested in shopping online. As tech- nology became more affordable and easier to use, small and medium-sized businesses committed investment dollars to e-business and technology systems.

Business Access to and Use of Stakeholders' personal data: Consumers

Consumers' shopping habits are also a rich source of data for businesses. Companies tracking big data, sometimes called meta-data, can pick out specific details about an individuals' shopping habits, preferences or tendencies. The collection of consumer information raises important ethical issues of privacy and security. Another important consumer issue involving the ethical use of information technology includes the collection and use of patients' medical records. The questions of how much information companies should collect about their stake- holders and if the collection of stakeholders' information benefits these stakeholders or not remain controversial. Whether businesses have adequately built protections against unwanted invasions of stakeholder privacy and breaches of information security remain to be seen.

The Role of Technology in Business

E-business

Institutions (institutional investors)

Examples: pension funds, mutual funds, insurance companies, and university endowments These institutions are sometimes called "Wall Street" investors. For obvious reasons, institutions usually have more money to invest and buy more shares than individual investors. Since the 1960s, growth in the numbers of such institutional investors has been phenomenal. In 2010, institutions accounted for 63 percent of the value of all equities (stocks) owned in the United States, worth a total of about $15 trillion—about eight times the value of institutional holdings two decades earlier. Although people of every age, race, and socioeconomic status own stocks, ownership tended to be higher among some groups than others. The affluent (with household incomes of $75,000 or more) (80 percent) owned stocks as a higher rate than lower-income people (with household incomes of less than $30,000) (15 percent). Age also made a difference: 57 percent of people between550 and 64 years old owned stocks, compared with just 24 percent of young adults under 30. The growing influence of the institutional sector of the market over the past four decades, with an apparent reversal of the overall trend following the financial crisis.

Consumers make less rational choices when they have accurate information about a product. True False

False

Institutional investors have little incentive to hold their shares and organize to change management policy. True False

False

It is illegal in the United States to offer stock trade tips to clients based on public information. True False

False

Shareholders must rely exclusively on the board of directors to protect their interests. True False

False

The doctrine of strict liability extends only to the retailer who is involved in selling the product, not the manufacturer. True False

False

Digital divide

Gap between those that have technology and those that do not People in developing countries often have less Internet access than people in developed countries Problem: less advantaged individuals and societies may not enjoy the same benefits of technology as others. By 2013, nearly 98 percent of American homes were able to access the Internet on some sort of high-speed broadband network, either at home or work. Some experts argued that the most important issue going forward was not access, but educating Americans on how the Internet could be a valuable aid for job hunting, acquiring health insurance, and accessing government services and other benefits.

Fueling Technological Growth

Government investment has helped launch many new technologies, including the Internet, and these trends continue. Business investment: • Business firms have invested directly in technology through their research and development (R & D) operations. • Benefited the business and produced innovations that have moved industries forward. The combination of government, private investor, and business investment in technology has continued to drive innovation forward.

Government interventions

Governments play various and sometimes conflicting roles with respect to information and ideas. In some countries, particularly in nondemocratic regimes, governments censor and restrict citizen access to information. In democratic countries, the role of government is more likely to look out for the public good and protect intellectual property; that is, the private ownership of certain kinds of information. Governments intervened to restrict their citizens' access to information and various Internet and social media sites To suppress political dissent To impose particular religious or ideological views In all of these instances, governments intervened to restrict their citizens' access to information and various Internet and social media sites, generally to suppress political dissent or to impose particular religious or ideological views. In most democratic, Western nations, such interventions would not be tolerated. Yet, how Western countries intervene when it comes to information technology has varied. Sometimes a government accesses information for the public good and limits individual rights; while at other times, govern- ments support individuals' control over their personal information or protect the individu- al's intellectual property.

Shareholder Activism - Stockholder Lawsuits

If shareholders think they have been damaged by actions of company officers or director, they have a right to bring lawsuits. Shareholder lawsuits maybe initiated to check abuses. Example: Insider trading Timely disclosure of material information The outcome can be very expensive for companies.

Executive Compensation

Incentives instead of fixed salary Alining the interests of the corporation and its shareholders with those of its top managers (Pay - for Performance approach.

The Loss of Privacy

Individuals are under a technology microscope with vast amounts of data collected each minute and available to be analyzed in great detail. In 2014, a law was introduced in the U.S. that would require car owners to control the data collected on the device called the event data recorder, commonly known as a black box. Smartphones are another common device that can capture vast amounts of information. Apple and Google announced that they were creating a new operating system to prevent law enforcement agencies from retrieving the data stored on a locked phone. Invasions of individual privacy come from many different directions. Automobiles are becoming smarter, with global positioning systems, Internet connections, data recorders, and high-definition cameras. While automakers say they are only responding to consumer demands for more technology, the new technologies increase the number of people with access to this data. Ethical challenges on how this information is collected and analyzed are becoming increasingly salient.

Arguments against high executive pay

Inflated executive pay hurts the ability of firms to compete with foreign rivals High executive pay causes mid- and lower-level employees to feel they are not receiving their fair share Empirical evidence finds weak relationship between executive pay and company success

Top management commitment

Managers in an organization strongly supporting corporate entrepreneurship

Business Access to and Use of Stakeholders' personal data: Employees

Most state governments ruled that businesses have the right to monitor their employees at work. Businesses need to ensure that the time employees spend on the job is productive, since wasting time can result in significant economic losses. While high-tech monitoring may feel like a violation of privacy to some workers, others argue that it is necessary to ensure and improve workplace safety and productivity. Technology can also reduce employee theft, protect the company's intel lectual property and secrets, and be used to investigate claims of harassment or discrimination at work. Only two states, Delaware and Connecticut, require employers to tell workers that their electronic communications—anything from e-mails to instant mes- sage to texts—are being monitored. "It is not a question of whether companies should monitor," said Lewis Maltby, founder of the National Workrights Institute, which promotes employee privacy. "It's a question of how."

Government Internet Censorship and Control: North Korea

North Korea is one of the world's most recognized censors of the Internet But its government made an unprecedented move in 2013 when it allowed Internet searches on mobile devices and laptops by foreigners--but not by its citizens.

Insider Trading

Occurs when a person gains access to confidential information about a company's financial condition Uses that information, before it becomes public knowledge, to buy or sell the company's stock for a profit Since others do not know what an inside trader does, the insider has an unfair advantage. cases The courts have generally interpreted this to mean that it is against the law to trade stock (or stock options) based on material, nonpublic information. This includes company officials, of course, who may have inside information based on their work. But it also includes also other individuals who obtain such infor- mation through a "breach of trust," that is, a tip from someone who has an obligation to keep the information confidential. The tipper can also be guilty, if he or she benefits from the exchange. It is not, however, illegal to trade based on information developed from publicly available sources. Insider traders are not necessarily high-placed executives, wealthy individuals, or household names. Insider trading is contrary to the logic underlying the stock markets: All stock buyers and sellers ought to have access to the same information.

Environmental Regulation: Air pollution

Occurs when more pollutants are emitted into the atmosphere than can safely be absorbed and diluted by natural processes. Results from human activity, especially industrial processes and motor vehicle emissions. A special problem of air pollution is acid rain. The efforts of the U.S. government to reduce acid rain illustrate some of the difficult trade-offs involved in environmental policy. →Example: high-sulfur coal vs. low- sulfur coal

Environmental Regulation: Water pollution

Occurs when more wastes are dumped into waterways than can be naturally diluted and carried away. Failure to comply with clean water laws can be very expensive for business. The main U.S. law governing water pollution is the Water Pollution Control Act, also known as the Clean Water Act. Goal is to restore or maintain the integrity of all surface water in the United States.

Government Internet Censorship and Control: Pakistan

Pakistan. In 2010, the Pakistani government, with the support of conservative Islamic groups, broadened an existing ban on social networking sites to include YouTube, some Flickr and Wikipedia sites, and about 450 individual web pages, because of what it described as "growing sacrilegious content." (The ban followed one day after a Pakistani court ruled that access to the Facebook site should be temporarily suspended for 12 days, citing offensive drawings of the Prophet Muhammad.) Despite the objections of many Pakistani citizens, who included nearly 25 million Internet users, the Pakistan Telecommunications Authority said in a statement that the ban was "in line with the Constitution of Pakistan, the wishes of the people of Pakistan." After YouTube removed offensive material, the ban on this site was lifted

Principles of Good Governance

Select outside directors to fill most positions Hold more open elections for members of the board Appoint an independent lead director (= non executive chairman of the board) Align director compensation with corporate performance Evaluate the Board's performance on a regular basis 1. No more than two directors are current or former company executives. 2. The audit, compensation, and nominating committees are made up solely of outside directors. 3. Each director owns a large equity stake in the company, excluding stock options. 4. Each director attends at least 75 percent of all meetings. 5. The board meets regularly without management present and evaluates its own performance annually. 6. The CEO is not also the chairperson of the board. 7. There are no interlocking directorships (where a director or CEO sits on another director's board).

Shareholders and the Corporation

Shareholders have become an increasingly powerful and vocal stakeholder group in corporations Provide capital Monitor corporate performance Assure the effective operation of stock markets Bring new issues to the attention of management Play a very important role in making the business system work

Government Internet Censorship and Control: Iran

Since 2009, after contentious presidential elections that pitted various religious groups against each other, the elected Iranian government banned Facebook, Twitter, YouTube, and later Instagram. Based on the ruling party's religious-political stance and the country's official philosophy: "the media should be used as a forum for healthy encounter of different ideas, but they must strictly refrain from diffusion and propagation of destructive and anti-Islamic practices." The political hard-liners in that country argued that the country's president had not done enough to "stop the spread of the dec- adent Western culture."

Shareholder Activism - Social Investment

Social investment Refers to the use of stock ownership as a strategy for promoting social, environmental, and governance objectives. Stock screening Through selecting stocks according to various social criteria A growing number of mutual funds and pension funds use social screens to select companies in which to invest. Socially responsible investing has rapidly grown in Europe and beyond. Social criteria may also be used when selling stocks.

Alternative Policy Approaches: Environmental standards

Standard allowable levels of various pollutants are established by legislation or regulatory action and applied by administrative agencies and courts. The traditional method of pollution control Also called command-and-control regulation because the government commands business firms to comply with certain standards and often directly controls their choice of technology. Can be an environmental quality standard or emission standard.

Insider Trading is illegal under SEC Act of 1934, meaning against the law to:

Steal nonpublic information and use it to trade a stock Trade a stock based on a tip from someone who had an obligation to keep quiet Pass information to others with an expectation of gain

Employee engagement

Sustainability leaders have found they are most effective when they involve line managers and employees from across the organization in the process of change.

Government Internet Censorship and Control: China

The Chinese government operates one of the most sophisticated systems of Internet censorship in the world. It requires all China-based Web sites and blogs to register with the government and blocks access too many kinds of information. Passed new rules requiring Internet users: To provide their real names to service providers Required all Chinese video-streaming sites to receive approval from China's top broadcasting regulator or have the content banned

The Role of Technology in Society

The Internet One of the most visible and widely used technological innovations over the past decade has been the Internet. Enable users to share information along multiple channels linking individuals and organizations. In 2008, China surpassed the United States with the most Internet users by country.

Ethical Challenges Involving Technology

The Loss of Privacy Free Speech Issues

Board of Directors

The centerpiece of corporate governance composed of inside and outside directors, who are elected by the shareholders to represent their interests Vary in size, composition, and structure Work through committees Compensation/ nominating/ CSR/ Audit plays a central role in corporate governance. an elected group of individuals who have a legal duty to establish corporate objectives, develop broad policies, and select top-level personnel to carry out these objectives and policies. also reviews management's performance to be sure the company is well run and all stakeholders' interests are protected, including those of shareholders. it also has its own interests, which it seeks to protect.

Environmental Regulation: Land pollution

The contamination of land by both solid and hazardous waste. Environmental justice: The effort to prevent inequitable exposure to risk, such as from hazardous waste, in disadvantaged communities. Superfund or CERCLA legislation passed in 1980 Established fund to clean up the most dangerous toxic waste sites in the U.S.

Environmental justice

The effort to prevent inequitable exposure to risk, such as from hazardous waste, in disadvantaged communities. example, Native American tribes in Utah, Nevada, and New Mexico have organized to block the construction of nuclear waste disposal facilities on their land, saying the facilities would threaten their health, culture, and economic viability Superfund or CERCLA legislation passed in 1980 Established fund to clean up the most dangerous toxic waste sites in the U.S.

Intellectual property

The ideas, concepts, and other symbolic creations of the human mind Protected through a number of special laws and public policies, including copyrights, patents, and trademark laws Governments have protected individuals and companies' ideas-their intellectual property. In the United States, intellectual property is protected through a number of special laws and public policies, including copyrights, patents, and trademark laws. Not all nations have policies similar to those in the United States.

Shareholders

The legal owners of business corporations (also called stockholders or investors). By purchasing shares of a company's stock, they become owners. For this reason, they have a stake in how well the company performs

incident-response plan for cyberattacks

These plans complement the effort to prevent access to information but also focuses on what to do when a breach occurs.

Social Responsibility Shareholder Resolutions

This is a resolution on an issue of corporate social responsibility placed before shareholders for a vote at the company's annual meeting Resolutions cannot deal with a company's ordinary business, such as employee wages or the content of advertising, since that would constitute unjustified interference with management's decisions When a social responsibility shareholder resolution is filed, several outcomes are possi- ble. In some cases, managers enter into a dialogue with shareholder activists and resolve an issue before the election. If no resolution is reached, the proposal will generally be submitted for a vote by shareholders. In 2014, such resolutions garnered, on average, around a fifth of all votes cast; executive compensation and corporate governance proposals were supported by more than a third of voters, a threshold at which many boards pay serious attention

Proxy

Those not attending are given an opportunity to vote by absentee ballot

Effective Sustainability Management Shares a Number of Common Characteristics

Top management commitment Clear goals and metrics Employee engagement Alignment of rewards and incentives

Consumer advocacy groups in the United States actively promote and speak for the interests of millions of consumers. True False

True

Shareholders have become an increasingly powerful and vocal stakeholder group in corporations. True False

True

The two main types of investors that own shares of stock in U.S. corporations are individuals and institutions. True False

True

Business Access to and Use of Stakeholders' personal data

Two major stakeholders targeted by business organizations for the collection of information: Employees (here in Connecticut, too!) Consumers Arguments: How much information companies should collect about their stakeholders and whether the collection of stakeholders' information benefits these stakeholders or not remain controversial?

Government Rules on Executive Compensation

Under U.S. rules, corporations must disclose top five executives' compensation and the rationale for it. Public companies are required to hold shareholder votes on executive compensation at least once every three years.

Arguments in favor of high executive pay

Well-paid top managers are simply being rewarded for outstanding High salaries provide an incentive for innovation and risk-taking High compensation reflects a shortage of labor; necessary to attract top talent Not many individuals are capable of running today's large, complex organizations

A prime social responsibility of business is to safeguard consumers: By supplying consumers with products at the lowest possible cost. By providing new technology. While continuing to supply them with goods and services they want. While maintaining high profit margins.

While continuing to supply them with goods and services they want.

Information Technology Challenges for Governments and Businesses

While scientists and technicians keep technology moving quickly, governments must try to keep pace, ensuring that the public is protected. One of the major obstacles to achieving the right balance between the enjoying the benefits of information technology and controlling its potential threats is that government and business often do not understand each other very well. Cooperation will be necessary if society is to able to reap the full benefits of technology without threat to people's security and safety.

Who protects these Shareholder rights?

Within a publicly held company, the board of directors bears a major share of the responsibility for making sure that the firm is run with the interests of shareholders, as well as those of other stakeholders, in mind. We turn next, therefore, to a consideration of the role of the board in the system of corporate governance.

Ecologically Sustainable Organization (ESO)

a business that operates in a way that is consistent with the principle of sustainable development In other words, an ESO could continue its activities indefinitely, without altering the carrying capacity of the Earth's ecosystem. Such businesses would not use up natural resources any faster than they could be replenished or substitutes found. They would make and transport products efficiently, with minimal use of energy. They would design products that would last a long time and that, when worn out, could be disassembled and recycled. They would not produce waste any faster than natural systems could absorb and disperse it. They would work with other businesses, governments, and organizations to meet these goals. Is an "ideal," absolute standard against which real organizations can be measured. Some visionary companies are trying to achieve this. No companies, including Interface, have yet become truly sustainable businesses, and it will probably be impossible for any single firm to become an ESO in the absence of supportive government policies and a widespread movement among many businesses and other social institutions. Supportive government policies and widespread movement among many businesses and other social institutions will be needed for ESOs to succeed.

Executive compensation

a governance mechanism that seeks to align the interests of managers and owners through salaries, bonuses, and long-term incentives such as stock awards and options Executive compensation has also been the subject of government regulations. Under U.S. government rules, companies must clearly disclose what their five top executives are paid, and lay out a rationale for their compensation. Companies must also report the value of various perks, from the personal use of corporate aircraft to free tickets to sporting events, which had previously escaped investor scrutiny. An important mechanism for aligning the interests of the corporation and its shareholders with those of its top managers is executive compensation. But recent events suggest that the system is not always doing its job.

Shareholder Activism

actions by large shareholders to protect their interests when they feel that managerial actions of a corporation diverge from shareholder value maximization increased activism of three shareholder groups: large institutions (including hedge funds and private equity firms), social investors, and owners seeking redress through the courts.

Business Responses to Invasions of Information Security

build strong defenses to protect information and ensure stakeholder privacy. Experts encourage companies to develop an incident-response plan for cyberattacks. These plans compliment the effort to prevent access to information but also focuses on what to do when a breach occurs. Reduce criminal intrusion of their sites by paying hackers, often called white hatters. Businesses use the white hatters' computer skills to identify weaknesses in the company's information systems.Whether businesses have adequately built protections against unwanted invasions of stakeholder privacy and breaches of information security remain to be seen. Many companies have institutionalized their attention toward protecting information by hiring managers trained in this field and able to implement strong safeguards within the company and its system. These managers are profiled next.

Technological Innovation

can lead to imaginative new methods for reducing pollution and increasing efficiency. they produce innovations that can win new customers, penetrate new markets, or even be marketed to other firms as new regulations spur their adoption.

Internet Censorship

government attempts to control internet traffic, thus preventing some material from being viewed by a country's citizens

Types of shareholders

individual and institutional

Free Speech Issues

individuals have certain ethical rights, including the right to free speech. However, this right is not absolute and must be weighed against its consequences for the community. For example, an individual is not permitted to yell "fire" in a crowded movie theater, even though some might see this as an expression of free speech, since the potential harms caused by panicked moviegoers outweighs the right of free expression. The issue of free speech was at the core of Elonis v. United States, a case scheduled to be heard by the U.S. Supreme Court in 2015. Examples: check out this example (Yelp!) Other free speech issues have appeared recently, such as the Yelp, Inc. v. Hadeed Carpet Cleaning, Inc. case. Joe Hadeed, owner of a carpet cleaning company, argued that his business dropped 30 percent after two negative posts appeared on Yelp. How much power does a Yelp review have? (2013) How Review Sites Can Affect Your Business (And What You Can Do About It) (2018) These issues raised the ethical and legal question whether anyone can post anything they want on a social media site, even if untrue or unsubstantiated and negative consequences occur due to the posting. In some cases it appears acceptable, but not in other situations.

material sustainability issues

issues that are particularly relevant to an evaluation of a particular company or industry's sustainability practices refer to those that are particularly relevant to an evaluation of a particular company or industry's sustainability management.

Most shareholders do not vote their proxies, either, however; currently,

just 30 percent of all shareholders and just 13 percent of individual shareholders—cast their ballots

Emission standard

manufacturing have a limit to the amount that they can put into the air

Another method some businesses use is to reduce criminal intrusion of their sites by paying hackers

often called white hatters and discussed earlier in this chapter. Businesses use the white hatters' computer skills to identify weaknesses in the company's information systems.

Individual shareholders

people who directly own shares of stock issued by companies. These shares are usually purchased through a stockbroker and are held in brokerage accounts.

Environmental-quality standard

polluters control their emissions to maintain air quality

social investment

sometimes also called socially responsible investment or sustainable, responsible, and impact investment (both of which terms use the acronym SRI). refers to the use of stock ownership as a strategy for promoting social, environmental, and governance objectives. This can be done in two ways: through select- ing stocks according to various social criteria, and by using the corporate governance pro- cess to raise issues of concern.

Omnichannel

the idea that every distribution channel must work together to deliver a unified and consistent customer experience.

Corporate Governance

the process by which a company is controlled, or governed. A system of mechanisms to direct and control an enterprise in order to ensure that is pursues its strategic goals successfully and legally Just as nations have governments that respond to the needs of citizens and establish policy, so do corporations have systems of internal governance that determine overall strategic direction and balance sometimes divergent interests.

The complex auditing and forecasting techniques used by these firms help

them anticipate a wide range of external influences on the firm, not just ecologi- cal influences.

Wide-angle planning helps

these companies foresee trends—new markets, materials, technologies, and products.

Clear goals and metrics

they set measurable sustainability goals and regularly assess and report their performance. By setting specific goals, these firms hold themselves accountable (and allow their stakeholders to do so).

The duties assigned to a CIO

• Establishing an innovative language to enable everyone throughout the organization to be clear of the objectives, processes, and timetables for any project that involves technology or information. • Providing structure to welcome inventive thinking and creating protocols for testing and reviewing these novel ideas. • Educating others in the organization to help open the eyes of organizational members to what is possible or what is not regarding technological initiatives or information. • Applying marketing knowledge to ensure that innovative ideas reach the proper stakeholders inside and outside of the organization and have a meaningful impact. • Acting as the lead security officer to protect information and data integrity by overseeing all functions of information technology in the organization. • Participating in organizationwide committees and projects to maintain a clear emphasis on the value of information, as well as protect against threats to information. In the past decade, since the creation of the CIO position within most business organizations, the CIO role has evolved from primarily being focused only on the collection and protection of information to a senior executive role essential to all business functions and operations.