Corporate Finance

Introduction

Because of the previous experience of the organization from the past years’ declination of sales, it is natural for the organization to take precautions in the next business venture. The aim for corporate social responsibility, increase in return of investments and sustainable development will remain a dream if Mineral Plc. will not create the appropriate approach for their current situation. The aim of the paper is to investigate and measure the effectiveness of corporate finance as well as the governance of the organization. Through dealing with the appropriate methods, such as computation and analysis, the paper can answer the requirements according to the needs of the organization.

Discussion

The proposed investment in Medco Republic (MR) is viable depending of the used methods. In the comparison of NPV and IRR, the first method is recognized to be better than of IRR. However, in financing, the corporate executives are more familiar in IRR because they provide useful information and this is used as a method for the proposed projects. But since there is an investment, it is therefore important to look for the benefits for its return. The NPV creates a significant result because it gives a direct measure on the dollar benefits or the foreign currency benefits, based on the present value, of the project to the firm’s shareholders. In this way, most of the finance managers preferred to use the NPV as the best single measure of profitability. On the other hand, IRR also measures profitability but it is expressed in the percentage rate of return. Many decision makers like the nonfinancial managers, prefer to reference the result of IRR because of the emphasis the method gives on the return of investment of the shareholders. NPV has a direct relationship with the Economic Value Added (EVA) which means that, when the project during the year indicated a positive NPV then over time its cumulative EVA should rise to the by the sum of the projects’ NPVs. Things will never work out this way because investors cannot determine the expected NPVs all of the firm’s projects. Still, over time positive NPVs should translate into positive EVAs, and to a positive market value added (MVA), or the access of the firm’s market value over its book value (Brigham & Gapenski, 1997).

The issues that need to cover in Corporate Social Responsibility (CSR) are the moral and ethical concerns such as the code of conduct and good governance. The company should aim for corporate social responsibility is to have an overall positive impact on society and for the sustainable development (Fonteneau, 2003). Corporate social responsibility is an essential element of present and future social policies. The strategy is to develop the multinational economic and financial groups that is needed in global market economy or firms that going through serious of internal crisis. The strategy is a replacement for many socially and ethically irresponsible practices to avoid or lessen the possibilities of bankruptcies, fraudulent actions, legal obligations that involves the issues of health and safety in the workplace, employment policies and environmental protection (Noon, 2008).

Risks are always present in dealing with business transactions. The exposure of the organization in the foreign currency risk is very evident in the international corporation because of their participation in the international trade. The impact of movements of foreign exchange rates may result to the fluctuations in exchange rates. The risk may arise from a variety of sources such as foreign currency retail accounts and retail cash transactions and services, foreign exchange trading, investments denominated in foreign currencies and investments in foreign companies. In order to reduce the risk in business transactions there should be policies that can effectively manage and control the foreign currency risks (Bank of Jamaica, 2005). This includes:

1. Statement of risk principles and objectives governing the extent to which the institution is willing to assume foreign exchange risk;

2. Explicit and prudent limits on the institutions’ exposure to foreign exchange risk; and

3. Clearly defined levels of delegation of trading authorities.

Conclusion

Due to the growth of globalization and impact of technologies and economic uncertainties, the proposals for the organization are weighed. The supporting views of the leaders in the responsive approach of increasing the profitability and increase the return to their shareholders is a great indication that the organization starts to recover. In order to gain such benefit, the organization should take advantage of the new initiatives that can support and promote the business towards achieving the corporate social responsibility.

References:

Bank of Jamaica, (2005) Standards of Sound Business Practices: Foreign Exchange Risk Management [Online] Available at: http://www.boj.org.jm/pdf/Standards-Foreign%20Exchange%20Risk%20Management.pdf [Accessed 12 August 2010].

Brigham, E., & Gapenski, L., (1997) Financial Management: Theory and Practice. The Dryden Press, 8th Ed.

Fonteneau, G., (2003) Corporate Social Responsibility: Envisioning its Social Implications, The Jus Semper Global Alliance, Living Wages North and South [Online] Available at: http://www.jussemper.org/Resources/CSRsocialimplications.pdf [Accessed 12 August 2010].

Noon, P., (2008) Corporate Social Responsibility, Negotiator’s Guide [Online] Available at: http://www.world-psi.org/ [Accessed 12 August 2010].

Corporate Governance & Corporate Social Responsibility

Introduction

Every organizations, whether government, business, academic, or health organization, are expected to perform with corporate social responsibility and governance. The actions of the employees and leaders regarding the standards pay attention on the good practices as well as the promotion of the key initiatives. Through the presence of the practices in the organization, the effectiveness and competitiveness in an organization can be recognized.

Background and Problem Statement

Corporate social responsibility is an essential element of present and future social policies. The strategy is to develop the multinational economic and financial groups that is needed in global market economy or firms that going through serious of internal crisis. The strategy is a replacement for many socially and ethically irresponsible practices to avoid or lessen the possibilities of bankruptcies, fraudulent actions, and even disrespecting for the basic working values. The concept of corporate social responsibility accommodates a wide variety of achievements and initiatives that covers the moral and ethical concerns such as the code of conduct and good governance. On the other hand, the corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled. In corporate governance, the relationships among the many stakeholders involved and the goals for which the corporation is governed is also included. However, how does the corporate governance and corporate social responsibility create a great impact in the organization?

Research Aim and Objectives

The aim of the study is to investigate the influence of corporate governance and corporate social responsibility in organizations. In order to obtain the information in the study, there are three objectives that should be considered. First is to identify the purpose of corporate social responsibility and corporate governance in every organization. Second is to present the effectiveness of the CSR and governance in the internal and external function of organizations. And third is to measure the long-term impact of governance and CSR in every organization.

Literature Review

The aim for corporate social responsibility is to have an overall positive impact on society through a socially responsible conduct. It also includes the voluntary integration by the companies of social and environmental concerns towards the commercial activities and the relationship with stakeholders. The corporate social responsibility is an important way for organizations to increase their contribution to society and to sustainable development. The strategy covers the things and organizations have an impact beyond its immediate operations and legal obligations and goes beyond legal obligations that involves the issues of health and safety in the workplace, employment policies and environmental protection. If a business recognized the role of the corporate social responsibility, it definitely contributes in the development of the communities in which the business operates. Meanwhile, the principles of the corporate governance reflect on stimulating the debates about the problems or issues in relation to the corporate governance. The organizations are encouraged to adopt the recognized standards of governance to ensure the relationship of investors and organization by informing the investors in the present capital market and law. The corporate governance codes and principles is also evidently visible in different entities, such as stock exchanges, corporations, institutional investors, or associations or institutes of directors and managers. Although there are many advantages, corporate governance also faces challenges due to developing, emerging, and transitional economies. Moreover, the idea of corporate governance takes considerable advantages once the system proved itself to be effective. First is promoting the efficient use of resource of both within the company and the economy. And because corporate governance can lower transaction costs associated with corporate information access, the managerial incentives that are risky for profits are diminished. It also facilitates the proper access to capital, and could complement to institutional and legal framework of the organization. And most of all, corporate governance can contribute to lessen the corruption in the business.

Methodology

The suggested method in the study is the use of comparative case studies. The ideas regarding the corporate social responsibility (CSR) and corporate governance is already implemented among the organization across the world. In order to determine the approach of the organizations regarding the two internal actions, it is better if the study will look in the strategy of the organizations in implementing the CSR and governance. Because the organizations have the responsibility in ensuring their internal and external effectiveness, it is a great advantage for the study to look for the impact the CSR and governance can create in the corporate world.

References:

Fonteneau, G., (2003) Corporate Social Responsibility: Envisioning its Social Implications, The Jus Semper Global Alliance, Living Wages North and South [Online] Available at: http://www.jussemper.org/Resources/CSRsocialimplications.pdf [Accessed 13 August 2010].

Heugens, P., & Otten, J., (2005) Corporate Governance Reforms around the World, Tjalling C. Koopmans Research Institute [Online] Available at: http://www.uu.nl/uupublish/content/05-08.pdf [Accessed 13 August 2010].

Noon, P., (2008) Corporate Social Responsibility, Negotiator’s Guide [Online] Available at: http://www.world-psi.org/TemplateEn.cfm?Section=Home&Template=/ContentManagement/ContentDisplay.cfm&ContentFileID=23044 [Accessed 13 August 2010].

Vasilecu, L., (2008) Corporate Governance in Developing and Emerging Countries, The Case of Romania [Online] Available at: http://mpra.ub.uni-muenchen.de/10998/1/MPRA_paper_10998.pdf [Accessed 13 August 2010].

Central Problems of Corporate Governance and Mechanisms

Introduction

Every organization is already plagued with various internal problems. Added to that is the unexpected external uncertainties like the economic downturn, financial crunches, and other globalized crises. However, through the effective leadership and monitoring that lies within every organization, there is a great potential for most of the businesses to turn their weaknesses to opportunities.

Background and Problem Statement

Across the globe, the countries that suffer much on the global threats in their economy are the developing countries that struggled much in order to continuously adjusting their pace and reach the status of development. It is said that a strong economy mirrored by a strong leadership, even in a small and medium scale businesses. The appropriate use of leadership in the organization is the most desirable method that can be ever be implemented. Most of the defined corporate strategies are the ability of the business to use the corporate governance in keeping the company aligned with their goals and objectives. However, what would be the central problems of the corporate governance that might be present among the companies, particularly in Pakistan.

Research Aims and Objectives

The aim of the study centers in discovering the problems that may exist among the Pakistani companies regarding their implementation of corporate governance. In order to support this aim is through the three objectives that can be also the guidance of the study. The first objective is to determine the effectiveness of corporate governance in the organizations across the Pakistan. Second is to investigate the center problem in terms of implementing the corporate governance in the Pakistani organizations. And third objective is recognizing the mechanisms on corporate governance that appears in the respective organizations.

Literature Review

Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled. A good corporate governance reduces emerges in the market vulnerability to the financial crises, reinforcing of the property rights, reduction on the transaction costs and the cost of capital that in the long run will lead in the market development. On the other hand, the weak corporate governance can influence the reduction of the confidence among the investors and can also discourage the external investment. And it definitely created various impacts in every part of the organization but the pressure can be often felt by the shareholders. In corporate governance, the relationships among the many stakeholders involved and the goals for which the corporation is governed is also included. The corporate governance systems are typically described as “insider” versus “outsider” systems, as “shareholder” versus “stakeholder” capitalism, or as involving “equity-financed” versus “debt-financed” firms. The corporate governance models as well as the reforms around the world are diverse but are evidentially in use of the corporate governance mechanisms.

The corporate governance in the organization is an essential process wherein every organization should incorporate all their practices. With the provision and guiding codes of the corporate governance, the organization are aligned in reaching for their goals thus, lessening the different threats that usually comes in the internal part of the organization. The idea of corporate governance as well as creation of strong relationship among the shareholders is a great opportunity that the organization can provide. Most of the shareholders feel doubt in the ongoing operation for their investment is incorporated in the cycle of the business. The good return or profit of the business might help lessen their worries and promotes good leadership.

The practical models for governance have commonly accepted different principles toward its effectiveness and efficient corporate governance. The rights and equitable treatment of shareholder is where organizations should respect the rights of shareholders and support them to exercise their rights including the security of ownership of their shares, right to vote, sharing information, and making participation in decisions. Also, the organization should recognize that they have legal and other obligations to all legitimate stakeholders such as giving emphasis on their interest.

Methodology

The suggested methodology that can be applied in the study is the use of secondary information that can illustrate the implementation of corporate governance, most especially in Pakistani organizations. Through the utilization of secondary organization, the policies, laws, set of processes and even the institutions can be fully detailed. The importance of secondary information is that, there is an important set of information that can be gathered in order to accommodate what are the queries involved in the study.

Works Cited:

Heugens, P., & Otten, J., (2005) “Corporate Governance Reforms around the World”, Tjalling C. Koopmans Research Institute, Accessed 02 June 2010, from http://www.uu.nl/uupublish/content/05-08.pdf

ROSC, (2006) “Corporate Governance Country Assessment”, Report on the Observance of Standards and Codes Accessed 02 June 2010, from http://www.worldbank.org/ifa/rosc_cg_sen_eng.pdf

SECP, (2003) “Impact Assessment of the Code of Corporate Governance 2002”, Accessed 02 June 2010, from http://www.secp.gov.pk/Reports/ImpactStudyCCG.pdf

An Evaluation of Corporate Governance in Credit Union and Its Impact on their Shareholders

Introduction

In the emerging market economy, the improvement for the corporate governance is south after. In the principle of the corporate governance, different public policy objectives and its importance is emphasized through the ongoing changes. A good corporate governance reduces emerges in the market vulnerability to the financial crises, reinforcing of the property rights, reduction on the transaction costs and the cost of capital that in the long run will lead in the market development. On the other hand, the weak corporate governance can influence the reduction of the confidence among the investors and can also discourage the external investment.

Corporate Governance in the Market

Different researchers added the credit in describing the well founded corporate governance, its structures and its processes. However, only few can describe the tacit meaning of the corporate governance. Simply, corporate governance refers to the different processes that can apply in the direction and control of the companies. It is concern in the relationship among the management, board of directors, and the shareholders. An organization with good corporate governance contributes in the sustainable economic development by enhancing the performance of the companies and increasing their accessibility to the external investment or capital (ROSC, 2006). Corporate governance is applied with the guiding principles to promote the public awareness in the importance for the effective operation of the companies and for ensuring the accountability, transparency, and protection of the shareholders with their rights through the practices in public education, advocacy, and dissemination.

Annual Audit and the Application of the Codes

The audit team applies the importance of the code which is respected by different companies. The audit committee adds the role of the corporate governance in achieving the objectives and as well the advantage that it might bring in the economy of the country. The function of the credit union creates an efficient business performance. Through the confidence in the performance of the companies, the meaningful assistance of the various audit bodies. In addition, the good corporate governance enhanced the fiduciary responsibilities.

The standards of the code justified the different requirements of the corporate governance practices. It ensures the informational strategies that become the basis in improving or fostering the improvement of the regulations in the capital, market and the performance of the entire organizations. It is very evident that the different entities such as the stock exchanges, corporations, investors, or the associations of the directors and the managers (Heugens, and Otten, 2005).

Impact on the Shareholder

The impact of the corporate governance also affects the shareholders as well as their confidence. Because all of them are well informed regarding the performance of the business, such as in the accuracy and transparency of the financial statements. The shareholders that they are more secured. Through the reports, the chances for the fraudulent actions and different improper transactions are reduced but turn in enhancing the investors’ confidence (SECP, 2003). The corporate governance also faces different challenges and constraints due to the developing, emerging, and transitional economies (Vasilecu, 2008).

Moreover, the idea of corporate governance takes considerable advantages once the system proved itself to be effective. First is promoting the efficient use of resource of both within the company and the economy. And because corporate governance can lower transaction costs associated with corporate information access, the managerial incentives that are risky for profits are diminished. It also facilitates the proper access to capital, and could complement to institutional and legal framework of the organization. And most of all, corporate governance can contribute to lessen the corruption in the business.

Conclusion

The corporate governance in the organization is an essential process wherein every organization should incorporate all their practices. With the provision and guiding cods of the corporate governance, the organization are aligned in reaching for their goals thus, lessening the different threats that usually comes in the internal part of the organization. The idea of corporate governance as well as creation of strong relationship among the shareholders is a great opportunity that the organization can provide. Most of the shareholders feel doubt in the ongoing operation for their investment is incorporated in the cycle of the business. The good return or profit of the business might help lessen their worries and promotes good leadership.

References:

Heugens, P., & Otten, J., 2005. Corporate Governance Reforms around the World, Tjalling C. Koopmans Research Institute [Online] Available at: http://www.uu.nl/uupublish/content/05-08.pdf [Accessed 26 Feb 2010].

ROSC, 2006. Corporate Governance Country Assessment, Report on the Observance of Standards and Codes [Online] Available at: http://www.worldbank.org/ifa/rosc_cg_sen_eng.pdf [Accessed 26 Feb 2010].

SECP, 2003. Impact Assessment of the Code of Corporate Governance 2002 [Online] Available at: http://www.secp.gov.pk/Reports/ImpactStudyCCG.pdf [Accessed 26 Feb 2010]

Vasilecu, L., 2008. Corporate Governance in Developing and Emerging Countries, The Case of Romania [Online] Available at: http://mpra.ub.uni-muenchen.de/10998/1/MPRA_paper_10998.pdf [Accessed 26 Feb 2010].

Other Source:

Corporate Governance Initiative [Online] Available at: http://www.csd.bg/fileSrc.php?id=10124 [Accessed 26 Feb 2010].