As usual, submit all of your answers to the questions for both of this week's learning activities in the same initial posting, use proper formatting with headings and APA style, include citations and references, make the necessary number of well thought out follow-up responses, and so on. The best way to go about adding your initial postings and follow-up responses is to first type them into a MS Word document and then paste them into the textboxes in LEO – there should NOT be any attachments for the learning activities unless stated otherwise since they would take too long for students to open and professors would not have time to open and read so many either. Make sure to pay special attention to any wording, spelling, punctuation, formatting, and similar types of issues. Feel free to have someone else look your work for any ways to improve it (the actual ideas expressed still have to be your own though) or contact the UMUC Effective Writing Center to see how you can improve your writing abilities as much as possible since you pay for this service anyway and surveys have indicated that one of the main things that employers want to see from graduates is that they have excellent professional business writing skills.
Learning Activity #1: Accounting and Financial Issues and Executive Compensation
There is a lot of material in the final two chapters and it will come as no surprise that different business schools have whole programs dedicated to each of the subjects covered in them. Some students will have had more experience with accounting and finance than their classmates. I would encourage students to try to remember what the difference is between the main financial statements (e.g., balance sheet, income statement, and statement of cash flows) and general concepts in the finance chapter since you should see these again in other classes and the business world.
1) Identify an organization (this could be almost any that maintain financial records – domestic or foreign, for profit or nonprofit, public or private, large corporation or small family business, government related or a business entity) that has encountered some kind of legal, and/or other serious issues related to accounting and finance problems that may be due to ethical problems or simply the result of mismanagement. Check out other students’ postings first so that you can choose a different organization than one that has already been discussed (you could also share a personal observation involving an organization without mentioning the name of it). What was the nature of the issue? What stakeholders were affected and what were the ramifications to the organization? Who was responsible? What happened to the individual(s) or should have happened? What should have been done to keep the problem from happening in the first place? What could be done after the fact to minimize the negative impact?
2) We have explored some interesting issues in business that people have different opinions about such as the situation someone was faced with when trying to decide whether or not to inform a coworker that his job may be ending, tax inversions, how effective some international trade treaties have been, offshoring, and so on. You should have a fairly good idea of what top managers in organizations do after having almost completed this class.
The issue of CEO pay and “golden parachutes” (i.e., the exceptionally high compensation and benefits top managers get when they voluntarily or are forced to leave an organization) comes up in the news every now and then with some people insisting that that these leaders provide a substantial amount of value to the organization and deserve to be well compensated and others such as management writer Charles Handy stating that this is mostly overrated. (A related issue that you will learn more about in future business classes is called “agency theory” which involves the extent to which an “agent” represents the interests of the stakeholders in an organization and determining what types of corporate governance are most effective in controlling this.) In 1983, the average CEO of Fortune 500 companies made 46 times more than the average worker (not the lowest paid ones) and you can find an interesting graph of how it has varied over the years here: http://www.businessinsider.com/fortune-500-ceo-vs-worker-pay-2014-6. The following article describes a recent Harvard study that indicates that this figure is now over 350 times more and includes statistics of what the gap is in some other countries (not surprisingly it is highest in the United States): http://www.washingtonpost.com/blogs/wonkblog/wp/2014/09/25/the-pay-gap-between-ceos-and-workers-is-much-worse-than-you-realize/. Some management educators have suggested that this level of pay far exceeds the value that most CEO provide (it could be argued though that the actual founders such as Steve Jobs and Bill Gates provided exceptional value since the actual organization would not have existed in the first place without their efforts). Do you feel that the executives of most Fortune 500 firms are appropriately compensated for the value that they contribute to their companies? What do you think the average level of pay for a CEO versus an average worker in such organizations should be?