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Tutorial 2 Chapter 11: Corporate Governance, Corporate Social Responsibility & Ethics Task 1 Discussion Question

Stakeholders are individuals or groups that are impacted by a company's decisions. Internal stakeholders include employees and investors, while external stakeholders are customers, suppliers, and communities. Stakeholders have certain rights like accurate information for investors and safe working conditions for employees. A stakeholder analysis identifies stakeholders, their interests, potential claims, importance to the company, and strategic challenges. Agency theory deals with conflicts when decision-making authority is delegated, like an agent not fully representing a principal's best interests due to information asymmetry. Unethical behaviors from agency problems include Enron directors failing to protect investors due to lack of oversight.

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45 views

Tutorial 2 Chapter 11: Corporate Governance, Corporate Social Responsibility & Ethics Task 1 Discussion Question

Stakeholders are individuals or groups that are impacted by a company's decisions. Internal stakeholders include employees and investors, while external stakeholders are customers, suppliers, and communities. Stakeholders have certain rights like accurate information for investors and safe working conditions for employees. A stakeholder analysis identifies stakeholders, their interests, potential claims, importance to the company, and strategic challenges. Agency theory deals with conflicts when decision-making authority is delegated, like an agent not fully representing a principal's best interests due to information asymmetry. Unethical behaviors from agency problems include Enron directors failing to protect investors due to lack of oversight.

Uploaded by

Victoria
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Tutorial 2

Chapter 11: Corporate Governance, Corporate Social Responsibility & Ethics

Task 1
Discussion Question
1. Define stakeholders. Explain the types of stakeholders that could affect company’s
decisions.
Stakeholders: a person or group who has an interest in an enterprise and whose support is
required in order for an enterprise to be successful.

➢ Internal stakeholders: those within a company whose interest stems from direct
employment, ownership or investment. Internal stakeholders include employees,
managers, board members, donors and investors.

➢ External stakeholders: those outside of a company who are indirectly affected by


said company's decisions and outcomes. External stakeholders include customers,
suppliers, government agencies, creditors, labor unions and community groups.

2. Explain the rights of stakeholders.

Stakeholders Rights

Stockholders Timely and accurate information about their investments

Customers Be fully informed about the products and services they


purchase

Employees - Safe working conditions


- Fair compensation for the work they perform
- Just treatment by managers

Suppliers Expect contracts to be respected

Competitors Expect that the firm will abide by the rules of competition and
not violate the basic principles of antitrust laws

Communities Expect that a firm will not violate the basic expectations that
and the general society places on enterprises
public

3. Explain the steps in the stakeholders impact analysis.


● Identify stakeholders along with their interests and concerns
● Identify the probable claims of stakeholders on the organization
● Identify important stakeholders from the organization’s perspective
● Identify the resulting strategies challenges

4. Explain Agency Theory and Agency Problem. Discuss some of the unethical behaviour
that arises from Agency Problems.
● Agency theory is dealing with business relationship problems when decision-making
authority is delegated from one person to another.
● Agency problem is a conflict of interest that occurs when agents do not fully
represent the best interests of principals.
● Principals hire agents to represent their interests and act on their behalf.
● Agents are frequently hired to allow businesses to obtain new skill sets that the
principals lack or to accomplish work for the firm's investors.
● Agency problems include information asymmetry.
● The agents have more information about the resources being managed than the
principal.

Unethical behaviours that arise from agency problems.


● One particularly famous example of the agency problem is that of Enron. Enron's
directors had a legal obligation to protect and promote investor interests but had few
other incentives to do so. But many analysts believe the company's board of directors
failed to carry out its regulatory role in the company and rejected its oversight
responsibilities, causing the company to venture into illegal activity. The company
went under following an accounting scandal that resulted in billions of dollars in
losses.

Task 2
Chapter 11 : Closing Case - HP’s Disastrous Acquisition of Autonomy
Case Discussion Questions 1-3.
Chapter 11 :Hill,C.W, Schilling,M.A and Jones, G.R. 2017. Strategic Management:
Theory & Cases: An Integrated Approach, Asia Edition, 12th Edition. Cengage
Learning.

1. Why do you think Apotheker so eager to make an acquisition?


● he thinks that this would transform the firm from being primarily a hardware
manufacturer into a fast-growing software firm
● software world is growing rapidly and this is a potential business opportunity
● wants to make more profits in this field

2. Why do most acquisitions result in paying a premium over the market price? Was the 50%
premium for Autonomy reasonable?
● an acquiring company will pay an acquisition premium to close a deal and ward off
competition
● An acquisition premium might be paid too, if the acquirer believes that the synergy
created from the acquisition will be greater than the total cost of acquiring the target
company.
● The size of the premium often depends on various factors such as competition within
the industry, the presence of other bidders, and the motivations of the buyer and
seller.
● Autonomy's 50% premium is unreasonable
● Oracle decided that even if the numbers Autonomy was presenting were taken at face
value, it was not worth buying even at a $6 billion price tag.
● market value was already high, at about 15 times its operating profit.
● Catherine A. Lesjak arguing that it was not in the best interests of the shareholders
and that HP could not afford it
● overestimated, not worth buying at this price.

3. Was it unethical for Apotheker to propose the acquisition at the 50% premium? Was it
unethical for Autonomy to go along with the price at a 50% premium? Who suffers the
consequences of an overpriced acquisition?
● It was unethical for Apotheker to propose the acquisition at the 50% premium because
only half of the board participated in the decision and thus not everybody's voice was
heard/considered, particularly shareholder voice.
● It was unethical for Autonomy to go along with the price at a 50% premium this is
because the price was 15 times its operating profits- clearly unsuitable
● The shareholders suffer the consequences of an overpriced acquisition most as the
share price falls following the acquisition.

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