Question

a. Discuss the corporate control of your business. Explain why your business in Mexico is exposed to agency problems.

Answer 1

Generally the word corporate control is assumed to be limited

to just strategic decision like mergers and acquisitions, portfolio diversification,buyout etc. But this just part of corporate control the other part of it is external dealings i.e. communications and dealings with various stake holders like government,Supliers,customers,society etc. I.e. entire management control is covered under corporate control

In Our bussiness corporate control is defined and documented and responsibilities are segregated and assigned according the right person right job concept every employee ,manager ,member of board knows that he or she is a part of a big comman goal and that too the goal of the organization is aligned with the individual goals of the employees and officers.our communications policies with government agencies are of best standard, be it timely tax compliances legal compliance and avoidance of penalties.we are also having policies for social welfare which we conduct under CSR programs.we have also improved our customer follow up policies which has significantly improved our realisation ratios.we follow participative approach of management so that subordinats feel that their opinions are welcomed they should feel that if they will do thier job properly it will not only benifit the organisation but will also benifit them.

Agency problems arises when ownership and management are in different hands it is very common in corporate structures where owners are shareholders and management is in the hands of board of direct which some time creates conflicting situations because owners objective is maximise profits while management's objectives are effective and efficient control of the organization ,to make policies sothat these will benifit both persons within the organization and those who are outside the organisation. The maxico unit of our company is exposed to agency issues mainly because there is difference between social and economic culture of these two countries we desire profit maximization considering that situations in maxico are as same as these are in US but management has to deal with these in their day to day operations so they have to make policies consistent to Mexico's social legal and economic culture and such policies may not be as profitable as they should be and more over there are some issue between US and maxico which makes the situation even worse.