a. What are agency costs? Why do these tend to increase in severity, as a company grows larger?

b. Think back to the last time you ate at an expensive restaurant where you paid the bill. Now think about the last time you ate at a similar restaurant, but your parents paid the bill. Did you order more food (or more expensive food) when your parents paid? Explain how this relates to the agency problem in corporations.

c. You are the CEO of a company and you are considering entering into an agreement to have your company buy another company. You think the price might be too high, but you will be the CEO of the combined, much larger company. You know that when the company gets bigger, your pay and prestige will increase. What is the nature of the agency conflict here, and how is it related to ethical considerations?

Q2)

A listed company has been recently trying to adhere to corporate governance provisions who are a requirement of the Stock Exchange.

The company’s CEO holds 60% of the company’s share capital with the remaining holding being widely disbursed. The CEO also took up the role of the Chairman in an attempt to minimize costs as he has stated, however analysts have been claiming that he took up this role to avoid questioning of his decisions.  

Required:

Taking into account the necessity of good corporate governance principles within the company, critically evaluate the issues arising from the case.

THE DEMOTIVATION OF CEO PAY
How much did your CEO get paid this year? What did any CEO get paid? You may not know the exact amounts, but you probably think the answer is, “Too much money.” According to research from 40 countries that probed the thoughts of CEOs, cabinet ministers, and unskilled employees, we all think leaders should be paid less. Beyond that, we are clueless.
Where we err (fail to adhere to the proper or accepted standards) can be calculated by an organization’s pay ratio, or the ratio between CEO pay and average worker pay. In the United States, for example, the average S&P 500 CEO is paid 354 times what the lowest-ranking employee makes, for a ratio of 354:1 (eight times greater than in the 1950s). Yet, U.S. participants in the study estimated that the ratio between CEOs and unskilled workers was only 30:1! Americans are not alone in making this gross underestimate: Participants from Germany, for instance, estimated a ratio of around 18:1 when the actual is closer to 151:1.
In general, people worldwide are unhappy with—and demotivated by—their perception of inequity, even when their estimates of the ratios are far below the reality. Taking the German example further, the ideal ratio of CEO pay to unskilled workers as judged by study participants was around 7:1. To put it all together, then, people think the ratio should be 7:1, believe it is 18:1, and don’t realize it is actually 151:1. For all the countries worldwide in the study, the estimated ratios were above the ideal ratios, meaning participants universally thought CEOs are overpaid.
How does this affect the average worker’s motivation? It appears that the less a person earns, the less satisfied the person is with the pay gap. Yet virtually everyone in the study wanted greater equality. The ideal ratio, they indicated, should be between 5:1 and 4:1, whereas they thought it was between 10:1 and 8:1. They believed skilled employees should earn more money than unskilled individuals, but that the gap between them should be smaller.
No one in the United States would likely think the 354:1 ratio is going to dip to the ideal of 7:1 soon, although some changes in that direction have been suggested. Other countries have tried to be more progressive. The Social Democratic Party in Switzerland proposed a ceiling for the ratio of 12:1, but putting a cap into law was considered too extreme by voters. No countries have yet been able to successfully impose a maximum ratio.
Therefore, the job of restoring justice perceptions has fallen to CEOs themselves. Many CEOs, such as Mark Zuckerberg of Facebook and Larry Page of Google, have taken $1 annual salaries, though they still earn substantial compensation by exercising their stock options. In one extreme recent example, Gravity CEO Dan Price cut his salary by $1 million to $70,000, using the money to give significant raises to the payment processing firm’s employees. Price said he expects to “see more of this.” In addition, shareholders of some companies, such as Verizon, are playing a greater role in setting CEO compensation by reducing awards when the company underperforms.

there are 2 questions:

1- Read the case titled, “The Demotivation of the CEO Pay’ and explain the following two questions:
a. Which motivation theory would you use to explain the above case? Why
b. Can you solve the problem raised in the above case in all countries? Why?

2- You are a management consultant in Oman. One of the Omani domestic companies wants to expand to two different countries – one in Asia and the other one in North America. The company is hiring you to assist them in understanding ‘material culture’ and ‘social culture’ so that they can create appropriate strategies for these two countries.
a. Explain what is ‘material culture’ and ‘social culture’ to this firm with appropriate framework
b. What are the problems this firm would face if 2(a) is not handled properly?

In 2020, Pina Ltd., which follows IFRS, reported accounting income of $1,178,000 and the 2020 tax rate was 20%. Pina had two timing differences for tax purposes:

CCA on the company’s tax return was $476,500. Depreciation expense on the financial statements was $283,000. These amounts relate to assets that were acquired on January 1, 2020, for $1,906,000.

Accrued warranty expense for financial statement purposes was $138,100 (accrued expenses are not deductible for tax purposes). This is the first year Pina offers warranties.

Both of these timing differences will fully reverse over the next four years, as follows:

Prepare the journal entries to record income taxes for 2020

In 2021 the government announced a further tax rate reduction will be effective for the 2024 taxation year. The new rate will be 15%. Prepare the journal entry to adjust deferred taxes for the reduced rate.

In the June 2020, the Bureau of Labor Statistics (BLS) announced that they had possibly miscalculated the official U.S. unemployment rate for the last three months. The BLS said that they "underestimated" the unemployment rate (for March, April, and May) because of how furloughed workers had been classified. What's a furloughed worker, and should they be considered "employed", "unemployed", or "neither"?

Describe what sets an entrepreneur apart from a business founder and discuss how entrepreneurship can be a catalyst to social good

Assume the average age of an MBA student is 34.9 years old with a standard deviation of 2.5 years. ​a) Determine the coefficient of variation. ​b) Calculate the​ z-score for an MBA student who is 29 years old. ​c) Using the empirical​ rule, determine the range of ages that will include 99.7​% of the students around the mean. ​d) Using​ Chebyshev's Theorem, determine the range of ages that will include at least 91​% of the students around the mean. ​e) Using​ Chebyshev's Theorem, determine the range of ages that will include at least 87​% of the students around the mean.

Assume the average age of an MBA student is 30.7 years old with a standard deviation of 2.2 years.

​a) Determine the coefficient of variation.

​b) Calculate the​ z-score for an MBA student who is 26 years old.

​c) Using the empirical​ rule, determine the range of ages that will include 95​% of the students around the mean.

​d) Using​ Chebyshev's Theorem, determine the range of ages that will include at least 94​% of the students around the mean.

​e) Using​ Chebyshev's Theorem, determine the range of ages that will include at least 80​% of the students around the mean.

“US oil prices turned negative for the first time on record on Monday April 20th, 2020 after oil producers ran out of space to store the oversupply of crude left by the coronavirus crisis, triggering an historic market collapse which left oil traders reeling.” (The Guardian, April 20th, 2020) On April 21st, 2020 the US president Donald Trump tweeted: “We will never let the great U.S. Oil & Gas Industry down. I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan, which will make funds available so that these very important companies and jobs will be secured long into the future!”

a. Plot the price of oil (crude or brent) for the past 12 months period and explain the decrease in the price by using demand and supply framework.

Jackson Auto Parts Manufacturer, a U.S. based manufacturer of piston rings and other auto parts sold parts to a South Korean Auto Manufacturer on December 1, 2020 with payment in 10 million South Korean Won to be received on March 31, 2021. The following exchange rates are relevant:

Date:    Spot Rate                Forward Rate

Dec 1, 2020 $0.0035 $0.0034

Dec 31, 2020 $0.0033 $0.0032

March 31 2021 $0.0038 $0.0032

Assuming Jackson did not hedge its foreign exchange risk, how much foreign exchange gain or loss should it report on its fiscal year end December 31, 2020 financial statements/

Assuming that Jackson did in fact decide to hedge its foreign exchange risk and entered into a forward exchange contract to sell 10 million South Korean Won on December 1, 2020 as a fair value hedge of a foreign currency receivable, what is the net impact on Jackson’s 2020 net income resulting from a fluctuation in the value of the Won? Ignore time value of money.

Defend your answer.