Starbucks in China Essay Example for Free

Starbucks in China Essay Why did Starbucks fail in the Forbidden City? Zane lee (Ziang Li) ESLI PMP Why did Starbucks fail in the Forbidden City? Introduction Nowadays, economic globalization is becoming an irreversible tendency; therefore, different multinational corporations always want to extend their branches to other countries, especially for the food companies, such as, McDonald’s, Starbucks, and Burger King. In recent years, the world has also witnessed that China’s economy has developed to a higher level since China has reformed and opened for more than 30 years. According to Lardy, in the middle of 1990s, China had become one of the largest world’s trading nations (Lardy, 1995, p.1). Now, Chinese customers have more desire and abilities to enjoy western food. Therefore, many multinational food corporations, such as, Starbucks, KFC, and Krispy Kreme, want to enter in Chinese market, and these companies treat China as an emerging market because of the development of Chinese economy and consumption ability. However, China has thousands years of history, and its market situation is complicated. It is hard for western companies to be adapted to the situation. Now, some western food companies, to some extent, have achieved success in China, such as, Starbucks, KFC, and McDonald’s. There were also many companies, such as Dunkin, Krispy Kreme, and Burger King failed in China (Rein, 2012). Starbucks is one of the few that has successfully entered the Chinese market, but it is still facing many challenges, and it also failed in the most traditional areas in China, such as in the Forbidden City. In the past ten years, Starbucks has achieved much success in general business areas in China. Starbucks is an international coffee retailers which was founded in the early of 1970s in Seattle, U.S. It sells both a variety of coffee and other related beverages all over the world (Marketline, 2012, pp.3-4). Starbucks entered in Chinese market in 1999 (Wang, 2012, para.3). As the Trefils team (2012) shows that with the development of Starbucks, â€Å"Starbucks has successfully opened more than 570 stores in 48 cities since it first entered China twelve years ago. Building on this momentum, it plans to open 1500 stores by 2015† (Trefils team, 2012). To achieve the succe ss,  Starbucks’ marketing strategies have exerted a big influence in this process. According to Rein (2012), Starbucks introduced â€Å"coffee experience shop† to give customers an opportunity to experience Starbucks’ culture, and Starbucks developed some tea-flavor coffee to be adapted to Chinese flavor. Moreover, Starbucks chose wonderful shop location to promote its brand image and avoided using advertising or promotions to make direct conflicts with the Chinese tea culture. Furthermore, Starbucks also collaborates with local companies to spread Starbucks’ business and to reduce Starbucks’ cost (Rein, 2012). Through taking these strategies, Starbucks, to some degree, has overcame the challenges from both the traditional culture and the local competitors, such as U.B.C and Dio Coffee. However, Starbucks still failed in the Forbidden City. According to Netzley, Digantral, Wong, Tan, Hee (2011), at the Yale CEO Leadership Summit (2006), China Central Television’s news compere Chenggang Rui asked Jim that â€Å"Do you have plans to open stores in the Taj Mahai, Versailles, or Buckingham Palace?†. Half year later, Rui posted a blog in Sina blog to against Starbucks’ existence in the Forbidden City, and he thought that Starbucks existed in the Forbidde n City was a kind of erosion for Chinese culture. Even though in 2007, the internet was an infancy in China, it was growing fast. There were tens of thousands of people following Rui’s blog at that time. â€Å"In January 2007, Rui, an experienced media personality from CCTV turned this communication channel on Starbucks. The effort to remove the iconic western brand from the centre of the Forbidden City quickly became global news† (Netzleym, Digantral, Wong, 2006). Several months later, Starbucks closed the coffeehouse in the Forbidden City. By analysing Starbucks’ failure in the Forbidden City, this paper will help Starbucks to know how to control the risks, such as entering in some special areas in China, in the future and help other international companies to understand the Chinese culture. In recent years, Scholars have analysed how Starbucks can achieve success in the general areas in China. For example, Starbucks has two main business strategies: License and Joint Venture (Harrison, Chang, Gauthier, Joerchel, Nevarez, Wang, 2005, p.281), and Starbucks also uses HR strategy, which is offering good salary for staff, to maintain the quality workforce (Zhang, 2009, p.18). Scholars also have discussed some culture factors on cross-culture brand extension. For instance, â€Å"consumer s in several East Asian countries have higher levels  of self-construal. Therefore, the likelihood of brand extension success is expected to be higher in respect of these group† (Henseler, Horvà ¡th, Sarstedt, Zimmermann, 2010, p.8). Even though Starbucks’ marketing strategies made it success in general business areas in China, this does not mean that there is no potential risks for Starbucks in China. Starbucks is still facing challenges in the most traditional areas, such as in the Forbidden City, because the Forbidden City’s imperial culture excludes foreign culture, Chinese people’s nationalism could not accept Starbucks’ existence in the Forbidden City, and Starbucks’ fashion culture contradicts to the Forbidden City’s classic culture. This paper will discuss Starbucks’ failure in the Forbidden City from these three parts. The serious culture shock in the Forbidden City One of the most important reasons why Starbucks failed in the Forbidden City was Starbucks and the Forbidden City had different cultures, and they were different symbolisms. China has five thousand years history, and its traditional culture was handed down by each generation. Nowadays, Chinese traditional culture has exerted a big influence on modern business, especially on multinational companies which have set up business in China but have different cultures with Chinese. If multinational companies want to run their business to be more successful in China, it is necessary for them to understand Chinese traditional culture, especially for the company, like Starbucks, which want to set up its business in the most traditional areas in China. Starbucks’ symbol of western country could not combined with the Forbidden City’s imperial culture The Forbidden City is the symbolism of the imperial culture (Han Zhang, 2009, p.397). According to China. Org (2005), the Forbidden C ity (Imperial Palace) is setting in the center of Beijing, and it is the largest and most complete imperial palace and ancient building group in China. The buildings of Forbidden City was started to be built in 1406 and was finished in 1420. Since Ming dynasty, there had been twenty-four emperors lived and ruled China in this palace (China.org, 2005, para. 1). In the Forbidden City, yellow is the primary, and almost all roofs of buildings were decorated with yellow glazed tiles. During Ming and Qing dynasty, yellow was the color that only emperors could use. This kind of color â€Å"represents the emperor, the central figure of China, and also  represents land, the root and origin of all earthly creatures† (Han Zhang, 2009, p.397). Moreover, in ancient China, besides servants, only the people who had direct relationship with emperor could live in the Forbidden City. Therefore, the Forbidden City can be the symbol of the imperial culture. Starbucks is the symbolism of western culture. Starbucks is American company. Now, drinking coffee in Starbucks coffeehouse has become a normal living style for many American people. Moreover, Starbucks’ branches have spread to all over the world. On the one hand, according to Curtin and Gaither (2009), â€Å"In the eyes of many Chinese people, the image of Starbucks is encoded with a meaning that might convey, like many other western fast food brands which introduced from U.S., ‘America, western value’ in China† (Curtin Gaither, 2007, p.85). On the other hand, in or der to entering in Chinese market, Starbucks has developed its coffee flavours to be adapted to Chinese taste, and Starbucks also sells tea and moon cakes which are the traditional Chinese food in its coffee house (Rein, 2012). These product, to some degree, can implicate traditional culture. The supreme imperial culture of the Forbidden City excludes Starbucks’ culture. The imperial culture is a traditional Chinese culture, and it has thousands years of history. In the ancient time, normal people could not use the stuff that emperor used and also could not enjoy the food that emperor enjoyed, which means that the imperial power was supreme and had the feature of exclusiveness. According to Chiu and Cheng (2007), when Starbucks opened its coffeehouse in the Forbidden City, these traditional Chinese food were also sold in Starbucks Forbidden City Shop, and on the surface of its products, Starbucks still used its English logo (Chiu Cheng, 2007, pp.85-86). As Bzelova shows that moon cakes, which have thousands years of history, are treated as the symbol of family reunion and the round harvest moon. Initially, moon cake was invented by soldier. In Ming dynasty, the mood cake was introduced into the Forbidden City and became a kind of specialized food for emperor at one time (Bzelova, 2013). Another fact is moon cakes are usually yellow. As above mention ed, in the ancient time, only emperor could use the color â€Å"Yellow†. However, Starbucks sold the moon cakes with English logo, it was a kind of contradiction to the traditional Chinese culture. Moreover, the English logo which was painted on the yellow moon cake was a kind of contradiction to the imperial culture. Even though emperor was disappeared  for almost one hundred year and the Forbidden City had also become a tourist attraction, the imperial culture still exist in the Forbidden City, which can be revealed from the Forbidden City’s main color—â€Å"Yellow†. Therefore, selling these products by a foreign company could emerge conflicts to the Forbidden City’s imperial culture, and the imperial culture of the Forbidden City, to some degree, prevented Starbucks to run its business in the Forbidden City. Chinese nationalism could not accept Starbucks in the Forbidden City Chinese people’s nationalism could not accept Starbucks’ existence in the Forbidden City. As Miscevic (2010) defines that â€Å"nationalism† is usually used to describe two phenomena: â€Å"(1) the attitude that the members of a nation have when they care about their national identity, and (2) the actions that the members of a nation take when seeking to achieve (or susta in) self-determination† (Miscevic, 2010, p.1). Chinese people’s nationalism has hundreds years of history. In 1840, the first opium war happened in China, and Britain invaded in China by selling opium. For western countries, such as British, Spain, and France, after the first industrial revolution, their industries and economy were developed fast, and their domestic demands could not meet the requirements of their economic development; therefore, many of these countries wanted to invade to other countries to make profits, and China became one of the most important targets for western invaders. After the first opium war, China paid millions of silver for British and France and ceded territory to British. In the following one hundred year, Chinese people had experienced a series of invasions from western countries. Chinese people’s nationalism was set up during these disasters. According to He (2007), even though China is becoming more and more open, and people’s living condition is becoming more and more fortu nate, Chinese people still cannot accept that western culture exceedingly combined with Chinese culture (p.6). As above mentioned that Starbucks can be treated as a symbol of America. Even though in the history, China and America did not have direct conflict, U.S. is still usually treated as the representation of western power because America is one of the biggest and the most powerful country in the world (Cheng, 2012). However, Chinese people usually treat the Forbidden City as the most tradition area, and â€Å"[t]he presence of any foreign brands or products in this place may imply invasion of western culture assisted by western corporate power† (Hang Zhang. 2009, p.398). As these areas were destroyed by western invaders during the war; therefore, it is hard for Chinese people to accept western companies, such as Starbucks, which have strong culture to run its business in the Forbidden City. Starbucks’ fashion contradicts to the Forbidden City’s classic culture The Forbidden City is the symbolism of Chinese classic culture. This symbolism can be experienced from the Forbidden City’s design. According to Han Zhang (2009), â€Å"[t]he design of the Forbidden City, from its overall layout, as laid down in the Classic of Rites (Li ji), to the smallest detail of decoration, has symbolic meaning with underlying philosophical and religious principles† (Han Zhang, 2009, p.397). From Han Zhang’s analysis, we can find that the design of the Forbidden City’s buildings contains profound Chinese culture. As Wang (2010) indicates that â€Å"[t]he calligraphy tablets hung over each main gate and building, although often neglected by visitors, actually are special embodiments of traditional Chinese concepts either well known or maybe unexpected by their readers† (Wang, 2010, p.11). Taking the Confucianism â€Å"Harmony† for example, there are three great front halls in the Forbidden City, their names are â€Å"Hall of Supreme Harmony†, â€Å"Hall of Central Harmonyâ € , and â€Å"Hall of Preserving Harmony†, respectively. In ancient time, the emperor usually believed that he was the son of Heaven. â€Å"His highest goal was established to achieve harmony among Heaven, the Earth and the human being. Thus, harmony was repeatedly emphasized on the tablets to idealize the effectiveness of the court† (Wang, 2010, p.12). This is the one of the traditional cultures that can be found in the Forbidden City. The Forbidden City’s buildings also represent the theory of â€Å"syncretism between heaven and man† and the theory of â€Å"self-discipline and social commitment† (Zi, 1987, p.448). Therefore, the Forbidden City implies many great and profound Chinese classic culture. Starbuck is the symbol of fashion. From the surface of Starbucks, we can find that the meaning of Starbucks is represented by the green logo, â€Å"the fine coffee drinks, music, cozy in-store setting and free Wi-Fi† (Puel, Pons, Jin, 2007, p.2). According to Han and Zhang (2009), Starbucks is making itself to be a widely known brand in China. â€Å"Particularly, Starbucks is targeting affluent Chinese customers as well as the growing middle class, making itself ubiquitous in chic shopping malls†¦. Drinking Starbucks coffee has gradually become fashionable† (Han Zhang, 2009, p.397). Therefore, Starbucks’ fashion culture has deeply rooted in the heart of Chinese customers. Starbucks’ fashion culture contradicts to the Forbidden City’s classic culture. As Cha (2003) indicates that Chinese classic culture is dominated by the Confucianism, and in the Confucianism, â€Å"self-cultivation† is an important thought which means people should keep their bodies to be healthy and through self-reflection to improve their minds to reach an optimal state (Cha, 2003, pp.170-171). From the definition of â€Å"self-cultivation†, we can recognise that Chinese classic culture advocates the importance of having a peaceful living style, the importance of implementing self-discipline, and the importance of keeping on the rails. However, as Harrison (2005) shows that Starbucks’ fashion culture advocates the importance of freedom and the importance of materials (p.281). Therefore, Starbucks’ fashion culture could not combined with Starbucks’ classic culture. Objections Except the cultural factors, media influence is also a cause for Starbucks’ failure in the Forbidden City. In recent years, China’s internet media is developing so fast and is becoming more and more powerful on affecting business. According to Chiu, Lin, and Sliverman (2013), the most popular websites, such as Sina, Tencent, and Netease, are important media for companies to engage in the increasingly affluent online audience, and companies can also use â€Å"social media as a vital source of information for brand and product decisions. China’s social media landscape is a complex environment at huge scale† (Chiu, Lin, Sliverman, 2013, para.3). As above mentioned that Chenggang Rui posted a blog on Sina to against Starbucks. According to Han and Zhang (2009), â€Å"[s]ince September 2006, Sina launched a blogsphere, informally called ‘celebrity blogs (mingren boke),’ where most bloggers are well-known public figures such as performers, artists and writers. Using a ranking system, Sina promotes certain celebrities’ blogs and downplay others† (Han Zhang, 2009, p.397). After Rui posted his blog, his arguments were spread to many places quickly because of the tremendous internet users. â€Å"Without using Sina as platform, Rui’s voice would not have been so well received† (Han Zhang, 2009,  p.397). Therefore, the internet media, to some extent, made influence on Starbucks’ failure in the Forbidden City; however, the cultural problems is still the main cause for Starbucks’ failure because internet media is only a kind of medium for opponents to advocates the cultural problems. Conclusion This article shows the problems that Starbucks had experienced in the Forbidden City and analyses the reasons why Starbucks failed in the Forbidden City. With above mentioned analysis, we can draw a conclusion that Starbucks failed in the Forbidden City because of the serious Chinese culture shock. Even though Starbucks has achieved success in the general business areas in China, it still cannot thoroughly cope with the problem of culture shock in the most traditional areas in China, such as in the Forbidden City. The case that Starbucks failed in the Forbidden City is a good example not only for Starbucks itself but also for other multinational corporations in China to understand how serious the Chinese culture shock is, and Starbucks can also learn from this case to avoid making the same inappropriate decision in the future. References Bezlova, A. (2013). China’s traditional moon cake now a status symbol. Retrieved from http://www.culturebriefings.com/articles/chinmnck.html Cheng, D. (2012). The complicated history of U.S. Relations with China. Retrieved from http://www.heritage.org/research/reports/2012/10/the-complicated-history-of-us-relations-with-china Cha, S. H. (2003). Modern Chinese Confucianism: The contemporary neo-Confucian movement and its cultural significance. Social compass, 50(4), 481-491. Chiu, C. Y., Cheng, S. Y. (2007). Toward a social psychology of culture and globalization: Some social cognitive consequences of activating two cultures simultaneously. Social and Personality Psychology Compass, 1(1), 84-100. Curtin, P. A., Gaither, T. K. (2007). International public relations: Negotiating culture, identity and power. Thousand Oaks, CA: Sage. Chiu, C. Lin, D., Sliverman, A. 2013. High influence: China’s social media boom. Retrieved from http://cmsoforum.mckinsey.com/article/high-i nfluence-chinas-social-media-boom

Literature review: learning on the internet

Literature review: learning on the internet RESTRICTED CHAPTER TWO LITREATURE REVIEW LITERATURE ON THE SUBJECT 1.Internet is an important tool in the modern day context. All searches pertaining to any kind of search to are within the finger tips. There by it has become a topic for researchers to research and write the thesis on covering various aspect of the internet. Saunders says that a thorough understanding of, and insight into, previous research that relates to a project is essential for the quality of the study, this usually being achieved by means of critically reviewing the extant literature1 2.My literature review of research will be based on publications such as subject related text books .E books, articles, journals, periodicals, projects proposals and unpublished thesis, pamphlets, completed reports and other available literature information resources already published by external authors on the respective subject area. According Timothy and Ellis they state that the literature review should be structured in following stages. So that I have used this model in order to sequence my literature review.2 On the attributes of a critical literature review Saunders, Mark N. K.1 Rojon, Cà ©line21School of Management, University of Surrey, Guildford, GU2 7XH, United Kingdom;2Department of Psychology School of Management, University of Surrey,Guildford, GU2 7XHUnited Kingdom Achieved by means of critically reviewing the extant literature.1 2A Systems Approach to Conduct anEffective Literature Review in Support of Information Systems Research Yair Levy and Timothy J. Ellis Graduate School of Computer and Information Sciences,Nova Southeastern University, Florida, USA INTRODUCTION TO THE INTERNET 3.There are plenty of definition can be find on what internet and this what the oxford dictionary says â€Å"A global computer network providing a variety of information and communication facilities, consisting of interconnected networks using standardized communication protocols†. The definition itself brings out what it exactly does and also it describes under which conditions it should use. According to Linux information project on 2005 describes it as a network that is composed of a number of smaller computer networks which connects thousands of networks and hundreds of millions of computers throughout the world. It shows that no barriers on using the internet for any kind of a user for the benefit of him or for his organization. 4.The internet is a unique collection of networks, or a network of networks, that was made possible by scientists with vision to implement a compatible communication standard. These standards’ allow computers built by a variety of manufacturers running on different operating systems to exchange data. The internet, therefore, is able to facilitate the sharing of resources among participating organizations, which include government agencies, educational institutions, and private corporations.3 HISTORY AND EVOLUTION OF INTERNET 5.The Internet has revolutionized the computer and communications world like nothing before. The invention of the telegraph, telephone, radio, and computer set the stage for this unprecedented integration of capabilities. The Internet is at once a world-wide broadcasting capability, a mechanism for information dissemination, and a medium for collaboration and interaction between individuals and their computers without regard for geographic location. The Internet represents one of the most successful examples of the benefits of sustained investment and commitment to research and development of information infrastructure. Beginning with the early research in packet switching, the government, industry and academia have been partners in evolving and deploying this exciting new technology4 6.The history of the Internet begins with the development of electronic computers in the 1950s. Initial concepts of packet networking originated in several computer science laboratories in the United States, Great Britain, and France. The US Department of Defense awarded contracts as early as the 1960s for packet network systems, including the development of the  ARPANET(which would become the first network to use the  Internet Protocol.) The first message was sent over the ARPANET from computer science Professor Leonard Kleinrocks laboratory at  University of California, Los Angeles(UCLA) to the second network node at  Stanford Research Institute(SRI)4. 7. Access to the ARPANET was expanded in 1981 when theNational Science Foundation(NSF) funded theComputer Science Network (CSNET). In 1982, theInternet protocol suite(TCP/IP) was introduced as the standard networking protocol on the ARPANET. In the early 1980s the NSF funded the establishment for national supercomputing centers at several universities, and provided interconnectivity in 1986 with theNSFNETproject, which also created network access to thesupercomputersites in the United States from research and education organizations. CommercialInternet service providers(ISPs) began to emerge in the late 1980s. The ARPANET was decommissioned in 1990. Private connections to the Internet by commercial entities became widespread quickly, and the NSFNET was decommissioned in 1995, removing the last restrictions on the use of the Internet to carry commercial traffic4. 8.Since the mid-1990s, the Internet has had a revolutionary impact on culture and commerce, including the rise of near-instant communication byelectronic mail,instant messaging,voice over Internet Protocol(VoIP) telephone calls,two-way interactive video calls, and theWorld Wide Webwith itsdiscussion forums,blogs,social networking, andonline shoppingsites. The research and education community continues to develop and use advanced networks such as NSFsvery high speed Backbone Network Service (vBNS),Internet2, andNational LambdaRail. Increasing amounts of data are transmitted at higher and higher ___________________________________________ exploring the internet by Clive C. Sanford 4http://www.internetsociety.org/internet/what-internet/history-internet/brief-history-internet#Origins(accesed on 03 march 2014) speeds over fiber optic networks operating at 1-Gbit/s, 10-Gbit/s, or more. The Internets takeover of the global communication landscape was almost instant in historical terms: it only communicated 1% of the information flowing through two-waytelecommunicationsnetworks in the year 1993, already 51% by 2000, and more than 97% of the telecommunicated information by 2007.[1]Today the Internet continues to grow, driven by ever greater amounts of online information, commerce, entertainment, andsocial networking4. 9.The Internet has revolutionized the computer and communications world like nothing before. The invention of the telegraph, telephone, radio, and computer set the stage for this unprecedented integration of capabilities. The Internet is at once a world-wide broadcasting capability, a mechanism for information dissemination, and a medium for collaboration and interaction between individuals and their computers without regard for geographic location.3 10. The graph below shows how the expansion of internet from 1996 to 2014. Sri Lanka as a developing country 31mpeople out of hundred use intenet accordind to the cences given by the international telecomunucation union. Internet users per 100 inhabitants Source:International Telecommunications Union POSITIVE IMPACT OF THE INTERNET POSITIVE IMPACT OF THE INTERNET 11.Educational achievement is perhaps of secondary importance to many of the children; however, it too seems to be a real advantage. From 10 years of age onwards, there is a pressure from school to get the internet and a sense that access to the internet allows the willing student to attain a higher quality of extra information relevant to the subjects.4 12.This research suggest that it also has a role re-engaging some of the educationally disengaged, as they enjoy the control and fun of working with a PC. It can also enable the academically able to find more relevant information and research more effectively. For some though, who are not particularly interested in schoolwork, they remain uninterested whether they have internet access or not. 13.Research about the Internet generally has focused on social effects, such as psychological well-being; for instance, children are more likely to use the internet when they feel lonely. A study by Michigan State University has found that the internet has had a positive effect on reading but not mathematics. One explanation is the internet is a text rich environment with fewer opportunities to foster mathematics or science skills; however, both the Internet and children are changing. Students increasingly use visualization, which can relate to mathematics and science as much as creative writing.4 14.The internet can facilitate a game like learning environment, which is highly motivating and interesting to students. Unlike in traditional classrooms, students do not sit across from the teacher, hold a textbook, and take a final exam. Instead, they can explore new information on the internet like a game combining both the learning journey and entertainment. More research is needed in this area as additional online games are built specifically for history, mathematics and science. Gaming has the potential to have a different kind of cognitive impact than traditional learning. 15.The internet’s is more exciting and challenging as a research environment than earlier media because it is a complex virtual, social and physical world that school children participate and co-construct, rather than something that is merely watched TV or PC. It becomes a complex virtual universe behind a small screen on which developmental issues play out in old and new ways, offering new views in to the thoughts, feelings and behaviours of schoolchildren’s. This universe will continue to expand as web-connected cell phones and other new internet applications emerge. Thus, existing theoretical models, research programmes and methodological techniques in developmental psychology are both challenged and stimulated by interactions between youth and the internet.5 16.According to the research done by three Japan universities regarding â€Å"Children and the Internet in Japan†, they identified that junior high school students enrolled in the school that use the internet had higher skills for practical use of information compared to students in the school that did not use the internet in its classes. This indicates that internet use in school activities helped in increasing the ability of students to use information practically. In this research, they proposed that â€Å"skills for practical use of information† are composed of six sub skills, namely, skill of collections, the skill of judgment, the skill of expression, the skill of processing, the skill of creation, and the skill of communication. In terms of these skills, students in the school that used the internet in its classes had particularly better skills of collection, judgment, expression, processing and communication compared to the students enrolled in the school that d id not use the Internet in its classes.5 17.Students possibly will feel bored if they only study from textbook day by day. That is why internet can be good alternative media to improve students’ motivation in studying. By using internet as a learning media, students can see relevant pictures or animations, which are related to lesson. Based on some reliable researches, students’ motivation in studying can increase fast if teachers or lectures use pictures or animations in explaining lesson.5 2-1 RESTRICTED Unethical Act Among Contractors: Class F in Selangor Unethical Act Among Contractors: Class F in Selangor 1.0 INTRODUCTION Contractors are the independent entity that agree to construct certain number or quantity of goods, material, equipment personnel ,or services that meet the requirement of specifications at a mutually price with a specific timeframe with another independent entity call contractee or project owner (Oxford Times). All contractors are rated Class F are Bumiputera. According to Article (160(2)) the concept of a bumiputra ethnic group in Malaysia was coined by activist Tunku Abdul Rahman. It recognized the special position of the Malays provided in the Federal Constitution of Malaysia, in particular Article 153. But, the constitution does not use the term bumiputra; it defines only Malay and aborigine (Article 160(2)).This means that the contractor is Class F Bumiputera contractors and do not need to apply for Recognition of Bumiputera. According to PKK (Pusat Khidmat Kontractor) until 26th June 2010 there are 4210 registered class F contractors in Selangor. A countrys economic system, irrespective construction industry plays a role in, construction industry plays a substantial role in a countrys national economic system (Zantanidis Tsiotras, 1998). Indeed, this sector is an important employer of a nations workforce as it employs between 2% to 10% of total workforce of most countries (Abdul Rashid Hassan, 2005). Malaysia has gained an impressive economic growth during the last three decades (Abdul Rahman et al, 2005) and this sector has employed an estimated 798,200 workforce nationwide in 2004 (CIDB, 2006). The Malaysian Government has given a much needed boost to the countrys construction industry under the 9th Malaysian Plan where a total of 880 projects worth RM15billion is to be tendered (The Star, 2006). It should be foregrounded that the issue of poor quality in the construction sector has, nevertheless. been identified as a major concern even as far back as the mid 1980s (The Star, 2006). Generally, it is a rule that constructi on projects must be completed within the planned cost, scheduled time and required quality. Quality may sometimes be ignored in this industry to cut the costs or to shorten the project time (Turk, 2006). To deal with the low quality problem faced by the industry, quality management is seen as an approach to achieve the required level of quality of the end product and has been given great attention worldwide over the past three decades (Hiyassat, 2000; Berawi and Woodhead, 2005). However, there is a perception that majority of quality related issues are caused by human factor. In response to that perception, a study was performed to look into the relationship between professional ethics among participants of construction sector and the quality related issues in Malaysian construction sector. It should be noted that for this purpose of survey, contractors and clients are regarded as professions and they are required to demonstrate a high degree of professionalism in performing their t ask, in response to the Governments effort who has introduced the National Integrity Plan to enhance integrity and ethics in the nation. Unethical acts of fraud, waste, abuse, and corrupt practices are what receive prominent treatment in the media worldwide. Such as inappropriate gifts, unauthorized payments, and fiscal infractions are the unethical act problems most noted. The Conference Board in New York reported that the above issues have widespread agreement on each of these issues as being a serious concern among the leaders of the free world, including those in the United States, Canada, Japan, and Australia. Due to the increased of public awareness toward the contractor unethical acts and also decreased of public tolerance for wrong-doing, it is important for contractor to focus specifically on the question of how professional ethics should be incorporated into awareness of individual to make sure every projects should be completed as standard. The ethical statement can describe the act was right or wrong, or act with a right or wrong which it can provide a line of distinction between good and evil of the act or the tendency of a person or at least it can develop guidelines that can be made with various moral considerations(J.L Mackie, 1971). Ethical act are very important because it use to determine the thoughts, actions and behavior of members of the organization to fulfill their responsibility and trust as an employee. It is also to create statements and coordination between the contractors as a key institution for national development. Ethical act also important to maintain and improve client confidence in the organization, 84% of FMIs respondents said that theyve seen an unethical act committed in the construction industry in the past year is an alarming statistic. Contractors, can take little comfort in the probability that incidence of unethical behavior is just as high in other industries these days. FMI had offer f our solution and one of the solutions is to stiffer the penalties for those caught in unethical or illegal acts is the least likely to succeed. Secondly, the FMI had suggest to develop an industry-wide code of ethics which these codes of ethics need to be enforced in every country. A less formal but corollary solution would hit closer to home. Companies should place more emphasis on social responsibility in their dealings with other firms. This approach is easier said than done, of course, although a few respondents in the survey say they have walked away from projects or companies and suffered short-term consequences as a result. They did not indicate, however, that they regretted their decisions in the long term. Training in ethical conduct is the fourth solution, and its the one that holds the most promise as long as it is coupled with commitment to these practices from the top ranks of any construction company. The FMI report states that unethical acts can signal a failure of management to know how to get the job done the right way. 1.2 Problem statement Due to many issues in our country regarding construction industry that lead to the unethical act by the contractors in running the projects such as the issue on the Kuala Lumpur Middle Ring Road 2( MRR2 ), Matrade building and also the issue on the Navy Recruit Center. If this ethical issue still going on in our construction industry, it will affect our construction quality. According to the Works Minister Datuk Seri S. Samy Vellu, more than 18,000 contractors and sub-contractors were either paid late or have yet to receive payment for completed work totaling RM23.7billion since 2000. This is a very huge sum, about 14% of the allocation for development projects under the 9th Malaysia Plan. The Construction Industry Development Board (CIDB) had carried out a six-month survey on 330 contractors, in which 273 cases of payment problems involving RM877.8mil were reported. Another example for the issue in Malaysian construction industry is the Plaza Rakyats project. The government will iss ue a warning notice to the Plaza Rakyat project contractors to continue the project as early as next week, initially, and if defaults, the tender will be forfeited. Minister of Federal Territory and Welfare Commissioner, Datuk Raja Nong Chik Raja Zainal Abidin said, a notice will be given to contractors in a week or two so that they continue construction work. 1.3 AIM AND OBJECTIVES OF THE RESEARCH. The aim of this research as far as the unethical act among contractors class F in Selangor is concerned, is to identify the effect in the construction quality. These main objectives are broken down to more specific objectives in order to better understand the topic at hand. To achieve the desired aim of the research, there are some of the objectives had been choose for this research. Objectives for this research are: Assess the level of professional ethical standards and its practice in the Selangor construction industry, To identify the problems associated to unethical acts in construction industry Determine the role of professional ethics in improving quality management in construction industry. 1.4 Organization of Study Chapter 1 introduces the research topic. It discussed about the unethical acts, definition of contractor, definition of bumiputera, issue related to unethical acts in construction industry problem statement and the objectives that initiated this study. Chapter 2 involves the extensive review of literature relating to the relevant topic of the subject matter of research including the professional ethic and relationship between ethic and construction. Chapter 3 discussed the methodology used in this study. It includes the developed hypothesis and data collection methods. It also includes a brief explanation on the data analysis methods. Chapter 4 reports data analysis and findings of the survey obtained from the findings. Chapter 5 involves detail finding and discussion on the result of survey base on the analysis. Chapter 6 present conclusions and recommendation based on the findings of the study. Key recommendation and their future prospect have been outlined which may assist in future plans to facilitate knowledge sharing plan in school. CHAPTER 2 LITERATURE REVIEW 2.0 Introduction In this chapter a great extent of literature of relevant concepts are being reviewed in order to get insight of and identify variables which have impact on the objectives of this research. The researches which are done by different scholars and researches will be reviewed. 2.1 Quality In Construction Industry Quality is a measure of excellence or a state of being free from defects, deficiencies, and significant variations, brought about by the strict and consistent adherence to measurable and verifiable standards to achieve uniformity of output that satisfies specific customer or user requirements. ISO 8402-1986 standard defines quality as the totality of features and characteristics of a product or service that bears its ability to satisfy stated or implied needs Since tribal chiefs, kings, and pharaohs ruled the issues of quality have already existed (Gitlow, 2005). In a project scenario, quality can be defined as meeting the legal, aesthetic (Arditi Gunaydin, 1997) and functional requirements of a project (Berawi, 2006). Customers nowadays place more emphasis on the quality of products rather than the price which was the major concern in the past. Hence, a rapid expansion of international competition in quality has occurred (Tsiotras Gotzamani, 1996; Abdul Rahman Berawi, 2002). In America, the professional societies have prepared codes of ethics since before early twentieth century. These have been incorporated to a greater or lesser degree into the regulatory laws of various countries. Such as The Institution of Civil Engineers (ICE) in the UK, they have a code of ethics incorporated into its standards of conduct and as for Canadian societies of professional engineers likewise have such codes of conduct as well (Bowen, P., R. Pearl and A. Akintoye. 2007). Mainly for practical and professional use, codes of ethics are developed for supplementing the building codes and other acts of law. These ethical aspects were considered based on mans natural morals (Darabarek Symotink, 1999). In terms of quality in construction industry, Turk (2006), citing Arditi Gunaydin (1999), mentioned that à ¢Ã¢â€š ¬Ã‹Å"high quality building project includes factors like the design being easily understandable and applicable, conformity of design with specifications, economics of construction, ease of operation, ease of maintenance and energy efficiency. According to S. Fryer, Buro Happold, UK (2007), no matter how clever or elaborate the design of a structure is, any construction project will ultimately be judged on the quality of the finished product. Zantanidis Tsiotras (1998) and Abdul Rahman Berawi (2002) mentioned the expectations for quality construction projects will continue to grow rapidly as the number of affluent, educated and quality conscious customers are increasing. With the globalization of economy, construction firms worldwide are actively engaged to achieve internationally accepted quality levels to ensure their position in the emerging international market especially in those developing economies. Thus, the need to have a proper system that ensures quality is critical, coupled with high level of attention paid to quality management in construction industry (Abdul Rahman, Berawi, et al, 2006). Scholars indicate that quality management has been adopted by many countries in their construction industry including Hong Kong (Leung et al, 1999; Au Yu, 1999 and Tang Kam, 1999), Singapore (Low Omar, 1999 and Low Yeo, 1997), Greece (Tsiotras Gotzamani, 1996 and Zantanidis Tsiotras, 1998), Turkey (Turk, 2006), Jordan (Hiyassat, 2000), Saudi Arabia (Bubshait Al Atiq, 1999), Sweeden (Landin, 2000), United States (Chini Valdez, 2003), South Africa (Rwelamilla, 1995) and Malaysia (Chew Chai, 1996). As for Malaysia,we have the code of ethics for co ntractor which need to be followed by the contractors. In that code of ethic it emphasizes more about the level of professionalism, productivity, and quality. Excellence in the construction industry is very much determined by the level of efficiency, productivity, quality and professionalism in the delivery services. The delivery of construction services is connected directly or closely related integrity of the construction contractors in the performance responsibilities. This aspect has been dealt with when Construction Industry Master Plan (CIMP): 2006-2015 enacted. CIMP has given special emphasis on increasing productivity, image and professionalism in the construction industry as the strategic thrusts of this industry to greater high. For this purpose CIMP also has proposed legislation Code of ethics to further strengthen the practice of values and moral ethics among contractors in the country in implementation of construction works. Many developers were also fined for not confo rming to the Housing Development Act, including not preparing reports on schedule, especially work progress reports every six months (NST, 2010). This quality in our construction industry can be improved if everybody doing their part. For every developer, starting a new housing project is a new business. So, if they understand their responsibility as a developer and follow the agreement, they must complete the projects according to the dates set. According to Michael S. Poles, the quality of the construction can be control by competence supervision. It is the duty of the contractor to complete the work covered by his or her contract, in accordance with the approved plans and specifications. The contractor must carefully study the approved plans and specifications and should plan their schedule of operations well ahead of time. If at any time it is discovered that the work which is being done is not in accordance with the approved plans and specifications, the contractor should immed iately correct the work. In order to assure that the work being done is in accordance with the approved plans and specifications, the contractor must always supervise, and coordinate of all of the work that need to be completed. 2.2 Professional Ethic in Construction Industry Profession is an occupation that requires both advanced study and mastery of a specialized body of knowledge and undertaken to promote, ensure or safeguard some matter that significantly affects others well being (Vee Skitmore, 2003). Almost every profession has its codes of ethics to provide a framework for arriving at good ethical choices. Therefore, professional ethics is a system of norms to deal with both the morality and behavior of professionals in their day to day practice, and ascribes moral responsibility not to an individual, but to all professionals practicing in a particular profession. For the building and designing professions, the incalculable value of human life demands nothing less than the highest moral considerations from those who might risk it otherwise (Mason, 1998, cited in Vee Skitmore,2003). Professional ethics concerns the moral issues that arise because of the specialist knowledge that professionals attain, and how the use of this knowledge should be governed when providing a service to the public (Ruth Chadwick, 1998). The construction industry is a perfect environment for ethical dilemmas, with its low price mentality, fierce competition, and paper thin margin (FMI, 2006). Jordan (2005) stated that unethical behavior is taking a growing toll on the reputation of the industry. From a survey conducted by FMI, 63% of the respondents whom are the construction players feel that construction sector is tainted by unethical conducts (FMI, 2006). Surveys conducted by researchers in Australia (Vee Skitmore, 2003) and South Africa (Pearl et al, 2005) identified several unethical conducts and ethical dilemmas in the construction industry such as corruption, negligence, bribery, conflict of interest, bid cutting, under bidding, collusive tendering, cover pricing, frontloading, b id shopping, withdrawal of tender, and payment game. It is evident that there exist significant areas of concern pertaining to the ethical conducts practiced by the construction professionals. There are many other efforts taken to increase the ethical standards and integrity among the professionals in construction sectors worldwide. According to Pearl et al (2005), the regulatory professional Acts relating to the built environment professional sector in South Africa were totally overhauled in the late 1990s and a new suite of professional Acts were promulgated in 2000 to enhance the professionalism. Meanwhile, in America, the Construction Management Association of America (CMAA) has updated its code of ethics to include a wider range of professional services as well as professional services among construction players (CMAA, 2006). A Standard of Professional Conduct to govern the ethical practices in the American civil engineering profession was published by the American Society of Civil Engineers (ASCE, 2007). On the other  hand, Australia has their own codes of tendering to enhance fairness and transparency (Ray, 1997). In Malaysia, the government is very serious about improving ethics in both public and private sector. For instance, the construction industry has introduced codes of ethics for contractors to encourage self regulation among the contractor in this sector (The Star, 2006). Stakeholders of construction projects were asked to enforce the existing code of ethics to safeguard the engineers good name (The Star, 2006). The Construction Industry Development Board (CIDB) of Malaysia also host integrity courses for contractors to promote the importance of integrity and plans to make the course as a pre9requisite for contractors when renewing their registration (The Star, 2006). Finally, the launching of the Construction Industry Master Plan (CIMP) by CIDB in 2004 also had in the master plan an objective to enhance professional ethics in the local construction industry (Construction Industry Master Plan 2006 à ¢Ã¢â€š ¬Ã¢â‚¬Å" 2015). According to Housing and Local Government Minister Datuk Seri Kong Cho Ha, 1,345 developers and more than 5,000 directors of such companies involved in problematic projects have been blacklisted because they abandoned housing projects and also those that were not completed on schedule. They are not only been blacklisted, they also fined for not conforming to the Housing Development Act, including not preparing reports on schedule, especially work progress reports every six months(NST 2010). 2.3 Relationship between Professional Ethic and Quality Related Issues Besterfield et al (2003) mentioned quality is dependent on ethical behavior, whereby quality and ethics have a common care premise which is to do right things right and it is a proven way to reduce costs, improve competitiveness, and create customer satisfaction. It is evident that low  ethical standards among construction professional will lead to quality problem. These issues were highlighted in the media and received great concern of public (Fleddermann, 2004; NST, 2004; and RTM, 2006). As an example, the ethical related case in the construction industry was the collapse of the Hyatt Regency Kansas City walkways (Fleddermann, 2004). It is a hotel project in 1970s with walkways suspended over the large atrium. With the intention to save the cost, the subcontractor for the fabrication and erection of atrium steel suggested changes in the structure and it was approved by the consulting structural engineer. During the construction, part of the atrium collapsed and the engineer came out with the report saying that the design was safe and ready to be opened for business in 1980. The tragedy happened one year after the completion of the project during a dancing party in the atrium lobby. Some of the walkways on which people were dancing collapsed onto the crowded atrium floor, leaving more than a hundred people died and almost two hundred injuries. Investigation was then conducted by the Missouri Board of Architects, Professional Engineers and Land Surveyors reported that the original design was only marginally acceptable to the Kansas City building code where the walkways would only have had approximately 60% of the capacity required by the code. The situation was even worse in the new design proposed by the steel subcontractor and approved by the engineer. The consultant was found negligence in its investigation of the atrium collapse and places too much reliance on the subcontractor. Therefore, the engineer has been charged for negligence, incompetence, and misconduct. Both the engineer and the consultant firm lose license of practicing. This case strongly indicates that unethical behaviour will lead to quality problems and structural failures. In Malaysia, as an example, a newly opened specialist hospital in Johor Bahru was closed due to fungi attack on the equipments and walls (RTM 2006). It was found that many of the hospitals equipments such as oxygen piping and sewerage system are not according to the specifications. This clearly shows the poor ethics of the contractor who failed to do right things right. The contractor was given three months to rectify problems including leaking pipes, broken ceilings and faulty air conditioning ducts (NST, 2004). Another substandard quality of construction project in Malaysia is the RM238 million Middle Ring Road Two (MRR2) flyover which was closed to traffic after cracks were found in 31 pillars and structural movements were detected (The Sun, 2004). The Government engaged an independent consultant from the United Kingdom to investigate the defects. The independent consultant identified that design deficiencies and improper anchoring of the columns to the crossbeam were the main cau se of the cracks (NST, 2004). Design deficiency is found to be a negligence on the design team and the repair works was then carried out at an estimated cost of RM20 million. Contractors confront dozens of issues, many of which have substantial impact on their own self or organization, as well as others involved in the project. Many decisions have a straight forward answer determined by contract language or budget. Some, however, require entering an indistinct gray zone where the contractor must use best judgment to devise a course of action. Ethical questions raised include: what happens when professional codes and regulations lag behind technological innovations; what precautions must engineers take when trying to balance the benefits, new technologies bring against risks to public safety, often associated with engineering innovation and what are engineering and corporate responsibilities to the public for failed innovation; and should he hold then payments for the benefit of his organization. Often these challenges are managed with little or no preparation or formal guidelines and sometimes with negative results. Engineering ethics is attracting interest in colleges of engineering throughout the world. Therefore, the new technology must address the human being as its central subject and has to be introduced by ethics (Cywinski, Z. 2001). The construction of the new national palace at Jalan Duta, Kuala Lumpur has doubled in a period of four years from RM400 million to RM 811 million. Contracts for the construction were awarded to three companies through direct negotiations instead of open tenders ( NST 2003). Government will focus on overcoming the problem `leakage of tenders in the Ninth Malaysia Plan (RMK-9) are exploring the possibility of tightening conditions of the application to the contractor class F. Entrepreneur and Cooperative Development Minister Datuk Mohamed Khaled Nordin said the conditions were studied for class F contractors license applican t is to ensure that applicants undergo interview, examination, has offices and operations background of the net. The number of contractors has increased dramatically recently that 46.983 of the contractors registered with the Contractor Service Centre (PKK) in the country. Of the total, 35,544 are Class F contractors. The contractors will face intense competition in seeking jobs or contracts, and more disturbing is the number of contractors that own more than the number of contracts offered, especially from the government. CHAPTER 3 RESEARCH METHODOLOGY 3.0 Introduction This section describes the methodology used in conducting this research. It starts by describing the sample selection, research design, variables and hypothesis and continues with the description of the methods of data collection and data analysis. Finally, some of the limitations and key assumption of the findings are described. Primary source were used to collect data from the sample to assess the perception of respondents toward knowledge management and knowledge sharing, the school culture and work environment, individual barriers and organization barriers toward knowledge sharing. The selected data was tested and conclusions were drawn. There are 6 procedures used in completing this study. First, a review of literature was conducted. The review was focused on the emergence of knowledge economy and knowledge management. Then the roles of knowledge sharing were discussed. A further potential barrier toward knowledge sharing was reviewed. Variable which has affected on knowledge sharing was also discussed. The review of literature served as a frame work for the study, and offered contrasting opinions of the authors. Second, a rough draft of the survey instrument and possible methods of testing and assessment of variables was done. A questionnaire was tested and validated before implementation reviewed for preventing any bias and avoiding errors. Questionnaire survey is the main research methodology used to achieve the research objectives. Five hundred (500) sets of questionnaires were distributed to targeted respondents in Selangor state by post ,via the internet , by hand. Targeted respondents ranging from consultant firms and contractor personnel within Selangor area .To ensure the reliability of the questionnaire survey, the sample size taken was then compared to match with the sample size recommended by Krejcie and Morgan (Sekaran, 2000: 295). Third, a survey was implemented. Questionnaire was sent to the list of all class F contractors which registered under PKK within Selangor area. Fourth, the result of the survey was assessed using Statistical Package for Social Science (SPSS) 15.0 software. The result were tested and presented with illustration. Scores were converted into percentage rating and presented in graphical format using excel 2003. Fifth, the conclusion was driven from data analysis and findings. Important points were highlighted and recommendations were given. Research Design The research was designed to explore the unethical acts among contractors regarding the issue on the construction quality in Selangor. The data produced from the research was then analyzed so that the following objective could be achieved. The stated hypothesis could be tested and further recommendations could be made with regard to specific focus of this research. To identify areas for further, and more specific areas of research Quantitative method utilizing survey method is used for gathering information. Variables Variables are classified into three groups including dependent variables, moderate variables and independent variables. Dependent Variable Unethical act is considered as dependent variable Independent Variable Contractors and construction quality are considered as independent variables. Data Collection A comprehensive literature review and self administered questionnaire were used to provide an insight to the study. These instruments provide informative ideas on the possible issued experienced by factors affecting perception of respondents about unethical acts will effected the construction quality The survey aimed is to target contractor class F in Selangor. The aimed was chosen because of two reasons. Firstly, there are too many contractors class F in Selangor. Secondly, the issues that involved contractor class F are more major in our construction industry and this give the author the possibility to sent the questionnaires to some contractor firm on one to one basis. The author would have preferred a larger sample of respondents to participate in the research, but due to limitation of time, this was not possible. The survey was aimed at the contractors class F in Selangor area. Data were collected from 500 contractors selected randomly from different firm and background. Questionnaire was send through mail and respondents were given three weeks to respond before they were send back to the author. 3. 4 Research Assumptions When conducting this study a number of assumptions have been made with regards to the literature reviewed and the respondent sample selected. These assumptions are identified as below. The secondary data collected from various resources have been assumed to be valid and based on the research done by authors. The secondary data has been assumed to present public interest as a whole and without any biases. The respondents have responded to the questionnaire without any biasness and to the best of their abilities. Instrumental Biases In administrating the questionnaire, there has been a significant degree of biasness that was exercised by researcher. The questionnaire was developed based on the respondents. This minimizes the respondent biasness to a certain level. Various scaling methods were utilized where appropriate to minimize biasness. Sample size Approximately 500 contractors were randomly selected from the target population of different firms. The simple random sampling method was utilized in this situation. This was to deter any sample biasness that could have distorted the result. The respondents samples of contractors were surveyed in the Selangor area. The contractors who responded came from various hierarchy levels of different firms. Scaling of Questionnaire In order in measure the operationally defined and elements of a variable, the rating scale has been used to elicit responses with regard to the person studied. A number of rating scales techniques and measurements were utilized when administrating questionnaire involving Category scale and Likert scale. Example: Category Scale What is your highest educational qualification? PHD degree Bs degree Ms degree Diploma/STPM Knowledge sharing is fully supported by school administrator. Extremely disagree/ Strongly disagree/ Disagree /Agree /Strongly Agree/Extremely A

Frankenstein | Feminist Interpretation

Frankenstein | Feminist Interpretation In most 18th century stories, men portray to be the more dominate figure in the story or family. Women in the stories tend to be less important than the males. In Mary Shelleys Frankenstein: or, The Modern Prometheus, women are mention that much and even if they are, they end up being killed or dying. Feminist interpreters tend to think Shelley has patriarchal man-centered views regarding gender roles. The idea of inactive women in a patriarchal society tremendously impacts the scheme of the novel. This is a complicated topic because most of her women characters are quiet, content women who, at first, share little similarities with self-confident women. Women did not have many rights as men and they could not stand up for themselves. If a woman were to do so they would be label as impertinent and unthankful. Shelleys approach on women is more complex than what we know it. She reveals to us that women are ambiguous and conflicting people, without a vast amount of control. Shelley reve als the injustice discreetly all through the book. All through the novel, Mary Shelley suggests that women are victims in a patriarchal world. In Frankenstein: or, The Modern Prometheus, Caroline Beaufort Frankenstein, Justine Moritz, and Elizabeth Lavenza are examples victims of a patriarchal world, dominated by men Caroline Beaufort Frankenstein, Victors mother is a victim in a patriarchal world. After her fathers death, Caroline is taken in by, and later marries, Alphonse Frankenstein. She ends up marrying Alphonse, a friend of her father. Alphonse later became her protector, he came like a protecting spirit to the poor girl, who committed herself to his care; and after the interment of his friend he conducted her to Geneva and placed her under the protection of a relation. Two years after this event Caroline became his wife (18). Alphonse is the dominate figure over Caroline, he is her protector. This shows women, like Caroline are not capable of taking care of themselves. In chapter 1, Shelley portrayal of Alphonses care for Caroline sounds as if she is in charge, Everything was made to yield to her wishes and her convenience (19). This short description shows that Caroline is cherished by Alphonse, making her more dominate. Shelley tells how Alphonse, strove to shelter her, as a fair exotic is sheltered by the gardener, from every rougher wind and to surround her with all that could tend to excite pleasurable emotion in her soft and benevolent mind (19). Shelley seems to portray women as a delicate person they needs to be care for by a man. Women, like Caroline appears to being incapable of taking care of themselves. This implies that women are victims in a patriarchal society, dominated by men. Justine Moritz lives with the Frankenstein family as their servant after her mother pass away. She is a victim in a patriarchal world, dominated by men. After William is murdered, the creature puts an image of Caroline, Williams mother, that William was carrying in Justines pocket and she is blame of murder. She later confesses wrongly to the crime out of trepidation of going to Hell. Victor did not believe that she has murder William saying, Justine Moritz! Poor, poor girl, is she the accused? But it is wrongfully; everyone knows that; no one believes it surely, Ernest? (62). Even after this she is still guilty of the murder and is executed. This reveals that Justine is a victim because even though she did not actually murder William, she was found guilty. The murdered was actually a male, the creature, yet Justine was punished. She is wrongfully executed for an action of a man. Justine is an innocent girl; she would rather face the consequences of a murder conviction than be excomm unicated by the church. Justine, a pure innocent soul, has no one defend her in trial. Yet, when Victor, a men, accused of killing Henry Clerval, has many people to defend him, a much more corrupt soul. For this reason Justine is put to death, therefore she is also a victim of a male dominate world. Elizabeth Lavenza is an example of women being victims in a male dominated world. Elizabeth is an orphan taken in by Victors parents. She is passive, waiting for Victors return. She is a victim is a mans whole because all she does majority of the time in the novel is wait for him to return. After receiving the news that Victor has fallen deeply ill she immediately writes him a letter, My dear Friend, It gave me the greatest please to receive a letter from my uncleà ¢Ã¢â€š ¬Ã‚ ¦my poor cousin, how much you must have suffered! I expect to see you looking even more ill than when you quitted Genevaà ¢Ã¢â€š ¬Ã‚ ¦My uncle will send me news of your health, and if I see but one smile on your lips when we meet, occasioned by this or any other excretion of mine, I shall need no other happiness (165-166). Elizabeth seems obsess with Victor, Shelleys portrayal of her seems to be as if she is in need of Victor, as if she would die without him. Elizabeth models the Victorian angel in the house. Victor describes her as a being heaven-sent. bearing a celestial stamp in all her features, fairer than pictured cherub (20). Victors description of Elizabeth makes us think that she is an angel. Victor is very fond of her, this show that Victor treasures her greatly, hence her being dominate over Victor for a moment. Victors action is the cause of Elizabeths death, because of the promise Victor broke to the creature he vows to take revenge on Victor. The creature ends up murdering Elizabeth on her honeymoon night with Victor. Even though at times Elizabeth appears to be dominating over Victor, he still surpasses and controls her, thus Elizabeth being a victim of a patriarchal world. Throughout the story Shelley suggests that women are victims in a patriarchal world, dominated by men. Frankenstein: or, The Modern Prometheus is an embodiment of Shelleys concern for feminine position and importance in the 18th century patriarchal society. Shelleys approach on women tells us that women are ambiguous and contradictory, lacking power. Shelley reveals the inequality inconspicuously all through the story. Throughout the novel, Mary Shelley suggests that women are victims in a patriarchal world. Caroline Beaufort Frankenstein, Justine Moritz, and Elizabeth Lavenza are victims of a patriarchal world, dominated by men. Men are the reasons why these women were punished. The novel exemplifies the unfairness of women in the 18th century and in the novel.

Review Of a Lion In Winter :: essays research papers

Henry, the King of England, married Eleanor for her land; their first son died, after him, John was Henry's favorite, Richard was Eleanors favorite, but turned out to be homosexual, Geoffrey plotted against all of them with the King of France who was Richard's "friend;" Henry had an affair with Rosalyn, and Eleanor, with Richard lead a couple of civil wars against him, so Henry locked Eleanor in a tower; Henry's lover died, he bought a wife, Alice, for the son who was to be King, but had an affair with her . . . And so went life in the late 12th century. Involved in this complex arrangement there are many aspects of life during this period including: the status of women, power of the church and living conditions all of which were illustrated in The Lion in Winter. One of the most apparent things in The Lion in Winter was the role of women. At first impression they did not seem significant. Eleanor was cheated on, not an uncommon practice, and then locked in a tower to only be aloud out on holidays. Alice was bought and then became Henry's new lover, and beyond that no other women were mention. Despite all this, when looked at more closely women were important to the feudal society. A king could acquire land by conquering, or marrying the daughter who had that land in her dowry. Also in the movie Eleanor wielded more power than one would have thought, for one she and Richard had led civil wars against Henry before. Secondly because of her control of the Aquataine she exercised more power than other women of the times. Because of all this women were necessary to the feudal system, but were still not regarded as meaningful. The role of the church was influential in the movie, but not as prominent as expected. It was the church that gave the king his authority and could take it away. Henry threatened to annul his marriage with Eleanor to gain leverage to obtain the Aquatain. There was even joking about being excommunicated, again. Without the church to have marriages and settle things of that nature it probably been more chaotic than it already was. It was the church that kept reading and writing going through the Dark Ages, and also played and important role in the late 12th century. More interesting than other topics was the living conditions. Whenever reading a fairy tale, or watching a movie about castles they are always glorified as wonderful places, large and beautiful, with every luxury.

Antigone is a Tragic Hero Essay -- essays papers

Antigone is a Tragic Hero A subject of debate in Sophocles’ play Antigone is which character complies with the characteristics of a tragic hero. The qualities that constitute a tragic hero are, in no particular order, having a high social position, not being overly good or bad, isolation, being tenacious in their actions, arousing pity in the audience, a revelatory manifestation, and having a single flaw that brings about their own demise and the demise of others around them. Creon possesses some of these qualities but, does not completely fulfill them all. Antigone does, however, conform to the persona of a tragic hero. The first qualifying aspect is that Antigone has a high social position. She is the daughter of Jocasta and Oedipus (the former king and queen of Thebes), and the niece of Creon (the present king of Thebes). Because of her stature she is capable of suffering more and losing the fame and regard she holds. Some may argue that because she had no political power she does not qualify to be a tragic hero but, she is still a powerful figure in Thebes. She was to be wed to Creon’s son, Haemon, and it seemed as though the citizens of Thebes knew how tragic her life had become. Both Creon and Antigone show that they are not overly good or bad. Creon shows his negative side when he creates a law against burying Polyneices. His positive side is that he has let Antigone and Ismene live with him and raise them after their father passed on. Antigone expresses her positive side when she insists on burying her brother who has been killed in battle. Antigone isolates herself from others, a quality common among tragic heros. Ismene offers to share the crime of burying their brother but, Antigone denies the re... ...come of her life was due to her own fatal flaw. Antigone clearly captures the audiences pity. Creon’s stubbornness and lack of compassion do not win pity. When Creon’s wife and son die the pity is shifted to them not Creon. All of Thebes sympathizes with Antigone, especially after she has been sentenced to die. Haemon even tells Creon what people have said. â€Å"And I have heard them, muttering and whispering†¦No other woman‘, So they are saying, ‘so undeservedly Has been condemned for such a glorious deed‘† (Lines 693-695). It is obvious that she had the pity of the entire city except for Creon. Only the chorus sympathized with Creon at times. Not having pity disqualifies Creon as being the tragic hero. From her tenacity and personal strength in defying the law to her tragic death, Antigone captures the audience’s pity and sympathy. She is the tragic hero.

Agency conflicts

The genius of public corporations teems from their capacity to allow efficient sharing or spreading of risk among many investors, who appoint a professional manager run the company on the behalf of shareholders. However, the public corporation has a key weakness – namely, the conflicts of Interest between managers and shareholders. The separation of the company ownership and control, which Is especially prevalent where corporate ownership Is highly diffused, gives rise to possible conflicts between shareholders and managers.In theory, shareholders elect the board of directors of the company, which in turn ire's managers to run the company for the Interests of shareholders. Managers are supposed to be agents working for their principals, that Is, shareholders, who are the real owners of the company. In a public company with diffused ownership, the board of directors is entrusted with the vital tasks of monitoring the management and safeguarding the interests of shareholders. Un fortunately, with diffused ownership, few shareholders have strong enough incentive to incur the costs of monitoring management themselves when the benefits from such monitoring accrue to all shareholders alike. The benefits are shared, but not the costs. When company ownership is highly diffused, this â€Å"free-rider† problem discourages shareholder activism. As a result, the interests of managers and shareholders are often allowed to diverge. With an ineffective and unmotivated board of directors, shareholders are basically left without effective recourse to control managerial self-dealings.Recognition of this key weakness of the public corporation can be traced at least as far back as to Adam Smith's Wealth of Nations (1 776), which stated: The directors of such Joint-stocks companies, however, being the managers rather of other people's money than of their own, it cannot well be the partners of a private cooperator frequently watch over their own†¦. Negligence and p rofusion, therefore, must always prevail, more or less, in the management of the affairs of such a company.Agency theory in a formal sense originated in the early asses, but the concepts behind it have a long and varied history. Among the influences are property-rights theories, organization economics, contract law, and political philosophy, including the works of Locke and Hobbes. Some noteworthy scholars involved in agency theory's roommate period in the asses included Airmen Lucian, Harold Demesne, S. A. Ross and the famous paper â€Å"Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure. † of Michael Jensen and William Neckline.In an ideal situation the manager (or entrepreneur) and the investors sign a contract that specifies how the manager will use the funds and also how the investment returns will be divided between the manager and the investors. If the two sides can write a complete contract that specifies exactly what the manager will do un der each of all possible future unforeseen events, there will be no room for any inflicts of interest or managerial discretion. Thus, under a complete contract, there will be no agency problem. However, it is practically impossible to foresee all future contingencies and write a complete contract.This means that the manager and the investors will have to set up the control rights to make decisions under those contingencies that are not specifically covered by the contract. Because the outside investors may be neither qualified nor interested in making business decisions, or if there will be too many of investors, the manager often ends up acquiring most of this residual control right. The investors supply funds to the company but are not involved in the company's daily decision making. As a result, many public companies come to have â€Å"strong managers and weak shareholders. The agency problem refers to the possible conflicts of interest between self – interested managers as agents and shareholders of the firm, who are the principals. In the described circumstances the manager will end up with residual control rights to allocate investors' funds, and sometimes the disclosure of investment channels may not be clear and full. So the investors are not longer assured of achieving fair returns on their funds, in other words the agency problem lies in a loss of trust for the manager by the shareholders of the company.In the following paper examples of the agency problem, proposed ways of solving and controlling methods and their analysis will be presented and discussed. Chapter 1 . Prerequisites of the agency problem and different approaches to solving it 1. 1 . How we detect an agency problem Agency theory suggests that the firm can be viewed as a combination of different relationships – some of them well and others can be loosely defined – between resource holders. The primary agency relationship in business is between stockholders and mana gers.The relationships are not necessarily harmonious; indeed, the agency theory is concerned with so-called agency conflicts, or conflicts of interest between agents and principals. This has implications for, among other things, corporate governance and business ethics. When the agency problem occurs sustain an effective agency relationship, those will be discussed a bit later. So what can be signals for managerial self-interested behavior? Sometimes, the manager simply steals investors' funds.Alternatively, the manager may use a more pesticides scheme, setting up an independent company that he owns and diverting to it the main company's cash and assets through transfer pricing. For example, the manager can sell the main company's output to the company he owns at below market prices, or buy the output of the company he owns at above market prices. Some oil companies are known to sell oil to manager-owned trading companies at below market prices and not always bother to collect the bills.Self- interested managers may also waste funds by undertaking unprofitable projects that benefit themselves but not investors. For example, managers may allocate funds the ay to take over other companies and overpay for the targets if it serves their private interests. Needless to say, this type of investment will destroy shareholders' value. What is more, the same managers may take anti-takeover measures for their own company in order to secure their personal Job and perpetuate private benefits.In the same vein, managers may resist any attempts to be replaced even if shareholders' interests will be better served by their resignation. These managerial entrenchment efforts are clear signs of the agency problem. One of the clearest signals for the existence of the agency problem can be management of free cash-flow. High level of free cash-flows are usually presented in companies on a maturity stage of life cycle, with a low level of growth, so those free cash?flows are supposed to be distributed as dividends or should be invested in some projects, both of the actions can probably increase the firm's value.But there are a few important incentives for managers to retain cash flows. First, cash reserves provide corporate managers with a measure of independence from the capital markets, insulating them from external scrutiny and discipline. This will make life easier for managers. Second, growing the size of the company via retention of cash tends to have the effect of raising managerial compensation. As is well known, executive compensation depends as much on the size of the company as on its profitability, if not more.Third, senior executives can boost their social and political power and prestige by increasing the size of their company. Executives presiding over large companies are likely to enjoy greater social prominence and visibility than those running small companies. Also, the company's size itself can be a way of satisfying the executive ego. Consequ ently, managers of those companies either sit n a huge bunch of money, or bound to invest in a lot of not so successful projects or to take over some other firms in attempt to diversify and not to pay dividends or at least too high dividends.In the contrast in high-growth industries, such as biotechnology, financial services, and pharmaceuticals, where companies internally generate funds, which fall short of profitable investment opportunities, managers are less likely to waste funds in unprofitable projects. After all, managers in these industries need to have a â€Å"good reputation†, as they must repeatedly come back to capital markets for funding. Once the managers of a company are known for wasting funds for private benefits, external funding for the company may dry up quickly.The managers in these industries thus have an incentive to serve the interests of outside undertaking their â€Å"good† investment projects. Generally, the heart of the agency problem is the conflicts of interest between managers and the outside investors over the disposition of free cash-flows, so in the following part I would like to present different approaches on how owners of the firm can hedge and maintain managers of the firm to lower the risk of agency problem ND, subsequently, agency costs. 1. 2.Remedies of agency problem Obviously, it is a matter of vital importance for shareholders to control the agency problem; otherwise, they may not be able to get their money back. It is also important for society as a whole to solve the agency problem, since the agency problem leads to waste of scarce resources, hampers capital market functions, and retards economic growth. Several main governance mechanisms exist to manage or completely remove an agency problem: 1. Board of directors 2. Incentive contracts 3. Concentrated ownership 4. Debt 5.Overseas stock listings 6. Market for corporate control (takeovers) In most of the countries, shareholders have the right to elect the board of directors, which is legally charged with representing the interests of shareholders. If the board of directors remains independent of management, it can serve as an effective mechanism for curbing the agency problem. For example, studies showed that the appointment of outside directors is associated with a higher turnover rate of Coos following poor firm performances, thus curbing managerial entrenchment.In the same vein, in a study of corporate governance in the United Kingdom, Daddy and McConnell report that the board of directors is more likely to appoint an outside CEO after an increase in outsiders' representation on the board. But due to the diffused ownership structure of the public company, management often gets to choose board members who are likely to be friendly to management. The structure and legal charge of corporate boards vary greatly across countries.In Germany, for instance, the corporate board is not legally charged with representing the interests of shareholders. Rather, it is charged with looking after the interests of stakeholders (e. G. , workers, creditors, etc. ) in general, not Just hardliners. In Germany, there are two-tier boards consisting of supervisory and management boards. Based on the German extermination system, the law requires that workers be represented on the supervisory board. Likewise, some U. S. Companies have labor union representatives on their boards, although it is not legally mandated.In the United Kingdom, the majority of public companies voluntarily abide by the Code of Best Practice on corporate governance recommended by the Catbird Committee. The code recommends that there should be at least three outside directors and that the board chairman and the CEO should be different individuals in USA there are a lot of examples of CEO and chairman being the same individual, what is in author's opinion, can be one of the most crucial factors of top-managerial frauds).Apart from outside directors, separati on of the chairman and CEO positions can further enhance the independence of the board of directors. In Japan, most welfare of the keiretsu to which the company belongs. As previously discussed, managers capture residual control rights and thus have enormous discretion over how to run the company. But they own relatively little of the equity of the company they manage. To the extent that managers do not own equity shares, they do not have cash flow rights.Although managers run the company at their own discretion, they may not significantly benefit from the profit generated from their efforts and expertise. In the end of sees researches showed that the pay of American executives changes only by about $3 per every $1,000 change of shareholder wealth; executive pay is nearly insensitive to changes in shareholder wealth. This situation implies that managers may not be very interested in the minimization of shareholder wealth. This â€Å"gap† between managerial control rights and cash flow rights may enlarge the agency problem.When professional managers have small equity positions of their own in a company with diffused ownership, they have both power and a motive to engage in self-dealings. Aware of this situation, many companies provide managers with incentive contracts, such as stocks and stock options, in order to reduce this gap and align better the interests of managers with investors'. With the grant of stocks or stock options, managers can be given an incentive to run the company in such a way that enhances shareholder wealth as well as their own.Against this backdrop, incentive contracts for senior executives have become common among public companies in the United States. As will be shown in the second chapter of the paper, however, senior executives can abuse incentive contracts by artificially manipulating accounting numbers, sometimes with the connivance of auditors (for example, Arthur Andersen's involvement's with the Enron debacle), or by alte ring investment policies so that they can reap enormous personal benefits.It is thus important for the board of directors to set up an independent compensation committee that can carefully design incentive contracts for executives and regularly monitor their actions, and these incentives contracts should be composed in accordance to the characteristics of firm's operational activity, as will be demonstrated in the third part of the chapter. An effective way to mitigate an agency problem is to concentrate shareholdings. If one or a few large investors own significant portions of the company, they will have a strong incentive to monitor management.For example, if an investor owns 51 percent of the company, he or she can definitely control the management (he can easily hire or fire managers) and will make sure that shareholders' rights are respected in the conduct of the company's affairs. With concentrated ownership and high stakes, the free-rider problem afflicting small, atomistic s hareholders dissipates. In the United States and the United Kingdom, concentrated ownership of a public company is relatively rare. Elsewhere in the world, however, concentrated ownership is regularly implemented.In Germany, for example, commercial banks, insurance and other companies, even families often own significant blocks of company stock. Similarly, extensive cross-holdings of equities among keiretsu member companies and main banks are commonplace in Japan. Also in France, cross-holdings and â€Å"core† investors are common. In Asia and Latin America, many companies are controlled by founders or their family members. In China, the government is often the controlling ownership has a positive effect on a company's performance and value, examples of Japan and Germany.This suggests that large shareholders indeed play a significant governance role. Of particular interest here is the effect of managerial equity holdings. Previous studies suggest that there can be a nonlinear relationship between managerial ownership share and firm value and performance. Specifically, as the managerial ownership share increases, firm value may initially increase, since he interests of managers and outside investors become better aligned (thus reducing agency costs).But if the managerial ownership share exceeds a certain point, firm value may actually start to decline as managers become more entrenched. With larger shareholdings, for example, managers may be able to more effectively resist takeover bids and extract larger private benefits at the expense of outside investors. If the managerial ownership share continues to rise, however, the alignment effect may become dominant again. When managers are large shareholders, they do not want to rob themselves. To summarize, there can be an interim range† of managerial ownership share over which the entrenchment effect is dominant.Studies showed (Merck, Shellfire, and Vishnu) that the â€Å"entrenchment effect† is roughly dominant over the range of managerial ownership between 5 percent and 25 percent, whereas the â€Å"alignment effect† is dominant for the ownership shares less than 5 percent and exceeding 25 percent. A relationship between managerial ownership and firm value is likely to vary across countries. Although managers have discretion over how much of a dividend to pay to shareholders, debt does not allow such managerial discretion.If managers fail to pay interest and principal to creditors, the company can be forced into bankruptcy and its managers may lose their Jobs. Borrowing and the subsequent obligation to make interest payments on time can have a major disciplinary effect on managers, motivating them to curb private perks and wasteful investments and trim bloated organizations. In fact, debt can serve as a substitute for dividends by forcing managers to disgorge free cash flow to outside investors rather than wasting it.For firms with free cash flows, debt can be a s tronger mechanism than stocks for credibly bonding managers to release cash flows to investors. Excessive debt, however, can create its own problem. In turbulent economic conditions, equities can buffer the company against adversity. Managers can pare down or skip dividend payments until the situation improves. With debt, however, managers do not have such flexibility and the company's survival can be threatened. Excessive debt may also induce the risk-averse managers to forgo profitable but risky investment projects, causing an underinvestment problem.For this reason, debt may not be such a desirable governance mechanism for young companies with few cash reserves or tangible assets. In addition, companies can misuse debt to finance corporate empire building. Companies domiciled in countries with weak investor protection, such as Italy, Korea, and Russia, can bond themselves credibly to better investor protection by listing their stocks in countries with strong investor protection, such as the United States and the United Kingdom.In other words, foreign firms with weak governance mechanisms can opt to outsource a superior corporate governance regime available decision to list its stock on the New York Stock Exchange (NYSE). Since the level of shareholder protection afforded by the U. S. Securities Exchange Commission (SEC) and the NYSE is much higher than that provided in Italy, the action will be interpreted as signaling the company's commitment to shareholder rights. Then, investors both in Italy and abroad will be more willing to provide capital to the company and value the company shares more.Generally speaking, the beneficial effects from U. S. Listings will be greater for firms from countries with weaker governance mechanisms. Studies confirm the effects of cross-border listings. Specifically, Dodge, Karol, and Stall (2002) report that foreign firms listed in the United States are valued more Han those from the same countries that are not listed in the U nited States. They argue that firms listed in the United States can take better advantage of growth opportunities and that controlling shareholders cannot extract as many private benefits.It is pointed out, however, that foreign firms in mature industries with limited growth opportunities are not very likely to seek U. S. Listings, even though these firms face more serious agency problems than firms with growth opportunities that are more likely to seek U. S. Listings. In other words, firms with more serious problems are less likely to seek the remedies. Suppose a company continually performs poorly and all of its internal governance mechanisms fail to correct the problem. This situation may prompt an outsider (another company or investor) to mount a takeover bid.In a hostile takeover attempt, the bidder typically makes a tender offer to the target shareholders at a price substantially exceeding the prevailing share price. The target shareholders thus have an opportunity to sell the ir shares at a substantial premium. If the bid is successful, the bidder will acquire the control rights of the target and restructure the company. Following a successful takeover, the bidder often replaces the management team, divests some assets or divisions, and trims employment in effort to enhance efficiency.If these efforts are successful, the combined market value of the acquirer and target companies will become higher than the sum of stand-alone values of the two companies, reflecting the synergies created. The market for corporate control, if it exists, can have a disciplinary effect on managers and enhance company efficiency. In the United States and the United Kingdom, hostile takeovers can serve as a rustic governance mechanism of the last resort. Under the potential threat of takeover, managers cannot take their control of the company for granted. In many other countries, however, hostile takeovers are quite rare.This is so partly because of concentrated ownership in th ese countries and partly because of cultural values and political environments disapproving hostile corporate takeovers. But even in these countries, the incidence of corporate takeovers has been gradually increasing. This can be due, in part, to the spreading of equity culture and the opening and deregulation of capital markets. In Germany, for instance, takeovers are carried out through transfer of block holdings. In Japan, as in Germany, inter firm cross-holdings of equities are loosening, creating capital market conditions that are more conducive to takeover activities.To the extent that companies with poor investment opportunities and excess cash initiate takeovers, it is a symptom, rather than a cure, 1. 3. Different approach for different types of companies In the Journal of Financial and Strategic Decisions Robert L. Lippies wrote an article named â€Å"Agency conflicts, managerial compensation and firm variance†, where e described different situations where one type of managerial compensation would be more effective than others as a solution for an agency problem.The recent literature on agency conflicts between managers and shareholders is characterized by studies that test whether the implementation of incentive compensation schemes mitigate the manager-shareholder conflict. While these studies present evidence that incentives do influence managerial decision-making, no dominant class of incentives has been found. This finding is consistent with evidence that suggests firms must compensate according to their particular characteristics.The article of Robert Lippies will consider incentive compensation in relation to the manager's ability to increase the risk of future cash flows. In this context the relationship between compensation, risk taking, and managerial behavior can be evaluated. I would like to introduce some of his findings with short arguments. 1. Managers who receive a large portion of their total compensation in fixed wages will m ake efforts to reduce the variance of future cash flows. 2. Managers who receive a large portion of their total compensation in the form of fixed wages will have interests aligned to those of bondholders.Both wage and bond payoffs are negatively affected by increased dispersion because any values beyond these fixed claims are of no concern. This result implies that the interests of the manager and the bondholder become increasingly aligned as the manager's fixed wage increases. In the case of the pure fixed wage earner or pure bondholder, minimizing variance increases expected utility. Specifically, in this scenario, bondholders and wage earners have interests that are naturally aligned, and that is in direct conflict with the manager's role as an agent for the shareholders.The manager should consider bondholders interests to the extent that they impact the value of the firm but there should not be a direct alignment of interest between the manager and bondholders because this would violate the agency agreement between the shareholders and the manager and ultimately lower the value of common equity. Thus, the incentive compensation scheme must encourage the fulfillment of the principal-agent relationship. 3. Managers who receive a large portion of their total compensation in equity-related securities will make efforts to increase the variance of future cash flows. Managers who receive a large portion of their total compensation in equity-related securities will have interests aligned to those of shareholders. If the manager has significant control over the dispersion of firm values, the compensation scheme should reflect this fact by providing a lower fixed wage and more equity-related rewards. Of course, when the firm compensate its manager by equity-related reward, there is always a threat that the manager will manipulate with a price of shares, those manipulations may harm the real market value of the firm and may even lead to the firm's edge.If, however, t he manager has little control over the dispersion, a different type of remuneration package should be developed which limits the manager's exposure to risk which is beyond his control. 5. Managers of earning high wages will choose to hold larger amounts of the firm's equity-related securities. Assuming that a manager receives a wage, in case of high level of variance the manager should hold enough stock to offset any potential loss in wages.For example, if a firm is subject to large dispersions in value over which the manager has no control, the manager could hedge against a possible loss in wages by holding an mount of stock proportional to his wage claim. This wealth allocation would allow him to offset his potential loss of wages with potential capital gains. 6. Managers of stable firms who have little control over the dispersion of future cash flows and who earn high wages should receive fewer equity-related rewards from the firm.Clearly, if a manager has a little control over a firm's cash-flows, there is no need to connect his reward to the particular indexes of the firm, but as far as the firm is stable and has a lot of cash, it can allow high wage for its manager, what in turn is expected to be fair reward for the manger to prevent him from wrong-doings. 7. Firms which provide their managers with the ability to increase the dispersion of future cash flows should include more equity related rewards in the manager's compensation system. 8.The existence of compensation in the form of stock options lowers the incentive of managers to expropriate wealth from shareholders and increases the incentive to expropriate wealth from bondholders. While prior research has focused on managerial compensation and its motivational qualities; this model suggests that firm-specific characteristics relating o the propensity for firm variance and the degree of control that the manager has over this variance should be the fundamental determinants of managerial reward.In the s econd chapter of my paper various examples of agency problem will be presented, also how different aforementioned solutions were implemented for these examples will be analyzed and discussed. Chapter 2. Practical examples of agency problem's solution 2. 1. Good intentions usually backfire Executive loans. In the asses and early asses, loans by companies to executives with low interest rates and â€Å"forgiveness† often served as a form of compensation. Before ewe loans were banned in 2002, more than 30 percent of the 1500 largest US firms disclosed cash loans to executives in their regulatory filings, sum totaled $4. Billion, with the average loan being about $11 million. Half of these companies, charged no interest on executive loans, and half charged below market rates, and in either case the loans were often â€Å"forgiven†. An estimated $1 billion of the loans extended before 2002 (when they were banned) will eventually be forgiven, either while the executives are still at their companies or when they leave. For executives in companies that went bankrupt during the informational genealogy bubble collapse (when in the most of cases value of Internet-based or oriented companies could have been created by adding e- in front of their names or . Mom after), when investors lost of billions of dollars, this was very useful. According to the Financial Times, executives at the 25 largest US public firms that went bankrupt between January 2001 and August 2001 sold almost $3 billion worth of their companies' stock during that time and two preceding years as the collective shares fell by at least 75 percent, 25 had executives sell a total of â€Å"$23 billion before their stocks plummeted†.Large loans to executives were involved in more than a couple of these companies, one of the most notable being World. World loaned (directly or indirectly) hundreds of millions of dollars?approximately 20 percent of the cash on the firm's balance sheet?to its C EO Bernard Beers to help him pay off margin debt in his personal brokerage account. The loans were both unsecured and about half the normal interest rate a brokerage firm would have charged.World filed for bankruptcy a few months after the last loans were made. As a reaction to these scandals and clear frauds by top-management of huge impasses, the Serbians-Solely Act was passed in mid-2002 to improve financial disclosures from corporations and prevent accounting fraud, but also involved executive compensation. It banned loans by companies to directors and executives, also included the return of executive stock sale profit if overstating earnings will be revealed.Enron's compensation and performance management system was designed to retain and reward its most valuable employees, the system contributed to a dysfunctional corporate culture that became obsessed with short-term earnings to maximize bonuses. Employees constantly tried to start deals, often disregarding the laity of cash flow or profits, in order to get a better rating for their performance review, such actions helped ensure deal-makers and executives received large cash bonuses and stock options. The company was constantly emphasizing its stock price.Management was compensated extensively using stock options. This policy of stock option awards caused management to create expectations of rapid growth in efforts to give the appearance of reported earnings to meet Wall Street's expectations. At budget meetings, target earnings were developed on the basis â€Å"What earnings do you need to keep our stock price up? And that number would be used, even if it was not feasible. At December 31, 2000, Enron had 96 million shares outstanding as stock option plans (approximately 13% of common shares outstanding).Enron's proxy statement stated that, within three years, these awards were expected to be exercised. Using Enron's January 2001 stock price of $83. 13 and the directors' beneficial ownership reported i n the 2001 proxy, the value of director stock ownership was $659 million for the chairman of Enron Kenneth Lay, and $174 million for the CEO Jeffrey Killing. Employees had large expense accounts and many executives were paid moieties twice as much as competitors. In 1998, the top 200 highest-paid employees received $193 million from salaries, bonuses, and stock.Two years later, in 2000 the figure Jumped to $1. 4 billion. As we all know Enron had gone bankrupt on November 30, 2001, before that the price of Enron's share fell to 0,61 $, yet Just in the beginning of the year the CEO promised 2001 will be â€Å"their easiest year†. All in all we can conclude that pay-for-performance policy in combination with excessive stock- options for top-management result in shadowy deals and non-deliberated decisions on all levels of the company.