Report assignment Essay Example | Topics and Well Written Essays - 500 words

Report assignment - Essay Example Body: 76 expectant mothers have been interviewed for this survey. They were asked to describe Honey bear in one word that first come to their mind. 57 of the responded used negative adjectives such as â€Å"depressed†, â€Å"gloomy†, etc. to describe the honey bear; however only 8 responded positively used the words like â€Å"cute†, â€Å"appealing†, etc. The result of the survey clearly indicates that not all the people find Honey bear appealing. It is true that they were considered attracted way back in the 90’s but in modern age there is a need of changing the so called authentic image of the Honey bear. The graphic design department needs to make it more attractive by changing its shape and adding more colors to it or at least changing its position and introducing more poses. When the interviewees were asked that what can be done by the firm to make the honey bear more attractive they suggested to add more colors and add more poses. Now it is the responsibility of the graphic design department as well as the marketing department to work in collaboration on the design of the honey bear, based on the result that has been extracted from the interviewing the expecting mothers. As the mothers are the target market for the children’s clothing and bedding; therefore their opinion matters a lot as they will also be the potential buyers of the product. The result of the survey is clear. The audience wants innovation in the design. They want it to be more colorful as the children get attracted to such thing (Lascurain). Closing: the graphic design department needs to understand the fact that people no longer gets attracted to the old designs. If they will be using the old cartoon they must add new characteristics and innovative features to make it more interesting and make it more appealing in the eyes of the customers. The graphic

International Relations Theory and Global Economy Essay

International Relations Theory and Global Economy - Essay Example International Relations Theory and Global Economy Global economy is the combination of all the economies of the world’s countries. The valuation of the world economy can be arrived at by representing it in a certain currency like the US dollars. Each country experiences a trade cycle where the rate of growth of expenditure, incomes and production changes over a period of time. The duration and effects of these cycles are dynamic simply because the structure of the economy is developing. This may be caused by theoretical relationships between different variables, for example, unemployment and inflation which might have changed. This poses many challenges to policy makers as they try to control the economy and meet their objectives. Taking the economic growth of a country, for example the U.K., and analyzing how it has been for the past years, it is possible to know that the country has experienced many shortcomings to date. Notably, the UK has experienced recession and boom periods in the process of its economic development. J ust to highlight some key areas contributing to the growth of the U.K economy, one is strong consumption. Consumer spending has contributed positively and has had positive effects to the economy like, absorbing some of the weaknesses of the export and investment sectors. However, this has not come so easily because it has its limitations, which include increased debts and increase in rentals. Low investment in capital equipment has also led to growth in the economy as some of these major investments were left to the private sector to cover.3. Growth of the economy globally has main stages like the economic boom. A boom is a situation that occurs when gross domestic product grows faster than the trend growth rate. At this period, aggregate demand is high, and businesses increase production and employment. Due to high demand, prices may also increase which translates to cost push and inflation in demand. Demand for imports increases because of high marginal propensity of importation a mong customers. Revenues from tax increase as more people are in employment and earning, hence, they spend more money. In addition, company realizes high profits as production increases, thus, increasing sales due to high demand in turn leading to high investment. Labor is used exhaustively at minimal costs, that is, no extra labor is needed. The other economic cycle is the economic recession which is a decrease in national output4. Every aspect of the economy is restrained to its maximum. This is a period where the economy is operating below its breakeven point. As the negative part of the economy, it can lead to increased unemployment, low income per head, international insecurity as many become jobless increased bad debts and the end result of all this is conflicts. The table below gives an illustration of the economic growth of the UK and inflation rate in the country for the past few years; Resource: http://www.economicshelp.org/images/macro-graphs/econ-growth-inflation-dec-201 1png.jpg Further still, global economy has attracted the centre stage in international politics of late. Politicians cannot do without bringing the issue of economic growth and fall to the world as they try to appeal to the world to consider them in election to top seats. They lay down structured policies on how they are going to deal with the monster

Hidden Traps In Decision Making

Hidden Traps In Decision Making Q1. Referring to the hidden traps in decision making, briefly describe one decision you (or someone you know) made that may have been influenced negatively by one of the traps (please stipulate which bias you are referring to). [>60 words]Approximately five years ago, my mom fell prey to the status-quo trap. She made a decision not to pursue other investment opportunities for her 403B funds after her job turned the responsibility of managing these funds over to the employees. With limited investment knowledge, my mom used this as a convenient reason to do nothing thus, leaving her 403B funds invested the same way her employer had always done. This was a big mistake because the company had her entire funds invested in stocks and during that time the stock market went belly up and so did her investment. It was a bad decision for my mom because she did not force herself to develop some investment skills. She took what she thought was an easy and safe option by going with the status-quo or simply going with the flow because it was comfortable and she thought less risky than doing it herself. My moms way of thinking was typical for victims of the status-quo trap.Q2. Many decision makers fall into the trap of seeking confirmatory evidence. What does this statement mean, and what other types of information should managers also consider to avoid this bias? [>60 words]Decision makers fall into the trap of seeking confirmatory evidence when they approach decision making with a closed mind by intentionally ignoring information that does not confirm their perceptions or hypotheses regardless of whether the information is true. These decision makers have a tendency to test ideas in a one-sided way, focusing on one possibility, their way or idea, thus ignoring alternatives. They tend to seek information to confirm rather than challenge or falsify their hypothesis, thus falling prey to selective collection of evidence. To avoid the confirmatory evidence trap, decision makers should seek advice from others whose opinions they respect and as stated in the article, The Hidden Traps in Decision Making, avoid surrounding themselves with yes-men. Managers can also avoid the confirmatory trap by building counterarguments against their own decisions by selecting and ranking possibly several alternatives in the order of strongest to least strong reason to do something else. People tend to gather and recall information from memory and interpret it in a bias way. For example, if a manager has an employee in his department that is labeled as a troublemaker, the manager will take notice of any negative actions surrounding the employee, with less attention to other employees committing the same negative infractions. A tendency to do this over time unjustifiably strengthens the managers belief that the employee is a troublemaker, which is also suggests that people are bias towards confirming their existing beliefs.Q3. What is a prescriptive model of decision making? H ow does this contrast with a descriptive model (empirical accounts) of decision making? Name and briefly explain a prescriptive decision making model you have learnt from another class in your degree studies. [>50 words] [See lecture notes and do some internet sleuthing (cite any references. PS. Wikipedia has an incorrect defn. so leave it alone)]A prescriptive model of decision making is an analytical approach to decision making following an accepted standard model that produces a correct solution based on the proper data input. In essence, it implies what people should and can do based on a solution derived from a normative decision making theory that produces an optimum output. Like the word prescription in a medical sense, the prescriptive model is the best recommended cure for the problem based on extensive research. Descriptive models, unlike prescriptive models, are theories of choice related to the mental state of the decision maker influenced by misconceptions, biases and o ther tricks of the mind. Therefore, the descriptive model is more prone than the prescriptive model to being afflicted by the hidden decision making traps referred to in the article.One current decision making model that I am currently learning how to do in my quantitative analysis class is linear programming which consist of determining a way to achieve the best outcome ranging from maximum to lowest profit for a given outcome. In order to do this I Input my values and limitations into a pre done excel formula spreadsheet and it computes the best possible outcome by using an excel computer known as solver.Q4. What is meant by the term bounded rationality? [>40 words] [See lecture notes and do some internet sleuthing]I see bounded rationality as the best satisfactory rational choice made by a decision maker based on his ability and also influenced by his time and resource constraints. However, the decision maker is aware that his decision may not be the optimum solution but it is go od enough at that point in time for his situation. For example: when taking a test, I, the decision maker, choose and write down what I perceive as the correct answers to the test questions gathered from the available resources I had on hand to use in preparing for the test within an allotted time frame.   Q5. Provide examples of three structured decisions and three unstructured decisions that you, as a person, have had to make. Briefly explain why each example is structured/unstructured. [>75 words] [See lecture notes and do some internet sleuthing (cite any references)] Structured decisions, as stated in the Decision Support Encyclopedia on line, are decisions in which all three decision components (the data, process, and evaluation) are determined since these type decisions are made on a regular basis in business environments. These structured decision support systems may use a checklist or form to ensure that all necessary data are collected and that the decision making process is not skewed by the absence of data. Unlike structured decision, unstructured decision makers do not follow a systematic routine to arrive at an answer; they use their expertise or experience to reach a conclusion.The following are examples of structured decision making because standard formulas were in place for analyzing collected data to reach a precise output:(1) The ROI (return on investment) of a piece of equipment in a manufacturing plant. I was assigned to a task force during one of my summer jobs to help collect recorded revenue output generated from the use of a piece of equipment in production and input the data into a spreadsheet that used a standard accepted formula to determine the revenue collected over a specific period to determine if the equipment output was justifying its cost. This is an example of a structured decision that is made on a regular basis in business environments to justify equipment costs.(2) During a summer employment in a production facility I was responsible for testing production samples on a routine basis in a quality control testing lab with the responsibility of notifying the production manager if his production crew was generating a quality product. This is a structured decision because the production samples were routinely taken and tested in a laboratory with standard test procedures and the results were compared to a standard set of product specifications to determine if a quality product is being produced. (3) In my family business my responsibility for generating employees pay checks is done using struct ured decisions because I use standard accounting software that uses recorded hours and set employee pay scales to generate pay checks.The following are examples of unstructured decisions because I did not follow a set routine to accomplish the desired end results. I had to use my ability and available resources to set up a plan for accomplishing the desired outcome:(1) Assigned research paper. Last semester I had to do a research paper on an assigned topic following no given step by step instructions for how to research and format the paper. I had to use my knowledge gathered through my academic career to generate the research paper. (2) High school science fair project. Using my science expertise and knowledge I designed experiments necessary for testing a hypothesis and displaying the results.(3) Scoring the most points in a video game against my roommate. This was accomplished using unstructured decision making because I had to rely on my video game playing experience and experti se to score points in the game.   Q6 Click here to display a list of HBR articles related to management decision making. Choose any two of these articles and write an article summary of each. Click here for guidelines for writing article summaries. [about 200-250 words for each summary] The Judgment DeficitByChristopher Simmons The article The Judgment Deficit by Amar Bhide appeared in the September 2010 issue of Harvard Business Review. In this article, Bihide insists that the replacement of human judgment with computer models was instrumental in the recent near-collapse of the global economy. He further insists that the human judgment model is no better than the computer model if it is allowed to escalate out of control with no forms of control stops such as the right blend of centralized and decentralized controls. Behide uses financial examples such as the recent housing crisis and technology examples consisting of the sophisticated programming of IBMs Deep Blue computer to Microsofts Windows technology and their influences on the economy to show the pros and cons of each model in both a centralized and a decentralized setting. The outcomes in these examples show the importance of balancing authority and autonomy in decision making. According to Bhide, problems began to arise in the economy with the conversion from the old fashioned way (book keeping, accurate committees, and autocrats) to the new fashion way of using statistical models and algorithms in decision making. By doing this, some of the human filtering processes used in the human judgment model were omitted thus making it rather easy to make bad decisions. This kind of bad decision making continued to spiral out of control over the past months creating our present day financial crisis. The article does not say that use of statistical models and algorithms are the sole cause of the financial crisis and should not be used, instead it states that we must learn to harness and control these models and not rely solely on them. In the article The Judgment Deficit Bhide explains that the right blend of the computer models and the human authority models are necessary to keep our economy in balance. Make Better DecisionsByChristopher Simmons The article Make Better Decisions by Thomas H. Davenport appeared in the November 2010 issue of Harvard Business Review. In this article, Davenport insists that recent large number of well publicized poor decisions made in both the public and private sectors have resulted because of the lack of focus on improving decision making techniques. He asserts that there are just as many opportunities to improve decision making as there are to improve any other process. He appears to condone the need for more businesses to incorporate structured decision making techniques. Davenport states that a number of useful insights for improving the decision making process have been around for a long time but have remained unnoticed by many organizations. Recently, few businesses have actually paid attention to recent popular business books that are addressing a large number of decision making alternatives and have actually adopted some of these alternatives with good results. However, the need is increasing to recognize and incorporate the recent ly publicized decision making techniques into business operations. Davenport suggests that the framework for improving decisions can focus on examining the accessible components of decision making such as which decisions need to be made, what information is supplied, and the key roles in the process rather than focusing directly on the manager. He states that smart organizations that incorporate a framework for improving decisions can accomplish this in four steps consisting of identification of the important decisions that require immediate attention, identification of the key factors that go into each important decision, design the steps to incorporate the decision making process, and finally, enlist experts to work with company executives in improving the process. Davenport identifies two organizations that have successfully incorporated decision making techniques and the outcomes of their success. He states that analytics and decision automation are among the most powerful tools for improving decision making however he warns managers not to incorporate analytical models into their operation that they do not understand. He also states that it is important to keep track of and monitor the models to determine if they are working and always have a human backup in place just in case a model malfunctions. In the article Make Better Decisions Davenport stress that organizations encouragement for their manager to employ better decision making techniques does not guarantee that they will make better decisions but it can result in the likelihood that they probably will. (No attachments) Comments: Mon Aug 30 11:05:26 EDT 2010 Section Instructor Adrian Gardiner Chris Excellent work. Exceeds expectations Way to go. woo woo Sun Aug 29 23:35:55 EDT 2010 Student Christopher Simmons The HTML video u referred us to method did not work for me when i clicked enable HTML it would not let me paste anything in the box. Also on q 6 it will not indent the lines when clearly did it when i typed it up for the summary

Affirmative Action Essay -- Affirmative Action Essays

After you graduate from college, you will be putting in your application for a job that you went to college for. Even though you might be the most qualified for the job you still might not obtain the position. Affirmative Action sometimes causes this because companies have to hire a certain number of minorities relative to the size of the company. This means that if there are no minority citizens available, immigrants who aren’t even US citizens can take the position. This is why Affirmative Action should be readjusted, because it is helping immigrants instead of the people it was meant for, American citizens. The fact is that the current Affirmative Action plan is helping immigrants more than it is helping the American people. For instance, millions of immigrants and foreign visitors are eligible for, and many are actually using, Affirmative Action benefits to grab a head start of US born minorities because they do not have enough US minorities to fill the positions. In effect, many of today’s immigrants are coming to this country and moving right to the head of the line. James Robb, a Senior Analyst of the The Social Contract, a quarterly journal and the author of the study, â€Å"Affirmative Action For Immigrants: The Entitlement Nobody Wanted† came up with a great example of how immigrants are using affirmative action to there advantage. He states, â€Å"Of all US science doctorates awarded in 1993, forty-six percent went to foreigners. There were ten science PhD’s awarded to non-citizen Asians to every one awarded to a US Asian† (Robb). It doesn’t en d there, because after they receive their PhD’s many immigrants will stay in the US to take jobs. This is bad for American citizens who have their PhD’s because they struggle to find jobs, many of which are already taken by people who aren’t even U.S. citizens. It is a big deal that immigrants are using Affirmative Action to their advantage. There is something wrong with giving opportunities to non-US citizens over US citizens. Yes this is a big deal because if you put non-citizens and US citizens in the same job market, you are taking away opportunities from people that have been living here their entire lives. This creates a feeling of hatred between US and non-US citizens, which is the last thing we need. In contrast, there is nothing wrong with giving immigrants job opportunities because this is America, the lan... ...tive action would count if and only if they are minority citizens, which would give American citizens a better chance of finding a job because immigrants wouldn’t be accepted towards the number of minorities companies have to hire. After this subparagraph would be added, the president would then have to sign an executive order stating that although contractors may hire immigrants, only US born minorities would count toward meeting the affirmative action set goals. I think this would then take care of the non-citizen immigrants hiring problem. By reading the facts and opinions of this paper, I believe you will understand that this is a problem that needs to be faced. Affirmative Action is not pulling its weight in what it was initially created to do. Steps need to be taken to right this wrong, so people who deserve a shot, in turn receive a shot. Works Cited Robb, James S. â€Å"Affirmative Action For Immigrants: The Entitlement Nobody Wanted† 1996. http://pwz.netcom~jimrobb/NR-article.html(July,1996) Skerry, Peter. â€Å"Borders and quotas: immigration and the affirmative-action state Available from http://humanitas.ucsb./cgi-bin/mfs/11docs/skerry.html?99#mfs

How Are Theories Formed?

What is a Theory? We often hear someone say â€Å"That’s just a theory† or on the contrary – â€Å"In theory and in practice, it always works. † This term may indeed hold in itself a somewhat ambiguous undertone, and lead to confusion and misuse. Let’s look at the origin of the word; according to an etymology dictionary, theory derives from the Greek â€Å"theoreo† which means ‘to look at’, ‘to observe’. The definition tells us that one must firstly observe a phenomenon so that a theory about a certain aspect of it could form. There are essentially three forms of theories, and although they are different, all of them have one thing in common – a theory is always born with observation. The first form is theory as a belief, found in humanities such as philosophy and arts – this type is a theory that can guide or predict certain behavior in a social situation. For example: Maslow’s Hierarchy of Needs or the Karl Marx Theory of Bureaucracy. This is when someone might say â€Å"That’s just a theory†. The second form of theory is used primarily as a possibility, in other words as a tentative insight into the natural world – for example, the most famous in this category would be the Evolution Theory or in physics a String Theory. Finally, the third form is the scientific theory, and according to www. wordnet. princeton. edu, it is â€Å"A well-substantiated explanation of some aspect of the natural world; an organized system of accepted knowledge that applies in a variety of circumstances to explain a specific set of phenomena. In order for a theory to be considered scientific, it needs to satisfy certain parameters, which distinguishes it from the other two forms. Firstly, a scientific theory will explain how nature works for example Newton’s Theory of Universal Gravitation, or Kinetic Theory of Gases, and it will do so with significant evidence – unlike in the other forms, a scientific theory is always well tested by numerous experiments. This leads to the n ext point – scientific theories are mathematical in nature, meaning they explain measurable phenomena, and not abstract concepts, such as the theories in the first category. Why did I state that String Theory and Evolution Theory are not scientific theories as opposed to Kinetic Theory of Gases? The answer lies in the hypothesis of these theories. A hypothesis is a proposal intended to explain certain observations, a prediction. It must be testable, meaning that whichever prediction you make, you need to be able to prove it works. It also must be falsifiable, meaning capable of being proven wrong. In both the String Theory and the Evolution Theory, the hypothesis fails, because you cannot possibly test them and also prove them wrong. These are the steps in the formation of a scientific theory: 1. Observation 2. Hypothesis based on observation 3. Experiments 4. Evidence 5. Theory First form doesn’t make it to step 3 and second form doesn’t make it to step 4 – only scientific theories make it to step 5. The method outlined in these steps is called an inductive approach to science. It was introduced by Francis Bacon and he said that a scientist needs to erase what he knows in terms of science, and start with a clean slate, tabula rasa; his knowledge will be based on observation, lead to hypothesis, then to evidence (or lack thereof), then to theory and its generalization. The relationship between a theory and evidence is crucial – without evidence, there is no theory and no science, just random observations. To better demonstrate inductive method, let’s take Aristotle as an example. He observed dropping down two objects at the same time, and with numerous experiments he saw that objects which are heavier fall faster to the ground than lighter ones. So that was his theory, and it stayed that way until Galileo Galilei opposed it. This is what inductive method is about – you base your theory on observation and make it a scientific fact until something else contradicts it. It is similar to coming across mammals and saying all animals are warm blooded – until you come across a reptile. When Galileo objected to Aristotle’s theory, he said to forget inductive method and instead focus science on the deductive approach, an exact opposite. Instead a scientist would work from an already existing theory – an argument is that scientists make progress when they hold an idea in mind and then they go to observe and gather evidence for that idea/theory. Proponents of the deductive method assert that science makes progress through meta-theories, meaning that in place of one theory, another one will emerge. So when Galileo opposed Aristotle’s theory, he proposed that the different speeds of objects falling to the ground have nothing to do with their masses, but instead occur because of air resistance and acceleration due to a gravitational pull. He was right and Aristotle was wrong. Below is a summary of how evidence and a theory interact in their relation to each other. Evidence -> theory (inductive) Theory -> evidence (deductive) Meta-theory -> theory -> evidence (deductive) As mentioned throughout the paper, the validity of a theory and its worthiness depend primarily on the evidence and proof which is gathered after the theory has been stated. For example, the recent theory that all physical objects in the world and all living organisms are holograms is mind bending and would be a tremendous breakthrough in the world of science had the hypothesis been testable. Just like with the Theory of Evolution and Theory of Creationism, the Theory of a Hologram World, remains a theory â€Å"yet to be proved right†. The issue here though is overwhelming – how much information and evidence does one theory require in order for it to become a law/fact of science? And even when it does become a law such as Law of Gravity or Law of Multiplication Table in mathematics, it exists only as far as contradictory evidence is not presented, because in science, observations take precedence over everything else. Scientists also know that in science, there is no certainty. Before 1800’s people thought they have sufficient evidence that the Earth was flat, it is funny to us now, but who knows maybe in three centuries down the road we will also be laughed at. Going back to the question of how much evidence is needed for a theory to become accepted as science – this has also to do with the way a theory is structured, worded. Again, its linked to mathematics and measurement – the more precise the theory is in terms of numbers, the easier it would be to measure it. The more vague and open to interpretation it is, the harder it would be to come to a conclusion. This is concerned with issues of metaphysical/ontological theories – examination of nature as a physical experience versus a mental, spiritual experience. Another very important issue arises from the question – who researches scientific theories? At the end of the day, science is researched by people, and written by people. When evaluating theories, one might question the bias factor and the personal interest factor in the developments of science. Enterprise and governmental politics may play a key role when time will come to take a closer look at a contentious theory. Part 2: Question 4 One of the most controversial issues is regarding the question whether psychology really can be encompassed as a science or not. Psychology means the study of the human mind, also the study of human behavior, and science in its simplest definition is the explaining of the world through empirical and numerical evidence. Science as a concept is very structured – because the very nature of things it looks at, can be researched and studied under laboratory, experimental conditions. Paul Lutus, in his article â€Å"Is Psychology a Science? † states, â€Å"We should determine whether psychology can be relied on to objectively support the social and legal policies that are based on it. In modern times, such a serious public burden can only be borne by a field that is based on reason, on science. † If psychology is in fact responsible for providing answers, what is the content of this science? Psychology differs from biology and neuroscience primarily because it is concerned with the study of the mind rather than the brain. It focuses on the study of concepts of perception, cognition, interpersonal relationships between people and what motivates individuals to behave the way they do. Psychology also aims at treating mental disorders and classifying abnormalities and ways to cure them. Psychology differs from other social sciences such as anthropology, economics and sociology due to experimentation and the primary focus on the individual, or on small groups of individuals, rather than society as a whole. The next question would be, what is the methodology applied in psychology as a science to research the content? As the object of interest in psychology is the human mind, the most effective way to gain insight would be to apply projective techniques to the subjects of research. Projective techniques involve asking subjects to interpret or fill in visual stimuli, complete sentences, or report what ssociations particular words bring to mind. The way the questions are structured, enables the patients to project their own personalities onto the stimulus, often revealing personal conflicts, motivations, coping styles, and other characteristics. The best known projective test is the Rorschach test, created in the 1920’s by a Swiss psychologist Hermann Rorschach (r orschach. org). It consists of a series of ten cards, each containing a complicated inkblot. Some are in black and white, some are in color – subjects are asked to describe what they see in each card. Another famous projective technique in its purest form was established by Sigmund Freud, called free association, where the subjects are told not to filter out anything that comes into their mind and speak it out freely, so that language and voice communication acts as a direct channel to what is going on inside a person’s head. Methodology applied in psychology, consists of essential three elements: research, diagnosis and therapy. Most importantly, in order for diagnosis and therapy to be meaningful, the research i. e. he experiments need to be conducted in a way that assumes minimal bias and maximum control of the variables. Psychology is excellent at describing phenomena, however it often cannot reliably explain these occurred phenomena; this is to be expected, after all the object of study is the most complex and genius creation in nature – the human mind. Works Cited Lutus, Paul. (2009, May 12) Is Psychology a Science? Retrieved from http://www. arachnoid. com/psy chology/index. html Online dictionary www. wordnet. princeton. edu/perl/webwn? s=theory www. rorschach. org

Limitatitons of the Accounting Code of Ethics

Professional values, ethics, and attitudes. (AC 423) Group Assignment QUESTION: With the advantage of hindsight, what advice would you have given the Enron Board to avoid the 2001 disaster? GROUP MEMBERS 1. Augustine KuparaR082559R 2. Tonderai NyamadzawoR082987G 3. Simbarashe ChakaR089613J 4 Brighton Nzvuvu R089824H 5. Walter DangerR082990X 6. Simon ChigwandaR075968L 7. Ashley MurisaR082991Y 8. Frank Garatsa R082988H 9. Presely NheweyembwaR076037L 10. Peter DonaldR055241G 11. Shingirayi GweteR089773H BACKGROUND Enron Corporation was formed in 1985 from a merger of Houston Natural Gas and Internorth, Enron Corp.By early 2001, Enron had grown into the 7th largest U. S. Company, and the largest U. S. buyer/seller of natural gas and electricity. It was heavily involved in energy brokering, electronic energy trading, global commodity and options trading, etc. in 2001 Enron started to show major signs of trouble by announcing a huge third-quarter loss of $618 million. On October 22, 2001, the Securities and Exchange Commission (SEC) began an inquiry into Enron’s accounting practices and later that year the company filed for Bankruptcy.Key investigations revealed many shortcomings which include the use of complex & dubious accounting schemes to reduce Enron’s tax payments; to inflate Enron’s income and profits; to inflate Enron’s stock price and credit rating; to hide losses in off-balance-sheet subsidiaries; to engineer off-balance-sheet schemes to funnel money to themselves, friends, and family; to fraudulently misrepresent Enron’s financial Enron also used complex dubious energy trading schemes for instance the â€Å"Death Star† Energy Trading Strategy which was aimed at taking advantage of a loophole in the market rules governing energy trading in California.This essay will attempt to advice the Enron Board to avoid the 2001 disaster with the advantage of hindsight by focusing on the major areas in the paragraphs which fol low RECOMMENDATIONS THE BOARD OF DIRECTORS AND ITS FIDUCIARY DUTIES The Board, as the head of the organization is supposed to execute its duties and roles professionally and make sure that the company is run efficiently and effectively. It’s supposed to exercise oversight over all the operations of the organization.These duties includes adopting of corporate strategy, annual budget and formal organisational structure, ensuring that risk management structures are in place, the company is complying with the relevant laws and regulations and that adequate controls are in place, to exercise oversight over management operations, to act as a communication channel between management and shareholders and to ensure that financial information of the organisation is reliable and credible. There is need to ensure that the board is properly structured so that t it adds value to the organization.This means that it was supposed to have a chair, at least one the members is financially litera te and some of its members are non-executive directors. This would ensure that an independent perspective is brought into the board’s operations that would bring experience and expertise to the board The board supposed to follow its code of conduct in carrying out their duties. This ensures that all the activities it undertakes are in the best interest of the shareholders not themselves.For example, in carrying out their duties, all the board members are supposed to exhibit due care and diligence, to be honest and loyal, to exercise confidentiality on the organizational information and to disclose any conflict of interest. Some of the board members had financial interests in the Special Purpose Entities (SPEs) making large profits but they did not disclose this conflict of interest to the board. This would compromise their objectivity and independence in carrying out their duties.Some of the members of the board were not exercising due care and diligence in their operations. They were aware of the unethical and risky business operations that were taking place within the organisation but they took no action and did not bring it to the attention of the board. These included transactions through SPEs and the paying of unauthorised bonuses to senior officials. They even connived with the auditors to structure and perform some of the illegal transactions that were aimed at falsifying the performance and position of the organisation.The board is also supposed to have other special subcommittees that are aimed at enhancing the operations of the board in areas that need special attention. These include the Audit Committee that is aimed at overseeing the internal and external audit functions and the Remuneration Committee that will be responsible for the salaries and allowances of managers and other senior officials. The role of a company’s board of directors is to oversee corporate management to interests of shareholders.However, in 1999 Enron’s b oard waived protect the conflict of interest rules to allow chief financial officer Andrew Fastow to create private partnerships to do business with the firm? Transactions involving these partnerships concealed debts and losses that would have had a significant impact on Enron’s reported profits. Enron’s collapse raises the issue of how to reinforce directors’ capability and will to challenge questionable dealings by corporate managers. Specific questions involve independent or â€Å"outside† directors. Stock exchange rules require that a certain percentage of board members be unaffiliated with the firm and its management. ) Should the way outside directors are selected be changed or regulated? Directors are elected by shareholders, but except in very unusual circumstances these are â€Å"Soviet-style† elections, where management’s slate of candidates receives nearly unanimous approval. Should there be restrictions on indirect compensation i n the form of, say, consulting contracts or donations to charities where independent board members serve?Should the personal liability of directors in cases of corporate fraud be increased? Do the rules requiring members of the board’s audit committee to be â€Å"financially literate† ensure that the board will grasp the innovative and complex financial and accounting strategies employed by companies like Enron. Several of the auditor reform bills cited above would require the audit committee of a corporation’s board of directors to take a more active role in the selection and supervision of audit work.Enron should have kept an element of professionalism; the board of directors should show independence in decision making. The company must not have any close relationship whatsoever with its auditors. A strict and good system of corporate governance should have been set out , which sets out a clear system of duties of each director. They should have set out a syst em of segregation of duties that sees each director have an independent duty. AUDIT COMMITTEE Any effective audit committee must have been in place at Enron comprising of purely independent non-executive directors.Members should have an understanding of internal control system and financial and sustainability reporting experience. This committee reviews the accounting practices and approve the financial statements as integrated reporting. Thus the financial reports of Enron would not have been allowed to be published before the approval of the Audit Committee. Review the effectiveness of the internal control environment as well as oversight over the internal and external audit.The Audit Committee recommend to the Board of Directors the engagement, removal and liaise the terms and remunerations with the external auditor. The issue of non-audit services, it is also the responsibility of the committee to define the policy and approve the contracts. Hence the pure independent audit comm ittee it would have not allow Arthur Andersen to exercise multiple roles at Enron. Reports Management are received and reviewed to check whether in line with the approved internal Audit plan and the quality and effectiveness of the external audit function.Risk management is also pivotal in this committee so as to champion the fraud awareness. As an internal auditor, Sherron Watkins should have not directed her anonymous letter to the chairman of the board, Kenneth Lay but to the committee which oversee the internal control system. The Chief Accounting Officer, Richard A Causey who was getting money through the Special Purpose Entities had been once an auditor at Arthur Andersen an issue which should have been closely examined. An effective Audit Committee consider confidential reporting to facilitate whistle blowing.Overall, Audit committee have a combined assurance role thus monitoring the relations between internal and external audit to reduce duplication efforts as well as enhanc es transparency. AUDITOR ROTATION. The Issue Of Auditor Rotation Is Of Significant To The Quality Of Financial Reports. Auditors Should Be Rotated Every Few Years To Prevent Long Term, Close Ties Between The Enron And The Arthur Andersen Firm. Arthur Andersen is the firm that audited Enron’s books from its inception in 1985 (it was also global crossing auditor).Also there was questionable movement of personnel from between the two companies Richard A Causey, the Chief Accounting Officer had come to Enron after working on Enron audits for Andersen this creates a strong relationship, Familiarity threats and it is easy to can collude with Andersen in perpetuating fraudulent activities. Time should be put at least three years before a member can join Enron from auditing firm. Long term audit client relationships significantly increase the like hood of an unqualified opinion or significantly reduce the auditor’s willingness to qualify the audit reports.Mandatory audit rotat ion is ideal in maintaining the value of an audit for both the internal and external users. Although recurring auditors have got an advantage to Enron of that they will be auditing the business they know very well its environment and internal controls thereby reducing the chances of the auditor making an audit risk which is the risk that the auditor will give a wrong opinion that the financial statements are not materially misstated when in actual fact they are materially misstated. , however the disadvantages seemingly outweigh the costs of retaining the audits.According to Wallace, 1980 and De Angelo (1981) audit quality is a market assessed joint probability that an auditor will both discover a breach in the client’s accounting system and report the breach. According to Shockley (1982) a long auditor client relationship can have the effect of complacency, lack of innovation, less rigorous audit procedures and a learned confidence in the client may arise after long associat ion with the client. It also gives auditor time to develop a close relationship with the client in this case Enron employees..After a number of years there is some kind of turning point in the auditor and client relationship which can be detrimental to the auditor’s independence. Before the decision to rotate there is need to assess the quality of the audit client and this can be done in the following ways according to Shockley and Holt 1983, firstly the perceptions of users should be analysed, the pricing of the audit services has to be analysed and in this case Andersen’s firm was receiving a greater percentage of its revenue from Enron hence there is dependent on the company.The nature of the audit opinion has to be analysed it has a greater impact on the reliance with which we can place to the auditing firm. COMPLIANCE TO ACCOUNTING STANDARDS AND REGULATIONS The Enron was involved several accounting issues, one concerns the creation of special purpose entities (SPE s), these were established for the special purpose of covering Enron`s losses and there were also being used to transfer debts outside of the company and would not show up on the balance sheet at year end . The SPEs were supposed to be independent companies however they were headed by Enron former employees, and backed, ultimately, by Enron stock.The second issue was that Enron was also involved in other accounting scandals for example Enron took advantage of the limitations in the standards governing the energy business therefore over valued assets and selling some of decreasing assets to the SPEs at huge mark-ups and there realising the profits in the financial statements. As a resulted of these accounting misappropriations, Enron produced favourable financial statements leading to unapproved bonuses being claimed by employees and directors also providing themselves with obscenely generous stock option grants.The Securities and Exchange Commission (SEC) governs the activities of c ompanies registered on the New York stock exchange. Enron`s management should follow the regulations stated by SEC and also to prepare its financial statement according to the generally accepted accounting principles (GAAP). The accounting information produced by Enron should have been restated to show a fair financial position of the company. The SPEs should be liquidated no further transactions should be carried out between Enron and its related parties. In correcting its transactions Enron should other external auditors other than Arthur Andersen.These investigations should be carried confidentially so as to protect the manage the situation and also to protect Enron`s reputation. COMPENSATION TO EXECUTIVES AND OTHER PERSONNEL Effects of over paying directors it is results in directors losing focus of their core business, that acting their stewardship and accountability functions . Through good corporate governance directors via the agency theory are responsible to the shareholder s. Directors are independent form management; they are responsible for making sure management are carrying out their fiduciary duties.However if they are over compensated they are more likely to be inclined to favour management over shareholders, as they is a rise of a self-interest threat With no proper monitoring of the board through a remuneration committee, overpaying results bad corporate governance which affect the companies risk management. It results in problems not been brought to light, allowing them not been addressed. As directors ignore their duties and focus on short term profits and rather than maximising company growth in the long term, this reduces their ability to focus on strategic issues and establishment of unrealistic standards of performance.Decision-making is greatly affected as they will be they will be destruction of the authority line by the two boards who will be responsible for the overall well being of the company. As decision making will have been affe cted corporate and accounting practises will greatly be affected, which will increase the chances of fraud and error. These might include recording profits earlier and recognising expenses late. Overpaying also results in changes in the ethical culture of the organisation, as the board can select bad managers to run the business because they will be sharing a common perception.Which is lack of concern for long run of the business? Rather the advice would be for Enron to have a director’s board which contains an equal mix of executive and non-executive directors. This would be to ensure independence and accountability at the highest level, this also reduces self-interest threats . It allows for a board which separates itself from the management of the business Rotation of members at frequent intervals to allow for reduction in familiarity threats if members of the board stay for too long ,e. . more than five years they might become familiar with the management Establishment of remuneration committee which monitors the payment of executives, this ensures that directors are paid according to the tasks performed and not for unnecessary duties INDEPENDENCE Independence is when one makes decisions honestly and truthfully both in fact and in appearance and avoids internal and external pressures which may influence the outcome of a decision under review.The Enron scandal showed a number of independency issues being overlooked by the management of the company and instead concentrated on fraudulent profit making strategies which should have been avoided. These fraudulent activities involved the management of the company and their external auditors (Arthur Andersen), the company’s lawyers, consultants and lenders. The advice that l would have given to the management of Enron concerning independent issues was that they should have at first allowed every employee to exercise his or her duties without influence from anyone either internally or external.The man agement of Enron should have exercised their duties of stewardship to their principles without paying much attention to their excessive and self-centred interest of maximising wealth at the expense of their shareholders. The actions by Mr Ken Lay of forcing all employees to book their corporate travel through his sister’s travel agency was nowhere near independency but only self-interest and greed to accumulate wealth. The board members should have critically analysed the source of the monies they were receiving so as to find facts to justify the revenues.Instead they were only concerned about their packages and approved every idea the management would put before them without taking into consideration the effects of such decisions. This was a clear threat to the board’s independency since they were to choose on whether to be ethical or satisfy their insatiable need for wealth. These high earnings were also received by most of the company’s executives, finance, l egal and accounting professionals and they made them to overlook the questionable accounting practices which were yielding these huge packages.The management also needed to take note of their auditor’s operations when carrying out his mandate, there was need to segregate duties between auditing and non-auditing services. Arthur Andersen should have been engaged to one assignment only of auditing and leave the non-auditing services to other so that independent decisions could be made. The board should have rotated their auditors after a reasonable period of time to avoid familiarity and some associated threats to independence.There was need for the board to also discuss the issues of their auditor’s remuneration and other packages they offered so that they could match with the current market trends this would reduce the auditor’s dependency and force them to report any anomalies within the operations of the company. Role of Sell-Side Analysts Sell-side analysts h ave received considerable criticism for failing to provide an earlier warning of problems at Enron.On October 31, 2001, just two months before the company filed for bankruptcy, the mean analyst recommendation listed on First Call (which compiles and distributes analyst recommendations) for Enron was 1. 9 out of 5, where 1 is a â€Å"strong buy† and 5 is a â€Å"sell. † Even after the accounting problems had been announced in October 2001, reputable institutions such as Lehman Brothers, UBS Warburg and Merrill Lynch issued â€Å"strong buy† or â€Å"buy† recommendations for Enron. Analysts should have not been slow to recognize the problems at Enron.The analysts should not have financial incentives to recommend Enron to their clients. Investment banks earned more than $125 million in underwriting fees from Enron in the period 1998 to 2000, and many of the financial analysts working at these banks received bonuses for their efforts in supporting investment banking. Sell-side analysts must be independent and avoid any self-interest threats which may arise. Corporate Culture Enron has been described as having a culture of arrogance that led people to believe that they could handle increasingly greater risk without encountering any danger.According to Sherron Watkins, â€Å"Enron’s unspoken message was, ‘Make the numbers, make the numbers, make the numbers—if you steal, if you cheat, just don’t get caught. If you do, beg for a second chance, and you’ll get one. ’† Enron’s corporate culture did little to promote the values of respect and integrity. These values were undermined through the company’s emphasis on decentralization, its employee performance appraisals, and its compensation program. Each Enron division and business unit was kept separate from the others, and as a result very few people in the organization had a â€Å"big picture† perspective of the companyâ₠¬â„¢s operations.Accompanying this emphasis on decentralization were insufficient operational and financial controls as well as â€Å"a distracted, hands-off chairman, a compliant board of directors, and an impotent staff of accountants, auditors, and lawyers. † Jeff Skilling implemented a very rigorous and threatening performance evaluation process for all Enron employees. Known as â€Å"rank and yank,† the annual process utilized peer evaluations, and each of the company’s divisions was arbitrarily forced to fire the lowest ranking one-fifth of its employees.Employees frequently ranked their peers lower in order to enhance their own positions in the company. Enron’s compensation plan â€Å"seemed oriented toward enriching executives rather than generating profits for shareholders† and encouraged people to break rules and inflate the value of contracts even though no actual cash was generated. Enron’s bonus program encouraged the use of non -standard accounting practices and the inflated valuation of deals on the company’s books. Indeed, deal inflation became widespread within the company as partnerships were created solely to hide losses and avoid the consequences of owning up to problems.Conclusion In conclusion, one can see that a variety of perspectives can be applied to the Enron scandal which could have averted the 2001 disaster. If those charged with the governance of the entity had taken necessary steps in line with what is outlined in this essay, the corporation would not have collapsed. However even if Enron and its outside accountants and lawyers had done nothing improper, the sudden collapse of such a large corporation would suggest basic problems with the U. S. ystem of securities regulation, which is based on the full and accurate disclosure of all financial information that market participants need to make informed investment decisions. The overarching issue raised by Enron is how to improve the q uality of information available about public corporations. References * Bob Lyke. CRS Report RS21120, Auditing and its Regulators: Proposals for Reform After Enron. * JOINT COMMITTEE ON TAXATION, 2003 Report of investigation of Enron corporation and related entities regarding federal tax and compensation issues, and policy recommendations McLean, Bethany. 2001. â€Å"Is Enron Overpriced? † Fortune. * Paul D. Miller, Brief History of Enron (accessed 27 November 2012) http://www. freegrab. net/enronhist. htm * Paul M. Healy and Krishna G. Palepu, (2003) The Fall of Enron * Powers, William C. , Raymond S. Troubh and Herbert S. Winokur. 2002. â€Å"Report of Investigation by the Special Investigative Committee of the Board of Directors of Enron Corp. † * Steven C. Currall Marc J. Epstein 2003. Lessons From the Rise and Fall of Enron * Watkins, S. , 2002. Email to Eron Chairman Kenneth Lay,