Explain some of the ways that corporations are citizens of the world and how that impacts profits, shareholders and the corporation's reputation among competitors in the global market.© BrainMass Inc. brainmass.com March 4, 2021, 8:19 pm ad1c9bdddf
Explain some of the ways that corporations are citizens of the world and how that impacts profits, shareholders and the corporation's reputation among competitors in the global market
Company is an artificial person created under law. It's a citizen as it has its own identity, objectives and obligations. It has to comply with the rules and regulations of the state. One of the examples is that it has to comply with all the tax laws and other laws.
Moreover the corporations apply business ethics by having good corporate governance.
Corporate Governance is all about promoting Corporate Fairness, Transparency and Accountability.
Self-regulation for the company is an important step towards becoming more efficient and socially responsible. All parties to corporate governance have an interest, whether direct or indirect, in the effective performance of the organization. Directors, workers and management receive salaries, benefits and reputation; whilst shareholders receive capital return. Customers receive goods and services; suppliers receive compensation for their goods or services. In return these individuals provide value in the form of natural, human, social and other forms of capital. Hence it is clearly good that corporations like the individuals should seek to minimize their negative social and environmental impact resulting from their economic activity.
Thus corporate governance is required to promote fairness, transparency, discipline and self regulation. Good governance is having a significant impact and benefit because traditionally, a company's worth was based on the tangible assets (Imhoff). More and more intangible assets such as goodwill, brand value and intellectual property are needed to be valued. Measuring is depending of the credit rating of a company which is the reliable resources for investors. Therefore, the investors expect to see the information of rating, "a high rating indicates good compliance with governance standards" (Imhoff).
Example of Enron
Enron was founded on January 1, 1985 with the merger of Houston Natural Gas (Houston, TX) and InterNorth (Omaha, NE), and became the nation's largest gas pipeline system with a network of more than 34,000 miles. The company was at a compound annual rate of more than 60 percent from 1995 through 2000. The highest and amazing growth came in 2000, which its revenues increased from $40 billion in 1999 to over $100 billion just a year later. But this growth was artificial and it was inaccurate. It filed for bankruptcy on December 2, 2001. The CFO Fastow led the team which created the off-books companies, and manipulated the deals to provide himself, his family and his friends with hundreds of millions of dollars in guaranteed profits, at the expense of the corporation he worked for and its stockholders. (BBC NEWS, 2002) At the time it filed for bankruptcy on December 2, 2001, it was considered the seventh largest publicly traded corporation in the United States Enron manipulated the accounting statements and cheated the numerous investors and afterwards it filed for bankruptcy.
In August of 2000, Enron's stock price hit its highest value of $90 and Enron's executives, who possessed the inside information of the hidden losses, began to sell their stock but the general public and Enron's investors were told to buy the stock, as the sky was the limit. As executives were selling off their shares of stock, the price continued to drop. As the price dropped, ...
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