Managing Change in Healthcare Essay Example | Topics and Well Written Essays - 2750 words

Managing Change in Healthcare - Essay Example Some of the most favored approaches that have been preferred are cycle-time reduction, process engineering, and total quality management (TQM), with which companies have tried to flatten the organizational structure [3]. However, structural change programs on its own are likely to fail as they do not account for the human element, which actually forms the structure. Change management must work towards removing fear, cynicism, and defensiveness from the minds of the people. In the healthcare sector of US, the practice of midwifery was almost eliminated by concerted effort of university educated physicians [11]. The changes in perceptions about the profession of midwifery and its reinstatement into the healthcare industry, started in 1939, with the Frontier Nursing Service and has since then passed through various changes and reconstruction [11]. To enhance the performance of an organization it is important to improve the performance of the individuals and groups that comprise that organization. When organizations set new goals, they must also take care to see that the employees are made aware of these new goals well in advance or better still the company can set the new goals after consulting the employees. The employees must be backed by timely and adequate infrastructure to attain the goals; proper feedbacks and timely interventions must be integrated into the system. The Midwives Alliance of North America (MANA) was formed in 1982 and the struggle and persistent effort of the initial women of the midwifery profession has enabled it to get a legitimate status in 33 states of the country [11]. Managing Change - The Impact of Relevant Theory on the Change Process Aims Technological development has ushered in changes across organizations and our personal world. In the midst of these changes to better and sophisticated machines, it is important to remember that people form the basis of organizations. Technology makes structured and repetitive work easy while people use their intelligence to think, create, and solve. The major change today is the transformation of the work force from an information worker to an information user or what can be better described as a knowledge worker. Peter Drucker in his 'The New Society of Organization' has said, that the world economy is transforming to a knowledge society, where knowledge is the primary resource for the economy and for the individuals. In such an economy, according to Drucker, the competitive advantage comes not from the research and development of technology but from the skill and expertise of the knowledge workers, who form the organization [2]. The legitimacy of midwifery as a practice was established by the vision and persistence of the traditional midwifery experts, who encouraged self regulation in the next generation. Their efforts paid off and by the 1980's the standards of practice and certification began to be established in one state after another. The Midwives Alliance of North America (MANA) was formed in 1982, to help the movement gain support and legitimacy [11]. Issues Affecting Change and Personal Behavior Healthcare organizations are different from other organizations, as they involve something beyond business. According to

The impact of piracy on maritime trade and fishing industry Research Paper

The impact of piracy on maritime trade and fishing industry - Research Paper Example The researcher states that at the close of the year 2010, there were at least 600 seafarers who were captives of pirates in international waters. Piracy is a crime that without doubt has far reaching effects on one of the largest trade transport network. It is clear that a lot of money is lost as a result of piracy but the question that begs is, exactly how much is lost? According to Bowden, piracy costs at least seven billion dollars a year although the figure could go even up to twelve billion. We are all affected by maritime piracy whether directly or indirectly. In fact, even the countries that contribute to piracy like Somalia still face the negative impacts of piracy. For starters, there is a huge humanitarian crisis in the region as a result of the hijack of ships. Most of the ships that are hijacked are often taking food and medical supplies to hunger stricken people in Somalia and other neighboring countries in the region. Sea transport is the leading in freight and cargo ha uling across nations. In fact It is estimated that maritime trade accounts of at least 80 percent of the world’s trade. This is one of the oldest forms of transport but it has consistency grown over the years. Maritime transport has in fact doubled every decade ever since the Second World War. The onset of a globalised market has been one of the main catapults that has steered maritime transport to the position it enjoys today. In recent yeas however, one of the oldest crimes against this mode of transport has revived and increased steadily. Piracy is now threatening this trade especially in the horn of Africa where pirates operating from Somalia have perfected the art of hijacking ships. Since sea transport is very important for all of us, there is a need to compute just how much piracy costs the trade instead of dealing with mere estimates. Organizations have tried doing some research aimed at getting the most reliable estimates but the hugest challenge has been gathering o f reliable data owing to logistical challenges. There are a variety of scholars that have done an analysis of the costs of the maritime trade. However, they have not looked at both sides of the coin. The most commonly computed cost of piracy in maritime trade is the cost of the cargo that is lost together with the ransom fees that are paid t the captors I order to release the crew and the ships. However, there are many other costs involved that need to be considered as well. This paper will start by looking at the primary effects of maritime piracy but it will also go a step further and discuss the other secondary effects of maritime piracy that have been largely ignored by many people. Past initiatives There have been some initiatives in the recent past that were geared at trying to compute the cost of piracy on maritime trade. The most notable of these are Peter Chalk’s RAND institute in collaboration with the International Maritime Bureau which together put a rough estimat e in the range of one to six billion dollars per annum (Chalk, 12; Rosenberg, 222). However, most of the studies have concentrated on the first order costs of piracy namely, the ransoms that have to be paid to free the captives, security mechanisms that have to be beefed and the increased naval costs. However, there are not many that have considered the secondary costs which could be even higher, Secondary costs of piracy includes the inflation on commodity prices as well as the international investment in regional economies among others. The bottle necks in computing the real cost According to a recent actuarial scientific study on maritime trade and piracy, the challenge to the actuaries involved in pricing maritime insurance products is considerable†¦information about the attacks issued by shipping owners is often vague. Understandably, shipping owners don’

Hispanic American Diversity Essay Example for Free

Hispanic American Diversity Essay In identifying the linguistic, political, social, economic, religious, and familial conventions and statuses of Hispanic groups living in the United States (US); the following remain as the center of attention: Mexican Americans, Puerto Ricans, Cubans, and Columbians. While there is distinctiveness in each groups culture, their language categorizes them in one of two large groups known as Latino or Hispanic Americans. The Spanish language is communal between these groups, though all have exclusive dialects that set them apart. The commonalities and differences are not limited to just language, but span across every aspect of Mexican American, Puerto Rican, Cuban and Columbian way of life. Today in the US millions of people classify themselves as Mexican Americans (2005). The intricate and affluent Mexican American multicultural heritage is a direct reflection of influences from such places as Spain and Mexico (2005). The unique language of Mexican Americans is no exception to influences as it is derived from a combination of Mexicos national language, Spanish, and the national language of the US, English. Although sometimes described as an under-represented group in US politics, Mexican Americans were very active in the Mexican American Civil Rights movement. This movement included a wide-rang of issues, from rights for farm workers to the right to vote (2000). As with their political status, socially Mexican Americans continually battle to fit in. Their want of having the American dream burns bright within the hearts and minds of all Mexican Americans and makes their social battle seem that much more important. Throughout the immigration history of Mexican Americans, little advancement has been made for progress from immigrant standing to mainstream social status. This is largely due to the lack of education provided and the vast amount of discrimination they received (2006). In education, another battle for Mexican Americans arises. Richard Alba (2006) stated, Huntington presents data that appear to show very low levels of Mexican-American educational advancement beyond high school, regardless of generation. A full comparison of high school education completion broken down by Hispanic origin. Note. From Bernstein, R. Bergman, M. (2005). Young, diverse, urban. United States Department of Commerce News. Retrieved March 1, 2008, from http://www. census. gov/Press-Release/www/2003/cb03-100. html Similar to the struggle noted with education, economically, Mexican Americans struggle for fair pay. During the Mexican American Civil Rights movement Mexican American economics came from the shadows to become one of the many issues faced. Today this harsh reality still burdens most all Mexican Americans. The one bright light may be their religious beliefs. Although, not always true, most churches today deliver separate mass for Spanish speaking parishioners. Religion remains a very strong factor in Mexican American family and culture. As with their religion, family remains quite strong in the lives of Mexican Americans. They have strong ties to not only immediate family in the US but family living in Mexico as well. This bond is so deep that some families continue to send money to their loved ones in Mexico. Similar to Mexican Americans, Puerto Ricans speak a derivative of Spanish as their main language. Politically, Puerto Ricans like Mexican Americans are under-represented in US politics. In fact their start in politics held them back from individualizing themselves. The progression of politics into Puerto Rican life in the US has gone from focusing on social and cultural issues in the 1950s to electoral participation and lobbying becoming the mainstay of their political ground (2003, p. 6). With all the strides Puerto Ricans have made politically, socially they have grown as well. They have integrated themselves into society, by fighting the same battles all Latinos fought: racism and discrimination. Although, they have a higher percentage of people graduating high school than Mexican Americans, they still maintain less than three quarters of Hispanic origin people. As with education and politics struggles with economics also faced most Puerto Ricans. They struggled for fair wages and equal opportunities just as all Latinos did. Today that struggle has become less but still lingers in areas where there is still racism and discrimination. Very similar to Mexican Americans, religion remains a very strong factor in the family and culture of Puerto Ricans. Again most churches conduct separate mass for Spanish speaking parishioners, making it easier for Puerto Ricans to practice their faith. As with their religion, family remains quite strong in the lives of Puerto Ricans. They have strong ties to not only immediate family in the US but family living in Puerto Rico as well. The fact that all Puerto Ricans are US citizens makes family all that more important. As with Mexican Americans and Puerto Ricans, Cuban Americans main language is Spanish. Similar to Mexican Americans politically Cubans are under-represented in US politics. Most are just so happy to get out of the Dictatorship they lived in Cuba they would rather not get caught up in politics at all. The strides they have made politically have helped to advance them socially, economically and in their education. Out of the Hispanic origins Cubans are the second highest only being beat by other Hispanics for High school completion. According to Jason Cato (2003), In rising to dominate the centers of power in Miami, Cuban-Americans have reversed the traditional cycles of assimilation and acculturation. Seeking freedom from the oppression of Cuba has not removed the strong ties they have to their homeland. These ties have caused Cuban Americans to adapt parts of the US culture to their own. Striving for conventional culture is not a focus. Religiously, Cuban Americans like both Puerto Ricans and Mexican Americans are devout to their religion as it is a very strong factor in their family and culture. Again most churches conduct separate mass for Spanish speaking parishioners, making it easier for Cubans to practice their faith. As with their religion, family remains quite strong in the lives of Cubans. Family is their way of holding on to cultures and traditions from Cuba. As with Mexican American, Puerto Rican and Cuban, Columbians also speak Spanish as their principal language. Columbian Americans are a very poor. Most migrated to the US to flee war and poverty seen within Columbia. They are often looking for work so that they can send money to their family still living in Columbia. Columbians rarely get involved in politics as they are very focused on family and making money. Work related interaction is the limit, except for other Columbians, of their social standing in the US. As with politics Columbians have very little interest in US culture. Most are here to work to send money home. With work being their main objective while in the US, they do not have time for anything else. They live on very little money and scrape to send as much over to Columbia as possible. Their wages are very low and they work long and mostly very hard hours just to get by. Similar to Mexican Americans, Puerto Ricans and Cubans, Columbians are very strong in their religion. They have an opportunity to go to mass that is conducted in Spanish as well as practice their religion on their own. Family is so very important in a Columbian Americans life. Everything they do is to better their familys life. They have deep ties to family not only in the US but in Columbia as well. This helps them to keep their culture and heritage as strong today as it was yesterday. Everything in their culture revolves around their religion and family. When comparing different Hispanic groups, the commonalities out way the differences in almost every scenario. The Similarities range from language, religion, and family to the reasons they came to the US. They also all care deeply and have very strong ties to their homeland and continue to focus on that rich heritage. The differences are few but stem more from social status and the want to be part of the mainstream. Politics, economic and social standings all differ for each group. This is largely due to assimilation and the different level of strides that have been made over time. The groups that have had more success politically have had the opportunity to advance socially and economically. These three combined in any order lead to an opportunity of the other. The strides and struggles that these four Hispanic groups have made has cleared a path for other Hispanic origin groups to make the same journey. References Alba, R. (2006). Mexican Americans and the American Dream. Political Science Politics. Retrieved March 1, 2008, from www. apsanet. org/imgtest/PerspectivesJun06Alba. pdf Bernstein, R. Bergman, M. (2005). Young, diverse, urban. United States Department of Commerce News. Retrieved March 1, 2008, from http://www. census. gov/PressRelease/www/2003/cb03-100. html Cruz, J. (2003). Puerto Rican politics in the United States. Centro Journal. Retrieved March 1, 2008, from http://redalyc. uaemex. mx/redalyc/pdf/377/37715101. pdf. Cato, J. (2004). Becoming American in Miami: reconsidering immigration, race and ethnic relations. Center for Latin American Studies. Retrieved March 1, 2008, from socrates. berkeley. edu:7001/Events/fall2003/11-20-03-stepick/index. html Mendoza, V. , Chicano! History of the Mexican American Civil Rights Movement. (2000). , The Journal for Multimedia History. Retrieved March 1, 2008, from www. albany. edu/jmmh/vol3/chicano/chicano. html.

The Many Ways To Be Polite

The Many Ways To Be Polite Politeness is the actions taken by a competent speaker in a community in order to attend to possible social or interpersonal disturbance. Politeness is something strange which can be seen in different forms and levels. What is polite and what not depends on where you grew up and what norms of politeness you acquired there ( Meyerhoff 2006: 81). In a conversation a speaker might say something that would be considered very rude by the listener, but that speaker might actually just trying to be polite. He was being polite according to the standards of where he grew up. So, politeness is expressed in different ways, in different places. In this essay, we will see the different forms and levels of politeness and how these forms attend to different social needs. Also we will look at examples of the different forms that requests and apologies can take. We will explore how useful is distinguishing between the politeness which is used between friends and with people that we are not very familiar with. Then we will briefly discuss about the frameworks of politeness that are used in a workplace interaction and intercultural communication. All these phenomenon of politeness will be discussed in this paper with consideration of Brown and Levinsons theory (1978) in order to illustrate how there is more than one way of being polite. According to Meyerhoff (2006) there are a number of different ways in which linguists can analyse politeness. The various approaches differ primarily in the emphasis placed on the speaker, the addressee or both, and the emphasis given to accounting for behavior that would be considered polite or behavior that would be considered impolite (p. 83). The most widely known and extensively used approach to the study of politeness is Brown and Levinsons theory which has the most dominant position in the field.People associate politeness just with ways of speaking that avoid causing offence by showing deference to another person. (Meyerhoff 2006: 84). Brown and Levinson (1978) state that deference would be inappropriate in any speech community, in some contexts. Comments that orient to in-group membership may be what starts an interaction and avoid causing offence. For example you do not always reply thank you so much when someone helps you, cheers or thanks works better. Extreme deference c ould be taken as ironic or snobbish. Now, before continuing in more depth with Brown and Levinsons theory, it is useful to refer to Grices Maxims (1975), a set of rules that people follow in communication to maintain participant harmony. Brown and Levinsons theory suggests that these four Grices principles for speaking in a cooperative way, were correct. These rules can be summed up as the Maxim of quality where a person should be truthful and sincere, the Maxim of quantity: a person must say no more or less than required, the Maxim of relevance: being relevant to that topic and the Maxim of manner: being perspicuous. All of which underpins and is underpinned by the idea that the people involved in a conversation will cooperate with each other (the cooperative principle). These four principles are not considered to be a theory of face but constitute a foundation for a theory of face, later developed by Brown and Levinson. (Adapted for Brown and Levinson 1978:95 ) The theory of Brown and Levinson suggests that there are two types of politeness. The negative politeness strategies which are the strategies that avoid offence by showing deference (e.g. Do you mind if I borrow it for a second?) and the positive politeness strategies are those that avoid offence by highlighting friendliness (e.g. You look fit and healthy-any chance you could help me push the car?). Also, considering a strategy to be polite or impolite depends on the attention that a speaker pays to his own face wants and the addressees face wants. The term face derives from the work of Goffman (1967). In Goffmans work, face was a personal attribute or quality that each of us works to protect or enhance. In Brown and Levinson the definition of face emphasises less that interpersonal and communal nature of the face wants. Face is the public self-image that every model person (MP) claims for him or herself. Brown and Levinson propose that we want to guard our face against possible dama ge when we interact with others. (Meyerhoff 2006: 84) Now, it is important to refer to the factors involved in choosing politeness strategies. Choosing what kinds of strategies would be polite or impolite in a situation depends on evaluating three main factors. Power, distance and weight (cost) of imposition were identified by Brown and Levinson. Power refers to the difference in status between participants in discourse, distance relates to the level of familiarity that exists between the speaker and the addressee, and weight of imposition relates to the extent to which one wishes to impose on another person. People often put more effort to be polite to people that their position have greater social power than we have. For example I will use more negative politeness strategies (more polite) to a government official processing a passport application than I will use (less polite) to a telemarketer who rings during dinner. This has to do with power because I want the government official to do me a favor and speed up my application as for the telemarketer, he needs something from me so I am the one with power. Also, the social distance between speakers has a huge effect on the way that they speak to each other. Generally, we give more attention to the negative face wants (more polite) of people we do not know very well and we are more abrupt to close friends. For example when you are cooking with a close friend you might say Youve got the butter instead of I think the butter is closer to you that it is to me so could you pass it to me. But, when working with someone that you are not very close you might ask in less direct way, showing more attention to their negative face wants, you might say something like Excuse me, are those the telephone accounts? Could I have them for a second? . The cost of imposition, according to Brown and Levinson meant how big the social infraction is. An example is when you ask someone for the time, which is considered as a situation with a minor imposition, you can a stranger in the road for the time and the politeness strategies pay little attention to face wants (Sorry do you have the time?). But, asking for money is greater imposition. You usually ask for money someone you are close to and if the amount is big you will probably ask someone who is even closer to you, like a very close friend. Under this framework there are three social variables which shape the way that people choose the politeness strategies they will use.Their attention to others positive and negative face wants will be determined by the relative power and social of the interactants and by the social lost of the imposition (Meyerhoff 2006: 88). These three factors are by no means independent. Earlier, I referred to the two types of politeness and the term face. Actually, there are two types of politeness because we are concerned with maintaining two distinct kinds of face, the negative and the positive face. The negative face is the want of every competent adult member of a community that their actions be unimpeded by others. The positive face is the want of every member that their wants be desirable to at least some others. (Brown and Levinson 1987:62 in Meyerhoff 2006: 85). Some societies orientate more towards deference and being attentive to negative face wants. In such societies it seems very rude to ignore the distance that might be between you and your addressee and talk as if you know her or him better than you do. A Language example is Forgive me, Ms Smith, I do apologise, but could I possibly intrude for a second. In this sentence the title Ms shows deference politeness and distance attending to negative face. Forgive me and I do apologise try to reduce the imposition of the request and attends to negative face. A further attempt to reduce the cost of imposition is could I, possibly and a second. In contrast, there are societies which orientate towards positive face. The interaction between strangers is expected to be more personable and friendly. In these societies it is rude to interact by emphasizing or drawing attention to the social distance between the interlocutors. Such a society is the Australians, where the use of first names is the norm even in professional contexts. A language example of such a society is a greeting to an old friend that you have not seen for some time e.g. Tapper! Its been ages. Youre looking good. Whatve you been doing nowadays?. In this greeting the use of ingroup code (the nickname Tapper), showing attention to the addressees interests (Whatve you been doing nowadays?) and exaggerating the speakers interest or approval (Youre looking good) are strategies that attend to the addressees positive face wants. Brown and Levinson suggest that some conversational events which represent a threat to another individuals self-image are described as inherently facethreating acts (FTAs). When such an event occurs it is sure that somebodys positive or negative face wants will be threatened, and the participants have to decide what politeness strategies they will use. Examples of FTAs are expressing thanks and making an apology, these are threats to the speakers face wants. Saying thanks establishes indebtedness to the other person. Making an apology is having to state publicly that you have done something stupid or unkind, this threatens your positive face wants as other people may not identify you and will be unwilling to suggest that they share your wants and desires. So depending on how serious an FTA is it will require more or less action to mitigate (or reduce) the potential damage to the addressees or the speakers face. (Meyerhoff 2006: 90). As I said in the introduction I will also briefly discuss about the frameworks of politeness which are used in intercultural communication. Peoples use of politeness varies in intercultural communication depending on where they come from and how their societies orientate towards politeness. An example of such differences is when making a request for a drink in a bar in English and doing the same in German. In English you usually use strategies to attend the addressees negative face wants. (Could I have a glass of red wine, please?). But, in German there is not such an attention to the servers negative face wants and it is appropriate to say I will get red wine. Sometimes a could or please may be added but using both will sound absurd and snooty. (Meyerhoff 2006: 97). Another example is how people refuse an invitation to a meal from a social superior. In some cultures a general answer like Im busy that night Im afraid will be perfectly acceptable but in western communities people want to give a reason for your refusal. (Holmes 2001: 275). This has to do with peoples negative and positive face wants. People from western communities are more concerned about their positive face, they want their wants to be desirable to at least some others and they do not like drawing attention to the social distance. In conclusion, indeed there is more than one way of being polite. As it is presented above, politeness has many forms and levels and can be used in different ways. Politeness is perceived differently depending on where you grew up and your social status so it can be also expressed differently. People use different strategies to express politeness in a conversation depending on who is the addressee, what is his social status and how close they are to him. According to Brown and Levinsons theory there are two basic strategies, the positive and the negative strategy. These two strategies exist because we are concerned to maintain two kinds of face, the negative and positive face. People have to evaluate three factors in order to decide what strategies they will use, power, distance and cost of the imposition.

A Lesson Before Dying :: essays research papers

The lady that appears after the first 100 pages of the book turns out to be Vivian, Grant’s secret lover. Grant and Vivian take a walk and after their walk they visit Grant’s aunt, aunt Emma. Aunt Emma and her friends are very fond of Vivian and they give her many compliments. Aunt Emma, and the reverend go to visit Jefferson and they find that Grant’s previous account of Jefferson’s recovery was lie; Jefferson still eats and behaves like a “hog';. Aunt Emma and the reverend confront Grant regarding his faulty account of Jefferson’s recovery. Once again, Grant visits Jefferson and tries to convince him that he is not a hog and he is a man. After a couple more visits from the ladies and Grant, the chapter ends off with the whole town watching a Christmas play on the birth of Jesus. After the play, Grant is tired of watching the same play and seeing the same people dressed in the same kinds of clothing year after year. The hermeneutic view means the dominant interpretation to a text. In “A Lesson Before Dying,'; they end off the chapter with a Christmas play about the birth of Jesus. This is significant because Christmas to Christian’s is a symbol of birth. This could mean that there might be new hope for Jefferson. This is because Jefferson is currently on death row. Christmas does not symbolize death, but symbolizes birth. This could mean that Jefferson could get a new chance in life or at least will not be executed in the near future. Another important point is that everyone knew that this play is dedicated to Jefferson/. This could mean that the whole community is praying for Jefferson. The reverend started to pray and asked God to watch over everyone including the ones in jail who were innocent or guilty. At the end of this, Grant says, “Vivian said things were changing. But where were they changing?'; This is an important quote because Vivian might be implying that racism is beginning to stop, but Grant cannot see these changes. He only sees racism as a part of life. According to the political view, there is a hierarchical structure underneath the construction of race. When Grant has a talk with his teacher, his teacher said, “I am superior to you. I am superior to any man blacker than me.'; His teacher is possibly implying that lighter skin color is racially superior in society.

Class Struggle and Autonomy in the Communist Manifesto :: Karl Marx Communism Manifesto Essays

Class Struggle and Autonomy in the Communist Manifesto The University of Dayton emphasizes four humanities based themes to describe the essence of the human experience. Autonomy and responsibility, one of these four themes, is defined within the program as, â€Å"The individual person has the ability to make choices; with those choices comes a responsibility for the consequences of those choices.†[1] Although this definition fits well in modern American society since widespread autonomy has been granted by the Constitution to all citizens, Frederick Engels and Karl Marx observed quite a different human situation in the 19th century. The drastic increase in productive development characterized by the industrial revolution of the 19th century brought two major sociopolitical changes to Europe by the middle of the century. First, the industrial revolution gave rise to a middle class that would eventually become the driving political and economic force throughout Europe. Secondly, the industrial revolution demanded productive entities exploit the extensive influx of people into major urban areas in order to maintain competitive advantages and meet rising demand for European goods in domestic and foreign markets; such exploitation created an extensive urban social class that had no political power and little or none economic freedom. As these developments became more and more noticeable, Marx and Engels were prompted to write their now infamous Communist Manifesto in order to inspire what they believed as the inevitable downfall of capitalism and the bourgeoisie thus giving the proletariat something that both had stolen: their autonomy. To truly understand this concept an examination of the two major social classes in Europe at the time is critical. However, properly characterizing the bourgeoisie has been rather problematic for scholars. Pierre Proudhon defined the bourgeoisie as a â€Å"capitalistic aristocracy† who gained their wealth through little or no work.2 Nevertheless, many scholars like Michel Lhomme assert that the bourgeoisie is simply the social class that exists consisting of numerous facets between the landed aristocracy and the lower, working class. Ultimately, what seems to be true of the bourgeoisie is that it consisted of businessmen, professionals, and state officials that were united in ushering in the emergence of a middleclass 19th century society.3 These groups were connected because they shared a set of values that consisted of ideologies that embraced basic capitalistic ideals of economic expansion, increasing the standard of living, and augmenting the complexity of society as a whole; therefore, they were united in their defiance against the traditional, static society where production was limited to habitual consumption and business organizations remained monotonous.

Agency Costs and Financial Decision-Making

Agency Costs and Financial Decision-Making The Concept An agency relationship is a contract under which one or more persons (the principal(s)) engage another person (the agent) to perform some service on their behalf which involves delegating some decision making authority to the agent. If both parties to the relationship are utility maximizers and they may have divergent goals and objectives, and there is good reason to believe that the agent will not always act in the best interests of the principal (Jensen, Michael C. , and William H.Meckling. â€Å"Theory of the Firm, Managerial Behavior, Agency Costs, and Ownership Structure. † Journal of Financial Economics 3 (October 1976), 305-360) The concept of agency cost recognizes there are fundamental differences in how shareholders, managers, and even bondholders interpret their respective relationships to an organization. While they may share some common goals and objectives, there is the potential for at least some objectives to emerge that are focused more on individual enrichment than on the well-being of the whole.For example, managers may be more focused on building a reputation for themselves, possibly creating their own power bases within the structure of the larger organizations. Shareholders may become more focused on earning dividends now and less on the future of the business. Bondholders may be concerned only with the project associated with the bond issue, and lose sight of how the overall stability of the company can have a negative impact on the return earned from that bond. ( http://www. referenceforbusiness. com/encyclopedia/A-Ar/Agency-Theory. tml#ixzz14WVaUW4g) Agency Costs is an economic concept which is defined as the cost incurred by an entity in relation to issues like varied goals and objectives of the management and shareholders and information asymmetry. Self-Interested Behavior Agency theory suggests that, in imperfect labor and capital markets, managers will seek to maximize th eir own utility at the expense of corporate shareholders. Agents have the ability to operate in their own self-interest rather than in the best interests of the firm because of asymmetric information (e. g. , managers know better than shareholders whether they are apable of meeting the shareholders' objectives) and uncertainty (e. g. , myriad factors contribute to final outcomes, and it may not be evident whether the agent directly caused a given outcome, positive or negative). Evidence of self-interested managerial behavior includes the consumption of some corporate resources in the form of perquisites and the avoidance of optimal risk positions, whereby risk-averse managers bypass profitable opportunities in which the firm's shareholders would prefer they invest. Outside investors recognize that the firm will make decisions contrary to their best interests.Accordingly, investors will discount the prices they are willing to pay for the firm's securities. (Bamberg, Giinter, and Klau s Spremann, eds. Agency Theory, Information, and Incentives. Berlin: Springer-Verlag, 1987). A potential agency conflict arises whenever the manager of a firm owns less than 100 percent of the firm's common stock. If a firm is a sole proprietorship managed by the owner, the owner-manager will undertake actions to maximize his or her own welfare. The owner-manager will probably measure utility by personal wealth, but may trade off other considerations, such as leisure and perquisites, against personal wealth.If the owner-manager forgoes a portion of his or her ownership by selling some of the firm's stock to outside investors, a potential conflict of interest, called an agency conflict, arises. For example, the owner-manager may prefer a more leisurely lifestyle and not work as vigorously to maximize shareholder wealth, because less of the wealth will now accrue to the owner-manager. In addition, the owner-manager may decide to consume more perquisites, because some of the cost of th e consumption of benefits will now be borne by the outside shareholders. Bamberg, Giinter, and Klaus Spremann, eds. Agency Theory, Information, and Incentives. Berlin: Springer-Verlag, 1987. ) In the majority of large publicly traded corporations, agency conflicts are potentially quite significant because the firm's managers generally own only a small percentage of the common stock. Therefore, shareholder wealth maximization could be subordinated to an assortment of other managerial goals. For instance, managers may have a fundamental objective of maximizing the size of the firm.By creating a large, rapidly growing firm, executives increase their own status, create more opportunities for lower- and middle-level managers and salaries, and enhance their job security because an unfriendly takeover is less likely. As a result, incumbent management may pursue diversification at the expense of the shareholders who can easily diversify their individual portfolios simply by buying shares in other companies. (http://www. referenceforbusiness. com/encyclopedia/A-Ar/Agency-Theory. html#ixzz14WVaUW4g) Managers can be encouraged to act in the stockholders' best interests through incentives, constraints, and punishments.These methods, however, are effective only if shareholders can observe all of the actions taken by managers. A moral hazard problem, whereby agents take unobserved actions in their own self-interests, originates because it is infeasible for shareholders to monitor all managerial actions. To reduce the moral hazard problem, stockholders must incur agency costs. Measuring Agency Costs The idea behind assessing agency cost is to attempt to identify what impact these differences in objectives and the flow of information between the agent or manager and the shareholders is having on the overall profitability of the organization.By correctly identifying and addressing issues of agency cost, it is possible to minimize the influence of those factors, at least enough to allow the organization to continue moving forward, rather than running the risk of failure. Determining the agency cost normally begins with looking closely at the potential costs or risks associated with including some type of agent or manager in the organizational structure. For example, one potential risk would be the possibility that the individual who is appointed as an officer in the company could seek to use company assets for his or her own personal gain, to the detriment of the company.At the same time, agency cost also looks at the expense involved in anticipating potential abuses of power and resources, and structuring the organization so that abuse is less likely to occur. This may include offering incentives to key employees that promote loyalty and lessen the chance of misappropriation of resources, or structuring the accounting process so that a series of checks and balances create a separation of control, effectively preventing any one individual from having too much power within the organization. http://www. wisegeek. com/what-is-an-agency-cost. htm) Agency costs are defined as those costs borne by shareholders to encourage managers to maximize shareholder wealth rather than behave in their own self-interests. The notion of agency costs is perhaps most associated with a seminal 1976 Journal of Finance paper by Michael Jensen and William Meckling, who suggested that corporate debt levels and management equity levels are both influenced by a wish to contain agency costs. There are three major types of agency costs: 1) Expenditures to monitor managerial activities, such as audit costs (2) Expenditures to structure the organization in a way that will limit undesirable managerial behavior, such as appointing outside members to the board of directors or restructuring the company's business units and management hierarchy (3) Opportunity costs which are incurred when shareholder-imposed restrictions, such as requirements for shareholder votes on s pecific issues, limit the ability of managers to take actions that advance shareholder wealth.In the absence of efforts by shareholders to alter managerial behavior, there will typically be some loss of shareholder wealth due to inappropriate managerial actions. On the other hand, agency costs would be excessive if shareholders attempted to ensure that every managerial action conformed with shareholder interests. Therefore, the optimal amount of agency costs to be borne by shareholders is determined in a cost-benefit context—agency costs should be increased as long as each incremental dollar spent results in at least a dollar increase in shareholder wealth. (http://www. referenceforbusiness. om/encyclopedia/A-Ar/Agency-Theory. html#ixzz14WVaUW4g) Financial decision making for dealing with agency costs There are two polar positions for dealing with shareholder-manager agency conflicts. At one extreme, the firm's managers are compensated entirely on the basis of stock price cha nges. In this case, agency costs will be low because managers have great incentives to maximize shareholder wealth. It would be extremely difficult, however, to hire talented managers under these contractual terms because the firm's earnings would be affected by economic events that are not under managerial control.At the other extreme, stockholders could monitor every managerial action, but this would be extremely costly and inefficient. The optimal solution lies between the extremes, where executive compensation is tied to performance, but some monitoring is also undertaken. In addition to monitoring, the following mechanisms encourage managers to act in shareholders' interests: (1) performance-based incentive plans (2) direct intervention by shareholders (3) the threat of firing (4) the threat of takeoverMost publicly traded firms now employ performance shares, which are shares of stock given to executives on the basis of performances as defined by financial measures such as earn ings per share, return on assets, return on equity, and stock price changes. If corporate performance is above the performance targets, the firm's managers earn more shares. If performance is below the target, however, they receive less than 100 percent of the shares. Incentive-based compensation plans, such as performance shares, are designed to satisfy two objectives.First, they offer executives incentives to take actions that will enhance shareholder wealth. Second, these plans help companies attract and retain managers who have the confidence to risk their financial future on their own abilities—which should lead to better performance. (http://www. referenceforbusiness. com/encyclopedia/A-Ar/Agency-Theory. html#ixzz14WVaUW4g) An increasing percentage of common stock in corporate America is owned by institutional investors such as insurance companies, pension funds, and mutual funds.The institutional money managers have the clout, if they choose, to exert considerable infl uence over a firm's operations. Institutional investors can influence a firm's managers in two primary ways. First, they can meet with a firm's management and offer suggestions regarding the firm's operations. Second, institutional shareholders can sponsor a proposal to be voted on at the annual stockholders' meeting, even if the proposal is opposed by management.Although such shareholder-sponsored proposals are nonbinding and involve issues outside day-to-day operations, the results of these votes clearly influence management opinion. (http://www. referenceforbusiness. com/encyclopedia/A-Ar/Agency-Theory. html#ixzz14WVaUW4g) In the past, the likelihood of a large company's management being ousted by its stockholders was so remote that it posed little threat. This was true because the ownership of most firms was so widely distributed, and