Reviewing the large body of works in Dividend Pricing - Free Essay Example

Sample details Pages: 13 Words: 3938 Downloads: 3 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? For past 40 years, a large body of works on the ex-dividend day price behavior of stocks have demonstrated that the price drop in most cases is only partial, decreasing by less than the full dividend amount. Researchers have proposed three competing theories to explain this empirical preference for capital gains over dividends. These include the existence of tax-induced clienteles (Elton Gruber, 1970), short-term trading (Kalay, 1982) and discreteness of stock prices due to minimum tick-sizes (Bali Hite, 1998). Don’t waste time! Our writers will create an original "Reviewing the large body of works in Dividend Pricing" essay for you Create order Although the partial price drop is well established as an empirical regularity, the explanation of this behavior is still very much an unresolved issue. In this chapter, we will discuss these three competing theories in theoretical part and we will compare them critically. Then, in empirical part, we will go through the latest researches to show the research gap and construct research hypothesizes. 2.2 Theoretical Literature 2.2.1 Tax-Induced Clienteles Miller and Modigliani (1961) show that, in the context of perfect markets, with no taxation and no transaction costs, dividend policy is irrelevant. In this context, investors are indifferent between dividends or capital gains, and the price of the stock should go down by the full amount of the dividend on the ex-dividend day. (H. M. Miller Modigliani, 1961) Although Miller and Modigliani (1961) accept the existence of dividend clienteles, they argue that if the distribution of payout ratios corresponds exactly to the distribution of investor preferences, then the case is no different to the case of perfect markets, where it is irrelevant whether investors receive dividends or capital gains. Each firm will tend to attract its own clientele, consisting of investors that prefer its payout ratio. Black and Scholes (1974) propose that firms, knowing that there are preferences for differing types of dividend yields, will adjust their dividend policies as necessary to satisfy such de mand. Farrar and Selwyn (1967) observe that the unfavorable fiscal treatment of dividends over capital gains implies that firms should not pay dividends because investors would prefer the higher after tax returns associated with capital gains. Brennan (1970) develops this line of work and reaches similar conclusions. (Black Scholes, 1974) (Farrar Selwyn, 1967) (Brennan, 1970) Given the wide variety of investors present in markets, there is no doubt that there is differing preferences caused by any given fiscal framing. Several researches at that time tried to answer this question whether, by observation of real data, this clientele effect can be empirically detected. Elton and Gruber (1970) establish a relationship between stock price behavior on the ex-day and the tax levied on the marginal stockholder. In a market with rational arbitrage, the price drop should reflect the relative after-tax value of dividends and capital gains for the marginal stockholder. This implies that t he marginal investors income tax rate can be inferred simply by observing the price drop on the ex-day. The equilibrium condition is: Where is the stock price on the cum-dividend day, is the stock price on the ex-dividend day, is the stock price when bought, is the dividend, is the dividend tax rate and is the capital gains tax rate. From Eq. we obtain: Elton and Gruber (1970) find that, on average, the stock price drop is less than the dividend amount, which is consistent with the tax on dividends being higher than the tax on capital gains, in the period covered by their study. They also find a statistically significant positive relationship between the right hand side of Eq. , both with dividend yield and payout ratio. Barclay (1987) confirms the results of Elton and Gruber (1970), while Schlarbaum et al. (1978) find very little evidence of this type of relationship using individual investor data from a brokerage firm. After the 1986 tax reform act in the US that equalized t axes on dividends and capital gains, Michaely (1991) finds that the ex-day price drop remained below one contrary to the tax-induced clientele hypothesis. (Barclay, 1987) (Schlarbaum, Lewellen, Lease, 1978) (Roni Michaely, 1991) 2.2.2 Short Term Trading Around the Ex-Day Several papers study the effect of dynamic trading strategies around the ex-dividend day. These strategies imply that investors trade around the ex-dividend day in order to avoid or to capture the dividend, depending on their preferences for dividend or capital gain. Kalay (1982) shows that the price drop is bounded by transaction costs: Where, and is the expected cost of a round trip transaction. Only within the boundaries defined by transaction costs in Eq., where there are no arbitrage opportunities, would it be possible to infer tax-clienteles effect exists. Beyond those limits, the price drop would reflect only the effects of arbitrage trading. Miller and Scholes (1982) present a similar argument. (M. H. Miller Scholes, 1982) Eades et al. (1984) study the behavior of prices around the ex-dividend day and show the existence of abnormal returns on days other than the ex-day, which is contrary to the tax-induced clientele hypothesis. The results of Kalay (1982) are consist ent with the findings of Karpoff and Walking (1988), who detect a significant relationship between ex-day returns and transaction costs. Lakonishok and Vermaelen (1986) confirm the presence of short-term traders in the market around the ex-dividend day, detectable because of high or abnormal volumes. Michaely and Vila (1996) set out an inverse relation between transaction costs and abnormal volume. The evidence of abnormal volumes around the ex-day is contrary to the clientele models. Naranjo et al. (2000) re-examine and extend the work of Eades et al. (1984) and find that the high-yield stock ex-day returns were highly influenced by corporate dividend capture. (Eades, Hess, Kim, 1984) (Karpoff Walkling, 1988) (Lakonishok Vermaelen, 1986) (R. Michaely Vila, 1996) (Naranjo, Nimalendran, Ryngaert, 2000) 2.2.3 Market Microstructure Arguments The discreteness argument presented by Bali and Hite (1998) focuses on the multiple ticks of price changes as compared with the continuity of dividends. Because the price changes are discrete in most cases they cannot equal the dividend amount. The authors argue that the market systematically rounds the price drop down to the nearest tick and this causes the price to drop by less than the dividend amount. Dubofsky (1992) argues that an ex-dividend premium below one may be explained by mechanical rules imposed by the NYSE and AMEX for the ex-day adjustment of open limit orders to buy stock. (Dubofsky, 1992) The transition of ticks in US markets from 1/8 to 1/16 ticks and then to decimalization in 2001 provided an excellent opportunity to test the theory of Bali and Hite (1998). The reduction of ticks and the progressive elimination of discreteness should result in a price drop on the ex-day increasingly closer to one. Cloyd et al. (2006) refute the discrete pricing hypothesis and find new evidence consistent with long-term tax-induced clienteles. The price discreteness of Bali and Hite (1998) has been also refuted by Jakob and Ma (2004) and Graham et al. (2003). (Cloyd, Oliver Zhen, Connie, 2006) (Graham et al., 2003; Jakob Ma, 2004) 2.2.4 Comparison and conclusion Among these three theories that explained above, the microstructure theory is fully refuted. Because although after 2001 stock prices were decimalized, price drop ratio abnormality still exist in US market as Cloyd at al. (2006) proved. So, the price discreteness could not be a good explanatory reason. Short term trading theory also faced with several shortcomings. Transaction cost plays an important role to provide arbitrage opportunity. Therefore, this theory just can be apply for stocks which amount of dividend is high enough to compensate transaction cost and provide arbitrage opportunity on ex-date. In result, short term theory has its` own limitation and cannot generalize to all stocks and markets. Tax-clientele theory apparently is the first and more reliable theories while discussed first time by Miller and Modigliani (1961) on dividend area. Elton and Gruber (1970) extend this theory for the first time to explain price behavior on ex-date. Most of researchers confirm the result of Elton and Gruber (1970), while others only find very little evidence of this type of relationship. It is apparent that research methodology and sampling play an important rule to investigate tax-clientele theory. However, most of researchers find consistent results with Elton and Gruber (1970). Moreover, Withworth and Rao (2010) expand this research for a period of more than 80 years and find the same result. Moreover, they investigate the stability of this theory for two different period of time and approved the tax-clientele theory. In summary, we high light and confirm Borges (2008) point of views as follow: ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ different theories have not been very successful at explaining this regularity. At best, the evidence is still mixed as to the existence of tax-clienteles and, in most cases, is inconsistent with the discreteness hypothesis. By this deliberation, we select tax-clientele theory as our research framework and try to overco me its` shortcoming by introducing strategic ownership as a moderating variable. The reason behind it will be discussed in empirical literature review while we evaluate the latest researches critically. 2.3 Empirical Literature Review In this part we start with Elton and Gruber (1970) who founded Tax-Clientele theory on ex-dividend date pricing explanation. Then we review and criticize other related researches which tried to proved or refute this theory to show their difference and shortages. Consequently, we express how this research could fill these gaps and deficits and help the explanatory power of tax-clientele theory. As explained in theoretical literature, Elton and Gruber (1970) establish a relationship between stock price behavior on the ex-day and the tax levied on the marginal stockholder. In a market with rational arbitrage, the price drop should reflect the relative after-tax value of dividends and capital gains for the marginal stockholder. This implies that the marginal investors income tax rate can be inferred simply by observing the price drop on the ex-day. The equilibrium condition is: Where is the stock price on the cum-dividend day, is the stock price on the ex-dividend day, is the sto ck price when bought, is the dividend, is dividend tax rate and is the capital gain tax rate. From Eq. we obtain: Elton and Gruber (1970) hypothesize that high tax bracket investors will on average generally prefer to hold low dividend yielding stocks, to avoid the consequences of taxes, while low tax bracket investors will on average generally prefer to hold high dividend yielding stocks since taxes have a smaller impact on the after-tax value of dividend income. This theory is commonly referred to as the clientele effect. Empirically, Elton and Gruber (1970) document that on average, the securities of dividend paying stocks decline less than the amount of differential taxation on dividends and capital gains. Elton and Gruber (1970) also find that the implied tax bracket decreases when the dividend payout increases, which they interpret to imply that: (1) high tax bracket investors own low dividend yielding stocks; (2) low tax bracket investors own high dividend yielding stoc ks; and (3) corporations (who are taxed more on capital gains than they are on dividends), will prefer high dividend yielding securities. This, they argue, provides evidence of a tax-induced clientele effect. Eades, Hess and Kim (1984) investigate ex-dividend day returns of several taxable and non-taxable distributions by investigating the pricing behavior for five days on each side of the ex-dividend day which they define as the ex-dividend period. Their results are quite surprising and cast considerable doubt on the clientele or tax hypothesis interpretation of ex ­-day pricing behavior. Their paper contributes to the ex-dividend day literature by looking at four different dividend distributions. First, ex-dividend day returns for taxable cash distributions are observed to be positive and significant, which is consistent with the hypothesis that dividends are taxed more heavily than capital gains. Second, ex-dividend day returns for preferred stocks are negative and sign ificant; since corporations dividend tax rates are less than their capital gains tax rates, and they tend to be the largest clientele of preferred stock, one would expect a negative ex-day return as reported. Third, non-taxable stock dividends and splits are priced on the ex ­-day as if they are fully taxable. This result is puzzling, particularly if returns are caused by tax effects. In this case one would expect to find no ex-day premium for non-taxable distributions. Finally, non-taxable cash dividends are priced as if they receive a tax rebate. This result casts further doubt on the tax interpretation of ex-day pricing behavior. To help explain the conflicting results, Eades, Hess and Kim (1984) investigate several explanations of the ex-day period anomaly. In particular, they examine the possibility of errors in data, day of the week effects, dividend announcement effects, the impact of infrequent trading, and non-normality of returns. None of the proposed explanations a re capable of explaining the curious ex-dividend day results; however their research eliminates possible reasons for the documented ex- ­dividend day anomaly. Poterba (1986) also finds interesting results associated with the ex- ­dividend day when he examines the Citizens Utilities Co. Citizens Utilities is unique since it has one class of common stock which pays stock dividends and another which pays taxable cash distributions. Poterba (1986) finds that the cash dividends ex-day price decline is less than the dividend amount, while the price of the stock paying stock dividends declines on the ex-day by nearly the full amount of the dividend. Clearly the disparity between the ex-day dividend valuation and the observed prices of the two shares is consistent with previous explanations of dividend distributions Poterba (1986) offers the following explanations for his results, the first of which he himself admits may be weak. First, he argues, investors may value cash d ividend income more than stock dividends particularly when transaction costs are high. Second, he argues that investors may value certain firm attributes which are correlated with cash dividend payments. This may explain why firms pay cash dividends even though investors value cash dividends less than comparable capital gains. (Poterba, 1986) Barclay (1987) investigates the ex-day behavior of stock prices before income taxes exist. Looking at data between the years 1900 to 1910, Barclay finds that stock prices fell on average by the full amount of the dividend. This evidence is consistent with the hypothesis that investors value dividends and capital gains equally in the pre-tax period, and that the differential taxation of dividends and capital gains has since caused investors to discount the value of taxable cash dividends in relation to capital gains. Michaely (1991) tests for the validity of the tax-clientele effect and explicitly compares his findings to those of Elton an d Gruber (1970) and Kalay (1982). As a competing hypothesis, Michaely (1991) argues that the existence of short term traders and corporate traders dominates the market and thus affects the ex-dividend day return. In other words, he expects to find a premium greater than one on the ex-dividend day, whereas Elton and Gruber and Kalay (1982) find a premium less than and equal to one, respectively. Michaely (1991) terms his hypothesis the corporate-trading hypothesis. Michaelys analysis (1991) is unique in the sense that he identifies and eliminates two sources of heteroskedacity found in the premium, where the premium is defined as the ratio of the price change between the last cum-day and the ex-day to the amount of the dividend. When the premium is adjusted to correct for heteroskedacity, Miachaely (1991) finds a negative abnormal return, particularly among high yield securities. Since corporations may prefer dividends over capital gains, this result provides evidence that corpora te and short term trading on the ex-dividend day affect price behavior. In fact, Michaely (1991) finds no evidence of an adverse tax effect since he finds a negative premium. 2.3.1 Tax law Changes Although a complete understanding of the determinants of ex-dividend stock price behavior still eludes us, the essence of the best-known and most enduring of all theories is that different tax rates cause investors to value dividends and capital gains unequally. The works cited previously employ a wide variety of methodologies that have furthered our understanding, but there are few better opportunities to test theories about taxes than the natural experiment created by changes in a countrys tax laws. Therefore, the remainder of this subsection reviews most of the important works that have considered one or more tax law changes, whether in the U.S. or abroad. We then discuss some of their strengths and weaknesses, along with how this study advances knowledge in the area. We begin with Barclay (1987), who documents ex-day price behavior before and after the introduction of the Federal Income Tax in 1913. Using data from the Commercial and Financial Chronicle, Barclay finds that i s not only close to one but also stable across groups when stocks are sorted into quintiles by dividend yield. In a matched sample from the post-income tax era, is less than one and generally increases with dividend yield. These findings are clearly consistent with EG. While its uniqueness makes Barclays study (1987) extremely interesting, it does have one notable drawback. Specifically, his post-tax matched sample is drawn from the period 1962-1985. Although the Center for Research in Security Prices (CRSP) database makes it much easier to obtain these later prices, one cannot help but wonder how ex-day prices behaved immediately following 1913. Grammatikos (1989) examined ex-day price behavior before and after the Tax Reform Act (TRA) of 1984. The 1984 Act lengthened the time a corporation must hold the stock at risk from 16 to 46 days. If the corporation does not meet the minimum holding requirement, the dividend becomes ineligible for the inter-corporate dividend exclusion an d is instead taxed at the normal rate, thus eliminating the motivation for dividend capture altogether. Consistent with the added risk imposed on dividend capturers, ex-day returns rose on average after the Act, but not so much for stocks that could be hedged with options. (Grammatikos, 1989) Of all U.S. tax law changes, none has been more thoroughly researched with respect to its effect on ex-day pricing than the 1986 Tax Reform Act (TRA). The 1986 Act lowered ordinary personal and corporate income tax rates but eliminated preferential tax treatment of long-term capital gains. According to the EG model, either of these two changes should cause to rise (and ex-day returns to fall), and indeed most empirical investigations [e.g. Robin (1991), Lamdin and Hiemstra (1993), Koski (1996)] support this prediction. Probably the most notable dissenter is Michaely (1991), who finds that is not significantly different from one in any of the years 1986-1989 around the TRA, leading him to con clude that short-term traders are much more active now than in the time period studied by EG. (Koski, 1996; Lamdin Hiemstra, 1993; Robin, 1991) However, Bhardwaj and Brooks (1999) point out that Michaelys estimates may have been distorted by outliers. They are able to replicate his results, but after filtering out a small number of observations with other simultaneous distributions, excessively large positive or negative price drop ratios, and/or missing bid/ask prices on the cum- or ex-day, they find that in 1986 (i.e. before the TRA took effect) was on average less than one, positively correlated with the dividend yield, and negatively related to transaction costs, consistent with the integrated tax framework. (Bhardwaj Brooks, 1999) Ki (1994) results are mixed, as ex-day excess returns fall post-1986 for his NASDAQ sample but not for NYSE/AMEX securities. Finally, it is also worth pointing out that the 1986 TRA decreased tax heterogeneity, as it caused long-term investors and would-be arbitrageurs to view dividends and capital gains similarly. Michaely and Vila (1995) and Wu and Hsu (1996) support the general consensus that ex-day returns dropped following the 1986 reform, but consistent with prior arguments, they also find a significant reduction in ex-day volume as decreased heterogeneity reduced the incentive to trade. (Ki, 1994) (Roni Michaely Vila, 1995) (Wu Hsu, 1996) 2.3.2 Non-US Stock Markets Of course, studies of tax reforms need not be confined to the U.S. Tax law changes in the United Kingdom (UK) have provided several excellent opportunities to test the basic tax clientele model, and the evidence has been mostly supportive. While Poterba and Summers (1984) do not find a notable change in ex-day returns following the introduction of a capital gains tax in 1965, they do find a substantial drop following a 1973 reduction in the effective tax rate on dividends. Lasfer (1995) finds that ex-day returns decline following the 1988 Income and Corporation Taxes Act, which reduced the differential taxation of dividends and capital gains (similar to the 1986 TRA in the U.S.). (Poterba Summers, 1984) (Lasfer, 1995) Bell and Jenkinson (2002) study ex-day returns 30 months before and after the 1997 Finance Act (FA97), which removed pension funds preference for dividends over capital gains. Price drop ratios fell and ex-day returns rose following FA97, especially for high-yield stocks, implying not only that taxes affect valuation but also that pension funds are the likely marginal investors for the securities used in the study. (Bell Jenkinson, 2002) While the UK evidence has been mostly compatible with EG, results from Canadian tax reforms have been less so. In spite of a 1971 tax law change that increased the value of dividends relative to capital gains, Lakonishok and Vermaelen (1983) find lower price drop ratios for securities on the Toronto Stock Exchange, which they attribute to another provision of the tax reform that reduces short-term trader profits. In a sample period (1970-1980) covering four different tax regimes, Booth and Johnston (1984) find that is consistently less than one. However, they are unable to draw conclusions in favor of the tax model because PDR does not increase with dividend yield as hypothesized. (Lakonishok Vermaelen, 1983) (Booth Johnston, 1984) 2.3.3 Other Securities and Non-Taxable Distributions While most ex-day pricing research has focused on taxable cash dividends on common stocks, one can also make inferences about existing theories by observing the price behavior of different securities and around other distribution types. Eades, Hess, and Kim (1984) document negative excess returns for preferred dividends, as might be expected for high-yield dividend capture targets. However, Stickel (1991) obtains conflicting results. In his sample of nonconvertible preferreds, he finds positive abnormal returns and volume on the ex-day, with returns declining for more liquid stocks. So far, this is consistent with a synthesized model where both long-term investors and short-term arbitrageurs influence prices around preferred dividends. Inconsistent with this framework, however, is Stickels finding that trading volume increases with liquidity for low-yield but not high-yield preferred. (Stickel, 1991) Preferred dividends are of course relevant to ex-day pricing theories, but it i s perhaps more interesting to compare observations around non-taxable distributions against those around the usual taxable dividends. Eades, Hess, and Kim (1984) and Grinblatt, Masulis, and Titman (1984) examine ex-day price behavior around stock dividends and splits, which are non-taxable. According to both the EG model and the short-term trading hypothesis, these studies should find ex-day price drops fully reflective of the dilution caused by additional shares. In fact, neither does. Eades et al.(1984) report that non-taxable stock dividends and splits are priced on ex-dividend days as if they are fully taxable. Oddly, Grinblatt et al.(1984) note higher positive ex-day returns for stock dividends than splits, possibly due to the added inconvenience investors face when dealing with odd lots. (Grinblatt, Masulis, Titman, 1984) Green and Rydqvist (1999) study a unique security, Swedish lottery bonds, to which special rules apply. Coupon payments on the bonds (distributed by lott ery) are not subject to income tax, but capital gains are taxed at the ordinary rate. Furthermore, the regulatory environment is not conducive to short-term arbitrage using these securities. Consistent with the EG tax model, Green and Rydqvist find that the bond price drops by about 130 percent of the distribution on the ex-coupon day, and that the bonds frequently trade at negative pre-tax yields. (Green Rydqvist, 1999) Elton, Gruber, and Blake (2005) examine two samples of closed-end funds. In one sample, distributions are not taxed (but capital gains are); in the other, distributions are taxed normally. As expected, market-adjusted price drop ratios are greater than one for the non-taxable distributions but less than one for the taxable sample. Price drop ratios for both samples also behave as predicted by the EG model following tax law changes in 1993 and 1997. Similarly, Milonas, Travlos, Xiao, and Tan (2002) examine taxable and non-taxable dividends in the Chinese stock ma rket and find price behavior mostly consistent with the tax theory. (Elton, Gruber, Blake, 2005) (Milonas, Travlos, Xiao, Tan, 2006)

The Vibrant and Unpredictable Era of the Gilded Age

The Gilded Age was one of the most vibrant and unpredictable eras in the history of America. It brought about a new wave of industrial and economic opportunities that allowed some to build massive businesses and fortunes, while other lower and middle class citizens struggled to survive. Some would go as far to say it created a war between the classes across American societies. Giants of industry, such as Andrew Carnegie and John D. Rockefeller, revolutionized how big business led to the rise of corporate America, but also how it leveled competition in the free-market. The Gilded Age offered America rapid economic growth and new technological products that created an economical boom. Yet, these advancements were created at the costs of exploiting industrial workers and farmers working long hours in dangerous conditions for low pay and the American people sought political and social reforms in an effort to rebalance the scale of power in the United States. During the Gilded Age, the American economy had shifted from a nation of small farmers and craftsmen to an economy transformed by railroads and telephone lines that stretched from coast to coast. Confronted by new models of economics and politics, unforeseen struggles caused farmers and laborers to fight for survival while emerging industrialists celebrated new wealth. This period of transition left much of the population without a voice. The wealthy seemed to be running the country without any advice from lower

Social Responsibility Free Essays

Presentation Transcript Core Concepts of ManagementSchermerhorn : Schermerhorn – Chapter 4 1 Core Concepts of ManagementSchermerhorn Prepared by Cheryl Wyrick California State Polytechnic University Pomona John Wiley Sons, Inc COPYRIGHT : Schermerhorn – Chapter 4 2 COPYRIGHT Copyright 2003  © John Wiley Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that named in Section 117 of the 1976 United States Copyright Act without the express written consent of the copyright owner is unlawful. We will write a custom essay sample on Social Responsibility or any similar topic only for you Order Now Request for further information should be addressed to the Permission Department, John Wiley Sons, Inc. The purchaser may make back-up copies for his/her owner use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, cause by the use of these programs or from the use of the information contained herein. Chapter 4Ethical Behavior and Social Responsibility : Schermerhorn – Chapter 4 3 Chapter 4Ethical Behavior and Social Responsibility Planning Ahead What is ethical behavior? How do ethical dilemmas complicate the workplace? How can high ethical standards be maintained? What is corporate social responsibility? What is Ethical Behavior? Schermerhorn – Chapter 4 4 Ethical behavior what is accepted as â€Å"good† and â€Å"right† in the context of the governing moral code Values broad beliefs about what is or is not appropriate behavior What is Ethical Behavior? What is Ethical Behavior? : Schermerhorn – Chapter 4 5 What is Ethical Behavior? Examples of Values Equality Fairness Honesty Responsi bility Harmony JCAHO Standards : JCAHO Standards RI 2. 10 The hospital respects the rights of patients: Elements of Performance 2. Each patient has the right to have his or her cultural, psychosocial, spiritual and personal values, beliefs and preferences respected 4. The hospital accommodates the right to pastoral and other spirituals services for patients. RI 2. 220 (LTC only) Residents receive care that respects their personal values, beliefs, cultural and spiritual preferences, and life-long patterns of living Slide 7: Schermerhorn – Chapter 4 7 If we are to comply with JCAHO standards, how important is it to understand the differing worldviews on which our patients base their values and spiritual beliefs as well as knowing our own? Five Questions about WV : Schermerhorn – Chapter 4 8 Five Questions about WV 1. What is ultimately the prime reality? (†¦ such as â€Å"God†, or Matter/Energy) 2. What is the basic nature of the universe? 3. What is the basic nature and condition of man? 4. What happens to man at death? 5. What is the reason or basis of ethics and morality? Conflicting world views? : Schermerhorn – Chapter 4 9 Conflicting world views? â€Å"I am aware that no one†¦. is neutral on such emotionally charged issues. None of us can tolerate the notion that our worldview may be based on a false premise and, thus, our whole life headed in the wrong direction. Dr. Armand M. Nicholi Jr. Slide 10: Schermerhorn – Chapter 4 10 â€Å"Most of us make one of two basic assumptions: we view the universe as a result of random events and life in this planet is a matter of chance; Or we assume an Intelligence beyond the universe who gives the universe order, and life meaning. † Dr. Armand M. Nicholi Jr. The basis for an approach to ethics : Schermerhorn â€⠀œ Chapter 4 11 The basis for an approach to ethics Worldview establishes the foundation that individuals rely on to form their approach to ethics. There are two fundamental worldviews from which ethics and values manifest in behavior and decision-making: A belief that humans are created beings accountable to a creator. A belief that humans evolved from the result of a chance event. Alternative Views of Ethical Behavior : Schermerhorn – Chapter 4 12 Alternative Views of Ethical Behavior Utilitarian – greatest good to the greatest number of people Individualism – primary commitment is to one’s long tem self-interests Moral-rights – respect the fundamental rights of people Justice – ethical decisions treat people fairly according to rules Cultural Issues in Ethical Behavior : Schermerhorn – Chapter 4 13 Cultural Issues in Ethical Behavior Cultural Relativism ethical behavior is always determined by cultural context Cultural Issues in Ethical Behavior : Schermerhorn – Chapter 4 14 Cultural Issues in Ethical Behavior Ethical Imperialism attempt to externally impose one’s ethical standards on others Ethics in the Workplace : Schermerhorn – Chapter 4 15 Ethics in the Workplace What is an Ethical Dilemma? Situation that requires choosing a course of action offers potential for personal and/or organizational benefit may be considered unethical Examples of Ethical Dilemmas : Schermerhorn – Chapter 4 16 Examples of Ethical Dilemmas Should I support my bosses incorrect views? Should I sign a false document? Should I accept a gift from a client? Should I give special treatment to a friend or boss’ friend? Ethics in the Workplace : Schermerhorn – Chapter 4 17 Ethics in the Workplace Rationalizations for Unethical Behavior Convincing oneself that: behavior is not really illegal behavior is really in everyone’s best interests nobody will ever find out the organization will â€Å"protect† you Preventing Rationalization for Unethical Behavior : Schermerhorn – Chapter 4 18 Preventing Rationalization for Unethical Behavior Question 1 â€Å"How will I feel about this if my family finds out? † Question 2 â€Å"How will I feel about this if it is printed in the local newspaper? † Ethics in the Workplace : Schermerhorn – Chapter 4 19 Ethics in the Workplace Factors Influencing Ethical Behavior Person Organization Environment Factors Affecting Ethical Behavior : Schermerhorn – Chapter 4 20 Factors Affecting Ethical Behavior Person family influences religious values personal standards and needs Factors Affecting Ethical Behavior : Schermerhorn – Chapter 4 21 Factors Affecting Ethical Behavior Organization policies, codes of conduct behavior of supervisors, peers organizational culture Factors Affecting Ethical Behavior : Schermerhorn – Chapter 4 22 Factors Affecting Ethical Behavior External Environment government regulations norms and values of society ethical climate of industry Maintaining High Ethical Standards : Schermerhorn – Chapter 4 23 Maintaining High Ethical Standards Ethics Training structured programs that help participants to understand ethical aspects of decision making Slide 24: Schermerhorn – Chapter 4 24 Where do pressures for unethical acts come from? BOSSES LOWER LEVELS Sometimes, perhaps too often Bosses may ask: â€Å"support an incorrect view† â€Å"sign a false document† â€Å"overlook a wrong doing† â€Å"do business with my friends† Who hold a lot of power Who depend on them for raises, promotions, etc. Maintaining High Ethical Standards : Schermerhorn – Chapter 4 25 Maintaining High Ethical Standards Whistleblower Protection Whistleblowers expose misdeeds of others to preserve ethical standards protect against wasteful, harmful, illegal acts Maintaining High Ethical Standards : Schermerhorn – Chapter 4 26 Maintaining High Ethical Standards Whistleblower Protection Barriers to whistleblowing strict chain of command strong work group identities ambiguous priorities State laws protecting whistleblowers vary Federal laws protect government workers Maintaining High Ethical Standards : Schermerhorn – Chapter 4 27 Maintaining High Ethical Standards Top management support model appropriate ethical behavior Formal codes of ethics official written guidelines on how to behave Corporate Social Responsibility : Schermerhorn – Chapter 4 28 Corporate Social Responsibility Obligation of the organization to act in ways that serve both its own interests and that of stakeholders Social Responsibility in Action : Schermerhorn – Chapter 4 29 Social Responsibility in Action Social Audits Evaluate corporate social performance by asking Is the organization’s Economic responsibility met? Legal responsibility met? Ethical responsibility met? Discretionary responsibility met? Social Responsibility and the Legal Environment : Schermerhorn – Chapter 4 30 Social Responsibility and the Legal Environment Governmental agencies that monitor compliance with government mandates Federal Aviation Administration (FAA) Environmental Protection Agency (EPA) Occupational Safety Health Administration (OSHA) Food Drug Administration (FDA) Complex Legal Environment : Schermerhorn – Chapter 4 31 Complex Legal Environment Areas of government intervention occupational safety and health fair labor practices consumer protection environmental protection How to cite Social Responsibility, Papers Social Responsibility Free Essays Sole proprietorship This business is an individual owned organization. This business is the most attractive because of its simplicity and control over the business. * Liability-. We will write a custom essay sample on Social Responsibility or any similar topic only for you Order Now This business has unlimited liability. The owner is responsible for everything. If the business begins to fail personal assets and business assets can be sought after to pay off debts. There is no distinction between the two assets. * Income taxes- Business owners in a sole proprietorship file a 1040 as well as a schedule C (â€Å"profit or loss from a business or profession†). The Proprietor’s personal income is supplemented by all profits of his business. This form of taxation is known as pass-through taxation, meaning there is no separate federal income tax reporting for the proprietorship. * Longevity/continuity: In the event the sole proprietor dies and planned steps were not properly carried out the business will cease. Sadly the family’s source of income is no longer available. Life insurance is an important need to the proprietor, it may be the family’s only source of income. Secondly a will is a must have with precise details on to whom and how the business should be carries out. It’s also important to pre-plan with his chosen representative, teaching them how the business is managed. Control: The sole Proprietor may choose to directly run his business or hire others to manage for him. Being in total control of the business the proprietor is solely responsible for the major functions of his business. Leaving him with the responsibility of guiding his business down the path of success. * Profit retention: Al l profits belong to the owner. There is sole gain, no partners or stockholders to share proceeds with. * Location: One of the best things about a sole proprietorship is there are no limitations on the business. If the owner wishes he can expand, down size, move locations, or sell his business at will. Convenience/Burden: A sole proprietorship has the convenience of absolute freedom of action. A downfall to the Proprietor is the responsibility of running a business that â€Å"pays the bills†. In the event he were to die become ill or injured the business could no longer run. General Partnership This form of business consists of two or more partners. The partners are the founders of the organization. * Liability: Being co- owners, the partners have equal rights to the possession of the partnership assets. They can’t sell, assign, or transfer their individual shares of the ownership. Each partner is unlimited liable for the firms obligations. Partners are responsible for the debts. Any debt not covered could be made up from personal assets. Partners are responsible for one another. * Income taxes: There is no federal income tax imposed on the partnership. Individuals must file an informational tax return. Each partner must include his share of the profits. Partners can take advantage of the partnerships losses to offset their personal income. * Longevity/Continuity: If a partner were to die, sell, or retire his or her part of the partnership would be dissolved. Exception would be the â€Å"buy sell† agreement. Meaning the surviving partner must buy the deceased partners’ interest from the heirs. Personal ownership dies but the deceased interest possess to the decedent’s personal representative. * Control: Each partner has equal authority. In partnerships with more than two members the majority will rule. Each partner becomes an agent of the other. A partner may not assign or sell partnership property, admit another to the firm without the consent of all associates, or sell their interest to another without consent of the partners. Profit: All profits and losses are distributed evenly throughout the partnership. * Location: The rules and regulations vary from state to state . General partnership should use Schedule R to apportion income between the states. * Convenience/Burden: The main advantage of this form of buisness is low volume of paperwork needed for registration and its cheapness. Limited Partnership This busine ss has two or more partners much like the general partners. There is a few key differences though. * Liability: There is a partner that carries full liability and the others are limited liability. Income Tax: Income taxes are paid after the partners have received their share. There is four characteristics that would make a limited partnership have to pay corporate taxation. They only need two of the four to qualify. * Longevity/Continuity: In the case of a death the partnership would most likely end. * Control: The general partner would control the daily business for the partnership and the limited partners just have control over the investments. * Profit Retention: All profits are distributed evenly through the partnership. * Location: Partners should pay taxes according to the amount made in each state. Convenience/Burden: The ability to have funds from the limited partners and not having control. On a negative side there would be a risk if a partner dies or leaves the partnership . C-Corporation This corporation is also known as the regular organization. They have an unlimited amount of stockholders, allowing both residents and non-residents in. * Liability: Owners are limited to the amount of his or her investment. All personal assets are safe. * Income taxation: The C- Corporation is taxed as a corporation. Net income is paid to shareholders for dividends. They also pay personal income tax, thus meaning they are double taxed. Longevity/Continuity: The life period is unlimited, as long as they have the money to back up the debts they will not be affected by the death of a stockholder. * Control: Shareholders do not directly manage the business they elect the board of members that will manage the business. * Profit Retention: Profit can be used in two ways. One it can be invested in the business or can be paid out in dividends to shareholders. * Location: Corporate taxes are equal in all states. * Convenience/Burden: The ability to raise money for funds is a n advantage. It also benefits from the ability to continue if a shareholder leaves the business. And obviously the double taxation is a big negative. S-Corporation This corporation has all the advantages of the previous businesses but also has its own disadvantages. * Liability: Shareholders liability is limited to the amount of investment. * Taxation: Company doesn’t get taxed itself, only shareholders pay taxes. * Longevity/Continuity: Company is unlimited same as an S-Corporation. The shareholders will not affect the organization. * Control: The company is ran by the board of directors. Stockholders have corporate meetings. * Profit Retention: Same as the C-Corporations, pass through tax. Location: Must be domestic in any state. * Convenience/Burden: Business that are starting up usually pick this type of business because of the losses endured. There is a lot of paper work and the meetings are very inconvenient. Liability Limited Company Each member owns his or hers amount of shares according to their contributions. * Liability: An LLC functions much like a corporation . It’s members are unlimited liable. * Taxation: An LLC has a pass through taxation and only the shareholders are taxed individually. * Continuity/Longevity: There is a 50% rule in a LLC . If a member owning more than 50% of the business leaves or dies the LLC will end. But if a member owning less than 50% of the business the business will continue. * Control: There is two types , member –managed and managed – managed . * Profit Retention: Profits are distributed among members according to their stake. * Location: Most states allow an LLC . Different paperwork is required in different states. * Convenience: A LLC may federally be classified as a sole-proprietorship, partnership, or corporation for tax purposes. Classification can be selected or a default may apply. How to cite Social Responsibility, Papers

Music and Culture in New Orleans free essay sample

Music and Culture Imagine It Is prime time prohibition era In the city of New Orleans. Music Is blasting, the alcohol is freely flowing, and there are crowds of dancing flappers and dapper gentlemen all over the French Quarter. For decades, New Orleans has been the epicenter for Jazz music in America. It is essential to the culture, economy, and history of the city. Over the last few years, however, some of New Orleans city officials seem to think the beat has left the city, and its personality Is suffering because of It.Others believe New Orleans Is tired and old, and should be used for no ore than a ghostly museum of what used to be: a vibrant explosion of all different kinds of culture. Two articles specifically have opposite views of the same topic of revival: while one encourages the rebirth of Jazz and the lifestyle that comes with it, the other seems to side with the ever-changing culture of America, rather than New Orleans rich background. In an article called, Tapping New Orleans Musical Mine, Martha Bayle believes in what New Orleans Jazz used to be: a lifestyle. While she knows It still exists In dirty street corners and hole-in-the-wall diners, she cannot deny just how tiny of a portion s still thriving. But to Bayle, sometimes culture isnt about enriching your own life; its about sharing it with others. The NONE (New Orleans Music and Entertainment Association) has agreed to steer the city into an outward approach in gathering fans. Europeans says Ramsey, who points out that New Orleans recordings sell briskly overseas If we can Import the music, NONE asks, why cant we Import the fans? (Bayle. Martha).Most natives seem skeptical about the plans for their city, but NONE insists that a foreign fan base will not only revive the old jazz culture, but also ill improve the suffering economy. Though Gnomes confidence cannot be shaken, citizens of the historic city have doubts of their own. But, frankly, I dont see what singles out New Orleans as opposed to any other music scene as far as the current pop culture goes. Some citizens think the city has separated Itself from the rest of the country with Its unique scene and spicy way of life (Bayle, Martha).The music scene will continue to strive to make outreach possible, through publicizing on local radio stations, and selling the idea to musical cities overseas like Liverpool. The effort o restore the old ways of New Orleans has begun, with a broader goal in fan base. Though the city seems to barely cling to what it was, organizations like NONE have expectations on what the future of the city should look like, that is what it once was: a flourishing place of cultural renaissance. Mr..Brothels, a public school music teacher and record company owner agrees with the pollen that something Is Indeed special about New Orleans musical culture: Thats one of the advantages of New Orleans. When people get turned off to the National culture, they can always come back to whats here. (Bayle, Martha). The question still remains as to when pop culture will get tired; when will people start searching for the old ways to fill their entertainment needs? In the comparative article called Will New Orleans Bury Jazz Alive? Author Tom the new thing so no one has to rely on the past. He puts great value on the historical aspect of Jazz, pointing out to the readers a time when thousands upon thousands of people attended the great Louis Armstrong funeral to honor him and the great city of New Orleans. He wrote of the respect that Jazz has obtained over time. (Bethel, Tom). He also speaks of the impact it makes on the tourism industry. they asked tourists to put down what they came to New Orleans for Jazz was third First was the French Quarter and second was food.Jazz, in fact, may be the most important attraction because these categories overlap. (Bethel, Tom). While there is no arguing that Jazz is important to the tourism and history, Bethel writes how this might lead to the genres ultimate downfall. Jazz Has now reached the stage of being regarded as a suitable recipient for grants, donations, federal funding, and corporate underwriting. (Bethel, Tom). According to the article, Jazz is not the defining aspect of New Orleans, like it used to be, and now it is a silly excuse for scholarships.What is the reason for such change? In the Jazz Age, New Orleans was a thriving town full of aspiring stars on the rise. Today, most artists dont think twice about performing at music festivals, and spectators think crafts are the main attraction. Today the music is used for concerts, Russell explained, Its used for festivals and its used on Bourbon Street. All the wrong things in other words All the wrong things because music is supposed to be for dancing and having a good time, ND not for Just sitting there (Bethel, Tom).The rest of the article explains that in todays world, music has a different definition than what it used to be. It is very possible that, according to Bethel, the Jazz Age has simply slipped through our fingers, being replaced by phones and gaming consoles. The revival of Jazz seems to be a choice: it is up to the audience, who doesnt seem to realize the importance or relevance of the genre. Bethel and Brothels do not differ in that they both rank the genre in the highest regard. The differences are noted when the problem of a shrinking fan base arise.In Tapping New Orleans Musical Mine, author Martha Bayle explores the theory of widening the search: taking the music scene to an international level. The NONE organization is optimistic about their future plans of revival. On the other hand, the article titled Will New Orleans Bury Jazz Alive? Bethel gives a more pessimistic view of the problem, and doesnt offer a solution besides making a museum to commemorate the great time. The purpose is to convince the reader that the Jazz Age was an enlightening period that should be admired, but not replicated, because the ritual passion that is required simply isnt there.