The Latitude of Management and the Firm - Essay Example

Section/# Q1) Without question, the differential between how the United s and the United Kingdom regulate thelaw with regards to the latitude of management and the firm to provide an opposition to hostile takeovers is vast. For instance, within the United Kingdom, the means whereby a manager can act against a hostile takeover is extraordinarily limited. Moreover, within the United Kingdom, such decisions are solely and exclusively left up to the stakeholders or institutional investors. Within such a framework, it is the understanding of the law that these stakeholders may have a less biased and more realistic interpretation for the means whereby a given firm or business can seek to maximize their own profits. Comparatively, within the United States, the manager or management of the firm has a high degree of latitude with regards to the actions and decisions that he/she can take to protect against a potential hostile takeover of his/her firm. As a means of explaining these key differentials to a greater and more complete degree, the following analysis will attempt to compare and contrast the means whereby managers within the United Kingdom and the United States are constrained by the rule of law to exhibit only certain levels of behavior in the event of a potential hostile takeover of their firm or business entity. Within the US system, the managers of the respective firm are allowed and encouraged to actively engage with regards to seeking to delineate the key benefits and drawbacks that a potential takeover may have upon the viability of the company. By comparison, UK law specifically refuses the right of the manager to engage in such decision making strategy; rather, it places the onus of such a choice squarely upon the shoulders of the shareholders. Yet, this should not be understood to mean that takeovers in the United States are somehow shareholder “unfriendly”. Rather, the Securities and Exchange Act of 1934 specifically gives managers a wide level of freedom to erect whatever defenses, within the law, that they may deem suitable to prevent a takeover from occurring. This can include a host of strategies up to and including what is known as the “poison pill”. “The “poison pill” option allows for a manager to engage in an active defense of the company’s stock if a potential takeover is denoted by the acquisition of 10-15% of a company’s stock by a hostile firm/individual. By comparison, managers within the United Kingdom are not allowed to take any “frustrating action”. This is due to the fact that the United Kingdom delineates a much more powerful focus upon the needs and rights of the respective shareholders as opposed to the United States approach which places most of the power and decision making ability upon the manager. As such, any “poison pill” option is implicitly forbidden under UK law. In short, “frustrating options”, defined as a means by which a manager of a firm can seek to disrupt the rate and extent to which a potential takeover might take place. However, what should be understood is that the strict laws that govern the level to which a firm in the United Kingdom can respond to a takeover only apply once the potential takeover is the horizon. As such, it is well within the law for the firm or entity to seek to entrench itself in a rather unassailable position prior to any of this taking place; thereby making its position much stronger and less likely to result in a predatory takeover of any sort whatsoever. Q2) Although ethics is broadly understood, the fact of the matter is that there are five traditional approaches to this topic which must be engaged with and understood in order for the student or the analyst to approach the topic with a firm level of understanding. As such, the following brief analysis will discuss each of these five traditional theories of ethics and define why each of these is important to understand and appreciate from the business perspective. Due to the fact that different points of emphasis have developed among different theoreticians and philosophers, each of these traditional ethical approaches has been informed, at least to some degree, by the bias and events of the time that they were founded. In such a way, the reader can at least partially understand why it is important to know and appreciate each of these; due to the fact that utilization of a single ethical approach is oftentimes not enough to explicate a given scenario. The first of these traditional ethical approaches is necessarily that of the utilitarian approach. This has also collectively been referred to as consequentialism. Within such an approach, individuals who ascribe to this traditional interpretation of ethics understand that right or wrong is only a measure of whether the consequences turn out to be positive or negative/good or bad. Similarly, the remainder of the four traditional ethical interpretations which will be discussed within this brief response ascribe to what has been termed “non-consequentialism”; or in effect, regardless of how good or how bad the consequences of a particular ethical decision or set of decisions might be, the decision in and of itself is the only thing that can and should be judged (Abend 177). The second traditional ethical approach to be discussed is that of the “rights view”. Within this particular understanding, moral rights are perceived as the ultimate good. Within such a view, it is immoral and unethical to deprive an individual or group of individuals of their moral rights; regardless of what lofty or high minded goal might wish to be accomplished as a result of such an action. Similarly, Kantian ethics puts forward the approach that the approach that the individual is the ultimate end in and of themselves. Within such a context, the reader can understand the non-consequentialism that is so firmly exhibited within the Kantian approach. A secondary aspect that Kantian ethics espouses is with regards to the universality of the ethical framework. In other words, according to Kantian ethics, what is good for person A is also a net and moral good for person B and so forth. Finally, Kantian ethics seeks to establish a social contract by which the reader/analyst is integrated with the idea that good and right moral norms of ethics are those by which they themselves would ultimately wish to be governed by. Likewise, the social justice theory of ethics seeks to maximize the most good for society as a whole. Within this interpretation, rather than taking the micro approach, the individual is encouraged to view the understanding of ethics with regards to how it impacts upon the system and the society at large. Finally, the virtue theories state that ethics in and of themselves should not be concentric upon rights, principles, or even utility. Instead, they should be solely and fundamentally built upon virtue. Naturally, one of the first names that comes to mind and is associated with such an approach is Aristotle; as he clearly and definitively explained this particular approach in many of his writings. Q3) The age old argument of whether or not the government or outside institutions should interfere with the business process is not restricted to economics or the understandings of supply and demand shifts. Rather, the question of interference in the form of securities regulation has been a pervasive and defining force within the past several decades. Ultimately, the argument of whether or not to enforce a degree of securities regulation is not defined as the conflict between the “free market” and those that seek to advance a more institutionalized and regulated governmental control. Rather, it is defined as the struggle between those that believe law and regulation should govern the securities exchange patterns and those that believe that the most efficient method would be to allow for the null hypothesis to take full effect (within this context and within this brief response, the null hypothesis will represent those individuals and groups which would seek to remove many if not all levels of constraint that the law currently has with regards to regulation). Although it can definitively be proven that a lower level of regulation leads to short term economic benefits and the increase in profitability of many entities throughout the economy as a whole, the long term drawbacks can easily be traced to some of the worst financial disasters and collapses that have ever before been witnessed. Without going into a great deal of discussion upon the topic, the current recession and global collapse that took place in 2007/2008 was fundamentally the result of a solid and definitive disregard for regulation as well as an incomplete regulatory framework that was unable to handle the needs or demands of the system it was supposed to govern. Moreover, a similar trend that was evidenced over the twenty to twenty five years leading up to the economic collapse which has just recently been realized is the fact that a systemic level of de-regulation had taken place around the globe. Feeling that a null hypothesis approach would be better towards helping business and financial institutions achieve their goals and increase the utility of society in the process, governments and systems around the globe began a definitive and sustained process of de-regulation. The results and impacts of such a choice of action lend the reader to come to the conclusive understanding that regulation in and of itself most certainly has its place within the securities markets of the world. Work Consulted Abend, Gabriel. "The Origins Of Business Ethics In." Business Ethics Quarterly 23.2 (2013): 171-205. Business Source Premier. Web. 20 May 2013. Read More