What Management of Sports Products Inc pursue as its overriding goal is that current theory states that the firms’ appropriate objective is to increase investors assets. A firm’s stock cost reveals the possibility of the cash flow, timing and size that shareholders anticipate a firm to produce through the years. Financial administrators must just accept the measures that they suppose will raise the rate of the firm’s potential cash flow. Investors of a firm are at times called residual claimants.
This means that they will only claim if one of the firm’s cash flows that stay after workers, providers and administrations are completely paid. Shareholders are at the end of the line. If the firm is unable to pay the stakeholders, the shareholders to do not gain anything. Shareholders allow for the most part the possibility of organizing the firm. Does the firm appear to have an agency problem? Explain The firm does appear to have an agency problem because the firm’s stock price had declined nearly $2 per share over the past 9 months. The other problem in the agency is that the firm’s profits have been going up.
In addition to the problem is that the shareholders receive are in the form of cash dividends and the firm has never paid cash dividends in its 20 year history. The other part of this problem is that the actions the managers are taking demonstrate that in case polluting controls demonstrate a profit increase which this means that they want to increase there salary instead of increasing the stock price. Evaluate the firm’s approach to pollution control. Does it seem to be ethical? Why might incurring the expense to control pollution be in the best interests of the firm’s owners despite its negative effect on profits?
I believe that it is unethical because they know that doing those illegal things are against the law and that they can be penalized for doing that. I believe it is also unethical because the company has not only done things against the law but they also set a poor code of ethics and moral standards. The company has to know exactly what things are illegal to dump and what things are not illegal. If the company does not know they can ask someone who is an expert and ask that individual what can they do with the waste.
Does the firm appear to have an effective corporate governance structure? Explain any shortcomings. In my opinion, I believe the firm does not appear to have an effective corporate governance structure because the management does not make good decisions to increase the assets of the investors. That is one of the shortcomings that the company has. Since communication is the best tool to be better, I believe that the sports company does not have very good communication among each other and everyone makes decisions at their own cost.
On the basis of the information provided, what specific recommendations would you offer the firm? The first recommendation I make is that they should not do illegal things like the ones they were doing with the waste. They should also establish a code of ethics and have rules that have to be followed in an appropriate manner in order to make things right. Another thing in mind is that they have to have a better communication system among them. It appears that the shareholders and the other individuals do not have a very good communication.