The Current State of the U.S Economy

As the economy in the Euro area continue to show bleak prospects, Americans can at least be starting to hear some good news regarding their economy. The recovery may not be over but key economic indicators suggest that the state of the economy is now better than it was in the past two years.

Latest figures from the Bureau of Economic Analysis shows that real GDP was up in the first quarter (Q1) of 2013 to 2.5% from 0.4% in the Q4 of 2012(Bureau of Economic Analysis,2013).  Personal income also increased by 0.2% in March just as there was a reduction in U.S trade deficit. These improvements are modest but nevertheless encouraging given where the economy is coming from. Figures by the Bureau of Labor Statistics (BLS) also show a trend towards the improvement in the economic outlook (BLS, 2013). Consumer inflation as measured by the Consumer Price Index (CPI) decrease in March by 0.2%. This was significant given that it had previously been on the rise for 12 consecutive months. The reduction in the CPI is mainly attributable to declines in some of the indices used in the measurement. For instance, the food and oil indices had declined from their levels in February. Unemployment still remains an issue for the economy even as other indicators show good signs. March saw unemployment rate still high at 7.6%.  The economy was able to add 88,000 payroll jobs in the same month. The over 1,000 mass layoffs that took place in the same month of March affected over 120,000 workers.

Leading equity benchmarks have also been promising since the start of 2013(Mass Mutual Financial Group, 2013). The Dow Jones Industrial Average managed to record a gain of 11.93% just as Standards and Poors(S&P 500) accumulated returns for the quarter was 10.61%.  The NASDAQ was, however, below at only 8.21%.  The relative poor performance by the NASDAQ may be an indication that investors are beginning to lose confidence in the information technology industry.

Though modest, any sign that the economy is on a rebound portends well for Americans. It would have been difficult to imagine an end to the recession that started in 2007 and ended in 2009. What started as a problem in the subprime mortgage sector wreaked havoc in the entire economy and beyond. Thanks to the interventions by the monetary and fiscal authorities, the economy has been able to rebound even if the pace has remained slow.

Working together with the U.S Federal Reserve (Fed), the treasury was able to intervene immediately when the crisis begun in 2008(Mass Mutual Financial Group, 2013). The initial stimulus package of over $600 trillion went along way in averting total collapse of the economy. Components of the package like the Troubled Assets Relief Program (TARP) were able to save the banking industry. Even the Fed was very innovative in its approach given that the crisis begun when the funds rate was at the zero lower bound.  The Fed adopted unconventional measures such as quantitative easing (QE).It continues to keep the funds rate low as evidenced by the latest meeting of the Federal Open Market Committee (FOMC) where members voted  for a 0.25% target interest rate. They have promised to keep it low until unemployment falls below 6.5%. Even more responsible for the current positive outlook is the ability of the Congress to avoid the fiscal cliff late in December 2012.   

From the exploits of the foregoing, things are at least starting to look good. Analysts expect the economy to continue on a growth path. The only fear is the potential effect of the Sequester which is likely to impact negatively on defense related industries. One can only hope that things will work out for the better.

References

Bureau of Economic Analysis (2013).U.S Economic Accounts. Retrieved April 30, 2013, from              http://www.bea.gov/

Bureau of Labor Statistics (30, April 2013).Latest Numbers. Retrieved April 30, 2013, from             http://www.bls.gov/

MassMutual Financial Group (2013). Q1 2013: Investors give the U.S Economy a Vote of Confidence. Retrieved April 30,2013,from     http://www.google.co.ke/url?sa=t&rct=j&q=&esrc=s&source=web&cd=57&ved=0CF4Q            FjAGODI&url=http%3A%2F%2Fwwwrs.massmutual.com%2Fretire%2Fpdffolder%2Fi  nvestments%2Fquarterly_market_review.pdf&ei=KSt_UfHBPMnVswaG-            IA4&usg=AFQjCNFWICCEXDwfVJZ2l3X1Ly1VVVqQmg

Read More»

Proposed Tax Cuts: A Double Edged Sword for Some Companies

Q1

The companies mentioned in the article all hold large amounts of Deferred Tax Assets (DTAs) on their balance sheets. For example, Citigroup currently hold $53.3 billion in DTA. Ford also holds a considerable amount standing at $12.9 while AIG follows very closely with $12.8 billions within the U.S. A tax cut will see these companies find ways to bring their DTA holdings to their fair accounting values. The only way for the companies to achieve this is through write down of huge portions of the DTAs. The written down values must then be charged to the earnings of the respective companies as expenses. Consequently, the companies must then report these added write down expenses explaining the heightened level of reported expenses. Examples of such huge write down expenses included AIG expected write down of about $2.6 billion. Similarly, Ford contemplates writing down $51.9 billion in the event of a tax cut to 28% down from the current 35%.

Q2

The proposed tax cut was never going to benefit all companies. For example, some of the companies holding huge DTAs would see the value of their assets go down which would in turn have a negative impact on investor confidence. Potential beneficiaries of the cut are companies that would be able to report taxable income when the cut take effect. These companies would then be able to defray their tax bills using their holdings of DTAs. Also to benefit from the cuts are companies that do not hold any deferred tax asset at the moment as they will not have to write down any of that asset against their earnings.

Read More»

Surviving the Sequester

March 2013 is coming to a Close: Will we survive the Sequester?

“This is not going to be an apocalypse, I think as some people have said.” Those were the words of President Obama to journalists just before he authorized $85 billion in the form of automatic federal spending cuts through sequestration. With a single stroke of the pen, Obama was taking a completely different path from what the White House had been singing for months. If there was ever any lesson from Obama’s statement, it is that Americans could still survive the automatic cuts.

Congress passed the Budget Control Act (BCA) in 2011 with the primary purpose of imposing caps aimed at reducing discretionary spending by over $1 trillion through the following decade beginning 2012.The legislation also established the Joint Select Committee on Deficit Reduction (the Super Committee). The Committee was to reduce the deficit by another $1.2 trillion with a provision that across the board automatic spending cuts would apply from January in the event that the committee fails. Congress had some agreement in January on taxes but it was unable to come up with a replacement of the sequester.

It would be dishonest to downplay the potential negative impacts of the sequester. For one, defense spending which is one of the areas scheduled for cuts is an important sector of the economy. With close to 8% cut on defense spending, many businesses and families that are directly connected to defense spending will be hurt. Top in that list would be those businesses that rely on defense contracts. Cuts in the various social safety net programs will also have a significant impact on the economy. Thousands of federal employees are also going to face layoffs .Some of these employees will also have to take more days of unpaid offs per week.

The economy is just coming from a troubling recession and the recovery process may take quite some time. Aggregate demand, which is important for that recovery, is still not very encouraging. The automatic spending cuts will surely dampen aggregate demand. Monetary policy may have been helpful in compensating for the contractions in fiscal policy measures. The impact of monetary policy measures may, however, be negligible given that the Federal Reserve has continued to keep the funds rate very low.  The current policy stance as announced by the Fed in many occasions is to keep the rate near zero until some time in 2014.

In theory, a lower Federal funds rate should increase liquidity in the economy. There are, however, some other conditions that must exist for this to be a reality. Lower costs of capital are only useful if lenders have confidence in the securities deposited by the borrowers. Lenders consider government securities as the safest. A reduction of government participation in the borrowing market in the manner envisaged by the automatic spending cuts is in stark contrast to this reality. The Fed may as well be engaging in a futile exercise if the near zero funds rate cannot stimulate liquidity.

Even with the above negative consequences, not all is lost.

For one, the cuts were never across the board as has largely been reported in popular media. Several program exemptions in the sequester will lessen its consequences. Most of the exempt programs are mandatory expenditures. They include Social Security, Medicaid and refundable tax credits to individuals. Others are low income programs such as health insurance to children, Supplemental Nutrition Assistance Program. Discretionary programs exempted include all programs that are under the administration of Veteran Affairs. The President can also notify the Congress for the exemption of military personnel accounts. These exempt programs can still have an important role in the process of recovery.

It is not that government spending will be reducing over time.

For months, the White House had created the impression that the sequester would lead to a government shutdown. This attitude may be in line with the original idea of extending the automatic cuts in the first place. It was meant to put a gun on the head of the politicians to force them to come up with a sustainable fiscal solution. It could be that the gun may as well be firing blanks. Both Democrats and Republicans are still stuck to their respective party positions. The fact of the matter is that government spending will actually be increasing over time. The sequester defines reduction in terms of percentages making it possible that nominal spending will actually increase over the decade in which it is to be in place.

Public opinion to the automatic cuts corroborates the view that it may not be a priority in the minds of many Americans. Perhaps this indifference is a result of citizen fatigue owing to the inability of the politicians to seek real solutions. One thing we can be sure of is that we will survive the sequester.

Read More»

Summaries

Walby, K. (2005).How Closed-Circuit Television Organizes the Social: An Institutional          Ethnography. Canadian Journal of Sociology, 30(2), 189-214.

Walby sets out to conduct an institutional ethnographic study of closed-circuit television (CCTV) surveillance in one large suburban mall in Victoria, British Columbia. The choice of this approach is informed by its ability to localize problematization of social relations besides its use in examining the way through which text organizes social relations with outsiders. In the case of CCTV surveillance, video is the text through which institutional ethnography is analyzed. This text is both ‘active’ and ‘activated’ to the extent that it allows people who are not known to each other to from some kind of relations without ever meeting.

In keeping with the above theme, the author was able to come out with a number of findings. For one, the discussions with respondents portrayed CCTV surveillance as a rolling text. The concept refers to the manner in which an institutional setting guides the manner in which a given text is interpreted. For the CCTV operators that were part of the study, their institutional setting of protecting the assets of the mall guided their interpretation of the video text. Thus, they would always set out to presume all those coming into the mall as potential thieves until the opposite is proven. Secondly, the text from CCTV surveillance formed the basis on which the operators initiated relations with other people outside their local setting of the control room. For example, an interpretation of the text may lead them to initiate communication with the police. Lastly, it came out from the study that the video texts informed discourse and ruling practices. The operators had they formed ways of categorizing people depending on the images they saw. For example, people from racial minorities would be more likely to have intensified surveillance.

Theodore,N.,Martin,N.,& Hollon, R. (2006).Securing the City: Emerging Markets in the Private      Provision of Security Services in Chicago. Social Justice, 33(3), 85-100.

Largely a descriptive account, the authors set off to detail a phenomenon that has been taking shape over the years in many parts of the United States (U.S). It is an explanation of how the private security industry has been able to exploit an emerging discourse on insecurity to gain a foothold in a domain that was once exclusive to the public sector. Called the law and order approach to insecurity, the new discourse points to the failure of government to discharge its mandate as a justification for other players like the private security firms to come in. Proponents of the paradigm attribute characterize the failure of the state not as one that can be remedied by increased enforcement measures given the bureaucratic inefficiencies that are natural to the government. The paper also grapples with other peripheral concerns of a growing private security industry like lower wages of their employees.

The authors had their focus on the phenomenon as it relates to the state of Chicago. They were able to document how the industry has exploited fears of insecurity to expand. For instance, the period under review also coincided with a time when many governments were trying to balance their budgets thereby necessitating reduction in public security expenditures. This naturally created a room for private security firms. In addition, the industry was able to project an image indicating that it was an important player in providing security. All these would then be augmented by their ability to identify new security risk areas as a growth strategy. Examples of such areas included the Chicago Transit Authority (CTA) the Chicago Housing Authority (CHA).  

Read More»

Oregon Death with Dignity Act

The Oregon Death with Dignity Act allows for Physician Assisted Suicide. The legislation came into force in 1997 having survived numerous legal challenges (Drum, White, Taitano& Horner-Johnson, 2010). A look through the law reveals several underlying principles.

Foremost among these principles is the issue of consent (Drum, White, Taitano& Horner-Johnson, 2010). While recognizing that some people may be entitled to seek medical assistance to end their lives, appropriate safeguards are in place to avoid abuse.  For instance, only people aged 18 years and above can avail themselves of the benefit of this law. This is in line the fact that minors are not in a position to give consent with the consent of their parents substituted for theirs. Besides merely being 18 years old, the person must also be suffering from a terminal illness. As to whether one is actually suffering from a terminal illness is to be determined by both an attending and consulting physicians respectively. Insisting on having a consulting physician reduces the risk of abuse to the process. On his part, the statute insists on a request to be made in a prescribed form and witnessed by two people.

Another important principle is the protection of the integrity of the medical profession (Drum, White, Taitano& Horner-Johnson, 2010). The medical profession is known throughout the world to be committed to life. The Oregon Death with Dignity Act emphasizes this by placing numerous responsibilities on participating physicians. Such duties include the need to ensure that terminally ill patients requesting to end their lives make informed decisions. This can be presumed to entail a duty on the physician to explain the potential consequences of a decision to the patient.

Reference

Drum, C.E., White, G., Taitano, G., & Horner-Johnson, W. (2010).The Oregon Death with           Dignity Act: Results of a Literature Review and Naturalistic Inquiry. Disability and        Health Journal, 3, 3-15.

Read More»

Online Ethics

Booklet 1

Issue

Peer to Peer file sharing of copyrighted materials

Description

Improved capabilities of the internet now enable people to share files with one another. This raises the issue as to whether it is right to engage in such activities given the fact that much of the sharing involve the reproduction of materials that would normally attract copyright infringement if the authorization of the copyright holder is not sought.

Laws pertaining to the issue

Under copyright law, the reproduction of copyrighted material gives rise to a liability. The claimant only needs to show that the infringing material is fixed in some medium. This test is relatively easy to establish given that the files people share online are fixed in the hard disks as well as the random access memory (RAM) of the computer.  

How the issue could affect me

I am a regular user of various file sharing software platforms. For instance, I subscribe to 4shared.com which allows me to view and share files with many other people. It is possible that the activities we engage in could be infringing on the copyright of others.

Example of a situation

I have once received a book in pdf format indicating that any distribution should be done only with the permission of the author.

Possible legal or ethical solution

It would be appropriate to just respect the notice not to distribute the document to third parties or seek the permission of the authors if I have to make a distribution.

Booklet 2

Issue

Hackers who steal credit card information

Brief description

This involves people who use a variety of methods to get confidential information on credit cards of other people. Such information may include the passwords of cardholders which enables them to transact with those cards.

Laws pertaining to the issue

 Under Title 18 of the United States Code, the interception and disclosure of wire, oral or electronic communication is prohibited. It also criminalizes unlawful access to stored communication.

How the issue could affect me

 As a regular user of credit cards for making payments, I am open to the risk that someone can get access to confidential information on my card details. That person could be my trusted friends, a con artist or even an employee of the credit card company.

Example of a situation

 I once lost my credit card and was so apprehensive that someone could use it to make payments. This was, however, not the case.

Possible legal or ethical solution

Report the loss as soon as possible to the credit card company given that any investigations by the authorities will have to involve the company.

Booklet 3

Issue

Employee email monitoring

Brief Description

With the use of computers in the workplace, employers are torn between the need to monitor the email communication of their employees while in the workplace and the equally important need to respect the privacy of those employees.

Laws pertaining to the issue

The position of the law is that employees do not have any expectation of privacy when using the computer networks of their employers. It authorizes employers to monitor email and other communications of employees.

How the issue affects me

I find it intimidating knowing that someone has the right to access my email communications so long as those communications are made through the computer network of the employer.

Example of a situation

I often use the computer network at the workplace for personal email communications. It is now that I realize how this innocent practice can make my privacy vulnerable to any review by the employer.

Possible solution

Given that the law is mostly on the side of the employer when it comes to this issue, I would be content to just avoid making personal email communications through the employer’s network.

Booklet 4

Issue

Use and distribution of customer information

Description

Online commerce businesses often hold a lot of data on their customers. For instance, a company like Facebook has so much information on all its users. An issue arises when these companies decide to sell or distribute such sensitive information to third parties. Google has occasionally been accused of selling information to advertising companies.

Laws pertaining to the issue

The legal protection for consumer privacy in the internet is rather weak in the United States. For instance, the Electronic Communication Privacy Act of 1986 allows the government to demand data held by companies such as Google and Facebook. The Federal Computer Fraud and Abuse Act even makes it more difficult for consumers as it requires those claiming infringement of their privacy to show that they have suffered some injury as a result of the violation.

How the issue affects me

Being a regular user of e-commerce platforms makes me vulnerable to these schemes.

Example of a situation

I have been receiving numerous unsolicited messages on in my email and a suspect that those sending the messages got my address from the email hosting companies.

Possible solution

 It would just be appropriate to use these services as minimal as possible since the law is unlikely to offer any help.

Read More»

Non Taxable Exchanges: Memo

XYZ, CPAs

Sacramento, A

June 24, 2013

Relevant Facts

Owen and Lisa exchanged business pickup trucks in 2012. The pickup truck given up by Lisa had an adjusted basis of $ 2,000 and a fair market value of $ 6,000. In return for this, she received Owen’s pickup truck which had a fair market value of $5,500 in addition to $500 in cash. The pickup truck given up by Owen had an adjusted basis of $2500. Owen later sold the pickup truck he received from Lisa in March 2013 to a third party at $ 5,800.

Specific issues

What is the amount of Owen and Lisa’s gain recognition respectively for 2012?

What is the effect of Owen’s subsequent sale of his pickup truck in March 2013?

Conclusions

The gain recognition for Lisa would be $ 500 while Owen does not have any gain recognition in the exchange. The subsequently sale of the pickup truck by Owen had the effect of creating a gain recognition of $ 2,800.

Support

The IRS considers some exchanges as non taxable with the implication that gains from such exchanges are not recognized. Similarly, losses from those exchanges are also not deductible (IRS, 2013). One of the exchanges falling under this category relates to the so called like-kind exchanges. This is where a property is exchange for the same kind of property as in the present case where Lisa and Owen were each exchanging a pickup truck for a pickup truck even if the respective colors were not the same (IRS, 2013). The only two requirements is that the traded property be a ‘qualifying’ and ‘like-kind’ respectively. The qualifying property aspect insists that both the property traded and the one received must be held for business purposes. The exchanges made by both Lisa and Owen meet this requirement as the pickup trucks were meant for business. On its part, the like-kind requirement stipulates that the properties involved be of the same nature or character. Thus, the exchange of real property is considered as meeting this requirement even if the quality of the properties may not be the same. Similarly, a personal property with another personal property also meets the requirement. Pickup trucks exchanged between Owen and Lisa are both personal properties differing mainly in their color and quality making both to meet the requirement of being like-kind property.

Furthermore, the IRS also lists automobiles under the category of general asset classes under the broader category of personal properties qualifying for like-kind categorization. Pickup trucks definitely fall within this group (IRS, 2013).

The situation is, however, different where one receives money in addition to the like-kind property in the exchange. The IRS consider such cases to be partially taxable exchanges and the gain is recognized to the extent of the money received (IRS, 2013). In the case of Lisa, the money received was $500 forming the gain recognition. In contrast, money paid in a like-kind exchange does not elicit any different treatment from a pure exchange of like-kind properties.

The non taxability of like-kind exchange does not, however, exchange to gains in subsequent dispositions or sales of the property to third parties. Thus, the subsequent sale by Owen created a recognized gain with his basis adjusted by the amount $ 500 he had to pay to Lisa while initially exchanging his pickup truck. The recognized gain was, therefore, the difference between the $ 5,800 received from the third party the adjusted basis of $ 3000($2,500+$500).

Action to be taken

Lisa and Owen still need to report their respective exchanges even where no gains are recognized. This should be done in 8824, Like-Kind Exchanges (IRS, 2013).

Reference

Internal Revenue Service (2013). Publication 544: Sales and Other Dispositions of Assets.             Retrieved 24 June, 2013, from http://www.irs.gov%2Fpub%2Firs          pdf%2Fp544.pdf&ei=PKrHUZm2KsyZhQfRiIHoBg&usg=AFQjCNG VhVzZpEfQO61LYZtkiPVDKPE7A

Read More»

Market Structures

The latest news that the Federal Trade Commission (FTC) has launched yet other informal anti-trust investigations on Google raise concerns of market competition policy (Wyatt, 2013). The new investigations will look into whether Google is abusing its market dominance in online display advertising. It is not possible to tell from the information available the specific statute under which the investigations have been launched. Perhaps this is because formal investigations are yet to start.

Bundling of advertising services together as Google is alleged to be doing creates a monopoly which is simply a market structure where there is very little competition. It is often associated with the monopolist extracting consumer surplus when buyers of their services or products are forced to pay more than the optimal price. Consumers are also deprived of the variety that would often come from a market with many competing players. Market dominance may also hamper innovation and creativity. In the case of Google, bundling advertising services may literally allow it to charge much higher for those services than they would have had in a situation where there are other serious competitors. Even the quality of what it offers may not be as stringent in a market it dominates. It is, however, not always the case that monopolies and oligopolies are bad for the society.

For one, a monopoly may be welfare enhancing when they bring some efficiency gains. For example, the bundling of Microsoft Operating System (OS) and Windows Media Player (WMP) achieves some levels of efficiency gains by reducing transaction costs. A customer intending to buy the two will not have to look for different providers (Cave&Williams, 2011). Transaction costs goes beyond the monetary payment that a user actually pays. Rather, it includes even non pecuniary costs like getting information from friends who have had the opportunity to use the particular bundle of service. The other advantage that may accrue from a market monopoly is the reduction in production costs. It is much more expensive to sell cars in bits so that every person in need of one must buy the different components then find somebody to assemble it for them. Producing and selling the various components bundled together as a finished car reduces production costs even as it enhances the chances that those parts will be compatible with each other. Similarly, one may defend Google’s bundling of advertising on the basis that those who place adverts do not have to negotiate different agreements which eventually push the production costs up.

There are also those situations where a monopoly may be welfare reducing. For instant, the monopolist may use their market position as a market differentiation strategy (Cave & Williams, 2011). By differentiation products or services that are similar in all respects, the monopolist can then extract more rent from consumers. Google, with its superior search brand, may just be using that brand to differentiate its advertising services from others in the market. The company can then charge more for these services. One can view the same issue from the concept of leveraging. A near monopoly like Google in the search market with presence in some other market such as online advertising may decide use its position in search as a leverage in online advertising. In a situation where the two services or products are perfect compliments like search and online advertisement, bundling the two virtually eliminates any competition.

References

Cave,M.,& Williams,H. (2011).The Perils of Dominance: Exploring the Economies of Search in    the Information Society. The Initiative for a Competitive Online Marketplace (ICOMP).

Wyatt, E. (2013, May 24).F.T.C. Is Said to Begin a New Inquiry on Google. The New York          Times.

Read More»

Management Questions

Q1

At the core of the author’s contention is the fact that people are more likely to repay greed with greed relative to doing the same with generosity. This contention may not fully capture the mixed ways in which people react to deeds. It is a conclusion the authors arrives at after looking at five different experiments involving either work or money (Nauert, 2012, p.1). Prior studies had concentrated on how to engender good behavior from people by extending acts of generosity towards them. It was, therefore, of much benefit to have a different approach to the issue. Findings from such studies are very useful in modeling behavior. Armed with such information, organizations are better prepared to elicit the appropriate kind of behavior amongst their people. Perhaps that knowledge may also help model the behavior of organizational units.

The extent to which the position taken by the author can be useful for organizational purposes, however, depends on the ability of the theory to apply to group behavior. It is true that individuals will act towards safeguarding their self-interest when acting as individuals. The whole theory of survival for the fittest is grounded on this line of thinking. It explains why acts of generosity are rarely rewarded or those who experience such acts rarely extend them to their future interactions with others.

In another research that looked at whether people return favors extended to them, the researcher actually found that people indeed reciprocate acts of kindness (Burger, Sanchez, Imberi and Grande, 2009, p.13). Unlike the contention of the author under discussion, this other study does not find any difference between responses to good acts on the one hand and to good acts on the other. Instead, the authors attribute the kind of reaction to the respondent’s need to be viewed in a certain way as well as internalized norms.

Q2

The general understanding of a school is that it is a place where people grow in a variety of ways (Jackson and Parry, 2008, pp.98-99). Students in a school build up their level of understanding as they move from a lower to a higher grade in the school system. Such developments are not limited to the intellectual matters. Thus, people also grow in their social abilities through the school system. Perceiving leadership as schooling, therefore, brings to attention the fact that it is all about an ongoing process.  Everybody in an organization begins to realize that there could be a better end state to what they are currently accustomed to. Seeing leadership as something that is continuously evolving will provide the necessary motivation for everybody to keep on improving just as people in a school system are always improving. Improvement may see a student score better grade in a particular school term. The teacher may also discover a better way of delivering instructions to students.

An aesthetic approach comes in to mitigate the potential negative attitudes associated with schooling (Jackson and Parry, 2008, pp.98-99). Not everybody in an organization had an interesting time at school. For those fortunate to have had their time at school wholly interesting, it may suffice to just apply leadership as schooling. It is, however, more beneficial to add an aesthetic aspect to the metaphor to make it appeal to the widest number of people. Thus, visualizing leadership as schooling in which learning is all fun will endear follows even more towards improving in whatever areas in which they may be inadequate.

References

Burger, J.M., Sanchez,J., Imberi,J.E.,and Grande, L.R., 2009.The Norm of Reciprocity as an        Internalized Social Norm: Returning Favor Even if No One Finds Out. Social Influence,           4(1), 11-17.

Jackson, B. and Parry, K., 2008.A Very Short, Fairly Interesting and Reasonably Cheap Book       about Studying Leadership.London: SAGE.

Nauert,R., 2012.Greed More Common than Generosity. Retrieved http://psychcentral.com/news/2012/12/19/greed-more-common-than-generosity/49369.html

Read More»

Healthcare

Q1

For one, a person may not be able to give informed consent in times of an emergency. It is not uncommon for people to be unconscious, disoriented, sedated or simply not capable of giving an effective consent (White, Rosoff&LeBlang,2010). In such cases, other people like the next of kin may be authorized to give consent on behalf of the patient. In the absence of such other authorized persons, the law presumes that the patient would want to be treated as necessary so as to preserve his life or function. It is incumbent upon the physician to establish that there was an emergency, that there was an immediate need to administer care, that there were attempts to contact next of kin or any other persons authorized to give consent, and lastly that the care given never went beyond the necessary until full consent can be obtained.  

Secondly, the extension doctrine allows the physician to dispense of the need for consent in the event of an unexpected complication making it medically advisable to go beyond the initial consent given. Thus in Kennedy v Parrot, the North Carolina Supreme Court saw a physician’s decision to remove as cyst as part of an appendectomy.  Elective or non essential procedures are not covered within this doctrine.

Lastly, a physician may determine than giving certain information to the patient will be harmful and thereby withhold such information. Under the principle of therapeutic privilege, a number of jurisdictions recognize that a physician may indeed have a right to withhold information in those circumstances.

Q2

For along time, Michigan law did not allow any person other than the patient to make treatment decisions. This has since changed with the Michigan Designation of Patient Advocate for Health Care. That law now allows any person who is at least 18 years old to appoint a surrogate decision maker in the event that they are no longer able to make those decisions. The appointment of such a surrogate is accomplished through what is called a Durable Power of Attorney. Through this power of attorney, the patient can appoint almost any person to make healthcare decisions on their behalf so long as that other person is 18 years and above.  The person appointed under this document is called a patient advocate. A durable power of attorney for healthcare only comes into force when the patient is unable to make healthcare decisions. The existence of a durable power of attorney for healthcare is, however, not a precondition for receiving treatment. It is not even an obligation on the part of the patient to have this legal document.

Besides a patient advocate, the Michigan Healthcare Disclosure and Consent Act list certain family members that can make healthcare decisions on behalf of the patient. Those listed are a member of the immediate family, the next of kin or the guardian. The law does not provide any guidance as to who among those in the list should take priority over the others. This law only applies when the patient has a reduced life expectancy arising from an advanced illness.

Q3

For the present purposes, the institution will be “A” while Privacy and Confidentiality are the chosen rights.

Privacy and Confidentiality Policy

At “A,” we are committed to safeguarding the privacy of our patients and staff.  To that objective, the protection of private and confidential information is our priority.

Patient Information

We follow two key values at “A” in maintaining protected health information (PHI): caring and integrity. All uses and disclosures of PHI are made with respect and sensitivity for our patients and the law. We recognize that some sensitive aspects of a patient’s life may be documented, it is for this that privacy and confidentiality is a priority to all our clients. As such, all members of the workforce must understand their role in protecting PHI and compliance with privacy laws.

Inappropriate disclosure of PHI is a violation of “A” policies besides the fact that such a violation may also be a violation of both federal and state privacy laws. Consequences of such a violation will lead to disciplinary action including the termination of employment.

Examples of Inappropriate Disclosures

Ø  Accessing the medical records of another worker to determine his/her diagnosis

Ø  Disclosing PHI about a patient or any other person to the media without approval from the patient.

Ø  Using PHI in the medical record or any other “A” database for research purposes without patient authorization.

Q4

In dealing with some of the most important rights of patients such as that on privacy and confidentiality, healthcare workers must discharge a number of responsibilities. In collecting information from clients, healthcare workers must ensure that patients give their consent for the collection. Healthcare workers must do proper documentation of the information they take as they may need it for their defense in the eventuality that a case is brought against them.

Secondly, healthy workers should also ensure that the consent from patients is informed. The consequences of any treatment option may be very substantial and it is only necessary that the healthcare discuss all the relevant information with the patient. This requirement aims to put the patient at the centre of care. Understanding the risks associated with treatments allows the patient to make a decision from a point of knowledge.

Furthermore, the healthcare workers have a duty to provide patients with their medical records when a request for such is made. Under HIPPA, healthcare workers are allowed to charge patients for the cost of copying such information.  The original records often belong to the healthcare provider while the patient has a right to obtain a copy.

 Reference

White, C., Rosoff, A.J.& LeBlang, T.R. (2010).Informed Consent to Medical and Surgical            Treatment. Retrieved 26 May 2012,from             http://www.google.co.ke/url?sa=t&rct=j&q=&esrc=s&source=web&cd=117&ved=0CG  YQFjAGOG4&url=http%3A%2F%2Fwww.ablminc.org%2FModel_Curriculum_LMME           _2010%2FBOOK_Legal%2520Medicine-7th_2007%2FCh33-          Informed%2520Consent%2520to%2520Medical%2520and%2520Surgical%2520Treatm            ent.pdf&ei=UyihUcmgF8X-rAeGz4GACQ&usg=AFQjCNGBm5fn1_cG-            ZmedRXQaVKKANtJQA

Read More»

Ethical and Corporate Social Responsibility Approaches to Reputation

The BP Case

With all that it has gone through, BP’s reputation is surely in a bad state. This is more so in the context of how it handled the Deep Water Horizon scandal in the Gulf of Mexico (Case 4 348-350). Whether it succeeds in regaining its reputation, the only certain thing is that it will be a long process. Not all is, however, lost for the company.

An appropriate starting point would be an understanding of the various components of an organizational reputation. One model identifies four such components (Dietz and Gillespie 6). First, an organization must exhibit ability by way of technical competence to carry out its activities. There is no question regarding the technical competence at BP in carrying out most of its ventures. The company has been ahead of its peers in some of technological breakthroughs in the energy sector. Secondly, the company must also strive to convince its various stakeholders that it is benevolence. This simply refers to how stakeholders view the company as genuinely concerned about them. The repeated incidences of ethical breaches at BP may as well have negatively impacted this aspect of its reputation (Case 4 350). There are those, especially people around the Gulf of Mexico, who may be viewing the company as totally unconcerned about the negative effects of its practices on the surrounding communities. Furthermore, BP is also facing challenges to its integrity as doubts have been cast on its moral commitments. For instance, revelations that senior people at BP knew of problems days before the Gulf of Mexico incident have created the impression that the company has no consideration for moral imperatives. It is a perception that the company has to change. In addition, whatever positive change that the company manages to effect must be seen to be predictable. It is the consistent occurrences of negative incidents that have reinforced the negative reputation of the company. Any change for the better must, therefore, be consistent.

Besides improving on the various components of reputation, BP must also conduct a serious overhaul of its ethical practices.It apparent from the case study that the company had been pursuing a reactive approach to ethics management (Schoeman 65). This must change to a more proactive and regular approach. There is no merit in BP using the code of conduct to appear good while nobody in the company complies with that code. A prerequisite to any proactive ethics management is knowledge on the part of the leadership of the ethical status of the organization. This knowledge enables the leadership to deal with real ethical issues as seen by the stakeholders as opposed to what the leadership perceives to be the problem (Steinberg 94-96). Thus, the management at BP should know the ethical strengths, weaknesses and potential weaknesses at the organization. They can achieve this by collecting views of all categories of stakeholders in a survey.

The other aspect of proactive ethics management that BP should pursue is the improvement of the level of ethical awareness especially among its employees (Schoeman 65). Just as visible policing reduces the levels of crime, a heightened level of ethical awareness reduces ethical misconduct even as it promotes ethical behavior due to its tendency to always act as a constant reminder. BP can achieve this by ensuring that all employees appreciate the role of ethics in business practices.

Works Cited

Case 4. “BP Struggles to Resolve Sustainability Disaster.”

Dietz,Graham and Nicole Gillespie. “The Recovery of Trust: Case Studies of Organizational         Failures and Trust Repair.”Institute of Business Ethics 5(2012).Print.

Schoeman, Cynthia. “Leadership Cracks.” Ethical Living 2012.Web.Retrieved 6 June 2013, from             www.ethicsmonitor.co.za/Articles/leadership-cracks.pdf‎

Steinberg, Richard. Governance, Risk Management, and Compliance: It Can’t Happen to Us-       Avoiding Corporate Disaster While Driving Success.Hoboken, New Jersey: John       Wiley&Sons Inc., 2011.Print.

Read More»

Economic Value Added (EVA)

The Main Questions

The study set out on the understanding that there are inconsistencies between theory and practice in Economic Value Added (EVA) as a concept in finance (Weaver, 2001). The research was, therefore, aimed at bridging the gap between theory and practice by identifying the inconsistencies. In that way, the author also thought the research would allow for more research into the subject.

Main Findings

The research found out that there are significant variations in EVA measurement practices with different survey respondents indicating variations in measurement practices. In places where there were some levels of consistency, it mostly happened within the same industry. It also came out that companies used EVA as a means of enhancing their performance metrics and even its implementation did not see those companies stop using other traditional tools of evaluation.

Methodology

The investigation used a survey research approach. An initial list of 89 EVA companies was generated. The CFOs of the companies were then asked of their willingness to participate.  Through an elimination method, the researcher was able to remain with only 29 respondents. Information from the respondents was obtained by way of questionnaires. In their answers, respondents furnished their company background and information as to whether their made certain adjustments.

Limitation

The utility of the study is limited in several respects. For one, the study had a relatively low level of participation from private companies. This makes it less likely for the findings to apply to such companies. Even when it used information from public companies, it was difficult to get information regarding non-reported divisions of those companies. Lastly, the companies under survey used different measurements methods limiting the utility of any comparisons.

Conclusion

The research concludes by noting the level of interest displayed towards the study. Further identifies the focus of a future follow-up analysis which should focus on a number of issues such as the application of EVA as a concept.

Reference

Weaver, S.C. (2001).Measuring Economic Value Added: A Survey of the Practices  of EVA        Proponents. Journal of Applied Finance, 50-60.

Read More»

Level 3 Inputs in Fair Value Accounting

Q1

Yes, the use of level 3 inputs actually provides useful information for users of financial reports. Major accounting standards such as the United States Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) provide their guidance on how to estimate fair values of financial assets and liabilities(Hoti,2011,pp.256-257). Both standards emphasize the values established in arms-length transactions as their definitions of fair value to the effect that fair value is mostly an exit position. For the U.S GAAP, the latest guidance on fair value measurement is contained in Financial Accounting Standard No. 157: Fair Value Measurement (FAS 157) while IFRS 13 provides the same for IFRS. Common to both standards is the hierarchy on the levels of inputs that reporting entities should use in determining fair values. Level 3 ranks at the lowest end of that hierarchy.

Both FAS 157 and IFRS 13 guidelines provide that level 3 inputs should only be used as a last recourse when levels 1 and 1 are inapplicable (Hoti, 2011, pp.256). By definition, level 3 inputs rely on valuation models in which the reporting entity’s own assumptions are substituted for what market participants would have reasonably assigned to the asset or liability. Critics argue that the level of subjectivity and biases involved in making these assumptions. These criticisms notwithstanding, it is not enough to just wish away the usefulness of the information to users of financial reports simply because their generation involved a higher level of judgment.

For one, much of financial reporting involves making judgment even in situations where information is available (Hoti, 2011, p.260). For instance, reporting entities use the historical cost approach in recording the value of purchased fixed assets. Most often, the amount of depreciation applied on those assets involve a judgment on the part of preparers of financial reports. Provision on doubtful debts is also another aspect of financial reporting where judgment is very important in determining the figures to report.  In essence, subjective judgment does not of itself render the figures generated from that process useless in the eyes of users of financial reports.

In addition, the concern that the use of level 3 inputs may affect the usefulness of fair value measurements in financial reports is mitigated by disclosure requirements in most guidelines on fair values (Hoti, 2011, p.261). Through these requirements, reporting entities are under an obligation to disclose qualitative information on how they obtain fair values. For example, FAS 140 relating to Accounting for Transfer and Servicing of Financial Assets and Extinguishment of Liabilities insist on such disclosures. Users of such financial reports, who are investors in most cases, are thus able to assess the reliability and relevance of the provided information and choose to accept or reject them following that assessment.

Lastly, users of financial reports are better off having some attempt at estimating fair values than to have none at all(Hoti,2011,p262). The alternative would be to presence incomplete financial reports where reporting entities would simply indicate their inability to place a value on some of their assets and liabilities. Such a scenario would be an appropriate breeding ground for a waning confidence in financial reports. Besides, level 3 inputs are used in very significant proportions of total assets and liabilities of most firms as to make their use harmful to the financial reports as a whole.  

Reference

Hoti, A.H., 2011.Credit Crisis with Focus on Level Three Valuations and 157: Analysis and         Recommendations for Change. International Journal of Accounting and Financial        Reporting, 1(1), 255-263.

Read More»