Monday, 3 April 2017

Discuss the concept of performance based equity compensation


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Business Ethics


Case Studies
Case (20Marks)
San Francisco: Waste from computers, televisions and other devices used in the United States is polluting environment and exposing workers to toxic chemicals in region of India and China where discarded electronics are dismantled, a study released on Wednesday said. Researchers detected high levels of toxic metals in more than 70 samples collected in March from industrial waste, river sediment, soil and groundwater around the southern Chinese City of Guiyu and the suburbs of New Delhi, according to the report by Greenpeace International. Dust from dismantling workshops contained the highest level of contaminants. “The extent of the contamination is even worse than we had feared. The levels analyzed are really scary and very concerning,” said Ted Smith, the founder of the Silicon Valley Toxics Coalition who chairs the computer Take Back Campaign, which promotes electronics recycling. Most of the electronics collected in the United States for recycling are supplied to China, India and other Asian countries where worker protection and environmental safety standards are weak, Smith said. The researchers chose to collect samples from the Mayapuri and Burari areas of New Delhi because the two regions are known to dismantle discarded American electronics to recover valuable metals such s gold, platinum and silver. The samples collected from those areas contained elevated levels of heavy metals including lead, tin, copper, cadmium and antimony.

Answer the following question.

Q1. Explain the ethical issues in the above case.

Q2. Explain the unethical issues involved in the above case.


Case (20Marks)
Executive compensation has been in the news as part of an ongoing discussion of income inequality. But as James O'Toole, the moderator of a panel called "Executive Compensation" at a recent meeting of the Business and Organizational Ethics Partnership at Santa Clara University's Markkula Center for Applied Ethics, said, there is a question as to whether a problem even exists. Are executives paid what they're worth, or too much? In addition to O'Toole, senior fellow in business ethics at Santa Clara University and former Daniels Distinguished Professor of Business Ethics at the University of Denver's Daniels College of Business, the panel consisted of Leslie Denend, former CEO of Network General, former chairman of the board at Verifone, and former board member at Exponent, McAfee and USAA; Tim Sparks, founder and president of compensation consulting firm Compensia; Edward Lawler, Distinguished Professor of Business and director of the Center for Effective Organizations at the University of Southern California's Marshall School of Business; and Donna Morris, senior vice president of global people and places at Adobe. O'Toole started the panelists out by asking how we evaluate corporate leaders. Is the sole criteria the extent of wealth created for shareholders? Or should they also be judged by the way they produce those profits? Similarly, should CEOs be paid solely based on the company's performance, or are there fairness and other issues to consider? The panelists took turns giving their perspective on these initial questions and then continued the discussion. Morris looked at the issue from the point of view of a practitioner. Compensation, she said, is both an art and a science. "Ultimately we're an IPbased business," Morris said. "The core asset that we have goes home every day. Rewards are as important to a bright new grad as to the executives that work for us." Lawler said he started studying pay 50 years ago. "The gap between the lowest and the top has escalated enormously – this is a longterm
trend," Lawler said. It's a complex issue, he said, and can be looked at from the shareholders' point of view or from the perspective of sustainability. "Things
are going better from the shareholder perspective than for sustainability," Lawler said. Sparks said the demise of stock options and the emergence of performancebased
equity compensation have driven a lot of changes, especially in the tech industry, in recent years. These trends can be traced to changes in the accounting treatment of different types of equity compensation. One question that has arisen is how to disclose executive pay when it's not clear how much equity the executive will actually receive, since that will be based on performance, or how much it will ultimately be worth. Denend laid out five points for creating ethical compensation packages, from the perspective of a board member. First, board members need to understand the context and expectations of the work they're taking on. Board members are expected to be independent and devote enough time to the work, for example. Second, board members should take the shareholders' perspective. "Every dollar you don't pay" in compensation is available to be distributed to shareholders, he said. A third point, Denend said, is to make sure the pay is fair. This often means making sure people doing similar jobs are paid the same, though he said it's difficult because all boards want to judge that their management team is above average. A second way to look at fairness is from top to bottom: Among companies in the same peer group, how much compensation goes to the CEO, how much to the CEO's direct reports, and how much to everyone else? Denend's fourth principle was paying for performance, though he noted that "the devil's in the details." The connection between pay and performance is not fully understood,
he said, but "it's not always as direct as you think." Finally, Denend said board members need to use good judgment and get advice: "Sometimes when the numbers argue that you do one thing, step back and say, 'What's the right thing to do?'"

Answer the following question.

Q1. Explain the five point laid out by Denend for creating ethical compensation packages, from the perspective of a board member.

Q2. Discuss the concept of performance based equity compensation.



CASE 8 (20 Marks)

Thirty two sadhus from Punchamahal district, who were on a 72hour relay hunger strike at Godhra since Friday to canvass against the BJP candidate from the Lok Sabha constituency there, Mr. Shankarisinh Vaghela, from his role in the toppling of the Keshubhai Patel ministry after spearheading a revolt, called off their agitation today, reports PTI. Reports received from Godhra, about 80kms from here, said the mahanta and sadhus, along with the vice president of all India ShadhuSant’s Samiti, Avichanddas Maharaj from Sarsa in Anand Constituency, withdrew the fast, which was to end at 2.00 p.m. tomorrow. It was not immediately clear as to why they called off the protest prematurely. The sadhus had said they wanted to ensure the defeat of Mr. Vaghela in the election and alleged that he had betrayed them by dethroning Mr. Patel last October. They also demanded an end to ‘Khajuraho Culture’ in the BJP and noted that Mr. Vaghela had flown dissident BJP MLAs to Khajuraho in Madhya Pradesh during the revolt by some rebels in the party. Meanwhile, the Chief Minister, Mr. Suresh Mehta, at a press conference at the Chhotaudepur town in Baroda district, appealed to the sadhus to end their program of dharna ‘in the interest of the BJP and the nation’.


Answer the following question.

Q1. Explain the unethical aspects in the above case

Q2. Suggest remedial measures in the above case.

Q3. What are your viewpoints on the above case

Q4. What do you mean by ‘ Khjuraho culture’ in the case? Explain.



Case (20 Marks)
Linda attends a large public university in Oregon. Before coming to college, Linda was a closeted lesbian. In her hometown she never felt comfortable opening up to anyone, be it family, friend, or mere acquaintance. When she arrived at her university, Linda
was able to find a safe haven with the LGBT (Lesbian, Gay, Bisexual, and Transgender) club. As Linda got more comfortable at her university, she began to go out at night to meet individuals outside of her LGBT community. She was able to find friends involved in different parts of her college campus: multicultural club, Greek life, student government, and more. One day, Linda is at a fraternity party with some of her friends in Greek life. While dancing and enjoying music, Linda overhears a conversation occurring at the beer pong table. One of her friends, Justin, is disappointed that his teammate is taking so long to finish his drink. She overhears him say, “That’s so gay.” Linda confronts Justin and expresses her distaste with the language he used. She tells him “gay” shouldn’t be a slangterm for lame or stupid. Justin doesn’t understand what the big deal is. He tells her that he is fully accepting of homosexuality and didn’t mean any harm with his words. Linda doesn’t accept this, refuses to speak to Justin again, and leaves immediately. A few weeks later, Linda and Justin are at the same nature hike with the Wilderness Club. At the end of the hike, there is a waterfall where you can jump into a lake below. Justin overhears Linda telling one of her friends to “Man up.” He confronts her about the term, saying that man up implies gender norms. Linda doesn’t understand why he’s so upset with this term. She says that it is used universally and isn’t supposed to insult anyone.


Answer the following question.

Q1. Do you think there is a difference between using the terms “That’s so gay” and “Man up?” Is it okay to use either of them? Discuss.

Q2. Does the unconscious use of above terms contribute to harmful stereotypes or does everyone understand that they don’t really mean anything? Comment.


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