Corporations

Valuation is the estimation of an asset’s value, whether real or financial, based on variables perceived to be related to future investment returns, on comparison with similar assets, or, when relevant, on estimates of immediate liquidation proceeds (Pinto, Henry, Robinson, Stowe; 2010). Correct valuation of real assets can present challenges to financial analysts. Different models can be used to arrive at the closest estimate of value and yet certain issues will always arise. This case attempts to tackle two approaches in real asset valuation: Discounted Cash Flow (DCF) analysis and the issues surrounding such, as well as the Black-Scholes Model for Real Options. Questions to be addressed in the study are:

1. Evaluate Amoco’s and Apache’s corporate objectives and strategies. Is it reasonable to expect that the MW properties are more valuable to Apache than to Amoco? What sources of value most plausibly account for the difference between buyer and seller? 2. Structure and execute a DCF valuation of all the MW reserves. How much are the reserves worth? Is your estimate more likely to be biased high or low? What are the sources of bias? 3. How would you structure an analysis of MW as a portfolio of assets in place and options? Specifically, which parts of the business should be regarded as assets in place and which as options? What kinds of options are present? Should this approach yield a higher or lower value that the DCF approach? 4. Execute the analysis you structured in Question 3, beginning with assets in place. How risky are the assets that underlie the options; i.e. how would you estimate SD for each? How much is the whole portfolio worth? 5. Assuming a sale goes through, how does Apache exercise each of the various options? When should it do so?

BACKGROUND

In a case prepared by Barbara Wall at the Harvard Business School, entitled MW Petroleum Corporation A, (doi:9-295-029; 1994), she stated that the 1980’s had been a difficult decade for the oil industry. Profitability of oil companies declined due to low prices; and most of these firms responded with cost-cutting measures. Many top companies divested their marginal properties, seeking to consolidate and rationalize their productive assets- one of which was Amoco Corporation. Amoco Corporation conducted an extensive review of its cost structure and profitability (p.2), leading to major restructurings to better focus on its core businesses.

The result of this was a divestment of the middle section of its assets along marginal curve. Morgan Stanley advised and assisted in the process, creating MW Petroleum Corporation – a new, free-standing exploration and production oil and gas company. MW was offered to a number of targeted international petroleum concerns, but the most attractive offer came from Apache Corporation. Apache Corporation was an independent oil and gas company based in Denver, Colorado engaged in exploration, development, and production of oil and natural gas. Their strategy, “rationalize and reconfigure” involves acquiring producing properties whose operations Apache could quickly control and make more efficient, producing significant cost-saving opportunities for the company. The sale of MW Petroleum provides such an opportunity for them. However, Apache must first carefully evaluate MW’s value to come up with a proposal that would be attractive for Amoco and profitable for Apache as well. CRITICAL ANALYSIS

1. Evaluate Amoco’s and Apache’s corporate objectives and strategies. Is it reasonable to expect that the MW properties are more valuable to Apache than to Amoco? What sources of value most plausibly account for the difference between buyer and seller?

AMOCO
APACHE
Growth Stage

MATURE
5th largest oil company in the U.S.

GROWTH
Operator of small-to-medium sized properties

Objectives
To increase profitability
To increase size/growth

Strategy

Divestment: major restructuring to better focus on its most attractive properties and opportunities (includes selling assets regarded as non-strategic)

“Rationalize and reconfigure”
-Acquiring producing properties whose operations they can control and quickly make more efficient

Yes, considering Amoco’s and Apache’s corporate objectives and growth stage, I can say that MW properties are more valuable to Apache than to Amoco. Amoco is already at the mature stage, and its current strategy is aimed at divestment (major restructuring to better focus on its core businesses) – MW properties no longer form part of such core businesses. Amoco is merely interested in selling MW for a profit, where as Apache sees it as an opportunity for growth and geographic diversification, to add further stability to the company, and to increase its reserves. Furthermore, Apache’s revenues are highly dependent on natural gas (current portfolio has an oil-gas ratio of 20-80), and with the increased volatility in natural gas prices, Apache would benefit from acquiring properties with a large concentration of non-gas assets. 2. Structure and execute a DCF valuation of all the MW reserves. How much are the reserves worth? Is your estimate more likely to be biased high or low? What are the sources of bias? At first, WACC and CAPM was attempted to be used as a source of cost of capital. However, for WACC, there is no available proportion of debt and cost of debt for MW. For CAPM, no available data seems to support the acceptable market return as compared to the 10-year government bond yield of 8.03%. Thus, the 13% discount rate used to compute the terminal value of MW petroleum was
used (line notes to MW Petroleum Projections #20).

ASSUMED COST OF CAPITAL: 13%

Using above assumed cost of capital, below DCF valuation shows the total value of all MW reserves. A separate DCF valuation was conducted for each reserve, with the total value summing up to MW’s total PV of 473.5M (refer to Exhibit 1 for complete details of DCF analysis). DCF of all MW Reserves

Proved Developed Reserves
383.84
Proved Undeveloped Reserves
40.79
Probable Reserves
41.47
Possible Reserves
7.42
Total Value of Reserves
473.51

DCF of Aggregated MW Projections

The sources of bias pertain to:
1. Cash Flow estimates were prepared by Amoco
2. Correct discount rate to be used (assumed rate was 13%, but it could be higher, which would then result to a lower PV for MW, and vice versa).

3. How would you structure an analysis of MW as a portfolio of assets in place and options? Specifically, which parts of the business should be regarded as assets in place and which as options? What kinds of options are present? Should this approach yield a higher or lower value than the DCF approach? MW can be thought of as a combination of assets-in-place and options. Assets-in-place pertain to properties that already provide cash flow. In this case, proved developed reserves would be most appropriate. The other reserves (proved undeveloped, probable, and possible reserves) are options. Currently, the firm has an option to delay until it is profitable to develop the reserves. Refer to Exhibit 2 for detailed Options Valuation computation.

Black-Scholes formula used is:

Real Options (@7years)

DCF
Proved Developed Reserves
383.84
(same value as DCF)
383.84
Proved Undeveloped Reserves
44.68

40.79
Probable Reserves
41.84

41.47
Possible Reserves
11.67

7.42
Total Value of Reserves
482.03

473.51

Real options valuation using the Black-Scholes model yielded a higher value compared to the DCF approach, since there is a real value attached with the firm’s ability to delay development. 4. Execute the analysis you structured in Question 3, beginning with assets in place. How risky are the assets that underlie the options; i.e. how would you estimate SD for each? How much is the whole portfolio worth? Refer to Exhibit 2 for Volatility computation
(weights of oil-gas ration given in the case and volatility taken from Exhibit 8 of MW Petroleum Case). 5. Assuming a sale goes through, how does Apache exercise each of the various options? When should it do so?

CONCLUSION
With the computed real option and DCF values, Apache should proceed with the purchase of MW Petroleum Corporation.

REFERENCES:

Equity Asset Valuation (Pinto, Henry, Robinson, Stowe; 2010)

MW Petroleum Corporation A, (9-295-029; 1994)

When did the first signs of communication problems surface at Cerner Corporation? What caused them? It is suggested that communication problems existed at the company prior to the March 13, 2000 memo sent by Cerner’s CEO. Patterson was concerned about employee work ethic at the company. Patterson takes one employee’s opinion as confirmation of his own concern about employee work ethics being low. Downward communication from CEO should be consistent and truthful; scare tactics are inappropriate; won’t improve work ethics or morale.

Patterson expected that his employees would understand the exaggerated tone of his memo indicating he might have used such tactics before. Meetings instead of memos, so information is not in writing b. Downward communication should not be insulting or threatening. The harsh memo Patterson sent on March 13, 2000 was a knee-jerk reaction that wasn’t thought through with Strategic Communication in mind. Patterson did not consider the possibility of the memo being leaked, and certainly did not prepare for any negative backlash from his sending of it .

It seemed that Patterson based his judgments on employee performance (and in turn, the performance of their managers) on very little Upwards Communication from his employees and managers, but rather his own personal observation. Perhaps the employees carpooled or did additional work from home; Patterson should have asked more questions of his employees before setting an ultimatum. Not only did some of Patterson’s own employees not respond well to the belligerent communication used in his memo, but it was also ill received amongst the unintended audience on the internet and Wall Street

Describe Neil Patterson’s communication style. Patterson’s main style of communication is analytical 1. Despite what outsiders may think of his methods, Patterson does tend to get results. He asks “how” and seeks more data and information. He dislikes making errors and feels the need to save face. Patterson seems to temper his analytical communication with passive-aggressive communication. Communications appear honest, but are actually confusing. He tends towards indirect communication while only seeming to be direct.

People do not have consistent views of his character and are not always sure what to expect from communication with him. One reason for Patterson’s communication problems and management style could be his bringing his farm-raised mindset into the corporate world. He was alone with his thoughts a lot. No employees to deal with. He was used to acting on what was in his head; not as useful in corporate context III. Describe how Mr. Patterson “should” style-flex to interact positively with his employees and constituents. Patterson should assess his own communication style.

He should plan his communications with managers, employees, and investors separately and according to their particular needs and cultures. He should adapt his style to suit the audience with which he is communicating. He should evaluate each communication in terms of its individual style and determine how effective the communication was IV. What are the ramifications of Mr. Patterson’s memo to the “organization and feedback” boxes of the Strategic Communication Model? Patterson’s memo had a negative effect on the organization box. Employees were unnerved by the tone of the memo.

Managers worried about losing their jobs and the other threats Patterson made in the memo, despite the fact he did not go through with his threats. The company as a whole was most likely more unstable when the stock began falling on Wall Street due to the internet leak of the memo. The memo produced many unexpected ramifications on the feedback box, particularly due to its leak to the internet. Patterson got 300 emails expressing feedback from employees post memo leak. Patterson could see what the investors and analysts thought due to the leak. Wall Street showed feedback in the form of a drop in stock value

III. Describe how Mr. Patterson “should” style-flex to interact positively with his employees and constituents.  Patterson should assess what communication style he uses personally 1. How Patterson sees his own communication style. How others see Patterson’s communication style. Feedback from co-workers and employees. Combination of the two interpretations of Patterson’s style with more weight given to outside opinion B. He should plan his communications with managers, employees, and investors separately and according to their particular needs and cultures .

Patterson should determine the best channel to use for each person with whom he must interact. He should choose language appropriate to each person, so he takes into account their cultures and all ethical considerations. He should avoid any threatening or insulting communication, as this is rarely (if ever) a good method of communication in any business. He should realize the differences required to be effective in his Downward Communication and Horizontal Communication, and also in communication with people outside the company .

He should account for time of day, location (if communicating in person), and other external factors that can have an effect on the interaction. He should adapt his style to suit the communication styles of the audience with which he is communicating. Patterson should evaluate the communication styles of the people with whom he is interacting. He should be aware of his communication while it is taking place, as he may need to adapt according to trial and error during the actual interaction.

He should be able to change his communication style to complement that of the person with whom he is interacting to be able to achieve the best effect. He should evaluate each instance of communication in terms of its individual style and determine how effective the communication was . Was Patterson able to flex his style effectively to adapt to the style of each person with whom he interacted? Did each person show understanding of Patterson’s communication and respond in a favorable fashion? Is Patterson achieving his goals with communication through style-flex?

Controlling and planning the activities of a business such as SPA Ltd is a critical concept of a business succeeding internally and externally. The financial situation of any business such as SPA Ltd must be monitored and handled effectively, taking considerations of information being accurate and well planned for presentation. Without, SPA Ltd having accurate financial information, the business may not perform effectively internally and externally and may incur problems suffering from financial position and legal status.

There are many purposes of which accurate financial records are kept. One of the main particular records is used to present information to inform the stakeholders of SPA Ltd, which it is legally entitled to present accurate financial position at a certain time. The whole purpose of presenting the current financial status of SPA Ltd to its stakeholders is to inform them of how well the company has progressed through the year. As SPA Ltd is a large company business, with a large yearly revenue, it has many stakeholders connected to the business internally and externally. Internal stakeholders

These are stakeholders of SPA Ltd, where they contribute on expanding its efficiency and yearly financial revenues. These are the main types of documents which are used to accurate identify the financial position of SPA Ltd. The process of the ratio analysis will follow the evaluation process of SPA Ltd Company and its final financial status. Profit and Loss Account This is a financial statement which represents the revenue that a business such as SPA Ltd may have received over a period of time, and the corresponding expenses which have been paid.

The profit and loss account shows the profit and the uses to which the profits have been put. By law SPA Ltd does not have to put every detail of overheads incurred. Moreover, the law tats that companies such as SPA Ltd must follow one or two standard formats set out in the Companies Act. Here is a basic format which is used by SPA Ltd and other companies: This is the basic format which may be used by companies such as SPA Ltd to present their financial information to the stakeholders. However, as SPA Ltd is a limited company, by law they must produce financial results of any changes to the structure of the company. This is stated in the (FRS 3 Reporting Financial Performance). Moreover, it states that the statement must produce the losses and gains of a company and the changes of its shareholders.

Balance Sheet This is a statement of a firm such as SPA Ltd’s assets, liabilities and owners equity at a specific date in time. Basically this gives a snapshot of which direction SPA Ltd is heading. From the balance sheet when the liabilities and owners equity is added, it represents the sources of capital and the assets represent the uses of the capital. In addition, the two sides of the accounts must balance as every penny made as capital has been used for some purpose.

In a balance there are formats and layouts which are used to present the information. Unlike the profit and loss account document, there are different terms for which the balance sheet consists of. As you can see from above, the ratio analysis is very important in providing information of a company such as SPA Ltd. This is because the ratio analysis will give a precise indication of how a company or SPA Ltd may be generating profit, its liquid position, controlling credit and debit periods etc… The ratios used can give an overview of what a company may need to do to improve the efficiency. This is why it is important that accurate finance information is correct, as the financial figures will be used in all aspects to see how well a company is doing. In the case, if there is a wrong figure it may provide wrong evidence which may result in wrong decisions on the company.

Using the financial documents of a company or SPA Ltd, the documents will have to be assessed. This is undergone through a procedure where, checks are made through previous years to see if there is any improvement of the company or SPA Ltd. The financial information received will be cross referenced with all documents such as, profit and loss, balance sheets, cash flows and ratio analysis from past years. After checking the accuracy of the financial data, it will provide a solid outcome of the situation of the company or SPA Ltd, and what needs to be improved on. In addition, the documents of finance may be cross referenced with other competing company’s that have the same aspects and basis of SPA Ltd or any other company. The cross reference procedure will provide the stakeholders or managers and directors of SPA Ltd and overview of what needs improving and changing to increase the stability and chances of surviving in the market. Furthermore, it also shows why it is important to have accurate financial information, perform at high standards and keeping up with potential competition.

Furthermore, SPA Ltd or any other company must undergo to follow legal requirements, where importance of accurate financial records is vital in keeping stakeholders of the company informed. Every limited company whether public or private is required by law to produce financial statements which are available for the public to inspect if they so wish. The law which stated that these legal requirements must be fulfilled is the Company Act 1985.

The ancillary are businesses that is in or next to the warehouse to extend the product and services to make the costumers more satisfied and to shop more frequently 2. Is Cost supplying, manufacturing, or retailing its product? Cost is an intermediate between the manufactures and the retailers, but is still a retailer that sells to the end user. Cost Is a sort of a retailer that buys most of their merchandise directly from manufactures and sells It In warehouses to members who are Involved with some sort of business. Members can be business and Individual with a evidence of business existence). Cost Is also offering services to their embers as gas stations, car washes, one-hour photo centers and so on. 3. Who is the end user of Costs product? Other businesses (EBB) but also individuals with a member card can shop at Cost warehouses for personal use. What does the business need? O Key activities/ capabilities- Cost has a great power to put pressure on the suppliers to lower the price as they buy huge volumes.

In that way Cost can sell their products to a lower price o Key resources ; Intellectual property (name, trademark, copyrights , patents, trade dress)adds value and its one of the most important factors in Costs success. Important factor cause of the high competition in the retail business. ; Own warehouse* everything internally o Key partners Services as check printing services, auto and home insurance, online investing do provide benefit for the members, Are generally provided by a third-part and vary by country and state. This service separate Cost from their competitors ; What does Cost offer? Value Proposition- tiny range – Limit specific Items pallets and ranks- simple display – low prices o Performance- custom oriented – additional products, services, and warranty o Many of their consumable products are only offered for sale in case, carton or ultimate-pack quantities = for business o “Getting the Job done” – Car wash, insurance, check printing, food court* services to makes shopping and life easier for the customers, and encourage members to shop more frequently o Design brand/status- Important success factor o Price/ cost reduction Offer lower prices because of the high sales volumes and rapid inventory turnover.

That combined with the operation effectiveness by volume purchasing, effective distribution, reduced merchandise (self-service warehouse) creates a lower gross margin and Cost can therefore sell their products for a lower price. Just in time o Risk reduction Cost has a strong brand name and has members who pay to be able to buy there. Combined with a high member satisfaction that generally accepts return of merchandise, and a 90 days return policy, technical support, extended warranty on electronics. Accessibility Online shopping to provide their members a full accessibility with home delivery o Convenience/usability Who are Cost serving and how are they reaching and taking care of them? O Costumer segments Mass market- Segmented- Business and special members o Channels – Costumers can buy it in store or online Dedicated Personal assistance- provided by a third party (customer services) ; Self service- Key factor- self service lower the labor cost ; Automated services- membership, CRM Communities – magazines, coupons* keep members and attract new How are we financing the business?

Case analysis

Document version:

• Moore Medical Corporation Analysis to IT investments Dilip IT for Business Managers Business Background

• Moore Medical Corporation founded in 1947 is a distributor of medical supplies. The company had built its business model taking care of specific groups of practitioners such as podiatrists and emergency medical service personnel.

• Moore provides more than 8500 products and the company had divided its customers into six groups.

• Moore has a strong tradition of accurately maintaining customer orders.

• Moore’s current IT infrastructure and spending was above the industry average implementing most of the latest technologies like ERP, telemarketing and e-commerce.

Case issues and results

Issue-1: Linda Autore, the CEO of Moore Medical, Inc was unsure if she needed to spend any of the company’s funds on CRM software.

Solution and Analysis: It is definitely true that CRM provides an integrated record of all customer contacts through all channels, assembling an optimal schedule of appointments for sales people which would lead to a better consistency of Moore’s interaction with its customers; however from the analysis of the case I see that Moore has currently a tradition of accurately and quickly filling customer orders which had no problems.

From the technology perspective it is definitely great to get a company like Moore to be updated with CRM but however looking at the current problem that Moore faces I believe it’s not worth wasting an investment in CRM.

Issue – 2: Moore has spent $7 million in implementing the ERP; however Moore’s ERP implementation was not very satisfying since it was not fully utilizing the information retained in the system and was also inferior to what had been in place previously.

Solution and Analysis: ERP is an excellent database system provided it has been implemented with respect to the company’s requirements. From the case I see that Moore’s ERP was unsuccessful and had shortcomings that were required to be fixed immediately. ERP covers all areas from finance, logistics to marketing and also Moore’s latest e-commerce website. I believe an additional investment of $600,000 to purchase the ‘Bolt on’ software is necessary to realize the $7 million investment made in the ERP.

Issue – 3: One of the major problems faced with Moore in their ERP systems was their poor implementation of demand planning. Moore’s performance on the “Perfect Order” was way below their expected goal of 90%. Solution and Analysis: It is mentioned in the case that 84% of the non-perfect orders are due to demand planning issues. Even if the company spends $300,000 on each of the four models which are in consideration to solve the forecasting issue the company would spend only $1. million. It must be noted that this additional cost will help the company in increased revenues, reduced costs and better customer satisfaction.

Issue – 4: Is Company’s decision to move to personal e-commerce a right choice?

Solution:

I believe the traffic and income generated towards personal e-commerce has been increased substantially in six months since the start of the new website.

However my suggestion to Moore is that it withdraws from yahoo is a phased manner. Relevance and analysis From the analysis of Moore Corporation I believe they have made relevant investments in IT infrastructure; however the company lacks a strategy to implement them. I believe the company needs to prioritize their requirements from their business point of view. Here I believe CRM is an important tool to improve customer relationships but however they need to set their prior projects right before setting their eye on CRM.

Their initial priority is to set right the ERP which would set right the demand planning issue also. Setting the ERP right would help also help in achieving good revenue from e-commerce applications. IT is definitely a solution to a particular problem, such as customer acquisition and retention, increased revenues and provides employees an efficient tool; however the goals of IT should be linked to the corporate strategy. Investing blindly in IT without a strategy will not derive the desired result.

Outer Space Corporation can be designed in such away that that it will incorporate a number of share holders and stake holders in the company. The main stockholders of the corporation are the owners of the corporation since they manage all the operations of the corporation and they are the main shareholders in that corporation since they are the owners of the corporation. Investors in the corporation can also be part of the stock holder since their investments in the company has contributed to the growth of the corporation.

Investors in any given organization are also part of the owners of the corporation. The stake holders of Outer Space Corporation includes: the workers and managers of the corporation, Dignitaries and customers, members of the corporation and weather fore castors. Workers and managers will contribute greatly to all the operations of the corporation. They are the people who take control of all the operational procedures of the corporation.

Dignitaries and customers plays a vital role since services of the corporation are rendered to them and therefore the operations of the company can be kept going since the corporation has reliable clients to offer their services to. The weather fore castors and space explorers can also be valued as stake holder in this corporation since for outer space corporation to operate they must be aware of the weather changes so that they can operate on favorable climatic condition which would not result to accidents due to poor climatic conditions.

These stake holders should work hand in hand with each other so that the company’s objectives can be met. For the company to prosper, all of them must ensure that they have played their part accordingly. Members of the corporation are also part of the shake holders of the corporation since they are the sole owners of the corporation. The outer space business is faced with potential risks that touch on workers, investors, customers and people living in the environment.

The most evident risks are the safety risk which involves all the people involved in the corporation. Workers of outer space corporation are faced with a lot of risks such as danger of lacking some of the essential needs in space which they could obtain from earth, they can take long to demand of nature in outer space since the environment is not the same as that of the earth, and also the danger of life failing to sustain them in outer space environment can contribute greatly to the risks that these workers are faced with.

The only risk that investors face is that of fear that the business may fail since many people fear taking trips to the space and therefore the corporation can lack enough clients to sustain them. When business fails, investors end up operating at a loss. Those people who live in the surrounding area can associate the corporation with the risk of intoxifiying the environment due to some of the intoxicants use as fuel in these moving bodies.

They fear that the environment around them will be polluted which will be a health hazard to them. There are a minimum number of liabilities risks that are involved in this corporation. These usually affect the company’s operations. These risks include damage of the transport system that they use in their operations such as shuttles. Accident can occur in most cases due to poor visibility as a result of bad weather in the space. The company also can be faced with technical, market, financial and legal-regulatory risks.

The risk addresses intellectual and physical property which must be protected. The property described here means the right to occupy and develop as long as it is active. The legal obligations under the property without sovereignty require that such rights in the off-earth commerce follow treaty provisions. Net loss is another risk that a company can experience in its operation since not many people prefer to venture into the space in most cases therefore is fear that the corporation can experience total loss.

What Role Should The Corporation Play in Our Lives and Society, If Any?

Coroprations are large firms that exist as a legal entity owned by shareholders who divide profits that are generated through the firm’s operations.1 A number of corporations is increasing within last years. It is undeniable that in contemporary world corporations influence people and their lives. Corporations play some important functions in society, such as employing people, producing goods that are commonly used in society, investing in development the industry and so on. The results of corporation’s operating could have both advantages and drawbacks. The first positive aspect of corporation is the fact that people can develop teamwork. Everybody works individually, but they all create the entirety. The work is divided into some parts of the one integrity. Everybody is responsible for something different and that makes the employers feel indispensable and responsible for the special areas. Teamwork has become an integral part of the modern workplace. The companies used to adapt hierarchical structure but they realize that their staff is more effective when they work together. It is true that there’s no ‘I’ in ‘team as teamwork requires collaboration. Moreover teamwork may be useful in our private life, for instance family life while people do something together.

The whole idea is presented in a Thomas Woodrow Wilson’s quotation, “We should not only use the brains we have but all that we can borrow“2. He implies that the key to success is sharing ideas with other people. A great exaple is Ilan Gluck, a man who works in Deloitte Company. He decribes his teamwork on his blog and presents teamwork as a skill that he learned and developed at work in a corportion.3 What is more, in corporations the remuneration is quite high. The highest remuneration is for those, who occupy the most important positions in the company. There is no doubt that there is a lot of work, which is full of stress. All in all, the salary is quite satisfactory. There are many bonuses, financial allowances and and rewards for those who have the best outcomes of the work. For instance, in Continental, the corporation, which deals with cars and the staff connected with them, they offer “additional payments such as holiday pay and a Christmas bonus. But that is not all: as part of group working, employees receive additional remuneration if the targets are met “.4 On the other hand Naomi Klein, a Canadian activist, who is famous for criticism of corporate globalisation has a completely different oppinion. In “NO LOGO”, a book, which is a manifesto against exploiting people in global corporations, she summarizes the system of payment in these words, “You make us rich, you get a healthy cut. But if we take a hit, then you take one too”5. She implies that the money people earn is strictly related to the results they achieve in the company and it is not as high as people think. Apart form that, many people who work in corporations have their career path planned by Human Resources Departmens of the corporations. As a result, to get a promotion, people should fulfill some requirements. The main advantage of that is the fact that in general the rules of promotion are transparent. In Mc Donald’s they offer a career path to help employees who want to advance.6 They claim thay it is easier to stay on track and plan for a successful career when they know McScholars tutition will match, where they want to go.

In addition, working in the corporation is a great opportunity to broaden horizons and a big chance to gain experience in our career. However corporations have some important disadvantages. Firstly, people do not realize that corporations became a dominant institution in their lives. They deal with big companies almost at every area of their lives. It is commonly said that corporations rule the world. People are just victims of marketing policy. Many information and news in the media is filtred, so it is possible that they are only partially true. People are surrounded by brands and logos of companies that are working internationally. On the face of it, there is nothing bad that a company thrives in many areas in the world. However it is worth saying that in general they don’t obey the rules of work ethics, morality and fairness. For instance in 2010, Mark Hurd resigned as CEO of Hewlett-Packard Co. following an internal investigation into his relationship with a contractor. The investigation ultimately found that Mr. Hurd hadn’t violated the company’s sexual-harassment policy, the company said, but concluded that he had run afoul of the company’s code of conduct.7 Every company claims that the most important merit for them is to serve the public good – nothing more misleading. Money is on the first place of the hierarchy in the companies. Their aim is to return the costs of production with extra financial benefits. The higher the benefit, the better for the corporation.

What is more, another negative impact of corporations is destroying nature and environment. The aim of the corporations is easy – money and financial profits, so others factors are not relevant for them. Many companies, especially those which produce goods, pollute rivers, produce many greenhouse gases and carbon dioxide. It’s impossible for them to conform to social rules with respect to lawful behavior. Sometimes they prefer to pay a fine for polluting the environment because it is cheaper than to resign from a business contract that will bring more financial profits. The truth is that corporations are not guided by public good, but only by their own financial interest. For instance, Allegheny Energy, an US energetic company appears to take proactive steps, including spending $1.2 billion on clean air technology. It’s also is on the third place in „The 15 Worst Companies For The Planet”, a ranking prepared by Newsweek.8 What is more, many corporations just exploit people. A good example of that are companies that produces clothes. Leading retailers – including Zara, Gap, Marks & Spencer, Monsoon Accessorize, New Look and Primark employ thousands of women working 14 hours a day for poverty pay in Bangladesh.9 The people, who are responsible for preparing the clothes obtain such a low remuneration that they are not able to help their family to survive, eat and finally live. The corporations wants to minimize the cost of production and maximize the profits during selling the clothes by exploiting people who work long hours and they sue the clothes almost like a robots.

The corporations should be: “as a family and work together, as a telephone system and reach everywhere, as an eagle and always be ready, noble, visionary and inspired”10. They should respect their employees more and compete with others in a fair way. Corporations should give up their despotic character but on the other hand some economist claim that the despotism in economy is safe for the market. Corporations determine almost every area of the society and our lives and partially they rule the policy and situation on the market. They have impact on the financial situation around us and as well as our mental health as working in a corporation is stressful and full of haste.