Assume that you are being recruited by a company (Time Warner Inc.) for one of i
ID: 2790659 • Letter: A
Question
Assume that you are being recruited by a company (Time Warner Inc.) for one of its managerial positions. The position is in a field of your professional expertise, and involves some financial responsibilities. Naturally, you feel undecided at first. On the one hand, you are not familiar with the company. You do not wish to be part of a “bad” company. On the other hand, you can research about the company to familiarize yourself with it. The offer is generous and you are eager to contribute to and grow with a “good” company. You have to do some research and analysis before deciding to join the company or not. The following are some questions addressing governance and financial concerns that you consider before making up your mind. Answer each of the following questions, to reach a conclusion at the end.
1)GOVERNANCE ENVIRONMENT
Assess the governance environment of the firm by considering its governance and management structure. Your discussion could incorporate board directors’ information, including the competence, and independence of board directors. Your discussion could also incorporate auditors’ information and analysts’ reports. Additional information may be obtained from the firm’s Annual Report (for example the MD&A Section, or the CEO’s message, or the Chairman’s message).
2)AGENCY CONFLICTS
Continue to assess the governance environment of the firm by considering conflicts of interest (or agency conflicts). What are agency conflicts? Provide two examples of conflicts of interest in the company (agency theory can be used as supporting theory) and analyze the conflicts situation. Explain how the company can use incentives and financial reporting to mitigate the conflicts of interest you described.
each part no more than 500 words
Explanation / Answer
Governance Environment :
The Team of 9 board members from different career such as Public service, academia , business and finance gives a confident that the company is in responsible hands.
The board is capable enough to accept and address risk factors prevailing in the market such as increased piracy, service disruptions, failure of communication, political and economic reasons of different countries, license, alternative source of entertainment etc.
The company has revised the Governance policy in February 2016 which describes the principles, guidelines and practices that will be a guiding factor for whole company.
The Board has formed Three committees: The Audit and Finance Committee, The compensation and Human Development Committee and The Nominating and Governance Committee.
The Board have policy for Auditor rotation, Director Nominations etc.
Overall Governance and policies are good.
Agency Conflicts:
It means the problem of fundamentals between Managerial Positions versus Owners or Shareholders. These conflicts raises mainly due to unaligned goals, different aversion level of risk.
Example of Agency Conflicts :
1) When manager takes decision which benefits the manager interest such as sales in such area from where receivables are difficult.
The company can mitigate the risk by introducing a clause in Incentive after considering the receivable due from the sales.
2)Purchases from the related parties on credit and at high prices. It can be controlled by maker checker role from accounts division.
On the above discussion , We can conclude that The company is Good. Offer can be acceted as the news for Agency conflicts of Time warner is less in the market.
The Gornace is also good