Corporate Restructuring
If done correctly, corporate restructuring can be an efficient method
for improving a firm's financial results. The goal of corporate
restructuring is to improve a firm's efficiency and its profitability.
Moves include selling off parts of the company that are either
unprofitable or a poor fit with the rest of the business and seeking
to rationalize headcount by eliminating unneeded or underutilized
personnel. Other steps can include changing how the company is
financed to reduce debt. The Wikipedia article "Restructuring"
(January 4, 2006) http://en.wikipedia.org/wiki/Restructuring lists a
number of other ways restructuring can occur:
"Changes in corporate management (usually with golden parachutes)
Sale of underutilized assets, such as patents or brands
Outsourcing of operations such as payroll and technical support to a
more efficient third party
Moving of operations such as manufacturing to lower-cost locations
Reorganization of functions such as sales, marketing, and distribution
Renegotiation of labor contracts to reduce overhead
Refinancing of corporate debt to reduce interest payments
A major public relations campaign to reposition the company with consumers"
If done effectively, the restructuring will leave the company in a
better financial position and with more effective operations.
However, there are cases where restructuring can enrich some
participants in financial markets while leaving companies in no better
or even worse shape than they were before. Mergers in particular
often turn out poorly, especially when they are highly leveraged.
Furthermore, while cost-cutting alone can create significant benefits,
over the long run firms often need to find sources of growth as well.
Achieving growth often requires capital spending, which may not be
viewed as a priority by executives slowly consumed with cost-cutting.
Additional sources:
"Can restructuring revive the Asian locomotive?" By Keith W Rabin,
Asia Times (March 14, 2002)
http://www.atimes.com/asia-crisis/DC14Db01.html
"Survey Concerning Corporate Restructuring and Employment" The Japan
Institute of Labor (2002)
http://www.jil.go.jp/english/laborinfo/library/documents/sr_restructuring(outline).pdf
"Do US Financial Markets Allocate Credit Efficiently? The Case of
Corporate Restructuring in the 1980s" by James R. Crotty and Don
Goldstein, Economic Policy Institute's Working Group on Monetary and
Financial Restructuring (December 1992)
http://people.umass.edu/crotty/EPI-Crotty-Goldstein.pdf
"Japanese Cabinet Approves Industrial Revitalization Plan" JETRO (July
21, 1999) http://www.jetro.go.jp/usa/newyork/focusnewsletter/focus6.html
"Corporate Restructuring and Governance in East Asia" by Magdi
Iskander, Gerald Meyerman, Dale F. Gray, and Sean Hagan, Finance &
Development (March 1999)
http://www.imf.org/external/pubs/ft/fandd/1999/03/iskander.htm
Corporate Responsibilities to Stakeholders
There is no doubt that corporations have duties towards their
stakeholders. A source of significant debate, however, is exactly who
a corporation's stakeholders are, and what its responsibilities are to
them. There is no doubt that to comply with the traditional view in a
market economy, a company is obligated to maximize its shareholders'
wealth while complying with the laws where it operates.
More recently, though, theories have been put forth that a company's
stakeholders encompasses more than just its shareholders; employees,
customers, suppliers, government, and the community where a company
exists have all been put forth as being stakeholders. Some activists
believe that a company's responsibilities to these stakeholders even
exceed its responsibility to provide shareholders with a profit.
Ultimately, society as a whole will have to determine who a
corporation's stakeholders are and what its obligations to them are as
well. Currently, different companies have different ideas about who
their stakeholders are and what their responsibilities to them are.
"A general and clear-cut answer to this question appears to be
missing. Certain stakeholder groups seem almost undisputed:
shareholders, employees and customers. Others, like the authorities,
citizens, the media, local communities or the society at large are
certainly less obvious. These categories appear in some lists, but we
seldom see a clear opinion as to what is at stake and who the
particular stakeholder may be."
"Who Are Stakeholders" CSRQuest (2006)
http://www.csrquest.net/default.aspx?articleID=12622&heading=
Sources:
"Corporate governance refers to the framework of rules and regulations
that enable the stakeholders to exercise appropriate oversight of a
company to maximize its value and to obtain a return on their
holdings." (Iskander et al.)
"Post, Preston, Sachs (2002), in their theory called Stakeholder view,
use the following definition of the term "stakeholder": "The
stakeholders in a corporation are the individuals and constituencies
that contribute, either voluntarily or involuntarily, to its
wealth-creating capacity and activities, and that are therefore its
potential beneficiaries and/or risk bearers.""
"Stakeholders" Wikipedia (January 27, 2006)
http://en.wikipedia.org/wiki/Stakeholders
"In market economies, companies normally pursue maximisation of
shareholder value (profit, share price, etc) bound by regulations
which address specific social responsibilities. In contrast, the
corporate responsibility and sustainability movement represents
companies that voluntarily recognise and address their
responsibilities to all their stakeholders for mutual benefit or even
purely on ethical/moral grounds. Stakeholders are everyone and
everything affecting or being affected by the company. Stakeholders
normally include investors, customers, employees, business partners,
local communities, the environment and society. However, it should be
pointed out that there is an ongoing debate about who are the key
stakeholders and about criteria for shareholder classifications."
"The stakeholder approach emphasises responsibility to stakeholders
over profitability and shareholder interests. Company success is
measured by stakeholder value which includes economic profit as well
as social and environmental values reflected in intangible assets such
as reputation, human and social capital."
"The Stakeholder Approach to Business Management" CSRQuest (2006)
http://www.csrquest.net/default.aspx?articleID=12106&heading= |
