Prepare a management report and describe the effects of corporate recklessness and negligence on the shareholders and employees of one organisation of your choice from the list below:
1. Royal Bank of Scotland
4. Volkswagen Inc.
5. Barclays Bank
6. Well Fargo Inc.
7. Caterpillar Inc.
Company's Global Management
Caterpillar Inc is a renowned American Company that develops designs, manufactures, engineers, markets and sells engines, machines along with financial insurance and products to all its consumers through an international dealer network (Bornstein 2017). The objective of this paper is to analyze the management of the global and international factors by Caterpillar Inc along with explaining the agency theory that explains shareholders as well as stakeholders value. The paper will also take the example of this company and explain the impacts of corporate negligence and recklessness on the employees and shareholders that have an impact on the share price along with finance of the company.
Caterpillar Inc has a modified organizational business structure of its national and international business. This business structure of the company is focused on its global management particularly for the mining, consumer and dealer facing business divisions (Brown 2016). Moreover, better management is ensured by the company internationally as it focuses on data analytics and innovation as a major priority. Global management organizational structure of the company facilitates it in enabling positive organizational changes that can drive certain simplicity to the business enabling the company to address its dealer and consumer needs through becoming lean, nimble and highly responsive (Buell 2017). Such changes have facilitated Caterpillar Inc to enhance its accountability at divisional level and has facilitated in differentiating its business model from all its competitors. In global management, the company competes effectively in free trade environment that requires continuous enhancement of international competitiveness and generating a surrounding that facilitates in better responding to consumer needs.
Caterpillar Inc has developed effective international business management strategies that have facilitated the company in maintaining its corporate excellence. The company has developed effective strategies in maintaining its international business excellence. It offers its consumers with suitable solutions that facilitate the company in offering profitable growth to the shareholders (Chen 2016). With having excellent values, Caterpillar Inc has an information driven approach with its operating and execution model that guides its decision making process. National strategies of the company are focused on guiding effective decision making process of the company that positions it for continuous business growth (Crosby 2014). Business model of Caterpillar Inc focused on national and international business operations are focused on realizing the consumers needs along with associated partners offering industry renewed goods and goods that is largely centered on the below three area:
- Expanding the company offerings that ensures consumer success by differentiated and integrated solutions
- Increasing company’s alliance on services with increased focus on solutions that are digital enabled and enhances consumer loyalty along with improving consumer relationships (Gilchrist 2017).
- Developing core competencies of operational excellence including quality, safety, competitive and lean cost discipline for enhancing cost advantage.
Four OECD Principles
Figure 1: Global Organizational Structure of Caterpillar Inc
(Source: Lin-Hi and Müller 2013)
Corporate governance can be defined as a system of rules, processes and practices through which an organization is controlled and directed. Corporate governance basically involves balancing the interests of the company’s stakeholders that includes management, shareholders, consumers, financiers, suppliers, community and the government (Lin-Hi and Müller 2013). In maintaining effective corporate governance, Caterpillar Inc governance structure offers accountability, leadership and transparency regarding the company’s business on the behalf of its employees along with the stockholders. The corporate governance framework of Caterpillar Inc serves the stockholders interest with maintaining increased standards of responsibility, commitment and integrity. Such standards are implemented and developed by its global management team and board of directors those oversee the organization’s governance policies and performance.
UK corporate code of governance includes good practices standards for the listed companies on board compensation along with remuneration, development, accountability, audit and shareholders return. Such code is published by the Financial Reporting Council (FRC). UK corporate governance coded contains broad principles along with highly specific provisions (Mentovich and Cerf 2014). All the listed companies are needed to report as an aspect of their yearly report as well as accounts regarding the way they have implemented the major principles of the code. The companies are also required to make sure that they are maintaining adherence with the provisions of the code. With the years, UK corporate governance code is revised for the year 2017/18. This code now takes into account corporate culture and succession planning along with the concerns raised in government’s green paper.
Corporate governance program of Caterpillar Inc makes sure that the company serves the shareholders as well as stakeholders interest with maintaining increased standards of integrity, responsibility along with compatible with several laws (Paolini 2017). Corporate governance of the company makes sure that it serves all the related standards are supported by its board of directors along with global management team those work to oversee an organization’s performance, actions and governance policies. Corporate governance assurance is maintained by Caterpillar Inc through:
- Board of directors: The company’s board of directors advices, oversees and councils its management along with supervising performance of its management team and ethical compliance (Rubenstahl and Brauns 2015).
- Officers: The Company is positioned as an industry leader coukd not take place devoid of commitment leadership of such dedicated group of officers.
- Code of conduct: Code of conduct of Caterpillar Inc defines what the company stands for and its belief. Moreover, it also documents the uncompromisingly high ethical standards of the organization that remained upheld since it’s founding (Siegel 2014).
- Committees and charters: The Company’s board appoints the standing committees to oversee certain processed that encompass compensation, auditing, public policies and governance. These committees are deemed to operate within written charters all of which encompass solely independent directors (Slapper 2017).
- Governance documents: Governance documents of the company are reviewed periodically and are also updated that makes sure of ongoing standards for superior corporate governance to be in place.
In maintaining effective corporate governance, Caterpillar Inc governance structure offers accountability, leadership and transparency regarding the company’s business on the behalf of its employees along with the stockholders. The corporate governance framework of Caterpillar Inc serves the stockholders interest with maintaining increased standards of responsibility, commitment and integrity (Rubenstahl and Brauns 2015). Such standards are implemented and developed by its global management team and board of directors those oversee the organization’s governance policies and performance.
Corporate governance code of conduct of Caterpillar Inc has certain values those include:
- Excellence that ensures power of quality
- Integrity that ensures power of honesty
- Commitment that ensures power of responsibility
- Teamwork that ensures power of working together
- Sustainability that ensures power of endurance
Corporate governance of Caterpillar Inc is focused on getting involved in activities that generates conflict among interests of the company along with personal interests. Such situation takes place at the time interest conflict arises in the business operations of the company (Rubenstahl and Brauns 2015). In the company the most vital interest conflicts the employees attain the authority to spend money of the company along with hiring or involving an individual outside the organization. The employees also might have certain information that can do benefit to certain people outside the company. An interest conflict or appearance of conflict takes place very often while employees are provided with any gift, entertainment or favor. While certain parts can turn out to be an aspect of normal business relationship, Caterpillar Inc does not accept favors, gifts or entertainment that has high value that it can reasonably reciprocate that might obligate people to act in a manner that is contrary to the law, business interests or ethical business practices of Caterpillar Inc (Rubenstahl and Brauns 2015).
From the company’s emergence, Caterpillar Inc focuses on fair competition that is deemed vital to free enterprise. In maintaining effective corporate governance, the company considers competition along with antitrust laws at the time of conducting business worldwide. In association with dealers, competitors, suppliers, distributors and consumers, the company avoids arrangements which restrict Caterpillar Inc’s capability to maintain competition with others (Lin-Hi and Müller 2013). The company also does not get involved in certain understandings and arrangements or agreements with competitors impacting prices, teams on which goods are sold along with type or number of products produced and sold.
Through maintaining stakeholder’s value, the company focuses on developing better lives, communities along with a better world (Solaiman and Langsted 2017). The consumers of the company employs all its equipments in building energy, infrastructure along with natural resource assets which enhance living standards along with making sure sustainable progress all through the world.
Board of directors of Caterpillar Inc revenant has 13 members. All the members offer diversity of experience devoid of hindering efficient discussion or decreasing individual responsibility (Tombs and Whyte 2015). Board of directors of the company is highly responsible in implementing the corporate governance guidelines. Such guidelines indicate commitment of the board to oversee the efficiency of policy along with decision making at the board as well as at management level. This is with an objective to improve stockholder value in the long term. The board has the responsibility that the guidelines must be an evolving corporate governance set of principles that is subject to change and review as per the needs of the circumstances (Tombs 2017). The board of Caterpillar Inc has members those are elected by organization’s stockholders that oversee company’s management along with its business. Senior management team is selected by the board that is responsible for operating business of the company along with supervising senior management’s performance. The major responsibilities of Caterpillar Inc’s board of directors are explained below:
- Analyzing performance of the Chief Executive Officer
- Succession planning for the senior executives and chief executive officer
- Overseeing and reviewing implementation of the organization’s strategic objectives and plans
- Overdesign the ethical and legal compliance
- Overseeing the company’s financial statements along with the integrity of the company’s financial reporting processes.
- Overseeing the organizations processes in evaluating and dealing with risks
- Nominating the directors, appointing the members of committee along with shaping efficient corporate governance
- Counseling and advising management considering significant concerns dealt by the organization
- Approving and reviewing considerable corporate actions
History of Corporate Governance in UK and Caterpillar Inc
Agency theory is employed for realizing the association among the principles and agents. In Caterpillar Inc the corporate executives and the shareholders are involved in the agency theory (Witting and Rankin 2014). Financial executives and the CFO’s are observed to take decisions on the shareholders interest behalf and are the principles in the relationship.
Caterpillar Inc is greatly focused on generating effective shareholder and stakeholder’s value. Through maintaining stakeholder’s value, the company focuses on developing better lives, communities along with a better world. The consumers of the company employs all its equipments in building energy, infrastructure along with natural resource assets which enhance living standards along with making sure sustainable progress all through the world (Lin-Hi and Müller 2013). Dedication of Caterpillar Inc is to build their business better than ever. Considering the same, all its dealers and consumers are investing enough to deal with the world’s existing issues including scarcity of resource and energy, poor sanitation, unsafe water as well as poverty. Considering the necessity of increasing stakeholders value, the company is highly committed to safety, diversity along with inclusion improvements for the employees along with sustainability practices in the things manufactured by the company as well as related processes.
Caterpillar Inc maintains highly effective shareholders value considering which the company announces increased dividend rate (Lin-Hi and Müller 2013). Moreover, the company’s improved cost structure, well developed balance sheet along with cash flow of the company. Moreover, the company also decided to increase quarterly cash dividend by one cent to seventy eight cents each share of the common stock. Caterpillar Inc paid increased dividends to its shareholders for more than 23 years and the cash dividends of the company gradually doubled. Based on the same, it pays a cash dividend each year as the organization was developed that paid quarterly dividend for a long time (Mentovich and Cerf 2014).
Unemployment issue took place in Caterpillar Inc after the company made huge investment in $600 million in developing a high tech plant that left more than 20,000 employees in the company jobless (Heminway 2016). Caterpillar Inc has faced the issue of strike in dealing with the employee retention initiative. There are some striking workers whose employment was dismissed by the organization after a labor dispute took place between Caterpillar Company and its employees in a situation of alleged misconduct within the pucket line. In addition, decreased demands in the company are resulting in employment cuts (Jacobus 2016).
The company has dissatisfied employees that did not contribute to high unemployment as the economy recovers employees might get resentful. Caterpillar Inc has responded to the strike through bringing in replacement employees so that it might continue addressing manufacturing schedules. In addition, the employees on strike manufactured hydraulic systems and components for several caterpillar machines, encompassing wheel loaders, track-type tractors along with mining trucks (Jo and Harjoto 2014). Additionally, the company is developing a strike, plant after union workers there overwhelmingly turned down a new contract at the time of weekend voting. Moreover, the company is dealing certain tough issues regarding its share performance as indicated by Bank of America. It is evidenced that the company’s stock stabilized after 4% decline that has generated new uncertainty along with generating a pressure within the investment case. It is also disclosed that IRS proposed a $2 billion tax penalty on the company (Liau 2014). In fact, stock of the company decreased by $2 billion in value recently.
The paper with the example of Caterpillar Inc explained the impacts of corporate negligence and recklessness on the employees and shareholders that have an impact on the share price along with finance of the company. It is gathered from the paper that Caterpillar Inc has an information driven approach with its operating and execution model that guides its decision making process. National strategies of the company are focused on guiding effective decision making process of the company that positions it for continuous business growth. Therefore, it is also evidenced that Caterpillar Inc has responded to the strike through bringing in replacement employees so that it might continue addressing manufacturing schedules.
Bornstein, S., 2017. Reckless Discrimination. Cal. L. Rev., 105, p.1055.
Brown, A.H., 2016. Recklessness: A Billion DollarOLLAR Question. Loy. Mar. LJ, 15, pp.279-375.
Buell, S.W., 2017. The Responsibility Gap in Corporate Crime.
Chen, A.L.M., 2016. Is It Any of Our Business? Canadian Perspectives on Transnational Corporate Accountability (Doctoral dissertation, Université d'Ottawa/University of Ottawa).
Crosby, C., 2014. Subjectivism and Objectivism in the Criminal Law: an examination of the limits of recklessness and negligence.
Gilchrist, G.M., 2017. Individual Accountability for Corporate Crime.
Heminway, J.M., 2016. (Not) Holding Firms Criminally Responsible for the Reckless Insider Trading of Their Employees.
Jacobus, D., 2016. Corporate criminal liability: is it time to say goodbye to vicarious liabity and hello to corporate ethos?(Doctoral dissertation, University of Johannesburg).
Jo, H. and Harjoto, M., 2014. Analyst coverage, corporate social responsibility, and firm risk. Business Ethics: A European Review, 23(3), pp.272-292.
Liau, T., 2014. Is Criminalising Directorial Negligence a Good Idea?. Journal of Corporate Law Studies, 14(1), pp.175-209.
Lin-Hi, N. and Müller, K., 2013. The CSR bottom line: Preventing corporate social irresponsibility. Journal of Business Research, 66(10), pp.1928-1936.
Mentovich, A. and Cerf, M., 2014. A psychological perspective on punishing corporate entities. In Regulating Corporate Criminal Liability (pp. 33-45). Springer International Publishing.
Paolini, A., 2017. Corporate and Insurance Law. In The Dieselgate (pp. 121-143). Springer International Publishing.
Rubenstahl, M. and Brauns, C., 2015. Trial and Error-A Critique of the New German Draft Code for a Genuine Corporate Criminal Liability. German LJ, 16, p.871.
Siegel, J.E., 2014. Admit It-Corporate Admissions of Wrongdoing in SEC Settlements: Evaluating Collateral Estoppel Effects. Geo. LJ, 103, p.433.
Slapper, G., 2017. Corporate Homicide, Corporate Social Responsibility, and Human Rights. The Handbook? of Homicide, p.213.
Solaiman, S.M. and Langsted, L.B., 2017, March. Crimes Committed by Directors Attributed to Corporations–Why Should Directors be Accessory?: Viewing through the Complicity Rules in Common Law. In Criminal Law Forum(Vol. 28, No. 1, pp. 129-161). Springer Netherlands.
Tombs, S. and Whyte, D., 2015. The corporate criminal: Why corporations must be abolished. Routledge.
Tombs, S., 2017. The UK’s corporate killing law: Un/fit for purpose?. Criminology & Criminal Justice, p.1748895817725559.
Witting, C. and Rankin, J., 2014. Tortious liability of corporate groups: from control to coordination.
To export a reference to this article please select a referencing stye below:
My Assignment Help. (2021). Effects Of Corporate Recklessness And Negligence On Shareholders And Employees: Case Study Of Caterpillar Inc Essay.. Retrieved from https://myassignmenthelp.com/free-samples/mod003353-business-environment/corporate-recklessness-and-negligence.html.
"Effects Of Corporate Recklessness And Negligence On Shareholders And Employees: Case Study Of Caterpillar Inc Essay.." My Assignment Help, 2021, https://myassignmenthelp.com/free-samples/mod003353-business-environment/corporate-recklessness-and-negligence.html.
My Assignment Help (2021) Effects Of Corporate Recklessness And Negligence On Shareholders And Employees: Case Study Of Caterpillar Inc Essay. [Online]. Available from: https://myassignmenthelp.com/free-samples/mod003353-business-environment/corporate-recklessness-and-negligence.html
[Accessed 28 February 2024].
My Assignment Help. 'Effects Of Corporate Recklessness And Negligence On Shareholders And Employees: Case Study Of Caterpillar Inc Essay.' (My Assignment Help, 2021) <https://myassignmenthelp.com/free-samples/mod003353-business-environment/corporate-recklessness-and-negligence.html> accessed 28 February 2024.
My Assignment Help. Effects Of Corporate Recklessness And Negligence On Shareholders And Employees: Case Study Of Caterpillar Inc Essay. [Internet]. My Assignment Help. 2021 [cited 28 February 2024]. Available from: https://myassignmenthelp.com/free-samples/mod003353-business-environment/corporate-recklessness-and-negligence.html.