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Principles of Finance: Unit 1, Some Illustrative Examples of Ethical/Fiduciary Conflicts 14 Views


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Hey, Shmoop - how about some examples of business ethics and fiduciary conflicts? Your wish is our command. Hint: you work for the shareholders. So, uh... you should probably try to make them happy.

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Transcript

00:00

Principles of finance ah la shmoop up some illustrative examples

00:05

of ethical and fiduciary conflicts Okay let's take a look

00:09

at a few examples in the world of business ethics

00:12

and fiduciary conflicts The're the cfo one sunday in the

00:21

middle of his back swing on the seventh hole your

00:23

c e o is struck by lightning Shocking He flies

00:28

over the sand trap and lands in the lake When

00:30

he emerges he can only say huh He believes he

00:34

has been saved and he instructs you to be certain

00:38

your company only buys product from devout christians suppliers Those

00:43

supplies cost twenty percent more than supplies you could buy

00:46

from heathens Should you buy with jesus Answer no your

00:51

company sells telephone handsets Jesus may or may not be

00:54

involved but you could inform your shareholders that god would

00:57

want ah higher profit margin business And yes there will

01:00

be times you will conflict with your ceo And if

01:03

you do remember the hierarchy shareholders elect the board of

01:07

directors the board of directors hires the ceo and while

01:11

the ceo pretty much hires everyone else including you the

01:14

cfo who then hires inside of your vertical of finance

01:18

iaea treasurer a controller a bookkeeper and so on and

01:22

eventually range for the hiring of your own auditors who

01:24

confirmed to the government that the profits you say you've

01:27

achieved are in fact the real profits you've actually achieved

01:30

well hopefully you have the relationship with the people above

01:33

to talk things out If there's ever a conflict if

01:35

you don't well you know sea glassdoor Dot com Cos

01:42

often want to be charitable They like to donate money

01:46

to the causes of senior management Good idea bad idea

01:50

Well answer usually bad idea management represents shareholders and in

01:55

a public company while they're often millions of shareholders how

02:00

can a handful of charities represent the wishes of millions

02:04

Shouldn't the decision be put back to them that the

02:06

company has simple much extra cash that it's looking at

02:10

donations to make Well why not have it pay a

02:12

special dividend and just give the cash back to the

02:15

people who own the company I e the shareholders When

02:18

did management become experts and charitable giving And isn't it

02:22

often the eagle of the ceo who likes being stroked

02:25

by the charity's she's funding Maybe the gifts are sincere

02:29

but why is it her job to decide where her

02:31

millions of shareholders excess cash profits should go And yes

02:35

there are times that charities are a good idea and

02:38

yes of course hearts are often in the right place

02:41

in making donations to good causes But that's not the

02:44

question Here the question revolves around whose right it is

02:48

to make those donations all right Your nostril trimmers retail

02:56

on amazon for twenty bucks Amazon keeps eight dollars and

02:59

you the manufacturer keep twelve That twelve dollars is your

03:03

wholesale price Your trimmers are made by highly unionized workers

03:07

in chicago and they cost you ten dollars each to

03:10

make If you moved manufacturing to beijing well you could

03:15

make them for seven dollars instead of ten Should you

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move well if you're only looking at profits Yeah it's

03:21

ah highly politically charged issue american workers Losing jobs is

03:25

not something any politician wants to talk about and soon

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robots will be replacing human We're hearing well that'll be

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a big deal to should you consider loss of american

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jobs when you think about suppliers Not if you're working

03:39

for shareholders with an unbiased shareholder wealth maximising at on

03:43

and you should know where that maximizing hada lot because 00:03:47.196 --> [endTime] that thing is really stylish

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