The Overriding Objectives of a Business Listed on the London Stock Exchange - Essay Example

'The overriding objectives of a business listed on the London Stock Exchange' The London Stock Exchange or LSE is an exchange of stock. It is locatedin London, England, United Kingdom. It was founded in 1801. London stock Exchange is on of the largest Exchange in the world. LSE is the part of Stock Exchange Group plc. Before the London stock Exchange the markets were incomplete due to incomplete state. London Stock Exchange had low brokerage fees. The reason of low fees is to maintain the desired world preeminence as a financial market, with lots of competing broker. Still the transaction costs are positive as they are in previous. The London Stock Exchange generates the Annual general meeting (AGM) reports in the Guildhall. One can see the cross check column "Today's Arrangements." In previous the British company's management would propose a dividend about 2 weeks before the AGM and the resultant dividend would publish in the Times. Management that "proposed" the dividend usually approved with the help of vote at the AGM. It is matter to decide that which market is better for trade especially the impact of other market is depend on London Stock Exchange. In market means the instrument. So we can have to know for every up and down in shares or one may has know about the rates of oil markets. For these sense the markets have too much personalities. If one decide to start business of share which has volatile personality, so 500 can be turn into profit or loss very quickly. Another importance part of London Stock Exchange is its strategy. Strategy means that one have to know the tricks to enter and exit from the London Stock Exchange. But there is not any strategy that is a winning strategy. Some people are in that position that they are constant for the "Holy Grail". Most of them hope that this will make them the millions. Most of the highly successful traders who make consistent profits in the markets and all traders in London Stock Exchange have different strategies. So everyone is not successful in this race of making milliner. There is also possibility of losing all hard earned money of ones life time. If we critically analyze on the London Stock Exchange and its data used init. There is a report published that revealed that the average ratio between highest paid director salary and bonus and average employee pa in the same company grew by 4 per cent between 1994-5 and 1995-6. This takes no account of share option or L-tips which can inflate remuneration considerably. It is the considerable thing for stakeholder model of corporate governance, the comment that the way to build a long term success is depend on investing in long-term relationships with stakeholders based on mutual respect and trust. It is duties of directors that have responsibility to shareholders. It is also the duties of directors' to reflect their obligations to other stakeholder group, including employees, suppliers, customers and shareholders. Director is responsible for taking decision for considering the stakeholder interests. The committees related to London Stock Exchange like Cadbury and the Greenbury put considerable emphasis on the role of non-executive directors (NEDs) in bringing independent judgment to bear the board of company. The NDEs are themselves drawn from very narrow pool many of the chief executives with similar backgrounds and interests. They decided that the nominations should be sought from stakeholder representatives; it can be including trade unions, national federation small business and environmental organizations. In London Stock Exchange listing Rule on confidentiality obligations on mergers. This takeover should be exchange so that it does not conflict with the legal obligation of companies to consult with employee representatives over proposed redundancies. Modern corporate finance has focused on tax, regulation, asymmetric information, and behavioral explanations to illustrate why and how dividend payments affect a firm's value. Whereas theory has produced clear channels by which dividend policy affect a firm's value, in practice it is difficult to disentangle the relative importance of each explanation. For instance, the stock price increase after an announcement of an increased dividend is consistent with both the theory of dividend clienteles, which comes from regulation theories, and with investors' reaction to the provision of new information, which comes from asymmetric information theories. In contemporary U.S. markets dividends have been rapidly overtaken by stock repurchases as a means of returning wealth to shareholders Stakeholder theory (Hutton) According to Hutton theory that the "narrative report covering main factors underlying the company's performance and financial provisions". This means that this economy is global and will steadily increase the globalization of business. The basic concept issue of the corporate governance is whether corporate directors should view themselves as solely stewards of their investor's capital so that maximizing the shareholder value. So they should concentrate on protecting interests and developing knowledge and skills for their employees. So if there is a group of people involve in the shareholder then there should be all get benefit. But it can not possible. If there is profit for one side then other have a loss, due to the values of share up and down by time to time. Elaine Sternberg As Elian Sternberg has remarked in her book just business By choosing whether or not, and to what extent, to support particular businesses with their investment or custom or labor, everyone can contribute to the economic conditions that critically affect business decisions. If, therefore, individuals have views as to how business should be conducted, they should ensure that their individual choices accurately reflect those views. If they find the product or the manufacturing process objectionable, or consider the service or the advertising offensive, or judge the declared values of the board or the management to be misguided, then it is up to them not to support the firm. When each potential stakeholder - otherwise known as every member of society - acts conscientiously in his personal capacity, and strategically bestows or withholds his economic support on the basis of his moral values, then the operation of market forces will automatically lead businesses to reflect those values. That might means if you fully know it was selling harmful product and you refuse to work for certain business. It might straightly means refusing to hold shares in a multinational company if you refuse its decision or if you know that it's marketing techniques to be dishonest. Copeland et al Copeland gives two theories of the financial mangers, for instance" value maximization is subject to the constraints of the legitimate claims of the different stakeholders" this means that when the companies increase or rose up the value of shareholder wealth then all the stakeholders get benefit. The second is to "maximize the value of organization". There is a concept that if the value of a company increases the value of share holders also increases. Ellsworth According to Ellsworth only those benefits that represent real additional value to customers and for ensuring that the benefits can be claimed at any time and without any additional effort by the customer. Seven categories of frustration incidents that affect the business like protest or avoidance could be identified. With four categories of incidents - inaccessibility, worthlessness, qualification barrier and redemption costs. For the other three - discrimination, economization and defocusing - frustration sensation and behavior also affect the perception of the relationship with the business of firm. So if there is a benefit there will be a business. More and more companies are implementing loyalty programs in order to enhance their knowledge of their customers, to identify the valuable customers, to differentiate and give personal attention to these valuable customers and especially to raise profits by increasing customer retention and by a more efficient use of marketing tools. Michael Skapinker (Financial Times) In fact, he said, shareholders took little risk. If they were unhappy with the company's management, they could sell their shares. The real risk-takers were company employees, he said. For dissatisfied employees, moving jobs was much harder. It was also more difficult for companies to recruit talented and committed workers than it was to find investors. "In every substantive sense, employees of a company carry more risks than do the shareholders," All employees should have the full right to meet their employer for discussion on different issues that may affect their interests, including mergers and takeovers, investment and disinvestment decisions and issue that are related to employment and its conditions, because all employees have risk of their business instead of employers. Ian Davis (head of McKinsey) Nothing should ever constrain shareholder wealth maximization; corporations should be managed solely to benefit non- shareholder stakeholders. Rational people do not advocate the position that corporations have an obligation to do anything that would increase shareholder wealth. Four particularly important conclusions derive from this approach. First, managers cannot satisfy their primary duties to shareholders if they fail to consider adequately the influence of morality within the markets affecting their firms. Second, managers should deviate from maximizing shareholder welfare when demonstrable, objective evidence exists that marketplace morality requires such Deviation; or manifest universal ethical norms require such a departure. Third, managers may deviate from maximizing shareholder welfare when demonstrable, objective evidence exists that marketplace morality allows such deviation. Fourth, legal rules should generally not interfere with the liberty of market participants to act on the basis of their moral desires. Instead, public policy and legal frameworks should generally support a marketplace of morality. Managerial approaches agency theory Agency theory is directed at the agency relationship, in which one party (the principal) allots work to another (the agent), who performs that work. Agency theory is concerned with resolving two problems that can occur in agency relationships. The first is the agency problem that arises when (a) The desires or goals of the principal and agent conflict (b) It is difficult or expensive for the principle to verify what the agent is actually doing. The problem here is that the principal cannot verify that the agent has behaved appropriately. The second is the problem of risk sharing that arises when the principal and agent have different attitudes towards risk. The problem here is that the principle and the agent may prefer different actions because of the different risk preferences. Agency theory has been successfully used by different researchers to explain relationships between two parties seeking a common outcome. The companies expand a model of testable propositions for applying agency theory to the relationship between implementation consultants and client organizations deploying the Enterprise Resource Planning systems, and to accordingly assess how the relationship affects the implementation success. Conclusion The London stock exchange is one of the biggest exchange from which many companies are associated. To come into the business as a shareholder one should keep in mind that are ups and downs in the stock market from every time. Different theories are made for help to understand the strategies of business and its related tricks. But it is very hard that if there is a group of people involve in a business then all get benefit to it. So, people must keep in mind that if there is profit then there is loss due to rapid changing in stock market's shares. Read More