The key characteristics of board members I would consider including commitment to the mission or goal of the customer and the organization, objective and independent judgment, legal compliance, courage, directness, honesty, integrity and understanding of values, vision, and the long term goals.  In our company, we have in-house compliance officer and manager (required by  law) with government inspection to ensure all orders and papers are following the regulations. Also, advisors would interview and review their customers’ investment plans annually. In order to renew license, every two years financial advisor needs to study and complete 24 credits in financial policy, management, and products training.  For those large investment funds, I think companies should hire outside independent consultants to examine the whole investment plan and ensure each one follows its investment objective and goal. Increasing legal compliance, training and education, and product knowledge, all these will benefit both consumers and the investment industry.

Increasing in regulations and laws of credit rating agencies not only enhance and help managing, organizing, monitoring, and restraining the industry, but also demand and ask for self-controlling or disciplining, accountability, and liability. Gitman (2009) analyzes and argues the new legislation “gives the SEC (The U.S. Securities and Exchange Commission) the tools necessary to hold recognized rating agencies accountable if they fail to produce credible and reliable ratings” (p. 296). The SEC needs new and updated laws to back up and support prior to take any permissible or lawful actions. The results of all these have on the market share or stake of the largest rating agencies are reducing their dealings and businesses. Shecter (2008) claims, “the CFA Institute says more than 10% of investment professionals who responded to a recent poll said they have witnessed a credit rating agency change a rating in response to pressure from an investor, issuer or underwriter” (p.1). If they reported these cases to SEC, and stopped it right away, especially in the matters of subprime investment rating, will this financial crisis come up? How many retiree or investors lost their life savings or hard-earned investment because of the  conflict of interest in the industry? How do we manage the issue and keep high criterion and professionalism?

     The question: How will this legislation affect the process of finding ratings information for investors? As examining risk and return study in the financial markets bases on getting accurate and well-timed data or information. The increasing competition in the marketplaces with advancing of information technology (IT) and globalization, plus stepping up inspection or investigation from the authorities with redesign or build up organizational structure, business ethics, and culture, all these would improve the merit or quality of the ratings data for investors (Gitman). The payment system which offers to the credit rating agencies from institutions or financial companies that creates problems of conflict of interest, and it needs to redefine or restructure (e.g., must disclosure and open to the public). At the same time, in order to keep high standard, and up-to-date information and business knowledge or business ethics, all professionals in financial industry must pass their trade examinations or must register and keep accountability and liability. They must take update courses (or credits of retraining or reeducation) every two years before renew their licenses—as a financial advisor in Ontario, we have the most tough licensing system in the industry, this is one of the reasons why Canada has fewer banking problems in this crisis among the Group of Seven (G7) industrialized nations.

References    

Gitman, L. (2009). Principles of managerial finance (12th edition). Boston, MA: Prentice-Hall

Shecter, B. (2008, July 7). Credit rating problems real: CFA poll. Financial post. RetrievedFebruary 19, 2009, from http://network.nationalpost.com/np/blogs/fpposted/archive...

       Although the objective of the firm is to maximize the wealth and values of its shareholders, including the owners, employees, suppliers, and communities, at the same time, its managers must apply moral management, and practice business ethics or the standards of conduct and ethical judgment.  Gitman (2009) argues “violations of these standards in finance involve a variety of actions: [creative accounting,] earnings management, misleading financial forecasts, insider trading, fraud, excessive executive compensation, options backdating, bribery, and kickbacks” (p.18). In the cases of Tyco, Fannie Mae, and Enron, or AIG and the major banks in the Wall Street, or in London in recent financial crisis, their common issues were largely because of poor or immoral management that many of their goals were to “hit the numbers.”  

     The executives liable for the near crash of Royal Bank of Scotland Group PLC (RBS) and HBOS PLC last Tuesday apologized for their deficient and inferior management in this financial disaster that needed taxpayers and government bailout in history (Deen and Hutton, 2009). When questioned why they were considering paying bonuses to employee for 2008 with public money, Tom McKillop, RBS’s former chairman argues, “the U.K. banking industry had [a lot of angst] about the pay culture, which he said was imported from the Wall Street in the U.S.” (Deen & Hutton, p.1).  For RBS’s $93 billion purchase of ABN Amro Holding NV, a Dutch bank, in 2007 of the subprime crisis, it was a totally bad decision and too much “hitting the numbers.” The most brilliant people and banking specialist with the highest pay in the financial industry seem little help or less bearing in this crisis that at the end needs the general public to rescue. Instead of “hitting the numbers,” managers should consider keeping the quality, improving the cost effective and efficient, or advancing customer service and management excellence as their main objectives and goals of the organizations.

References

Cornett, B. (2007). Subprime mortgage crisis explained. Retrieved

       February 13, 2009, from http://www.homebuying institute.com/homebuyingtips

       /2007/12

Deen, M. & Hutton, R. (2009). U.K. bank executives apologize for credit crisis.


       RetrievedFebruary 13, 2009, from http://www.bloomberg.com/apps/news

Gitman, L. (2009). Principles of managerial finance (12th edition). Boston, MA:
       Prentice-Hall.  

     In my study of Japanese domestic company, the organizational structure of Japanese business has its own set of belief and value system that has a different approach compared with Western structure. Under the Confucianism (that follow the idea and inspiration of Confucius, the Chinese philosopher and teacher from 551- 479 BC), the top leader, owner, or manager of an organization has a duty, or owes a certain degree of protection to the workers (OSB, 2008). In tradition, the management (or the master) has an obligation or responsibility to take care the welfare of his employees --like a team and not based on the notion of individualism. They may question or doubt their leadership skills or initial business planning, and believe the value of each individual and networking. In response, the employees are very loyal to the firm, in some cases; they would like to help out and work longer hours, or accept transfer to other undesirable branches or cities. "Hitting the numbers" may not always benefit the objectives of an organization.

Reference

Organization structure of business (OSB). (2009). Retrieved February 14, 2009

 From http://iml.jou.ufl.edu/project/Spring01/Newsome/structure.html

      The issues of subprime loans and tightening lending criterions that not only have great effects (with harsh and strict rules) on new mortgages, lending or credit applications, refinances, and first time home buyers on the housing market, but also have major consequences on the values of existing home market, economy, employment, import and export markets, and social, political, or business developments. Gitman (2009) analyzes, subprime mortgages and loans “climbed from near 0 % in 1997 to about 20% of mortgage originations in 2006 (with some $300 billion worth of adjustable rate mortgage or ARM)… [And] the mortgage banker group reported in March 2007 that 13% of all subprime loans were in delinquency, more than 5 times the delinquency rate for home loans to borrowers with the best credit ratings” (p. 197).  What and where were the financial regulators, supervisory bodies, or government administrations or watchdogs doing during these years?  Where is the leadership or managerial finance? Do we need another new financial regulation or act?

      Hagerty (2009) analyzes and examines that according to Zillow.com (an online real estate data and research site) “more Americans are moving from denial to acceptance… [And] it found in a recent survey (taken by Harris Interactive between Jan. 6 and 8 and involved 2,271 adults, of whom 1,573 were homeowners, in which) 57% of participants believe their homes lost value during the past year. That was up from just 38% in a similar survey during last year’s second quarter (p.1).  As a matter of fact, the average prices of homes and buildings in all major cities (including London, Toronto, Shanghai, Hong Kong and Tokyo) are declining promptly. On the other hand, based on the market of supply and demand, good credit investors or home buyers with enough savings or cashes, nowadays, have more selections and bargaining power to buy their properties in this sluggish housing market condition.

References

Gitman, L. (2009). Principles of managerial finance (12th edition). Boston, MA: Prentice-Hall.

Hagerty, J. (2009, February, 13). Zillow report shows homeowners facing reality, sort of.  The Wall Street Journal online. Retrieved February 13, 2009, from http://blogs.wsj.com/developments/

http://blogs.wsj.com/developments------------especially Lawler Economic & Housing Consulting, LLC.  It is the best time to buy some good homes or locations in the US.

Financial advisors often say: buy low, and sell high. Now, investors or firms with no debt and good credit rating or a handful of cash can buy a lot of good investment properties in good locations (with more selections and competitive prices) in this low economic time.  Mortgage brokers love to offer them the loans with rock bottom interest rates just like those new car dealers--this is why in most situations, rich is rich, and debt is debt. However, many people consider debt as an alternate of equity.

    For the question:  Is debt a substitute of equity? Mehar (2005) analyzes and examines  through Global 500 firms and claims that " debt and equity are not alternative sources of finance...leverage ratio of a company depends on its operational and financial activities including sales, profits, inventories and working capital... The combination of debt and equity may vary from industry to industry... [and] debt cannot be applied as a substitute of equity" (p.1).  In order to advance in optimal allocation of financial resources, the whole approach of our financial guidelines or culture needs to alter, vary or redesign (Mehar, 2005). 

Reference

Mehar, A. (2005, March, 1).  Is debt a substitute of equity? Relevancy of financial

     policy in current economic scenarios. Applied financial economics, 15(5),337.

     Retrieved January 07, 2009 from ProQuest Database.

     A chief financial officer (CFO) not only concerns about market, products or competitors, costs of production, financial and banking system, accounting standards, trade agreement or restrictions, employment and tax laws or regulations, currency exchange rates, and government trading policy, but also deals with language barriers, social, cultural, and political issues with different values and beliefs when a company expands into the international markets (Gitman, 2009).  

     For instance, Procter & Gamble (P&G) which is incorporated in 1890 and is located in Cincinnati, Ohio—it is the world’s number one producer and marketer of household products with many billion-dollar brands (e.g., Tide, Gillette, Pampers, Head & Shoulders, Olay, Wella, or Duracell). As it expands into the international markets, the major objectives of its CFO and the organization are: “a) Interface with customers to ensure that marketing plans fully capitalize on local understanding, to seek synergy across programs to leverage corporate scale, and to develop strong programs that change the game in…favor at point-of-purchase; b) provide services and solutions that enable the company to operate efficiently around the world, collaborate effectively with business partners, and help employees become more productive; and c) Ensure that the functional capability integrated into the rest of the company remains on the cutting edge of the industry” (P&G, p.1). All these match the aim and motto of the company: “Think globally and act locally” (P&G, p.1).  In all, increasing the cost efficient and effective, and the values of its stakeholders, and improving the market shares, customer services, and the management and financial excellence are the concerns or apprehensions of a CFO might face as a firm expands into the international markets.

References

Gitman, L. (2009). Principles of managerial finance (12th edition). Boston, MA: 


       Pearson Prentice Hall

P & G. (2009). Corporate info: Structure. Retrieved January 07, 2009, from

       http://www.pg.com/jobs/corporate_structure/four_pillars.shtml

  The benefits of a firm having no long term debt (over one year loans, bonds, or notes) mean no loan or interest payment out (free of worry) at all with healthy growth, less costs of production and more net profit or income (Investopedia, 2009). You may say it is an old approach to do business with limited capital, market, tax credit, or investment (negative aspects), but they do take their responsibilities seriously with more creative marketing plans (e.g., Netflix, Inc.) when compared to those heavy debtors (or financial leverage) with poor management of Wall Street corporations that totally failed (and need the public and tax payers to help them out) in this mess financial crisis that turned into a worldwide recession. Fortunately, we have largest percentage of small to medium companies with less depending on long term debts that support our basic economy that keep many people employing.  Financial leverage is a good idea and reason to borrow (and becomes a culture of credit or borrowing—we have huge long term or national debt), which creates both risk and return (Gitman, 2009).  However, if companies do not take their responsibilities in finance or management, and business ethics, and evaluate, measure, or redesign their financial leverage strategies constantly, the public may suffer more at the end—e.g., how many people lost their jobs or incomes and how many families suffered because of their misstep or faults. The concept of financial leverage or credit has a price to pay; companies and management must take their responsibilities genuinely.

References

Gitman, L. (2009). Principles of managerial finance (12th edition). Boston, MA:  Pearson Prentice Hall

 Investopedia. (2009).  Long-term debt. Retrieved January 07, 2009, from

       http://www.investopedia.com/terms/I/longtermdebt.asp

I have the same type of free charge credit card with dividend about 1% yearly also, and I pay every statement on time, so I don't have to pay interest. In fact when I travel, I ensure to buy all my air tickets or transportation with my credit card and I get free travel and medical insurance protections (some good gold cards give your over 2 million dollars maximum medical protection (with special airplane return if needed), with less than $200 yearly fee for 27 days overseas travel or over, but you may allow to go back the same card when you return home. I love and enjoy the system so much but you must keep yourself in the best credit rating and should not even have more than one speeding ticket within certain months or years. On the other hand, credit card companies would like to serve good credit rating customers because the more they shop and use, the card companies get more percentage or service charges or commissions from retailers and so increase their returns or number of accounts. At last, their companies' stock prices go up, and they can sell the whole credit card accounts or divisions to new investors--this is why they keep sending new cards out and spending  lots of advertising in different channels to reach mass populations as much as possible. Credit card companies ' major marketing strategy is: Sales is just a numbers game.