Category: Wealth

Decision-Making in Finance

Successful decision making in finance requires a deep understanding of the company’s objectives. Managers often apply to a variety of strategies that can ensure successful performance and problem solving within an organization. The most common objective of the firm is to increase the value of the firm’s stock and contribute to the wealth of the owners.

In order words, the firm managers work for enhancing shareholder wealth, which is introduced by the market price of a company’s common stock. In the majority of cases wealth maximization of shareholders and owners is a long-term objective and it states that “…management should seek to maximize the present value of the expected future returns to the owners of the firm” (Moyer et al. 2008, p. 5).

Certainly, firms must also consider other important objectives of an organization, including organizational culture improvement, analysis of retention policies, total quality management, change management, and many other fields. More importantly, managers should also be interested in the welfare of the community in particular and society in general due to the ongoing process of globalization.

Despite possible shortcomings of the established priorities, shareholder or owner wealth maximization should be at the core of management objectives. At the same time, attention should be given to constraints and ethical concerns of increasing stock price and, therefore, managers should find optimal balance while accomplishing the primary goal of financial management.

Advantages and Disadvantages of Shareholder Wealth Maximization

Putting the shareholder wealth maximization at the core of the company’ values and goals creates a number of benefits. To begin with, the goal explicitly analyzes timing and possible risks of the expected benefits produced by stock ownership. Managers must also consider the components of timing and risk management while making significant financial decisions, including capital expenditures (Moyer et al. 2008).

In such a manner, firms can solve problems that can improve shareholder wealth. Further, it is possible to define whether a certain financial decision correlates with the company’s objective.

In case a decision contributes to the augmentation of the market price of the company’s stock, than it can also provide substantial benefits to the welfare of the company’s owners and shareholders. However, in case the action does not meet the established purposes, it should not be implemented.

Because increase in shareholder wealth is an impersonal goal, it can also be considered as a considerable advantage for the firm. Shareholders and owners who disagree with the firm’s policies are eligible to sell their stocks under more beneficial terms as composed to the opportunities under the company’s strategy.

In case an investor has risk preference that is not adjusted by financing, or does not conform to the firm’s decisions, the investor can sell his/her shares at higher price and buy shares in the companies that are able to meet the investor’s requirements (Moyer et al. 2008). Hence, the company should introduce effective strategies and policies that would attract investors and would make them encourage company’s goals at the same time.

With regard to the above objectives, shareholders wealth maximization can be justified as the primary goal in financial management. Nevertheless, social corporate responsibility in business can become the major obstacle for achieving the established goal.

The point is that success of accomplishment of other objectives, as well as the challenges caused by agency relations, may lead to deviations from the firm’s primary objectives. Despite this fact, the shareholders’ wealth maximization objective creates certain patterns and paradigms against which decisions can be considered and, as a result, this objective is accepted in financial management analysis.

Narrow-focused adherence to the maximization of welfare of shareholders and owners is strongly associated with unconstrained shareholder wealth maximization, which, in fact, can result in serious shortcoming for the company. In this respect, Santos et al. (2007) introduce a detailed overview of the constraints that the firm can meet while achieving the shareholder wealth maximization.

The researchers explain that the concern exists because of insufficient data represented on the topic. Therefore, based on agency theory, Santos et al (2007) have proposed their model of increasing the welfare of stakeholders that should rely on a constraint. In other words, much concern should be connected to meeting the goals of all stakeholders involved into business activities of the firm.

In particular, the maximization objectives “…suggest that shareholder wealth maximization should not be achieved at the expense of stakeholders such as employees, environment, local community, creditors, and similar entities” (Santos et al. 2007, p. 110). In such a manner, the presented approach to finance management indirectly influences the ethical standards, as well as social responsibilities in the company.

Realization of constraints of shareholder wealth maximization can significantly enhance ethical curriculum and, therefore, the shortcomings of the objectives should be outlined as well. In this respect, owner’s welfare does not provide distinct relationship between stock price and financial decisions.

The second disadvantage of wealth increase can become a reason for management frustration and anxiety. Such an occurrence can emergence when managers are more concerned with short-term goals of a firm. Therefore, they can often confuse shareholder wealth maximization with the increase in company’s profits.

Therefore, specific attention should be given to the distinctions between these two goals (Shim and Siegel 2008). Hence, profit maximization can constitute a part of owner wealth advancement, but it cannot be considered a priority for the managerial staff.

It is an accepted fact that increase in shareholders’ wealth is prescribed as a relevant function for analyzing capital projects. At the same time, the objective does not represent a description of managers’ genuine objectives. In particular, there is a protracted debate in regard to economic objectives of managerial staff who do not possess controlling shares.

As a result, the possibility of emergence of conflicts of interest between managers and shareholders is obvious. According to Grinyer (1986), “…managers should identify and satisfy at least the minimum requirements of important participants in their company if they wish to ensure its survival” (p. 320). Therefore, most of the managers should approach rationally the wealth maximization.

Nonetheless, rational financial managers would try to increase the net cash flows created by a company, with regard to the limitations that reflect risk, as well as financial requirement of the members of an organization. With regard to the above, it is possible to argue that managers will prefer accumulating more cash to fewer amounts.

Their focus, therefore, will be made on effective operational management. Another important constraint of shareholders’ wealth maximization lies in excess attention to the financial issues which can lead to a failure of accomplishing nonfinancial goals of an organization.

Despite the above-highlighted constraints and shortcomings, much evidence reveals that shareholder wealth increase is the prevailing goal for business corporations. In this respect, Fatemi et al. (1983) introduces a model by means of which the researchers have discovered the priority of business organization, in which the first place is given to the goal of increasing the wealth of owners.

As per the secondary goals, emphasis has been placed on sales maximization, earning smoothing, and liquidity goal (Fatemi et al. 1983).

Ethical Standards Reconsidered

In case a company tries to increase its stock price, much concern should be connected with the benefits it can provide for society. In most of cases, shareholder wealth maximization is generally good, apart from the possibility of illegal actions, such as “…attempting to form monopolies, violating safety codes, and failing to meet pollution control requirements” (Besley and Brigman 2011, p. 168).

Other than that contributes greatly to the welfare of society as well. To achieve this purpose efficiently, stock price maximization must involve efficient plants that manufacture products and services of high quality and at an acceptable price. Further, stock price increase requires product development to meet the customers’ needs.

More importantly, it should also encourage introduction of profit through innovation, namely new technology and new products. Employment sphere should also be managed properly and, therefore, the task of the managers is to ensure competitive salaries. Finally, increase in shareholders’ wealth requires courteous and efficient services, well-situation business establishments and optimal stocks of merchandize.

All the above-mentioned factors are indispensible to maintaining a customer base necessary for producing sales and, therefore, revenues. In addition, in order to sustain a competitive advantage, business activities of an organization must be presented in congruence with all stakeholders, including owners, customers, employees, the government, local residents, and the environment.

Consequently, most activities contributing to stock price maximization are beneficial to society as well. In this respect, free enterprise, profit-motivated economics have produced significant results as compared to communistic and socialistic business systems. Due to the fact that managerial finance is incredibly important in operating firms successfully, which is necessary for a productive and healthy economy, finance is of great importance from social perspective.

While considering the role of shareholder wealth maximization in shaping social welfare, much emphasis should be placed on ethics and morality of financial management. Therefore, it is necessary to define the objective of increasing shareholder wealth from the viewpoint of moral justification for business behavior.

To uncover the ethical perspectives, Dobson (1999) introduces the essential aspects of corporate culture through which it is possible to analyze the morality of shareholder wealth maximization. Specifically, the researcher believes that making decisions premised on stock price increase is morally neutral and that augmentation of shareholders’ wealth could not be regarded as a strictly immoral action.

Within this context, decision making is considered “…a particular moral stance open to moral evaluation” (Dobson 1999, p. 69). In this respect, a financial manager who makes decisions for maximizing stock prices is morally neutral. However, this assumption is popular mostly among financial examinations and is explained by moral self-examination.

As a result, such a narrow-focused method creates a number of limitations to objective evaluation. In this respect, Dobson (1999) argues, “the acceptance and implementation of shareholder wealth maximization as the ultimate goal entails the acceptance and implementation of several layers of philosophical context” (p. 71).

First of all, it implies accepting a specific interpretation of utilitarian theory, in which value is presented as the greatest good and moral decisions within which company can rely solely on the outcomes of those decisions. Consequently, to prefer shareholder wealth maximization is to shape a specific moral environment in a broader context of moral and ethical philosophy.

Utilitarian theory, therefore, produces only one context within a broader one. As an approval of a business behavior, shareholder wealth maximization is justified by business ethicists whose criticism is premised on the fact that “shareholder wealth maximization places preeminent emphasis on the interests of shareholders” (p. 71).

Therefore, though the term shareholder wealth maximization often implies a materialistic interest, it, in fact, emphasizes the importance equity market value discovered through the company’s stock price.

With regard to the above-presented considerations, the concept of shareholder wealth maximization implies that “a finance professional, rather than having to reconcile diverse moral perspectives, can rely on the market mechanism to translate moral concerns into economic signals” (Dobson 1999, p. 74). In other words, the morality of the objective does not depend on the objective itself, but on the personal intentions of the executive agents.

The objectivity of the firm’s intention to maximize the wealth of owners and shareholders is still undermined by the existing standards of ethical behavior. As a result, the action can hardly be defined a priority for maintaining company’s welfare and reputation.

According Chambers and Lacey (1996), “a corporation that embraces SWM does not establish a moral and ethical position but rather merely acts as a conduit for the ethical beliefs and desires of market participants” (p. 93). What is more important is that market price can also reveal ethics, along with other values of a company, including cash flows.

Hence, a corporation that seeks to increase the wealth of its owners and shareholders makes the company’s stocks more attractive for investors. In case investors consider ethical behavior and social corporate responsibility a priority, they will unlikely to finance firm and, as a result, stock prices can become considerably lower. So, an ethical firm have much more possibilities to sustain a competitive environment as compared to unethical firms that care only about profit maximization.

Consideration of social corporate responsibility has a potent impact on deciding whether shareholder wealth maximization is a paramount goal for a business firm. There is also evidence proving positive reaction of world’s market on the company’s announcement of corporate social responsibilities, which means it can also positively influence the company’s profit increases, as well as augmentation of shareholders’ wealth.

According to the research studies, “…firms that experience a positive market reaction are larger, with lower leverage and have a higher level of employee productivity” (Clacher & Hagendorff 2012, p. 265). Because social corporate responsibility promotes ethical behavior and moral orientation of the firm, it is purposeful to state that profit increase can also be a motivating factor for shaping the company’s values. Well-established relationships between stakeholders provide an optimal balance for increasing profits and wealth of the company’s owners.

In a crisis context, shareholder wealth increase may lead to certain behaviors and decisions that contradict duties, such beneficence, reparation and non-maleficence. In this respect, Alpaslan (2009) contrasts shareholder wealth maximization model, which considers social responsibility and ethical concerns a constraint, with corporate governance model, which considers ethical concerns to be an important objective.

In this respect, the researcher stands against shareholder value maximization approach and prefers stakeholder model as a more relevant technique of corporate governance. In addition, Alpaslan (2009) that the objective of maximizations is justified and beneficial for the company unless it violate legal and ethical norms.

However, in a context of a crisis situation, managers often resort to elimination of shareholders’ losses, which does not always meet the purpose of shareholder maximization. Nevertheless, this approach is still paramount for the welfare of the firm because it produces greater good for the company, as well as meets ethical concerns more effectively than the model of corporate governance.

To define the benefits of shareholders’ wealth improvements and its importance for an organization, it is purposeful to compare it with other models of corporate governance. The reasons for choosing stakeholder model are predetermined by a number of reasons.

To begin with, the stakeholder model is more congruent with the principle of fair distribution, which underlines the significance of including all stakeholders in managing company.

Further, stakeholder models acknowledges the concept of ‘non-instrumental ethics’ according to which implies that “…when there is a conflict between the shareholder model and ethical customs or moral principles, ethical customs, ethical customs should dominate” (Alpaslan 2009, p. 42). Finally, the stakeholder model has different norms and, therefore, it opposes to the norms of the shareholder model.

The above is an antagonistic view on the ethicality of shareholder value maximization approach to managing a company. At the same time, the moral neutrality is the argument that still supports the necessity to increase wealth of owners, particular on the threshold of globalization and innovation. Most importantly, the objective is much more effective in creating a competitive advantage and attracting investors.

Conclusions

An in-depth analysis of various aspects and perspectives of financial management has revealed that stakeholder wealth increase should be considered as a priority for a business firm due to a number of reasons. From an ethical perspective, ensuring stakeholders’ wealth creates more opportunities for a firm to encourage profit management and introduce a strong competitive advantage.

Second, stakeholder wealth maximization provides a wider picture of how time and risk management can be arranged with regard to stock prices balancing. Third, focus on shareholders’ welfare allows managers to define whether financial decision correlates with the company’s philosophy.

Despite the fact that the goal is premised on meeting personal interest, it can still be regarded as impersonal objective because owners and shareholders’ intentions directly influence the overall organizational performance.

Apart from the benefits of shareholder wealth increase, there are certain constraints and shortcomings that can be met. This is of particular concern to the problem of social responsibility and ethical behavior, which is often neglected. However, this matter cannot be considered critical because financial managers making decisions are morally and ethically neutral.

Moreover, the objective is subject to utilitarian ethical principles, which defines positive consequences as a priority. Overall, the importance of adhering to the proposed scheme does not only provide welfare to the internal environment, but produces values at an external level.

In particular, owners and shareholders will still follow the ethical models of behavior and introduce effective conditions for other stakeholders, including employees, customers, the government, and environment.

Reference List

Alpaslan, CM 2009, ‘Ethical Management of Crises: Shareholder Value Maximisation or Stakeholder Loss Minimisation?’, Journal Of Corporate Citizenship, 36, pp. 41-50

Besley, S., & Brigham, E. F. 2011, Principles of Finance. Cengage Learning, New York.

Chambers, DR., & Lacey, NJ 1996, ‘Corporate Ethics and Shareholder Wealth Maximization’. Financial Practice and Education, 6, 1, pp. 93-96.

Clacher, I, & Hagendorff, J 2012, ‘Do Announcements About Corporate Social Responsibility Create or Destroy Shareholder Wealth? Evidence from the UK’, Journal Of Business Ethics, 106, 3, pp. 253-266

Dobson, J 1999, ‘Is Shareholder Wealth Maximization Immoral?’ Financial Analysts Journal, 55, 5, p. 69.

Fatemi, A, Ang, J, & Chua, J 1983, ‘Evidence supporting shareholder wealth maximization in management controlled firms’, Applied Economics, 15, 1, p. 49

Grinyer, JR 1986, ‘An Alternative to Maximization of Shareholders’ Wealth in Capital Budgeting Decisions’, Accounting & Business Research (Wolters Kluwer UK), 16, 64, pp. 319-326.

Moyer, RC, McGuian, JR, & Kretlow, WJ 2008, Contemporary Financial Management, Cengage Learning, New York.

Santos, M, Vega, G, & Barkoulas, J 2007, ‘An Improved Pedagogy Of Corporate Finance: A Constrained Shareholder Wealth Maximization Goal’, Academy Of Educational Leadership Journal, 11, 3, pp. 107-130.

Shim, JK, & Siegel, JG 2008. Financial Management. Barron’s Educational Series, US.

Executive Summary

Common Wealth Bank of Australia is a leading bank in Australia which also provides financial services in the US, UK, Asia and Far East. The paper tackles organization theory through analyzing the different aspects of the bank. The introduction is an overview on the different perspectives of organization theory that includes somewhat comprehensive definitions of symbolic interpretive, modern and post modern theories.

A brief introduction of the CBA is tackled in section two. An overview of the bank’s services and area of operations are tackled giving way for the actual analysis of the organization.

Modern analysis tackles the problems CBA is facing in terms of environment, social structure, culture and technology. The problem statement summarizes the problems as identified through the modern analysis while suggested solutions and recommendations on what needs to be done conclude the section.

The following section concentrates on the critique of the modern view of the organization through symbolic interpretive perspective. Here the, the paper takes a swipe at the views of modernity as being subjective by asserting that the stakeholders of organizations like CBA are better placed to understand why they engage in business and why the organization is structured as such. Post modernism on the other hand concentrates on the irrationality and seemingly selfish models and polices that characterize the contemporary corporate setting.

The section in-depthly critiques the modern aspect of organization theory through assertion that the corporations including CBA don’t have employee interest at heart and that the managerial structures in place at modern organizations are informed by irrationality and profit maximization principles. Post modernity also critiques modern organizations as using managerial award gimmicks to attain the loyalty of the employees while in the real sense stock holders and special interest are gaining.

Introduction

An organization is a collection of people working for a common purpose to achieve common goals through division of labour. Through collective efforts, people achieve more than what solo efforts would do. Organizations are classified according to the nature of activities they are involved in. the core activities of business organizations for instance is the delivery of goods and services to make profits from the prices they charge.

Every business organization is different and unique in its own way. The workings of business organizations are complex and need in-depth research and study to understand the driving force behind their workings. Over time, scholars including economists and academic researchers have come up with theories aimed at explaining the dynamic nature in business organizations which include decision-making distribution of power and control, conflict resolution and organizational change (Parnell & Lester 2006, p. 23).

Among the theories that have been formulated to explain the nature of organizations, are the theories of modernity, symbolic interpretive theory and postmodernism.

These theories help in explaining the nature organizations through different perspectives that include the environment, the technology that they are using, the social environment they operate in and the type of business that they do. Additionally, organizational theory is applied in strategy and finance, marketing, information technology, operations, human resources and communication.

In the modernist approach, organizations are theorized and analyzed as constituents of a larger environment, and entities that have social structures that help in ensuring the order of activities of their members.

Organizations through the modernist approach are also viewed as consumers of technology in the production of goods and services for the society and the clients they serve. They are also seen as entities with distinct cultures that form the symbolic world that the organization represents. Through the modernist approach organizations are also seen as physical structures with capabilities to support and constrain activity and meaning in their contexts as well as areas of operation.

The modernist approach also views organization as arenas where conflict and power plays are staged for control of the organization. Though the above concepts are related in different ways, each contributes something unique to the running and functioning of an organization.

Organization

This paper will analyze the Common Wealth Bank of Australia using the modernist theory approach. Later, there will be critiques of the modernist approach of the said organization through symbolic interpretivism and postmodernism. The Common Wealth Bank of Australia is an Australian multinational bank which is one of the biggest four banks in the country and with operations in different territories including New Zealand, Fiji, UK and US (Fleming, 2000, p. 48).

The financial services it provides covers a wide range including retail products, business, and institutional banking. Additionally, it includes insurance services, funds management, investment and broking and superannuation. The modern perspective analysis will focus on the bank through the areas identified in the introduction.

Modern analysis

Environment

The structuralist theories especially fronted by Burns and Stalker emphasized mechanistic forms of organizations that operated in stable environments and organic forms or organizations that operated in dynamic environments. According to Lawrence and Lorsch, organizations have to achieve a balance between differentiation and integration (Cunliffe & Hatch 2006, p. 300).

The banking environment in which the Common Wealth Bank of Australia operates has always been caught up in the economic fluctuations that characterize the free market economy (Fleming, 2000, p. 54). The environment is therefore characterized by both organic and mechanistic environmental qualities that the bank needs to maneuver through.

There have always been shocks emanating from both the financial and political sectors of the banking environment. To some extent, the upheavals the bank has faced since its establishment to the current world financial crisis makes it possible to classify its operating environment as uncertain. Thus its operations can be analyzed through the theory of environmental uncertainty.

The CWBA has operated in many territories and subjected to many political decisions that have characterized its operations since its formation. For instance the bank was conferred upon the powers of the central bank between 1920 and 1960. This was a largely political decision that will haunt it after the spat that existed between the bank and the government during the Great Depression. There bank also went through periods characterized by diversification, deregulation and privatization (Fleming, 2000, p. 60).

Politics and financial market factors underpinned these events. It’s therefore safe to conclude that the bank through has not been well insulated from politics and the existing subtle connection between its operations and politics presents a challenge that threatens its standing as well as core business. There is sufficient reason to believe that the bank’s structure is vulnerable to manipulation and offers little protection from external forces such as politics.

Social structure

The social structure of organizations varies greatly depending on the nature of business and location of the organization. The social structure of the CBA for instance can be analyzed through contingency theory which argues that there is neither a best way nor structure to manage an organization (Fleming, 2000, p. 57). Structure and management are contingent or dependent on the nature of the surrounding where the organization is situated.

The CBA serves a heterogeneous community that comprises young and old people as well as people of all economic classes. The bank finances literacy through community education support programs which in 2007 alone benefited more than 30,000 young Australians. The bank also supports sports and other activities such as music (Fleming, 2000, p. 68).

As such, it’s not easy to clearly identify the social structure that CBA belongs to. However, given that it’s the biggest of the four leading banks of Australia, it’s a safe assumption that the bank attracts top tier individual and corporate clients. It’s highly likely that middle-income individuals will seek services at the bank especially with numerous regional small banks.

That, though subtle may be a problem for CBA which somehow may be out of its reach since the bank carries out operations depending on the nature of business and the surrounding.

Culture

The modern aspect of corporate culture was mainly fronted by Schein. According to him, corporate cultures involve the basic patterns of shared assumptions people in an organization learn when they jointly solve problems. Solving problems are geared towards solving problems of internal integration and external adaptation of the organization.

In pursuit of corporate culture, the theory of symbolic management by Bolman and Deal comes out where it stresses on the importance of unraveling the meaning of what is happening in organizations (Sapru 2006, p. 124).

In keeping up with symbolic management, the CWBA has sought to create a culture of teamwork and collaboration where the people who are responsible for the bank’s success get rewarded for their achievements (Fleming, 2000, p. 63). Symbolic management as said earlier ensures organizations deal with internal management problems rather than problems that affect the industry.

In the respect, the bank’s culture aims at attracting passionate and engaged employees who are valued by the organization through the provision of a safe working environment. The bank as arrange of programs and work practices through which professional development is achieved by training and leadership. Additionally there are programs to ensure wellness and safety of the employees that is implemented through occupational health and safety initiatives and flexible working options.

The culture of training and rewarding employees that is pursued by the CWBA is a good one. Despite the emphasis on the incentives, there is no mention of profit sharing and share allocation to the outstanding employees. It’s a vital element of symbolic management that is lacking in the otherwise perfect corporate culture of the bank. Failure to provide or stress on the importance of proving employees with a path to bank ownership can be considered a weakness.

Technology

Banking has been characterized by rapid technological changes that have revolutionalized the ways services are provided. In the current 21^st century situation, banking services are offered online as automation increases and manual operations reduced. Technology in organizations especially banks can be explained through the socio-technical systems theory.

According to theory, the interaction between people and technology in an organization creates a socio-technical a system setting that is difficult to separate. There is a complex interaction between human behavior and technological infrastructure put in place. This theory therefore is about the social aspects of people and society and the technical aspects of organizations’ structure and processes (Jones 2001, p. 236).

In April of 2011, the NAB bank of Australia experienced a major technical hitch that messed payroll accounts of its clients. Experts cited the problem to be widespread and common in all the four major banks in the country including CBA. In fact, the experts approximate such technological hitches will be common for the next ten years and customers should brace themselves for the repercussions. CBA and NAB are cited to be spending money to amounting to two billion dollars to upgrade their core banking softwares (Fleming, 2000, p. 70).

The failures associated with IT infrastructure are may be as a result of system malfunction or human error or both. This is the complexity that is cited in the socio-technical systems theory. Being a wide spread problem, CBA is not exempt even on the backdrop of spending such huge amounts of money. There is still a risk for CBA in within the context of socio-technical systems theory.

Problem Statement

The modern analysis above on CBA brings out the following problems:

• Exposure and insufficient protection from political manipulation and control
• Lack of diversification to net both low end and high end customers
• Failure to implement strategies that will help employees own part of the bank
• Uncertainty in the performance of IT infrastructure and the need for constant upgrading

Solution

The risk to political manipulation has significantly reduced over time. There have been laws put in place to guide bank operations and to ward off vested interests. However, to overlook the possibility of political interference in the bank as it has been before will be a gross miscalculation.

The bank therefore needs to put in place measures that limit special interests at the bank. That can be through implementation of provisions of banking laws that specifically deal with that. Such measures will help the bank avoid the negative impacts associated with politics.

There is also need to enhance the diversification that the bank has gone through since its formation. Its size and position as earlier said can easily be an alienation factor in the pursuit of customers. It’s important for the bank to put in place measures that will be aimed at netting small and middle-income clients so as to maximize on profit making.

Profit sharing is a phenomenon that is fast catching pace with many organizations. A plan to share profits of the bank needs to be put in place that will help employees share the revenues the bank makes and also put them on the path to owning a stake of the bank. That way, the bank will ensure loyalty on from its employees and its will also boost their morale to work harder for better results.

There is a need to implement a state of the art core banking system that will significantly speed up bank operations. Additionally, the IT systems in place should be upgraded or replaced to ensure services rendered by the bank are reliable. It’s important to take advantage of the bank’s IT policy which compared to other banks is stable.

Recommendations

Some of the solutions above are tough and to achieve. It will therefore take some sacrifice and willingness to implement the recommendations below.

Implementing rules based on provisions of the banking laws that limit people with explicit political connections and interest from holding positions as employees or directors. Political influence as a result will be diminished and manipulation from special interest will recede.

The bank should consider launching partnerships with other organizations that have wide coverage in an agency-banking format that will expose it to the middle class. People are likely to appreciate such a move and the client base of the bank will rise.

The bank should develop a framework where it’s possible to share its profits with its employees. The framework will also spell out the way through which employees will be part of the bank in form of shares. It’s a sure way of ensuring loyalty from the banks workers.

The bank should contract an Information Communication Technology (ICT) firm to make and continuously update the core banking software. That way the dedicated firm will be able to understand the needs of the bank and to make products that suit it and their customers.

Symbolic Interpretive Critique

When looked at from the symbolic interpretive lens, it’s safe to acknowledge that organizations are continuously undergoing changes. They are constructed and reconstructed by the members through interaction that is underpinned by symbolic interaction.

The organizations are realities that are constructed socially where the meanings attached to them promote and are promoted by the self and other stakeholders that make up the organization. In essence therefore, people give meanings and order to the experiences they experience within the organization and the organization’s area of operation. The meanings are interpretive of the symbolic acts, forms and processes in an organization (Mouzelis 2003, p. 257).

The Common Wealth Bank of Australia for instance has been operating in an environment where politics and banking have a long history of mixing. It’s also important to note that the political leadership plays a crucial role in the formation and implementation of monetary policies.

It’s therefore not fair to judge and conclude that political and special interest involvement is not good for the bank. Additionally, the bank has managed to growth in the system that has an outsider can easily label politically involving. The people who run the bank understand the importance of involving the political class and the through the ideal situation may campaign against their involvement, management is better placed to decide on that.

Similarly, the management of the bank is better placed to identify the niche markets where they feel comfortable in investing. Diversifying is a sure way for many banks and other business organizations. However, the banks knows the value of engaging with the every class, how to engage with them and what to expect from such ventures. There is a meaning attached to the class of people they engage in and whey they do so.

It’s a common assumption that employees nowadays are the most important assets that a firm can have. Every expert will always be of the opinion that employee issues be given priority so that loyalty and morale can be booted. However, any policies that banks like CBA implements regarding employees are solely their own decisions.

The management of CBA knows the value of their human resource and any decisions that they make are for their best interests. Profit sharing may be an attractive idea but to the merits of implementing or not lies with the management of the bank. It’s safe to assume that the CBA knows the true value of its employees and treats then as such. Any other second opinion is just speculation.

The system that is in operation at the bank may not deliver according to an observer’s expectation. However, there are many more advantages known to CBA management that the system does that makes it important to them. The value of maintaining the system or upgrading it in the pace they are doing is only known to CBA.

Postmodernism

Postmodernist views organizations as sites where enacting power relations, oppression, irrationality communication distortion are rampant (Daft 2009, p. 169). Additionally, postmodernism considers organizations as arenas where fun and playful irony takes place.

The postmodernist approach asserts that organizations are texts produces by language that are holding human beings in captive. The organizational theory thinking that is underpinned by postmodernism alludes that there is need to destabilize managerial ideologies and modernist modes of organization to free the oppressed people in those contexts.

In CBA for instance politics and special interest domination is just meant to consolidate the grip on power and resources that the bank represents. Through this approach, it’s not important to look at CBA as a captive of the politics and special interest but as a part of it. The postmodern approach will assume that the people working as employees of the bank are captives who have whose livelihoods have been captured by the owners of the business hence have little control over what happens to them or the business.

Closely related, the managerial ideologies that are in place cannot offer part of their control machine to the people they have held captive. It’s safe to assume that such moves are thought as ceding too much ground to the people who are supposed to do the donkeywork to the bank.

It’s therefore almost impossible that such programs of profit sharing will be implemented and even if they are, the owners of the banks will always take the majority share. More often than not, rationality informs such decisions. Such a move will therefore amount to irrationality on their part given the policies organizations like CBA pursue.

Information technology is a tool that is used by the bureaucrats to govern organizations while keeping tight control over people. In the bank’s case, it is going to improve service delivery as well as help management to keep tabs on employee activities.

When looked at objectively, IT elements are used by management for spying and for maximizing profits. In fact, the primary reason why IT is implemented is not to give customers better service, but to give the business consolidation over its niche and to give it a platform to further economic dominance.

Diversification of bank products may be a good approach for many banks. However, any expansion is done with the profit motive in mind. It’s therefore unlikely that CBA will implement such initiatives given the returns it gets from its current niche. Furthermore, organizations have class which is rarely acknowledged in their PR exercises. They are unlikely to venture outside of their areas of operation because the main stakeholders don’t see a need. Besides they can’t risk losing high profile clients who may not appreciate such kind of expansion.

References

Cunliffe, L.A. & Hatch, J. M. (2006) Organization theory: modern, symbolic, and postmodern perspectives. NY: Cengage Learning.

Daft, R. (2009) Organization Theory and Design. NY: Routledge.

Fleming, L. (2000) Excel Preliminary Business Studies. Sydney: Pascall Press.

Jones, R. G (2001) Organizational theory: text and cases. NJ. McGraw Hill.

Mouzelis, N. (2003) Organization and bureaucracy: an analysis of modern theories. London: Thomsons Learning.

Parnell, J.A & Lester, D. (2006) Organizational Theory: A Strategic Perspective. London: Sage Publications.

Sapru, R.K. (2006) Administrative Theories and Management Thought. Burlington: John Wiley & Sons.

In his book, The Wealth of Nations, Adam Smith indicated that among the factors of production, labor was the most important and the only true source of a country’s wealth.

He explained that each citizen or laborer had the ability of deciding what was best for them and if the government left them free without interfering in their activities this could result in maximum and optimal productivity of these laborers. The same could be explained of the human resource management, if the department could allow the workers to work freely in a laissez faire (leave us alone) economic environment, workers could have motivation of working an extra step gaining maximum productivity.

However, in the past this was not possible as it was experienced during the industrialization process. During this period, it was very clear that human capital was the central contributor to the generation of wealth and industrial capitalization with the key to productivity being mass production.

As a result, the employers acquired monopolistic powers controlling labor in the manner they wanted since there were no other alternative sources of income. The employers made bumper harvests becoming even richer at the expense of the laborers who continued living in abject poverty (Engels, 2007).

Due to those conditions, the workers viewed that they were being treated negatively by the human resources and thus they formed labor unions. The unions were used by the laborers to represent their interests in efforts of offsetting the monopolist power, which their employers had acquired in the exchange to gaining of more economic gains.

These gains were realized through advocating for better payments, reduced work times and also the abolition of debtor imprisonments. As a result of these movements, employees were now well recognized although the employers were still using the prevailing oppressive legal environment to arrest and jail the union leaders (Engels, 2007).

The union helps employer-employee relation to work together by providing the rules required. For example, through a laborers’ union, there is usually the power of the collective bargaining where the involved stakeholders negotiates the terms and conditions that will be used before the official signing of the contract. The fame of these unions not only is related to a single country but they have spread in many parts of the world with the formation of International Labor Unions.

To work with labor unions, organizations have established labor relation strategies through which they can choose to cooperate or not to cooperate. The first strategy an organization can use is the acceptance strategy where the organization recognizes the workers’ unions as a legitimate player in ensuring the rights of the workers are not abused.

Other firms use the avoidance strategy, where the organization fears that the union might influence how the workers perform their duties and also losing employees. Such a strategy is not advisable as it creates conflict between the two parties (Holley, Jennings & Wolters, 2008).

The role of unions, however, has of late declined especially due to the economic growth and advancements in technology which has led to the shift towards an information service based economy.

These contributing factors include the changing composition of the workforce with majority of workers not joining the unions and with many people undertaking small businesses it has become hard for the formation of a single workers’ union. There have also been changed attitudes towards the unions due to the fraudulent behaviors of their leaders and finally there have been legislation by the authority which now protects the employees thus rendering the unions inactive.

Though workers remain a formidable asset to the productivity of any organization, in the past there had been instances of workers rights abused by their employers and this forced the workers to form unions which could fight for their rights. These unions have done quite a lot in ensuring the relationship between the workers and their employees is not exploitative.

Reference List

Engels, F. Ed. (2007). Capital: A Critique Of Political Economy: The Process Of Capitalist Production: Cosimo Classics Economics. Volume 1, Part 2 Of Capital: A Critique Of Political Economy, Karl Marx. New York: Cosimo Inc. Reprint.

Holley, H.W., Jennings, K.M., Wolters, R.S. (2008). The Labor Relations Process, 9th Edition. New York: Cengage Learning. Print

Wealth is essential in the material existence of human beings. It is accumulated through various means and also comes in various forms. One dominant form of wealth is finance. Financial wealth is essential for the present life and also for the future life. To achieve a good base in building financial wealth, several aspects including financial planning must be involved. A personal account of building financial wealth is shown below.

Personal financial planning

Financial planning for personal gain has considered several principles. They include the time value of money, effects of taxes on financial decisions, planning principles, and knowledge.

Time value of money

Wealth creation starts with the knowledge of the time value of money. Money has a time value attached to it. The money someone earns today has a higher value than a similar amount in a year’s time. When money earned today is invested, it will continue to earn profits for a certain period designated. Therefore, to focus on wealth creation and preservation, I have resolved to invest the savings made and allow them to grow. Investments could be through a mortgage, which allows me to buy a house today and pay for it in the future. The aspect of the time value of money has been realized after resolving to save $33 per month. The $33 monthly savings that earn 12% interest when compounded annually will produce $1 million when I will be at the age of 67 years since I am 20 now.

Financial Terminology

Financial planning involves two main financial terminologies that will guide this plan. They include credit and debit. The term ‘debit’ the used in the accounting sense to mean an increase to an asset account. On the other hand, the term credit is used to indicate an increase in the liability account. The two terms are opposite to each other and they occur at once. They are essential in a wealth creation plan because the process involves expenditure (liability) and income (assets) (Dempsey, 2009). Other terminologies used in financial planning include liquidity, which is the ability to recover the money when needed. There are also financial ratios such as liquidity and debt ratios that are vital for the determination of health of a business financially.

Financial Planning

Financial planning is dynamic and may be adjusted from time to time. In my plan, several processes have been considered. The first one is an evaluation of my financial health status. This involves analyzing a record of the amount earned, spend and, what to spend on. It further involves proper records including a personal balance sheet and budget. I also analyzed the source and entry of my money. The next planning process was a definition of the financial goals. During this process, I ascertained my purpose for saving, which was for future use. The amount I resolved to save was $33 per month. After that, I defined an action plan for spending. At the same time, I determined the flexibility of the budget, liquidity, protection, and minimization of taxes as part of the financial terms and important aspects to be observed in the budget. After that, the plan was implemented. The implementation involves keeping one eye on the income and current expenditure and another eye on the future goals at the same time. Finally, provision has been made for the review of the progress and revision of the plan. The review shall be done when the need arises where plans will be re-evaluated too.

Budgeting

To create and build wealth, one has to balance the expenditure and income to accommodate all financial goals. This is achieved through proper budgeting. For this case, consideration for making a cash budget was made. The cash budget made was a plan for controlling cash inflows and outflows. The total income for the previous year was examined. Based on figure obtained, the income for this year was determined with consideration for additions. The tax for the current year was determined and deducted from the estimated income to yield an after-tax income. The living expenses were estimated in almost the same way. With an aid of the previous year’s expenditure plan, fixed expenses such as rent were determined. Thereafter, variable expenses such as expenditure on trips were determined. The variables were adjusted for effective saving and the final figure was added to the fixed expenses. The total expected expenses’ figure found was subtracted from the anticipated income to determine the available income for saving and investment. To ensure the amount fits in the investment and savings goals, adjustments were done on variable expenses, and the plan was subsequently implemented (Keown, 2012).

Risk Management

Wealth creation involves the management of unexpected happenings that may result in loss of the investment or investor. Since risks occur unexpectedly, plans must be made for the management of the invested funds. The management involves asset protection and life management.

Asset Protection

Planning for wealth and subsequent building of the same is a healthy venture. However, there are some expenses that crop up when least expected. This implies that assets must be protected against catastrophic events such as fire. In my wealth building plan, I have decided to protect my assets from unexpected dangers. In this case, I have resolved to buy an insurance cover to guard on the same. The insurance cover to be bought will guard on the things I cannot avoid. This will be managed under property insurance.

Life and Health Insurance

The wealth creation plan will involve a life cover and also health insurance. The health insurance plan is provided by the employers and therefore it is guaranteed. However, life insurance cover will be taken. The cover will include a monthly premium of about $10, which will be paid through my employer.

Facing Financial Challenges

Financial challenges come when least expected. In the event of their happening, the expenditure on the planned budget exceeds the income. Since the needs in question are essential, there ought to be another way out. In my wealth-building plan, I have resolved to face a financial challenge through borrowing. Borrowing will be from a source that provides least or no interest. For noninterest source, friends will be considered whereas for other cases, banks will be approached. With the aid of my payslip, it will be easy to borrow from the bank (Keown, 2012).

Retirement Planning

Wealth creation strategy also involves the planning for retirement. This involves ensuring the current earning is included in the future considerations. Given the time value of money, planning for retirement should start as soon as one gets a source of income. After obtaining a source of income, one should think of investing and saving the same. There are several ways of retirement planning considered in my financial wealth creation plan. The first one is saving through social security funds. At the end of every month, $5 will be contributed to the national security fund kitty. The contribution is a means of saving and at the same time an investment opportunity. Money contributed to the national social security fund earns interest since the same money is invested in the good projects. At the same time, the employer contributes an additional amount to the employees’ contribution. This means that upon retiring, there will be enough savings to cater for old age times.

Estate Planning

The life of human beings is temporary. As one grows old, he or she will one day suddenly die. Given that the person may be having an estate accumulated through savings and investments, proper administration and sharing of the same should be ensued. As a result, the wealth building strategy in these considerations will involve an arrangement on the way the estate will be administrated. A will to take care of the same will be written later. The will consider nuclear family members as the identity or beneficiaries of the same.

Following Through

The wealth building plan will be followed through to accomplishment. The process of following through will consider several ways. In the first place, there is a belief in the plan. Feeling of certainty about the implementation of the plan will ensure physical and mental input into the same. At the same time, the goals set will be kept at minimum. Following through will further consist of constant reminders. This will be realized from records created on the same. At the same time, the plan will seek the services of a financial advisor, who will ensure the plan is implemented in a professional way (Tan, 2012).

References

Dempsey, P. (2009). Introduction to financial accounting. 7edn . Durban: Lexisnexis.

Keown. (2012). Personal finance: turning money into wealth.5 edn. London: Pearson.

Tan, V. (2012).Learn the art of following through: 5 steps to ensure you will achieve your goals.Web.

Introduction

Wealth management analysts are entry-level professionals who support partners and associates by carrying out administrative and support tasks, doing financial research, and engaging in basic financial modeling. A holistic view of a client’s financial situation is the goal of wealth management, which includes services like investment management, financial planning, tax planning, and estate planning (Wohlner, 2022). Although some financial professionals have dual roles as wealth managers and planners, the focus of wealth managers is on assets and investments, whereas planners also take into account daily household expenses, insurance requirements, and other factors. This project will be tasked with determining the location of a brick-and-mortar office within Connecticut.

Discussion

According to the data set, the majority of accredited investors in Connecticut are located in zip codes with higher incomes and higher rates of homeownership. The majority of accredited investors in Connecticut are located in zip codes with higher incomes and higher rates of homeownership. A person or business that is authorized to trade securities even though they are not officially registered with the financial authorities is known as an accredited investor (Hayes et al., 2020). They must satisfy at least one requirement regarding their income, net worth, asset size, governance status, or professional experience to be eligible for this exclusive access.

Certain requirements must be met to receive accreditation, such as working in the financial sector or earning more than $200,000 (Hayes et al., 2020). Because accredited investors are deemed to be financially savvy enough to bear the risks, they are the only ones permitted to purchase unregistered securities. Accredited investors are permitted to purchase and invest in unregistered securities so long as they meet one or more standards regarding income, net worth, asset size, governance status, or professional expertise. This is likely because these zip codes have a higher concentration of wealth, which accredited investors are more likely to have. The structure of the investor household is largely consisting of married couples with children because these households have a higher income and are more likely to be able to save for retirement. Household investment is a sizeable portion of all private investment, which has made a significant contribution to economic growth.

The retirement income mix of the investor is largely made up of 401(k)s and IRAs. The investor’s mix of retirement income is largely made up of 401(k)s and IRAs. The reason for this is because these are the most common retirement savings vehicles. Establishing retirement income objectives and the resources required to meet them as part of retirement planning. Identification of income sources, estimation of expenses, implementation of a savings plan, and management of assets and risk are all components of retirement planning (Kagan, 2019). Estimated future cash flows are used to determine the viability of the retirement income objective. Everybody longs for the day they can finally bid farewell to the labor force and resign. That is where retirement planning becomes possibly the most important factor. It does not matter where you are in life, either. Even if you are accustomed to a particular way of life, your Social Security benefits may not be sufficient. If someone puts money away now, they will have less to worry about in the future.

Based on the data, it appears that the best location for a brick-and-mortar office would be in a zip code with a high income and a high rate of homeownership. This is because these zip codes have a higher concentration of wealth, which accredited investors are more likely to have. Housing markets are complicated and dynamic. Strategic housing market analyses will not offer precise estimates of housing demand, need, or market circumstances as a result. However, they can offer insightful information on how housing markets function now and in the future. When developing planning and housing policies, they should take into account the characteristics of the housing market, the interplay of important variables, and the likely magnitude of change in future housing demand and need. To create regional spatial strategies, local development documents, regional housing strategies, and local housing strategies, it is essential to conduct strategic housing market assessments.

Conclusion

Based on the data, it appears that the best wealth management offerings for a brick-and-mortar office would be 401(k)s and IRAs. This is because these are the most common retirement savings vehicles. Seventy-four percent of adults in the United States believe they will never have high net worth, which is defined as possessing at least $1 million in investable or liquid assets. Yet, turning into a high-total assets individual throughout your lifetime includes more than making a decent salary or having different revenue sources (Gravier, 2022). We all have access to retirement investing, which plays a significant role in the portfolios of many millionaires. 55% of the wealth of the high-net-worth individuals who use the Personal Capital dashboard comes from retirement accounts like 401(k) plans and IRAs. People should use tools to keep track of their net worth over time as they work to increase their retirement savings.

References

Gravier, E. (2022). High-net-worth individuals have over half their wealth in IRAs and 401(k)s. CNBC. Web.

Hayes, A., Scott, G., & Clarine, S. (2020). Accredited Investor. Investopedia. Web.

Kagan, J. (2019). Retirement Planning. Investopedia. Web.

Wohlner, R. (2022). What Is Wealth Management And Do You Need It? Bankrate. Web.