Highway Robbery Essay

It was in the middle of the night, there was a carriage carrying gold and silver. It was on its way to Yorkshire. There was a guard with a rifle on the lookout for anything suspicious or threatening. There were people inside, chatting about the riches that were in their hands. The driver was driving the carriage; it had four horses pulling it. There was a co-driver as well, he was there in case anything happened to the driver. There was a man riding a horse, they were usually known as, â€Å"Highwaymen†, they stole from carriages and they were all aware that â€Å"Highwaymen† existed. Before the carriage got to the Highwayman’s location, the Highwayman cut down a tree with his axe, the tree obstructed the path of the road. Once the carriage got to the tree, it stopped, it was a very quiet place, no houses in sight, no people in sight, and it was in the pure country side. The guard got down from the carriage to take a look. He got very suspicious and had his rifle ready. The Highwayman with his horse hid behind a tree, silently. Then, suddenly the Highwayman leapt out of the woods and on to the road, he shouted â€Å"Give me all of your treasures, or die†. The Highwayman pointed his pistols at the guard. The guard slowly put down his rifle, and the richest man offered the riches to the Highwayman, then the slightly poorer people offered their treasures. Then the Highwayman, swiftly, rode off, in to the gloomy night. But then, the guard quickly, but silently picked up his rifle and started shooting at the Highwayman, but by then, the Highwayman had gone, and it was too late. By Matthew Williams

Prose coursework Essay

London being the most powerful city of its vast British empire had become the central point of the world. In the Victorian period, Britain owned the majority of the world and science was taking major jumps in history with discoveries, inventions and theories, for example the Darwin theory of evolution and the inventions of much revolutionary technology, such as the light bulb, the telephone etc. London was filled with life; it was a city where gas powered lamps lit the squalid streets covered with eerie shadows. Carriages clattered day and night delivering the rich and wealthy, but London was slowly deteriorating through wicked serial murders, drug misuse and frightened prostitutes. The city was famous for poverty: people who were stricken by ill health, cramped living conditions and high risk of sewerage water contamination. Soot rained over the city as the industrial revolution was at its peak, which was the cause of the covering of layers of black pollution creating a dark, dreary place. Public executions were frequency and Victorian people lived from day to day fearing crime, as renowned murderers walking the streets of London caused widespread fear across London, for example the likes of Jack the Ripper, infamous for ruthless murders of prostitutes and taunts he sent to the irresponsible police force, evidently many officers were publicly exposed as corrupt. Victorians had lost their respect for the police as they were thought to be unreliable in their protection of the desperate civilians of London. Arthur Conan Doyle’s character, Sherlock Holmes, surfaced in 1887. The people had found their savior, many immediately fell for the fictional character, and Holmes was seen as the super human detective like a cake with many layers, where each layer was revealed slowly throughout the fiction. He was a detective able to solve every mystery; he seemed to be a superhero always seeking justice to overcome evil. This fantasy became such a reality that when it’s creator tried to kill him off in 1893, many fans protested and even the author received death threats warning him to keep them supplied with the drug that feed their addiction for Holmes. This super sleuth had become famous in every province of the world. Many films, TV production, websites, museums and even organizations of secret police based in Eastern Europe were dedicated to him. Conan Doyle based his idea for Holmes on the traditional guide, but devised and invented the use of the scientific approach to solving mystery: observation, analysis of data observed, formation of theory based only on the facts. The traditional detective story is based on sudden adventitious circumstances; Doyle believed these circumstances didn’t occur in reality. Doyle’s mastery of the six rules of detective story allowed him to use the extra-ordinary. His concept was to reveal the mystery at the opening of the story followed by the development which explores detail of the story and at the conclusion Holmes explains and elaborates how the crime was committed. Holmes role and character is reveals throughout the story this is where we gain knowledge of his personality and mannerism, for example; -In the Red Headed league the case seem to be a joke but Holmes is still determined to work out the mystery, this show Holmes doesn’t fail to attempt even if it seem unworthy task. -In the Speckled Band Holmes pick up the smallest detail like the nonworking bell, the vent that leads into another room instead of outside, the bed that was bolted to the floor, a safe which had two holes, milk on a small plate not used for any animal a their home and the impression on the chair which had feet impression that was directly under the vent, these deduction prove Holmes superhuman ability and why he became so successful. Dr. Watson is the story teller, his relationship with Holmes seems to be strict controlling and ordered towards Dr. Watson but during their breaks Holmes becomes joyful and friendly towards Dr. Watson, for example; -In the Red Headed League Holmes tells Dr. Watson to leave him for 50 minutes to smoke his pipe and think, this order show Holmes superior over Dr. Watson. During many cases Dr. Watson seem to be the plot device as he develops the plot. The Speckled band is mystery where Holmes faces Dr. Roylett, throughout this story a lot of tension is built. Holmes conversation with Helen Stoner is calmer as Holmes gives her sympathy; here Holmes is presented as her knight in shining armor. 1 Sherlock Holmes Coursework Show preview only The above preview is unformatted text This student written piece of work is one of many that can be found in our GCSE Arthur Conan Doyle section.

Aileen

Wuornos was born as Aileen Carol Pittman in Rochester, Michigan. She had one older brother named Keith, who was born in February 1955. Her mother, Diane Pratt, was 15 years old when she married Leo Dale Pittman on June 3, 1954. Less than two years into marriage and two months before Wuornos was born, Pratt filed for divorce. Pittman was a child molester who spent most of his life in and out of prison. Wuornos never met her father, as he was imprisoned for the rape and attempted murder of an eight-year-old boy at the time of her birth. Leo Pittman was strangled in prison in 1969. In January 1960, Pratt abandoned her children, leaving them with their maternal grandparents – Lauri and Britta Wuornos. They were legally adopted on March 18, 1960 by the Wuornos family and took their surname. From a young age, Wuornos engaged in sex with multiple partners, including her own brother. At the age of 13, she became pregnant, claiming the pregnancy was a result of being raped by an unknown man. Wuornos gave birth at a Detroit home for unwed mothers on March 23, 1971. The child, a son, was placed for adoption. On July 7, 1971 Britta Wuornos died of liver failure, after which Wuornos and her brother became wards of the court. At age 15, Wuornos' grandfather threw her out of the house, and she began supporting herself as a prostitute. On May 27, 1974, Wuornos was arrested in Jefferson County, Colorado for drunk driving, disorderly conduct, and firing a . 22-caliber pistol from a moving vehicle. She was later charged with failure to appear. In 1976, Wuornos hitchhiked to Florida, where she met 70-year-old yacht club president Lewis Gratz Fell (June 28, 1907 — January 6, 2000). They married that same year, and the news of their nuptials was printed in the local newspaper's society pages. However, Wuornos continually involved herself in confrontations at their local bar and was eventually sent to jail for assault. She also hit Fell with his own cane, leading him to get a restraining order against her, after which she returned to Michigan. On July 14, 1976, Wuornos was arrested in Antrim County, Michigan and charged with assault and disturbing the peace following an incident in which she threw a cue ball at a bartender's head. On July 17, her brother Keith died of throat cancer and Wuornos acquired $10,000 from his life insurance. Wuornos and Fell divorced on July 21 after nine weeks of marriage. On May 20, 1981, Wuornos was arrested in Edgewater, Florida for the armed robbery of a convenience store. She was consequently sentenced to prison on May 4, 1982 and released on June 30, 1983. On May 1, 1984, Wuornos was arrested for attempting to pass forged checks at a bank in Key West. On November 30, 1985, she was named as a suspect in the theft of a revolver and ammunition in Pasco County. On January 4, 1986, Wuornos was arrested in Miami and charged with grand theft auto, resisting arrest and obstruction by false information (she provided identification with the name Lori Grody, her aunt). Miami police found a . 38-caliber revolver and a box of ammunition in the stolen car. On June 2, 1986, Volusia County deputies detained Wuornos for questioning after a male companion accused her of pulling a gun in his car and demanding $200. Wuornos was found to be carrying spare ammunition and a . 22 pistol was discovered beneath the passenger seat she occupied. Around this time, Wuornos met Tyria Moore, a hotel maid, at a Daytona gay bar. They moved in together, and Wuornos supported them with her prostitution earnings. On July 4, 1987, Daytona Beach police detained Wuornos and Moore at a bar for questioning regarding an incident in which they were accused of assault and battery with a beer bottle. On March 12, 1988, Wuornos accused a Daytona Beach bus driver of assault. She claimed that he pushed her off the bus following a confrontation. Moore was listed as a witness to the incident. Wuornos and Moore abandoned Peter Siems' car after they were involved in an accident on July 4, 1990, after which Wuornos' palm print was found. Witnesses who had seen the women driving the victims' cars provided police with their names and descriptions, resulting in a media campaign to locate them. Police also found some of the victims' belongings in pawnshops and retrieved fingerprints, which matched those found in the victims' cars and on Wuornos' arrest record. On January 9, 1991, Wuornos was arrested on an outstanding warrant at The Last Resort, a biker bar in Volusia County. Police located Moore the next day in Scranton, Pennsylvania. She agreed to get a confession from Wuornos in exchange for prosecutorial immunity Moore returned with police to Florida, where she was put up in a motel. Under police guidance, Moore made numerous telephone calls to Wuornos, pleading for help in clearing her name. Three days later, on January 16, 1991, Wuornos confessed to the murders. She claimed the men had tried to rape her and she killed them in self-defense. Wuornos went to trial for the murder of Richard Mallory on January 14, 1992. Prior bad acts are normally inadmissible in criminal trials, but under Florida's Williams Rule, the prosecution was allowed to introduce evidence related to her other crimes in order to show a pattern of illegal acts. Wuornos was convicted for Richard Mallory's murder on January 27, 1992 with help from Moore's testimony. At her sentencing, psychiatrists for the defense testified that Wuornos was mentally unstable and had been diagnosed with borderline personality disorder. She was sentenced to death on January 31, 1992. On March 31, 1992, Wuornos pleaded no contest to the murders of Dick Humphreys, Troy Burress and David Spears, saying she wanted to â€Å"get right with God†. In her statement to the court, she stated, â€Å"I wanted to confess to you that Richard Mallory did violently rape me as I've told you. But these others did not. [They] only began to start to. â€Å"On May 15, 1992, Wuornos was given three more death sentences. In June 1992, Wuornos pleaded guilty to the murder of Charles Carskaddon and received her fifth death sentence in November 1992. The defense made efforts during the trial to introduce evidence that Mallory had been tried for intent to commit rape in Maryland, and that he had been committed to a maximum security correctional facility in Maryland which provided remediation to sexual offenders. Records obtained from that institution reflected that from 1958 to 1962, Mallory was committed for treatment and observation resulting from a criminal charge of assault with intent to rape, and received an overall eight years of treatment from the facility. In 1961, â€Å"it was observed of Mr. Mallory that he possessed strong sociopathic trends. â€Å"The judge refused to allow this to be admitted in court as evidence and denied Wuornos' request for a retrial. In February 1993, Wuornos pleaded guilty to the murder of Walter Jeno Antonio and was sentenced to death again. No charges were brought against her for the murder of Peter Siems, as his body was never found. In all, she received six death sentences.

Marbury vs. Madison Case Essay Example | Topics and Well Written Essays - 500 words

Marbury vs. Madison Case - Essay Example Some legal scholars have accepted the legitimate reasoning of Marshall while others remain to challenge the decision he made toward the Marbury vs. Madison case. Alexander Bickel question John Marshall ruling, Bickel argued that Marshall Verdict in advocated justice for Marbury vs. Madison case was unconvincing and power-driven interpretation of jurisprudence. Marshall recommended that the Supreme Court had an outright obligation to strike-down every rule it discovers violated the constitution. â€Å"It is emphatically the province and duty of the Judicial Department to say what the law is" Bickel foresees that consenting the constitution to mean whatever the Supreme Court perceives to be right might turn the constitution into a mere document in the hands of the judges. Consequently, judges may twist and shape the constitution into any form that delights them rather than giving the legal decision that will facilitate court attaining decision that depict legitimate, fair and just rul ing. Alexander Mordecai Bickel puts evidently that the aim of John Marshall was using federalist tactic to craft a strong central government over the opposition of Jeffersonian who was alacritous to have a resilient state government. Therefore, John Marshal used the case to establish the Supreme Court as center of power, proficient at overruling the legislature, the president, and the state. Bickel believed that allowing Supreme Court to dictate the constitution might turn it susceptible as judges may desire to shape and twist the constitution towards their lusts, personal gains and egotistical interests2. It is important that Alexander Bickel’s notion is taken into consideration to circumvent future judges from using their positions for personal interest. Conversely, Supreme Court remained to be a vital constitutional independent branch, but it has to incorporate other institution such as congress, and the state interest thus fashioning a holistic relationship for sustainabl e governance of the country.

Implications of Health Economic Concepts for Healthcare Research Paper

Implications of Health Economic Concepts for Healthcare - Research Paper Example They consist of the following; barriers to entry, asymmetric information, comprehensive government intervention, externalities, and intractable uncertainty in various dimensions, as well as presence of third party agents (Fuchs, 2011). The paper will discuss five economic concepts in healthcare economics. The study would also highlight the benefits of learning about health economics in relation to government and private sectors, government involvement in healthcare economics, financing, and delivery. Additionally, the paper will also discuss why health care professionals and decision makers need to value health economics. The health care professionals and decision makers need to comprehend the value of health economics, since health economists evaluate many kinds of financial information such as charges, costs, and expenditures. Furthermore, they also need to comprehend that main aim of health care economists is to offer information to the decision-makers so that the choices that they make, maximize the health benefits to the population. Health economics is concerned with saving cash while enhancing the level and distribution of population health with the available resources (Shepard and Thompson, 2012). Due to the complex nature of the health care industry, more effort needs to be done to further develop and standardize the concepts related to health economics. Health economics is considered as an integral part of health management from the peripheral level to the apex referral hospitals. The health care sector is characterized by extensive government intervention, ranging from operational licenses of the doctors and the regulations on service delivery. According to Alastair et al. (2010), the public sector involvements in medical care include social justice, redistribution, prevention of monopolies, and public goods. Social justice is applicable to situations where offering of health services to one

Social Meaning of Vampires Essay Example | Topics and Well Written Essays - 750 words

Social Meaning of Vampires - Essay Example Eighteenth century can be bestowed with the credit for promoting the vampire phenomena after tons of vampire superstitions flew into Western Europe. However, it was Bram stoker’s vampire novel by the name of Dracula that greatly popularized the modern vampire superstition. When questioned about the image of Vampires or Dracula to be more precise, plentiful of people will be of the opinion that Vampires are nothing but tall, dark and handsome men dressed in a long white or black cape and have blood flowing out of their mouths like a river. Others think that Vampires are young, gorgeous, sensual and young women who seduce people, men mostly, in their beds at night and then succeed to suck their blood. This wide realm of opinions proves the very noticeable fact that the social meaning of vampires and the cultural meaning of vampires significantly fluctuate from one area to the other, one region to the other and one continent to the other. To begin with, in ancient Babylonia, people faithfully believed that there existed a female vampire popularly known as Lilu and Lilu was seen feeding and nourishing the pregnant women and at times the newborn babies in that region. On the other hand, in Slavic regions, the residents of that area believed that vampires took birth due to a collection of reasons and some of those reasons were offensive burial rituals and practices and dying an â€Å"unnatural death. (Vampires: The Origin of the Myth by Adrian Nicholas McGrath) In this increasingly modernizing world, as science and technology advances with every passing second, several cultural interpretations exist revolving around vampires. Various cultures and societies place unique concentration and even more distinctive interpretation to these deadly creatures. However, there exists an overlapping section where one can find some of

AMP for business and management Dissertation Example | Topics and Well Written Essays - 15000 words

AMP for business and management - Dissertation Example Moreover, one of the main points of importance of the World Trade Organisation lies on its ability to increase the quality of the products and services being offered whilst ensuring that a significant reduction in terms of costs is attained. Pertinently, the World Trade Organisation also allows access to untapped markets and has helped countries and governments in their battle against poverty (Winters, McCulloch and McKay 2004). The World Trade Organisation has contributed to the fight against poverty. Unfortunately, it remains a known fact that not all countries have actually received benefits from free trade that the World Trade Organisation promises to promote. Notwithstanding the inability of the World Trade Organisation to successfully aid countries and governments in their fight against poverty, a number of global companies has benefitted from it because of its capacity to promote free trade. In this regard, it is of utmost significance for countries that wish to go global to t ake free trade into consideration so as to effectively affect their transactions in a quite complicated market environment (Winters, McCulloch and McKay 2004). Background, Aims and Objectives Based on the foregoing section, the promotion of free trade through its liberalization has fueled globalization (Goldstein 2007). Cogently, it has given companies the needed access to markets that were once untapped. In the same manner, the promotion of free trade has arguably enabled global companies to actually take advantage of different countries by helping them mitigate their costs and reach their bottom lines. From its inception, even during the time when it was still known as the General Agreement on Tariffs and Trade (GATT) until today, in its current form, the World Trade Organisation has worked actively to attain greater trade liberalization (Thirlwall and Pacheco-Lopez 2008). Apparently, the World Trade Organisation has given paramount concern to the need to help nations attain their full potential whilst at the same time, providing solutions to the different concerns of their member countries. In the recently concluded Uruguay Round, the World Trade Organisation has successfully entered into better binding agreements that could help them solve pertinent trade issues. Undoubtedly the Uruguay Round, in this respect has been more successful as compared with the previous WTO Rounds in the past (Thirlwall and Pacheco-Lopez 2008). The recently concluded Uruguay Round, aside from what has been previously mentioned, was also successful in terms of increasing the opportunities related to Trade Liberalization. Interestingly, the entrance of the People’s Republic of China has likewise resulted to a significant increase in the global market size, taking into consideration the fact the country has the largest population worldwide. The entry of the Chinese into the World Trade Organisation has likewise resulted to the significant refurbishment of their economic polic ies, their social and legal systems. The Chinese government has also effected a reduction in their tariff rates that previously discouraged the foreigners from entering their market (Goldstein 2007). Finally, the Uruguay Round has resulted to the rise of the private sectors within the member countries thereby enabling them to attain a significant growth in their countries. Consequently, the rise of the p

IDiscusson board reply Coursework Example | Topics and Well Written Essays - 250 words - 1

IDiscusson board reply - Coursework Example The verse refers to the centurion’s servant as â€Å"dear.† The centurion sees the servant as important, and he values his wellbeing too. The employers expect respect in return if they treat their employees well as it creates a good working environment. The Bible says, â€Å"We should sincerely obey, respect and serve a boss as if he were Christ,† (Ephesians 6.5-8). That verse illustrates that employees need to respect the employers. Nevertheless, they must work hard to earn it. It is only through exercising good deeds will they obtain it. Additionally, employers and employees interact in human relationships built on trust and friendship. Therefore, the employers should treat the employees the way they expect to be treated if they were in the same position and should avoid judging other. In support for this postulation the Bible says in Mark 12:31, that â€Å"you shall love your neighbor as yourself,† that is a proof the employers should not act in favor of policies that harm their employees. Instead, the policies must empower the workers to live better lives. Lastly, the employer implements those policies as a matter of expressing kindness. Human relationships dictate that people be kind so that they share freely. Even though, the employees also have a responsibility of reciprocating to their employers; employers should set the pace by formulating and implementing favorable policies to employees’

Change and Development in the English Essay Example | Topics and Well Written Essays - 1000 words

Change and Development in the English - Essay Example When the West Saxon kingdom was overthrown England was left without a standard language where several dialects began to take important role. Started in 1066 AD by the troops of William the Conqueror, the Norman conquest of England was a pivotal event in English history as it basically removed the native ruling class and transformed the English language and the culture of England. "What the language would have been like if William the Conqueror had not succeeded in making good his claim to the English throne can only be a matter of conjecture. It would probably have pursued much the same course as the other Teutonic languages, retaining perhaps more of its inflections and preserving a preponderatingly Teutonic vocabulary, adding to its word-stock by the characteristic methods of word-formation already explained, and incorporating much less freely words from other languages... The Norman Conquest changed the whole course of the English language." (Baugh, 127) The Norman Conquest also h elped the English language acquire the greater part of that enormous number of French words and connected England more closely with continental Europe. By the introduction of Anglo-Norman as the language of the ruling classes in England, the Norman Conquest caused one of the most obvious changes in English history. In a critical assessment of the effects of the Norman Conquest of Britain on the English language, it becomes lucid that the most outstanding result is that the Norman Conquest reduced the Scandinavian influence and controlled the spread and growth of several creoles in English language. One of the most obvious results of the Norman Conquest was that it helped the progress of the English language along with its politics and law. In an analysis of the history of English language and its development, it becomes evident that the Old English which existed in England before the coming of the Normans in 1066 began to change due to the influence of the Anglo-Norman. "Although the majority of the population continued to speak English, French was now the language of the new ruling class and therefore the language of the new ruling class and therefore the language of government. This change in status for the English language allowed its grammar to change drastically." (Thackeray and Findling, 14) Such changes were reflected in the other aspects of the language such as spelling, vocabulary, and pronunciation. Therefore, the salient linguistic effects of the Norman Conquest resulted in the growth of the language. Significantly, the linguistic effects of the Norman Conquest started in 1150 which influenced the remained relatively unchanged until then and the language slowly shifted from the Old English to Middle English. One of the features of the Old English speakers was that they hesitated from using foreign words, and normally made up their own correspondent of words rather than borrowing in a straight line. "One of the most significant differences between Old English and Middle English is the amount of borrowing from other languages, which expanded mainly with the Norman Conquest... The French, however, kept words and sounds similar to their foreign roots. One example of foreign sounds directly affecting English phonemics is the difference between [v] and [f]." (The Norman Conquest: The Impact)

Critical Response Paper Assignment Example | Topics and Well Written Essays - 250 words

Critical Response Paper - Assignment Example It is imperative for the country to balance the opinions of the different religions and integrate them in the formation of the government. This is because the relationship between the government and the religion is very fluid; the religion and/or the politics change in response to history and its interpretation. According to Brown-Foster and Goldstein (2010), circumstance and history determines the evolvement of the relationship between the state and the religion. The institutions should be set up in a way that they do not have certain privileges within the constitution but the freedom of worship privately should be given. According to Costopoulous, Diamond and Plattner (2005), religious institutions should not be provided with constitutional privileged prerogatives that permit them to consent public policy within the democratic governments. It is important to note that the political parties will perform the role of mandating the public policy because the religious institutions are not supposed to mandate any public policy. Voting is the only way to offer transparency within the government and the political parties have the mandate of voting in their favorite

Read Chapters Three and Four of your text Corporate Universities and Essay

Read Chapters Three and Four of your text Corporate Universities and respond to the topic questions - Essay Example Meister says that the principle of corporate university is based on flexible approach so that they are able to incorporate the environmental changes within their work paradigms. My company keeps evolving with outside changes through creation of constant learning environment. The company’s well defined hierarchical organizational structure is designed to cater to the wider perspectives of competitive business. Coaching and feedback are top priority that enables us to keep up with the challenges of the time. I agree with Montgomery (2008) that changing times require more dynamic strategic goals to meet the emerging new challenges. My company’s plans and actions in promoting its dynamic business goals are aligned to its values which thrive on change. While corporate university is a recently evolved concept, the imperatives of providing a learning environment for the workers have been consistent with the vision and mission of our company since its inception. I strongly believe that training programs facilitate the acquisition of skills and necessary knowledge to develop a wider perspective towards various issues. Indeed, the company has been able to provide the hierarchy of workers with a wider scope for professional growth in the area of core competencies. Meister believes that the basic goal of the corporate universities is to ensure that the corporate bodies are able to easily adapt to the fast changing equations of the global business so as to maintain market position. They do that through partnership with other businesses and educational institutes. The alliances help to provide a wider database of new resources and knowledge acquisition. It facilitates development of curricula based on real situation and incorporates the demands of the changing times. Thus, the corporate universities are able to exploit the huge

The Negative Consequences of Genetically Modified Food Essay Example for Free

The Negative Consequences of Genetically Modified Food Essay Genetically modified foods (GM foods, or biotech foods) are hazardous to your health. These foods are derived from genetically modified organisms (GMOs), specifically, genetically modified crops. GMOs have had specific changes introduced into their DNA by genetic engineering techniques. Genetically modified organisms, or GMOs, are created when a gene from one species is transferred to another, creating something that would not be found in nature. GMOs are present in almost sixty percent of all processed foods including vegetable oil, Soya flour, lecithin, and Soya proteins. GMO maize products make up approximately fifty percent of processed foods including corn, cornstarch, and corn syrups. Beets, sugar, dairy products, and soybeans are also produced through genetic engineering. The six major GMO crops are Soy, Corn, Canola, Cotton, sugar beets and alfalfa. Have you ever wondered what may be causing the food allergies you or your children have? It is most likely due to GMOs. By drawing out proteins from foods and modifying other foods with them, there is a much greater chance of cross contamination of allergens. Without proper identification, this could be devastating if not deadly for those with serious food allergies. For example, a person that is allergic to peanuts (common allergen) may be also allergic to tomatoes that have had the peanut protein injected into them. Without knowing, the person may eat the tomato and have an allergic reaction to it not realizing that the tomato was genetically modified. So now, there will be more people that can develop allergies to tomatoes. Children, especially under the age of two, are more prone to develop allergies to GMO foods because they have the greatest number of reactions to new allergens in foods. They are particularly vulnerable to GM corn, which contains an allergen not found in natural varieties. Over the last several years, the greatest rise in food allergies was to soy products. In fact, â€Å"Soy allergies skyrocketed by 50% in the UK, soon after GM soy was introduced†. (1) Eating a diet with non-GMOs will also help to keep you healthy. GMOs have been linked to existing diseases and new diseases. In particular, genetically engineered corn and soy can wreak havoc on your health by promoting obesity and contributing to diseases. According to an article featured on a health website by Dr. Mercola, a well-known American physician: â€Å"The results show a positive link between GE corn and obesity. Animals fed a GE corn diet got fatter quicker and retained the weight compared to animals fed a non-GE grain diet. The studies were performed on rats, mice, pigs and salmon, achieving the same results. † â€Å"This not only may relate to a rise in obesity, but to increases in many modern diseases. These diseases include diabetes, digestive disorders, inflammatory bowel disease, colitis, autism spectrum disorders (ASD) (ADD), autoimmune diseases, sexual dysfunction, sterility, asthma, COPD and many more. (2) If you are concerned about the plight of starving people in the world, GMOs are not the answer for global food security or for reducing world hunger. Although biotech companies have argued that GM crops grow bigger and produce more food, which can help curb the poverty issue in the world, that is actually not the case. Genetically engineered crops have shown no increase in yield. In many cases other farm technology has proven much more successful, and even Monsanto, the world’s largest GM seed company, agrees that its genetically engineered crops yield less than conventional farming. In fact, when Monsanto attempted to introduce GM hybrid wheat to Europe for its cereal market, it revealed that the growth in hybrid wheat had failed to materialise. Our lack of success in hybrids means this is no longer a good strategic fit for Monsanto. (3). If you do not want to worry about the relationship between GMOs and food allergies and if you are concerned about the health risks associated with consuming GM foods, avoid purchasing GM foods. Here are some tips to help you to avoid purchasing and consuming GM foods. Look for 100% organic products, which means that all ingredients in the product are organic. Look for â€Å"non-GMO† or â€Å"Made without genetically modified ingredients† labels. Avoid at risk ingredients like soy, corn, cottonseed, canola, sugar beets, and alfalfa. In addition, consumers can change the GMO practices of food manufacturers. You can get together with your local community and start a petition to demand that GMOs be eliminated from the food supply. These two methods will help to ensure that all people can stay healthy. SOURCES CITED Audet, M. (2013). Genetically Modified Food and Risks to Human Health. Retrieved from http://organic. lovetoknow. com/natural-organic-food/genetically-modified-food-risks-human-health Smith, J. M. (2003). Genetically Engineered Foods Pose Health Risk to Children. Retrieved from http://www. saynotogmos. org/uoct03a. htm (1) Smith, J. M. (2007). Spilling the Beans. Newsletter. Retrieved from http://www. responsibletechnology. org/gmo-dangers/health-risks/articles-aboutrisks-by-jeffrey-smith/Genetically-Engineered-Foods-May-Cause-Rising-Food-Allergies-Genetically-Engineered-Soybeans-May- (2)Mercola, Dr. (2012). Decade-Long Feeding Study Reveals Significant HealthHazards of Genetically Engineered Foods. Retrieved fromhttp://articles. mercola. com/sites/articles/archive/2012/08/07/genetically-engineered-foods-hazards. aspx (3) Brown, P. and Oliver, M. (2003). Monsanto to Quit Europe. Retrieved from http://www. saynotogmos. org/uoct03b. htm#mquits.

Impact of Financial Leverage on Investment

Impact of Financial Leverage on Investment The term Investment is frequently used in jargon of economics, business management and finance. According to economic theories, investment is defined as the per-unit production of goods, which have not been consumed, but will however, be used for the purpose of future production. The decision for investment, also referred to as capital budgeting decision, is regarded as one of the key decisions of an entity. Leverage is a method of corporate funding in which a higher proportion of funds is raised through borrowing than stock issue. It is measured as the ratio of total debt to total assets; greater the amount of debt, greater the financial leverage. Financial Leverage is the ability of a company to earn more on its assets by taking on debt that allows it to buy or invest more in order to expand. Nowadays financial leverage is viewed as an important attribute of capital structure alongside equity and retained earnings. Financial leverage benefits common stockholders as long as the borrowed funds generate a return greater than the cost of borrowing, although the increased risk can offset the general cost of capital. In the past years, a large body of the literature has provided robust empirical evidence that financial factors have a significant impact on the investment decisions of firms. While traditional research on investment was based on the neoclassical theory of optimal capital accumulation (where under the assumption of perfect capital markets, the cost of financing does not depend on the firms financial position), more recent literature has increasingly incorporated frictions such as asymmetric information and agency problems as a source behind the relevance of the degree of financial pressure faced by the firm in determining the availability and the costs of external financing This chapter will seek to enclose literature on the impact of financial leverage on investment and other factors that may affect investment in firms. 1.1 Modigliani Miller (MM) 1958 theory with no taxation In what has been hailed as the most influential set of financial papers ever published, Franco Modigliani and Merton Miller addressed capital structure in a rigorous, scientific fashion, and their study set off a chain of research that continues to this day. Modigliani and Miller (1958) argued that the investment policy of a firm should be based only on those factors that will increase the profitability, cash flow or net worth of a firm. The MM view is that companies which operate in the same type of business and which have similar operating risks must have the same total value, irrespective of their capital structures. It is based on the belief that the value of a company depends upon the future operating income generated by its assets. The way in which this income is split between returns to debt holders and returns to equity should make no difference to the total value of the firm. Thus the total value of the firm will not change with gearing, and therefore neither will its Weighted Average Cost of Capita (Pandey, 1995). Many empirical literatures have challenged the leverage irrelevance theorem of Modigliani and Miller. The irrelevance proposition of Modigliani and Miller will be valid only if the perfect market assumptions underlying their analysis are satisfied Under the original MM propositions, leverage and investment were unrelated. If a firm had profitable investment projects, it could obtain funding for these projects regardless of the nature of its current balance sheet. 1.2 Modigliani Miller 1963 theory with tax M M (1963) found that the corporation tax system carries a distortion under which returns to debt holders (interest) are tax deductible to the firm, whereas returns to equity holders are not. They therefore concluded that geared companies have an advantage over ungeared companies, i.e. they pay less tax and will have a greater market value and a lower WACC. Following this research, the consensus that emerged was that tax is positively correlated to debt (Graham 1995, Miller 1977) and is considered a major influence in the debt policy decision. Modigliani et al (1963) argued that we should not waste our limited worrying capacity on second-order and largely self correcting problems like financial leveragingà ¢Ã¢â€š ¬Ã… ¸. That is firms should not be worried about growth as long as they have good projects in hand, since they will always be able to find means of financing those projects. 1.3 The Trade-Off Models Some of the assumptions inherent in the MM model can be relaxed without changing the basic conclusions as argued by Stiglitz (1969) and Rubenstein (1973). However, when financial distress and agency costs are considered, the MM models are altered significantly. The addition of financial distress and agency costs to the MM model results in a trade-off model. In such a model, the optimal capital structure can be visualized as a trade-off between the benefit of debt (the interest tax shield) and the costs of debt (financial distress and agency costs) as presented by Myers (1997) The trade-off models have intuitive appeal because they lead to the conclusion that both no-debt and all-debt are bad, while a moderate debt level is good. However, the trade-off models have very limited empirical support, Marsh (1982), suggesting that factors not incorporated in this model are also at work. Jensen and Meckling (1976) invoked a moral hazard argument to explain the agency costs of debt, proposing that high levels of debt will induce firms to opt for excessively risky investment projects. The incentive for such a move is that limited liability provisions in debt contracts imply that risky projects will provide higher mean returns to the shareholders: zero in low states of nature and high in good states. However, the higher probability of default will induce investors to demand either interest rates premiums or bond covenants that restrict the firms future use of debt. 1.4 Pecking-Order Theory Initiated by Donaldson (1961), the Pecking-Order theory argues that firms simply use all their internally-generated funds first, move down the pecking order to debt and then lastly issue equity in an attempt to raise funds. Firms follow this line of least resistance that establishes the capital structure. Myers noted an inconsistency between Donaldsons findings and the trade-off models, and this inconsistency led Myers to propose a new theory. Myers (1984) suggested asymmetric information as an explanation for the heavy reliance on retentions. This may be a situation where managers have access to more information about the firm and know that the value of the shares is greater than the current market value. If new shares are issued in this situation, there is a possibility that they would be issued at a too low price, thereby transferring wealth from existing shareholders to new shareholders. 1.5 Investment and Leverage One of the main issues in Corporate Finance is whether financial leverage has any effects on investment policies. The corporate world is characterized by various market imperfections, due to transaction costs, institutional restrictions and asymmetric information. The interactions between management, shareholders and debt holders will generate frictions due to agency problems and that may result in under-investment or over-investment incentives. Whenever we refer to investment, it is essential to distinguish between over- investment and under-investment. In his model, Myers (1977) argued that debt can create an overhang effect. His idea was that debt overhang reduces the incentives of the shareholder-management coalition in control of the firm to invest in positive net-present-value investment opportunities, since the benefits accrue, at least partially, to the bondholders rather than accruing fully to the shareholders. Hence, highly levered firms are less likely to exploit valuable growth opportunities as compared to firms with low levels of leverage. Underinvestment theory centers on a liquidity effect in that firms with large debt commitment invest less, no matter what their growth opportunities (Lang et al, 1996). In theory, even if debt creates potential underinvestment incentives, the effect could be attenuated by the firm taking corrective action and lowering its leverage, if future growth opportunities are recognized sufficiently early (Aivazian Callen, 1980). Leverage is optimally reduced by management ex ante in view of projected valuable ex post growth opportunities, so that its impact on growth is attenuated. Thus, a negative empirical relation between leverage and growth may arise even in regressions that control for growth opportunities because managers reduce leverage in anticipation of future investment opportunities. Leverage simply signals managements information about investment opportunities. The possibility that leverage might substitute for growth opportunities is referred to as the endogeneity problem. Over-investment theory is another problem that has received much attention over the years. It is described as investment expenditure beyond that required to maintain assets in place and to finance positive NPV projects. In these kind of situations, conflicts may arise between managers and shareholders (Jensen,1986 Stulz,1990). Managers seek for opportunities to expand the business even if that implies undertaking poor projects and reducing shareholder worth in the company. Managers abilities to carry such a policy is restrained by the availability of cash flow and further tightened by the financing of debt. Issuing debt commits the firm to pay cash as interest and principal, forcing managers to service such commitments with funds that may have otherwise been allocated to poor investment projects. Thus, leverage is one mechanism for overcoming the overinvestment problem suggesting a negative relationship between debt and investment for firms with weak growth opportunities. Too much debt also is not considered to be good as it may lead to financial distress and agency problems. Cantor (1990) explains that highly leveraged firms show a heightened sensitivity to fluctuations in cash flow and earnings since they face substantial debt service obligations, have limited ability to borrow additional funds and may feel extra pressure to maintain a positive cash flow cushion. Hence, the net effect would be reduced levels of investment for the firm in question. Accordingly, Mc Connell and Servaes (1995) have examined a large sample of non financial United States firms for the years 1976, 1986 and 1988. They showed that for high growth firms the relation between corporate value and leverage is negative, whereas that for low growth firms the relation between corporate value and leverage is positively correlated. This trend tends to indicate that to maximise corporate value, it is preferable to keep down leverage to a low level and to increase investment. Lang, Ofek and Stulz (1996) used a pooling regression to estimate the investment equation. They distinguish between the impact of leverage on growth in a firms core business from that in its non-core business. They argue that if leverage is a proxy for growth opportunities, its contractionary impact on investment in the core segment of the firm should be much more pronounced than in the non-core segment. They found that there exists a negative relation between leverage and future growth at the firm level. Also they argued that debt financing does not reduce growth for firms known to have good investment opportunities. Lang et al document a negative relation between firm leverage and subsequent growth. However, they find that this negative relation holds only for low q firms, i.e. those with fewer profitable growth opportunities. Thus, their findings appear to be most consistent with the view that leverage curbs overinvestment in firms with poor growth opportunities. Myers (1997) has examined possible difficulties that firms may face in raising finance to materialize positive net present value (NPV) projects, if they are highly geared. Therefore, high leverages may result in liquidity problem and can affect a firms ability to finance growth. Under this situation, debt overhang can contribute to the under-investment problem of debt financing. That is for firms with growth opportunities, debt have a negative impact on the value of the firm. Peyer and Shivdasani (2001) provide evidence that large increases in leverage affect investment policy. They report that, following leveraged recapitalizations, firms allocate more capital to business units that produce greater cash flow. If leverage constrains investment, firms with valuable growth opportunities should choose lower leverage in order to avoid the risk of being forced to bypass some of these opportunities, while firms without valuable growth opportunities should choose higher leverage to bond themselves not to waste cash flow on unprofitable investment opportunities. Ahn et al. (2004) document that the negative relation between leverage and investment in diversified firms is significantly stronger for high Q segments than for low Q business segments, and is significantly stronger for non-core segments than for core segments. Among low growth firms, the positive relation between leverage and firm value is significantly weaker in diversified firms than in focused firms. Their results suggest that the disciplinary benefits of debt are partially offset by the additional managerial discretion in allocating debt service to different business segments within a diversified organizational structure. Childs et al (2005) argued that financial flexibility encourages the choice of short-term debt, thereby dramatically reducing the agency costs of under-investment and over-investment. However the reduction in the agency costs may not encourage the firm to increase leverage, since the firms initial debt level choice depends on the type of growth options in its investment opportunity set. Aivazian et al (2005) analysed the impact of leverage on investment on 1035 Canadian industrial companies, covering the period 1982 to 1999. Their study examined whether financing considerations (as measured by the extent of financial leverage) affect firm investment decisions inducing underinvestment or overinvestment incentives. They found that leverage is negatively related to the level of investment, and that this negative effect is significantly stronger for firms with low growth opportunities than those with high growth opportunities. These results provide support to agency theories of corporate leverage, and especially to the theory that leverage has a disciplining role for firms with weak growth opportunities 1.6 Investment, Cash Flow and Tobins Q It was traditionally believed that cash flow was important for firms investment decisions because managers regarded internal funds as less expensive than external funds. In the 1950s and 1960s, this view led to numerous empirical assessments of the role of internal funds in firm investment behaviour. These studies found strong relationships between cash flow and investment. Considerable empirical evidence indicates that internally generated funds are the primary way firms finance investment expenditures. In an in-depth study of 25 large firms, Gordon Donaldson (1961) concludes that: Management strongly favoured internal generation as a source of new funds even to the exclusion of external funds except for occasional unavoidable bulges in the need for new funds. Another survey of 176 corporate managers by Pinegar and Wilbricht (1989) found that managers prefer cash flow over external sources to finance new investment; 84.3% of sample respondents indicate a preference for financing investment with cash flow. Researchers have also discovered the impact of cash flow on investment spending in Q models of investment. Fazzari, Hubbard, and Petersen (1988) find that cash flow has a strong effect on investment spending in firms with low-dividend-payout policies. They argue that this result is consistent with the notion that low-payout firms are cash flow-constrained because of asymmetric information costs associated with external financing. One reason these firms keep dividends to a minimum is to conserve cash flow from which they can finance profitable investment expenditures. Fazzari and Petersen (1993) find that this same group of low-payout firms smooths fluctuations in cash flow with working capital to maintain desired investment levels. This result is consistent with the Myers and Majluf (1984) finding that liquid financial assets can mitigate the underinvestment problem arising from asymmetric information. Whited (1992) also extended the Fazzari, Hubbard, and Petersen (1988) results in a study of firms facing debt financing constraints due to financial distress. She found evidence of a strong relationship between cash flow and investment spending for firms with a high debt ratio or a high interest coverage ratio, or without rated debt. Himmelberg and Petersen (1994) in a study of small research and development firms find that cash flow strongly influences both capital and R D expenditures. They argue that the asymmetric information effects associated with such firms make external financing prohibitively expensive, forcing them to fund expenditures internally, that is by making use of cash flows. An alternative explanation for the strong cash flow/investment relationship is that managers divert free cash flow to unprofitable investment spending. One study assessing the relative importance of such an agency problem was performed by Oliner and Rudebusch (1992), who analysed several firm attributes that may influence the cash flow/investment relationship. They find that insider share holdings and ownership structure (variables that proxy for agency problems) do little to explain the influence that cash flow has on firm investment spending. Carpenter (1993) focused on the relationships among debt financing, debt structure, and investments pending to test the free cash flow theory. He finds that firms that restructure by replacing large amounts of external equity with debt increase their investment spending compared to non-restructured firms. He sees these results as inconsistent with free cash flow behavior, because cash flow committed to debt maintenance should be associated with reductions in subsequent investment spending. Findings by Strong and Meyer (1990) and Devereux and Schiantarelli (1990) support the free cash flow interpretation. Strong and Meyer (1990) disaggregate the investment and cash flow of firms in the paper industry into sustaining investment (i.e., productive capacity maintaining) and discretionary investment, and total cash flow and residual cash flow (i.e., cash flow after debt service, taxes, sustaining investment, and established dividends). Residual cash flow and discretionary investment are found to be positively and strongly related. This evidence suggests that residual cash flow is often used to fund unprofitable discretionary investments pending. Devereux and Schiantarelli (1990) find that the impact of cash flow on investment spending is greater for larger firms. One explanation they provide for this result is that large firms have more diverse ownership structures, and are more influenced by manager/shareholder agency problems. The Q model of investment relates investment to the firms stock market valuation, which is meant to reflect the present discounted value of expected future profits, Brainard and Tobin (1968). In the case of perfectly competitive markets and constant returns to scale technology, Hayashi (1982) showed that average Q, the ratio of the maximised value of the firm to the replacement cost of its existing capital stock, would be a sufficient statistic for investment rates. Tobins Q, further assumes that the maximised value of the firm can be measured by its stock market valuation. Under these assumptions, the stock market valuation would capture all relevant information about expected future profitability, and significant coefficients on cash-flow variables after controlling for Tobins Q could not be attributed to additional information about current expectations. However if the Hayashi conditions are not satisfied, or if stock market valuations are influenced by bubbles or any factors other than the present discounted value of expected future profits; then Tobins Q would not capture all relevant information about the expected future profitability of current investment. If that is the case, then additional explanatory variables like current or lagged sales or cash-flow terms could proxy for the missing information about expected future conditions. The classification of q ratios into high and low categories is based on a cut-off of one Lang, Stulz, and Walkling (1989). The latters motivation for this cut-off is partially based on the fact that under certain circumstances firms with q ratios below one have marginal projects with negative net present values (Lang and Litzenberger, 1989). However, q is also industry specific and one may argue that managers should not be held responsible for adverse shocks to their industries. As such, the industry average may be a useful alternative cut-off point to separate high q firms from low q firms. Hoshi, Kashyap, and Scharfstein (1991) regressed investment on Tobins q, other controlling variables, and cash flow. They interpreted differences in the importance of cash flow between different groups of firms as evidence of financing constraints. Results obtained by Vogt (1994) indicate that the influence of cash flow on capital spending is stronger for firms with lower Q values. This result suggests that cash flow-financed capital spending is marginally inefficient and provides initial evidence in support of the FCF hypothesis. The stronger the influence cash flow had on capital spending in this group, the larger the associated value of Tobins Q. After the results presented by Kaplan and Zingales (1997 and 2000), several studies have criticised the empirical test based on the cash flow sensitivity as a meaningful evidence in favour of the existence of financing constraints. The significance of the cash flow sensitivity of investment, it was argued, may then be the consequence of measurement errors in the usual proxy for investment opportunities, Tobins Q, and may provide additional information on expected profitability rather than being a signal of financing constraints. Gomes (2001) showed that the existence of financing constraints is not sufficient to establish cash flow as a significant regressor in a standard investment equation, while Ericson and Whited (2000) demonstrate that the investment sensitivity to cash flow in regressions including Tobins Q is to a large extent due to a measurement error in Q. Likewise, Alti (2003) shows that investment can be sensitive to changes in cash flow in the benchmark case where financing is frictionless. 2.3 Investment and Profitability The idea that investment depends on the profitability of a firm is amongst the oldest of macroeconomic relationships formulated. The sharp fluctuations in profitability in the average cost of capital since the 1960s revived interest in this relationship (Glyn et al, 1990). However the evidence for the impact of profitability on investment remains sketchy. Bhaskar and Glyn (1992) concluded that profitability must be regarded as a significant influence on investment, though by no means the overwhelming one. Their results indicated that enhanced profitability is not always a necessary, let alone a sufficient condition for increased investment. However, years later Glyn (1997) provided an empirical study that examined the impact of profitability on capital accumulation. He tested the impact of profitability in the manufacturing sector on investment for the period 1960-1993 for 15 OECD countries. His findings suggested that the classical emphasis on the role of profitability on investment wass still highly significant and had a very tight relationship. Korajczyk and Levy (2003) investigated the role of macroeconomic conditions and financial constraints in determining capital structure choice. While estimating the relation between firms debt ratio and firm-specific variables, they found out that there was a negative relation between profitability and target leverage, which was consistent with the pecking order theory. This indicated that if leverage of the firm is low, profitability will be high and the entity will be able to invest in positive NPV projects i.e. increase investment. Bhattacharyya (2008) recently provided an empirical study where he examined the effect of profitability and other determinants of investment for Indian firms. He found that Short-run profitability does not have consistent influence on investment decisions of firms, implying that one should concentrate on the long-run profitability of a firm. This indicates that profitability is still regarded as one of the major determinants underlying investment decisions of firms. However, he suggested that liquidity is relatively more important than profitability when it comes to firms investment decisions. 2.3 Investment and Liquidity Under the assumptions of illiquid capital and true uncertainty, management can never be sure that investment projects will produce sufficient liquidity to cover the cash commitments generated by their financing. Yet failure to meet these commitments may result in a crisis of managerial autonomy or even in bankruptcy. Thus, capital accumulation is a contradictory process. Investment is inherently risky, while the failure to invest will ultimately lead to the firms marginalization or demise. Crotty and Goldstein (1992) Chamberlain and Gordon (1989) used the annual domestic investment of all nonfinancial corporations in the United States between 1952 and 1981 in an attempt to determine the impact of liquidity on the profitable investment opportunities available to the corporation. They have put forward that in their long-run survival model, liquidity variables play an essential role as it captures the firms desire to avoid bankruptcy. It was also noted that there was a significant improvement in the explanation of investment when liquidity variables were added to the profitability variables of their regression, thereby supporting the view that liquidity is a pre-dominant determinant of investment and that they are positively related. Hoshi, Kashyap and Scharfstein (1991) attempted to find the relationship between investment and liquidity for Japanese firms. They found that high current profits increase current liquidity, thereby generating further investment from the firm to ensure future profitability and increased output to meet demand. Myers and Rajan (1998) suggested that liquid assets are generally viewed as being easier to finance and therefore, asset liquidity is a plus for nonfinancial corporations or individual investors. However, Myers and Rajan argued that although more liquid assets increase the ability to invest in projects, they also reduce managements ability to commit credibly to an investment strategy that protects investors. Johnson (2003) found that short debt maturity increases liquidity risk, which in turn, negatively affects leverage and the firms investment. Jonson also suggested that firms trade off the cost of underinvestment problems against the cost of increased liquidity risk when choosing short debt maturity 2.4 Investment and Sales Sales growth targets play a major role in the perceptions of top managers. Using surveys, Hubbard and Bromiley (1994) find sales is the most common objective mentioned by senior managers. Additional explanatory variables like current or lagged sales are very important in the investment equation as they can act as proxy for the missing information about expected future conditions in case such information has not been captured by Tobins Q. Kaplan and Norton (1992, 1993, 1996) argue that firms must use a wide variety of goals, including sales growth, to effectively reach their financial objectives. They suggested that Sales growth influences factorsà ¢Ã¢â€š ¬Ã‚ ¦..all the way to the implied opportunities for investments in new equipment and technologiesà ¢Ã¢â€š ¬Ã‚ ¦.. According to this study of 396 corporations, Kopcke and Howrey (1994) found that the capital spending of many of the companies corresponds very poorly with their sales and profits. These divergences suggest that sales and profits do not represent fully an enterprises particular incentives for investing. Consequently, these findings do not support generalizations contending that companies with more debt are investing less than their sales and cash flows would guarantee. Athey and Laumas (1994) using panel data over the period 1978-86, examined the relative importance of the sales accelerator and alternative internal sources of liquidity in investment activities of 256 Indian manufacturing firms. They found that when all the selected firms in the sample were considered together, current values of changes in real net sales and net profit were all significant in determining capital spending of firms. Azzoni and Kalatzis (2006) considered the importance of sales for investment decisions of firms. They found that sales presented a positive and significant relationship with investment in all cases. Impact of Financial Leverage on Investment Impact of Financial Leverage on Investment The term Investment is frequently used in jargon of economics, business management and finance. According to economic theories, investment is defined as the per-unit production of goods, which have not been consumed, but will however, be used for the purpose of future production. The decision for investment, also referred to as capital budgeting decision, is regarded as one of the key decisions of an entity. Leverage is a method of corporate funding in which a higher proportion of funds is raised through borrowing than stock issue. It is measured as the ratio of total debt to total assets; greater the amount of debt, greater the financial leverage. Financial Leverage is the ability of a company to earn more on its assets by taking on debt that allows it to buy or invest more in order to expand. Nowadays financial leverage is viewed as an important attribute of capital structure alongside equity and retained earnings. Financial leverage benefits common stockholders as long as the borrowed funds generate a return greater than the cost of borrowing, although the increased risk can offset the general cost of capital. In the past years, a large body of the literature has provided robust empirical evidence that financial factors have a significant impact on the investment decisions of firms. While traditional research on investment was based on the neoclassical theory of optimal capital accumulation (where under the assumption of perfect capital markets, the cost of financing does not depend on the firms financial position), more recent literature has increasingly incorporated frictions such as asymmetric information and agency problems as a source behind the relevance of the degree of financial pressure faced by the firm in determining the availability and the costs of external financing This chapter will seek to enclose literature on the impact of financial leverage on investment and other factors that may affect investment in firms. 1.1 Modigliani Miller (MM) 1958 theory with no taxation In what has been hailed as the most influential set of financial papers ever published, Franco Modigliani and Merton Miller addressed capital structure in a rigorous, scientific fashion, and their study set off a chain of research that continues to this day. Modigliani and Miller (1958) argued that the investment policy of a firm should be based only on those factors that will increase the profitability, cash flow or net worth of a firm. The MM view is that companies which operate in the same type of business and which have similar operating risks must have the same total value, irrespective of their capital structures. It is based on the belief that the value of a company depends upon the future operating income generated by its assets. The way in which this income is split between returns to debt holders and returns to equity should make no difference to the total value of the firm. Thus the total value of the firm will not change with gearing, and therefore neither will its Weighted Average Cost of Capita (Pandey, 1995). Many empirical literatures have challenged the leverage irrelevance theorem of Modigliani and Miller. The irrelevance proposition of Modigliani and Miller will be valid only if the perfect market assumptions underlying their analysis are satisfied Under the original MM propositions, leverage and investment were unrelated. If a firm had profitable investment projects, it could obtain funding for these projects regardless of the nature of its current balance sheet. 1.2 Modigliani Miller 1963 theory with tax M M (1963) found that the corporation tax system carries a distortion under which returns to debt holders (interest) are tax deductible to the firm, whereas returns to equity holders are not. They therefore concluded that geared companies have an advantage over ungeared companies, i.e. they pay less tax and will have a greater market value and a lower WACC. Following this research, the consensus that emerged was that tax is positively correlated to debt (Graham 1995, Miller 1977) and is considered a major influence in the debt policy decision. Modigliani et al (1963) argued that we should not waste our limited worrying capacity on second-order and largely self correcting problems like financial leveragingà ¢Ã¢â€š ¬Ã… ¸. That is firms should not be worried about growth as long as they have good projects in hand, since they will always be able to find means of financing those projects. 1.3 The Trade-Off Models Some of the assumptions inherent in the MM model can be relaxed without changing the basic conclusions as argued by Stiglitz (1969) and Rubenstein (1973). However, when financial distress and agency costs are considered, the MM models are altered significantly. The addition of financial distress and agency costs to the MM model results in a trade-off model. In such a model, the optimal capital structure can be visualized as a trade-off between the benefit of debt (the interest tax shield) and the costs of debt (financial distress and agency costs) as presented by Myers (1997) The trade-off models have intuitive appeal because they lead to the conclusion that both no-debt and all-debt are bad, while a moderate debt level is good. However, the trade-off models have very limited empirical support, Marsh (1982), suggesting that factors not incorporated in this model are also at work. Jensen and Meckling (1976) invoked a moral hazard argument to explain the agency costs of debt, proposing that high levels of debt will induce firms to opt for excessively risky investment projects. The incentive for such a move is that limited liability provisions in debt contracts imply that risky projects will provide higher mean returns to the shareholders: zero in low states of nature and high in good states. However, the higher probability of default will induce investors to demand either interest rates premiums or bond covenants that restrict the firms future use of debt. 1.4 Pecking-Order Theory Initiated by Donaldson (1961), the Pecking-Order theory argues that firms simply use all their internally-generated funds first, move down the pecking order to debt and then lastly issue equity in an attempt to raise funds. Firms follow this line of least resistance that establishes the capital structure. Myers noted an inconsistency between Donaldsons findings and the trade-off models, and this inconsistency led Myers to propose a new theory. Myers (1984) suggested asymmetric information as an explanation for the heavy reliance on retentions. This may be a situation where managers have access to more information about the firm and know that the value of the shares is greater than the current market value. If new shares are issued in this situation, there is a possibility that they would be issued at a too low price, thereby transferring wealth from existing shareholders to new shareholders. 1.5 Investment and Leverage One of the main issues in Corporate Finance is whether financial leverage has any effects on investment policies. The corporate world is characterized by various market imperfections, due to transaction costs, institutional restrictions and asymmetric information. The interactions between management, shareholders and debt holders will generate frictions due to agency problems and that may result in under-investment or over-investment incentives. Whenever we refer to investment, it is essential to distinguish between over- investment and under-investment. In his model, Myers (1977) argued that debt can create an overhang effect. His idea was that debt overhang reduces the incentives of the shareholder-management coalition in control of the firm to invest in positive net-present-value investment opportunities, since the benefits accrue, at least partially, to the bondholders rather than accruing fully to the shareholders. Hence, highly levered firms are less likely to exploit valuable growth opportunities as compared to firms with low levels of leverage. Underinvestment theory centers on a liquidity effect in that firms with large debt commitment invest less, no matter what their growth opportunities (Lang et al, 1996). In theory, even if debt creates potential underinvestment incentives, the effect could be attenuated by the firm taking corrective action and lowering its leverage, if future growth opportunities are recognized sufficiently early (Aivazian Callen, 1980). Leverage is optimally reduced by management ex ante in view of projected valuable ex post growth opportunities, so that its impact on growth is attenuated. Thus, a negative empirical relation between leverage and growth may arise even in regressions that control for growth opportunities because managers reduce leverage in anticipation of future investment opportunities. Leverage simply signals managements information about investment opportunities. The possibility that leverage might substitute for growth opportunities is referred to as the endogeneity problem. Over-investment theory is another problem that has received much attention over the years. It is described as investment expenditure beyond that required to maintain assets in place and to finance positive NPV projects. In these kind of situations, conflicts may arise between managers and shareholders (Jensen,1986 Stulz,1990). Managers seek for opportunities to expand the business even if that implies undertaking poor projects and reducing shareholder worth in the company. Managers abilities to carry such a policy is restrained by the availability of cash flow and further tightened by the financing of debt. Issuing debt commits the firm to pay cash as interest and principal, forcing managers to service such commitments with funds that may have otherwise been allocated to poor investment projects. Thus, leverage is one mechanism for overcoming the overinvestment problem suggesting a negative relationship between debt and investment for firms with weak growth opportunities. Too much debt also is not considered to be good as it may lead to financial distress and agency problems. Cantor (1990) explains that highly leveraged firms show a heightened sensitivity to fluctuations in cash flow and earnings since they face substantial debt service obligations, have limited ability to borrow additional funds and may feel extra pressure to maintain a positive cash flow cushion. Hence, the net effect would be reduced levels of investment for the firm in question. Accordingly, Mc Connell and Servaes (1995) have examined a large sample of non financial United States firms for the years 1976, 1986 and 1988. They showed that for high growth firms the relation between corporate value and leverage is negative, whereas that for low growth firms the relation between corporate value and leverage is positively correlated. This trend tends to indicate that to maximise corporate value, it is preferable to keep down leverage to a low level and to increase investment. Lang, Ofek and Stulz (1996) used a pooling regression to estimate the investment equation. They distinguish between the impact of leverage on growth in a firms core business from that in its non-core business. They argue that if leverage is a proxy for growth opportunities, its contractionary impact on investment in the core segment of the firm should be much more pronounced than in the non-core segment. They found that there exists a negative relation between leverage and future growth at the firm level. Also they argued that debt financing does not reduce growth for firms known to have good investment opportunities. Lang et al document a negative relation between firm leverage and subsequent growth. However, they find that this negative relation holds only for low q firms, i.e. those with fewer profitable growth opportunities. Thus, their findings appear to be most consistent with the view that leverage curbs overinvestment in firms with poor growth opportunities. Myers (1997) has examined possible difficulties that firms may face in raising finance to materialize positive net present value (NPV) projects, if they are highly geared. Therefore, high leverages may result in liquidity problem and can affect a firms ability to finance growth. Under this situation, debt overhang can contribute to the under-investment problem of debt financing. That is for firms with growth opportunities, debt have a negative impact on the value of the firm. Peyer and Shivdasani (2001) provide evidence that large increases in leverage affect investment policy. They report that, following leveraged recapitalizations, firms allocate more capital to business units that produce greater cash flow. If leverage constrains investment, firms with valuable growth opportunities should choose lower leverage in order to avoid the risk of being forced to bypass some of these opportunities, while firms without valuable growth opportunities should choose higher leverage to bond themselves not to waste cash flow on unprofitable investment opportunities. Ahn et al. (2004) document that the negative relation between leverage and investment in diversified firms is significantly stronger for high Q segments than for low Q business segments, and is significantly stronger for non-core segments than for core segments. Among low growth firms, the positive relation between leverage and firm value is significantly weaker in diversified firms than in focused firms. Their results suggest that the disciplinary benefits of debt are partially offset by the additional managerial discretion in allocating debt service to different business segments within a diversified organizational structure. Childs et al (2005) argued that financial flexibility encourages the choice of short-term debt, thereby dramatically reducing the agency costs of under-investment and over-investment. However the reduction in the agency costs may not encourage the firm to increase leverage, since the firms initial debt level choice depends on the type of growth options in its investment opportunity set. Aivazian et al (2005) analysed the impact of leverage on investment on 1035 Canadian industrial companies, covering the period 1982 to 1999. Their study examined whether financing considerations (as measured by the extent of financial leverage) affect firm investment decisions inducing underinvestment or overinvestment incentives. They found that leverage is negatively related to the level of investment, and that this negative effect is significantly stronger for firms with low growth opportunities than those with high growth opportunities. These results provide support to agency theories of corporate leverage, and especially to the theory that leverage has a disciplining role for firms with weak growth opportunities 1.6 Investment, Cash Flow and Tobins Q It was traditionally believed that cash flow was important for firms investment decisions because managers regarded internal funds as less expensive than external funds. In the 1950s and 1960s, this view led to numerous empirical assessments of the role of internal funds in firm investment behaviour. These studies found strong relationships between cash flow and investment. Considerable empirical evidence indicates that internally generated funds are the primary way firms finance investment expenditures. In an in-depth study of 25 large firms, Gordon Donaldson (1961) concludes that: Management strongly favoured internal generation as a source of new funds even to the exclusion of external funds except for occasional unavoidable bulges in the need for new funds. Another survey of 176 corporate managers by Pinegar and Wilbricht (1989) found that managers prefer cash flow over external sources to finance new investment; 84.3% of sample respondents indicate a preference for financing investment with cash flow. Researchers have also discovered the impact of cash flow on investment spending in Q models of investment. Fazzari, Hubbard, and Petersen (1988) find that cash flow has a strong effect on investment spending in firms with low-dividend-payout policies. They argue that this result is consistent with the notion that low-payout firms are cash flow-constrained because of asymmetric information costs associated with external financing. One reason these firms keep dividends to a minimum is to conserve cash flow from which they can finance profitable investment expenditures. Fazzari and Petersen (1993) find that this same group of low-payout firms smooths fluctuations in cash flow with working capital to maintain desired investment levels. This result is consistent with the Myers and Majluf (1984) finding that liquid financial assets can mitigate the underinvestment problem arising from asymmetric information. Whited (1992) also extended the Fazzari, Hubbard, and Petersen (1988) results in a study of firms facing debt financing constraints due to financial distress. She found evidence of a strong relationship between cash flow and investment spending for firms with a high debt ratio or a high interest coverage ratio, or without rated debt. Himmelberg and Petersen (1994) in a study of small research and development firms find that cash flow strongly influences both capital and R D expenditures. They argue that the asymmetric information effects associated with such firms make external financing prohibitively expensive, forcing them to fund expenditures internally, that is by making use of cash flows. An alternative explanation for the strong cash flow/investment relationship is that managers divert free cash flow to unprofitable investment spending. One study assessing the relative importance of such an agency problem was performed by Oliner and Rudebusch (1992), who analysed several firm attributes that may influence the cash flow/investment relationship. They find that insider share holdings and ownership structure (variables that proxy for agency problems) do little to explain the influence that cash flow has on firm investment spending. Carpenter (1993) focused on the relationships among debt financing, debt structure, and investments pending to test the free cash flow theory. He finds that firms that restructure by replacing large amounts of external equity with debt increase their investment spending compared to non-restructured firms. He sees these results as inconsistent with free cash flow behavior, because cash flow committed to debt maintenance should be associated with reductions in subsequent investment spending. Findings by Strong and Meyer (1990) and Devereux and Schiantarelli (1990) support the free cash flow interpretation. Strong and Meyer (1990) disaggregate the investment and cash flow of firms in the paper industry into sustaining investment (i.e., productive capacity maintaining) and discretionary investment, and total cash flow and residual cash flow (i.e., cash flow after debt service, taxes, sustaining investment, and established dividends). Residual cash flow and discretionary investment are found to be positively and strongly related. This evidence suggests that residual cash flow is often used to fund unprofitable discretionary investments pending. Devereux and Schiantarelli (1990) find that the impact of cash flow on investment spending is greater for larger firms. One explanation they provide for this result is that large firms have more diverse ownership structures, and are more influenced by manager/shareholder agency problems. The Q model of investment relates investment to the firms stock market valuation, which is meant to reflect the present discounted value of expected future profits, Brainard and Tobin (1968). In the case of perfectly competitive markets and constant returns to scale technology, Hayashi (1982) showed that average Q, the ratio of the maximised value of the firm to the replacement cost of its existing capital stock, would be a sufficient statistic for investment rates. Tobins Q, further assumes that the maximised value of the firm can be measured by its stock market valuation. Under these assumptions, the stock market valuation would capture all relevant information about expected future profitability, and significant coefficients on cash-flow variables after controlling for Tobins Q could not be attributed to additional information about current expectations. However if the Hayashi conditions are not satisfied, or if stock market valuations are influenced by bubbles or any factors other than the present discounted value of expected future profits; then Tobins Q would not capture all relevant information about the expected future profitability of current investment. If that is the case, then additional explanatory variables like current or lagged sales or cash-flow terms could proxy for the missing information about expected future conditions. The classification of q ratios into high and low categories is based on a cut-off of one Lang, Stulz, and Walkling (1989). The latters motivation for this cut-off is partially based on the fact that under certain circumstances firms with q ratios below one have marginal projects with negative net present values (Lang and Litzenberger, 1989). However, q is also industry specific and one may argue that managers should not be held responsible for adverse shocks to their industries. As such, the industry average may be a useful alternative cut-off point to separate high q firms from low q firms. Hoshi, Kashyap, and Scharfstein (1991) regressed investment on Tobins q, other controlling variables, and cash flow. They interpreted differences in the importance of cash flow between different groups of firms as evidence of financing constraints. Results obtained by Vogt (1994) indicate that the influence of cash flow on capital spending is stronger for firms with lower Q values. This result suggests that cash flow-financed capital spending is marginally inefficient and provides initial evidence in support of the FCF hypothesis. The stronger the influence cash flow had on capital spending in this group, the larger the associated value of Tobins Q. After the results presented by Kaplan and Zingales (1997 and 2000), several studies have criticised the empirical test based on the cash flow sensitivity as a meaningful evidence in favour of the existence of financing constraints. The significance of the cash flow sensitivity of investment, it was argued, may then be the consequence of measurement errors in the usual proxy for investment opportunities, Tobins Q, and may provide additional information on expected profitability rather than being a signal of financing constraints. Gomes (2001) showed that the existence of financing constraints is not sufficient to establish cash flow as a significant regressor in a standard investment equation, while Ericson and Whited (2000) demonstrate that the investment sensitivity to cash flow in regressions including Tobins Q is to a large extent due to a measurement error in Q. Likewise, Alti (2003) shows that investment can be sensitive to changes in cash flow in the benchmark case where financing is frictionless. 2.3 Investment and Profitability The idea that investment depends on the profitability of a firm is amongst the oldest of macroeconomic relationships formulated. The sharp fluctuations in profitability in the average cost of capital since the 1960s revived interest in this relationship (Glyn et al, 1990). However the evidence for the impact of profitability on investment remains sketchy. Bhaskar and Glyn (1992) concluded that profitability must be regarded as a significant influence on investment, though by no means the overwhelming one. Their results indicated that enhanced profitability is not always a necessary, let alone a sufficient condition for increased investment. However, years later Glyn (1997) provided an empirical study that examined the impact of profitability on capital accumulation. He tested the impact of profitability in the manufacturing sector on investment for the period 1960-1993 for 15 OECD countries. His findings suggested that the classical emphasis on the role of profitability on investment wass still highly significant and had a very tight relationship. Korajczyk and Levy (2003) investigated the role of macroeconomic conditions and financial constraints in determining capital structure choice. While estimating the relation between firms debt ratio and firm-specific variables, they found out that there was a negative relation between profitability and target leverage, which was consistent with the pecking order theory. This indicated that if leverage of the firm is low, profitability will be high and the entity will be able to invest in positive NPV projects i.e. increase investment. Bhattacharyya (2008) recently provided an empirical study where he examined the effect of profitability and other determinants of investment for Indian firms. He found that Short-run profitability does not have consistent influence on investment decisions of firms, implying that one should concentrate on the long-run profitability of a firm. This indicates that profitability is still regarded as one of the major determinants underlying investment decisions of firms. However, he suggested that liquidity is relatively more important than profitability when it comes to firms investment decisions. 2.3 Investment and Liquidity Under the assumptions of illiquid capital and true uncertainty, management can never be sure that investment projects will produce sufficient liquidity to cover the cash commitments generated by their financing. Yet failure to meet these commitments may result in a crisis of managerial autonomy or even in bankruptcy. Thus, capital accumulation is a contradictory process. Investment is inherently risky, while the failure to invest will ultimately lead to the firms marginalization or demise. Crotty and Goldstein (1992) Chamberlain and Gordon (1989) used the annual domestic investment of all nonfinancial corporations in the United States between 1952 and 1981 in an attempt to determine the impact of liquidity on the profitable investment opportunities available to the corporation. They have put forward that in their long-run survival model, liquidity variables play an essential role as it captures the firms desire to avoid bankruptcy. It was also noted that there was a significant improvement in the explanation of investment when liquidity variables were added to the profitability variables of their regression, thereby supporting the view that liquidity is a pre-dominant determinant of investment and that they are positively related. Hoshi, Kashyap and Scharfstein (1991) attempted to find the relationship between investment and liquidity for Japanese firms. They found that high current profits increase current liquidity, thereby generating further investment from the firm to ensure future profitability and increased output to meet demand. Myers and Rajan (1998) suggested that liquid assets are generally viewed as being easier to finance and therefore, asset liquidity is a plus for nonfinancial corporations or individual investors. However, Myers and Rajan argued that although more liquid assets increase the ability to invest in projects, they also reduce managements ability to commit credibly to an investment strategy that protects investors. Johnson (2003) found that short debt maturity increases liquidity risk, which in turn, negatively affects leverage and the firms investment. Jonson also suggested that firms trade off the cost of underinvestment problems against the cost of increased liquidity risk when choosing short debt maturity 2.4 Investment and Sales Sales growth targets play a major role in the perceptions of top managers. Using surveys, Hubbard and Bromiley (1994) find sales is the most common objective mentioned by senior managers. Additional explanatory variables like current or lagged sales are very important in the investment equation as they can act as proxy for the missing information about expected future conditions in case such information has not been captured by Tobins Q. Kaplan and Norton (1992, 1993, 1996) argue that firms must use a wide variety of goals, including sales growth, to effectively reach their financial objectives. They suggested that Sales growth influences factorsà ¢Ã¢â€š ¬Ã‚ ¦..all the way to the implied opportunities for investments in new equipment and technologiesà ¢Ã¢â€š ¬Ã‚ ¦.. According to this study of 396 corporations, Kopcke and Howrey (1994) found that the capital spending of many of the companies corresponds very poorly with their sales and profits. These divergences suggest that sales and profits do not represent fully an enterprises particular incentives for investing. Consequently, these findings do not support generalizations contending that companies with more debt are investing less than their sales and cash flows would guarantee. Athey and Laumas (1994) using panel data over the period 1978-86, examined the relative importance of the sales accelerator and alternative internal sources of liquidity in investment activities of 256 Indian manufacturing firms. They found that when all the selected firms in the sample were considered together, current values of changes in real net sales and net profit were all significant in determining capital spending of firms. Azzoni and Kalatzis (2006) considered the importance of sales for investment decisions of firms. They found that sales presented a positive and significant relationship with investment in all cases.

Pay and Rewards in Human Resource Strategies

Pay and Rewards in Human Resource Strategies Introduction Socometal is joint ventures were 52% owned by French company and 48% by Senegalese it deals with metal container and can. 150-800 are working in the company for the past 20 years with the profit of $144 million. Analysis In this case study we can find three important people they are Diop is a Senegalese engineer (Asst Production Manager), Mr Olveir Bernard is a production Manager from France and NDiaye is a factory worker. African Management systems are followed in running the company. Majority of the managers are from Africa with only 8-10 Managers are from France. There was a meeting, where NDiaye requested Diop to sign an agreement regarding the overtime of two hour benefits to increase the production by 30%. NDiaye is solely responsible for the entire production process. Accepting the offer he positively replied that â€Å"We could even produce more†. 12000 units are manufactured per day and requests for 30% increase in the production level. Mr Bernard did not have good quality of manager as he was arrogant, uncommunicative and negative because of his character growth was limited. Socometal agrees with the contract to meet the short time increase in the volume of production. After doing so me calculation this was not agreed by Mr Bernard as he said â€Å"We will never get from our workers† after saying this he went to his home town due to illness. After the agreement proposal by Diop, he went to different department to discuss the proposal. Some French and Italian expatriates expressed that the workers will not do overtime but â€Å"most agreed it was worth a try†. Diop gave his agreement on condition to NDiaye by ensuring 30% increase in production by end of the day. Wages will be fixed only after assessing the increase of production by the management. One old French logistics manager said â€Å"Africans arent lazy but they work to live, and once they have enough they refuse to do more†. Action came into play after four days negotiation between Diop and NDiaye. Work was allocated to two of his subordinates to save enough time and energy to mobilise the workers. One of the Senegalese foreman declared that this agreement is an one of the best pract ice were workers can earn an extra money and also show French management that they are more capable workers than they think. Worker started one extra hour per day to increase the production to 8% more than expectation. Production levels been increased to 18000-22000 units per day between 38%-43% in two month time they created history and all the workers were so proud of their results. Mr Bernard returned from his illness he was shocked to see changes in the company there was dispute between Diop and Mr Bernard regarding the two hours pay to the worker, where work was achieved in one hour. Diops agreement with worker was not accepted by his manager and he stated that you have put the management in trouble and acted against company policies. He was unable to express his views about the process change to his manager as he was not interested. Thinking in employees prospective he plans to meet the Managing Director. To respect the words of Diop and NDiaye workers decided to maintain the new production level. The worker expressed if Mr Bernard deals the same as he did before the production reduces to normal. Background of HRM in India In todays world there is intense cut throat competition and everyone wants to reach great heights in order to stay in the top level for a longer period of time. India is land of opportunities and it is becoming one of the hot spots in the world. Human resource management is not same all over the world, its entirely differs from the societies within individual countries. Culture is defined as a group which moulds a person values, ethics and identity with the following differences like ethnicity, race, gender, class, religion, country so on and so forth. Cross culture in management terms- It means people working in the different cultural environment with different sets of people with different culture, caste and etc. However it is said that culture is concerned with the behaviour of our job, its all about adopting to the working environment, cultural differences, styles, participate in meetings, what we speak and finally dealing with the differences. Every company has an organisation s tructure and differs with each company; it literally means the companys structure of an organization according to their designation and ranks, 3 types of hierarchy system which is maintained in our country namely hierarchical, matrix and flat. These structures are prepared keeping just one home culture which indirectly hits back as diversity of culture is involved. It deals with the vision of the company and also defines responsibility to each staffs or individuals. It is also called as a management tool where division of labour is cultivated and it gives detailed structure of role from upper level management to lower level of management. Most companies in India are quality centric organizations which are ISO 9001:2000 certified which generally means quality is maintained. Managing people in India requires micro management strategy only with this strategy best outcome is resulted as when we compare to our western countries is different. Companies tends to run business on one talente d individual who will have the main control to direct the employees in order to get the assigned work done without any further questions. Meaning of pay in management terms Pay means its an amount which is paid to the staff in the organisation for the services rendered. There are 2 types of pay i.e. fixed and variable pay. Pay scales vary as per the role and designation in the company. Now let me take you to the subject matter of pay satisfaction in India. We all know that salary is an outcome of an employees work and it plays a vital role in the tenure of stay in an organization. Two types of organisation are operated in India they are Private and Public organisation. Private organisation pays more to employees compare to public organisation. Job security is less in private organisation when compared to public organisation. Some employees are paid more than the fixed salary due to personal attributes there are 2 types of variable are fixed and variable pay. All the companies in India are performance driven organization and they will undertake various improvements on research and development techniques by encouraging SMART objectives in order to drive and reward performances. In order to encourage performance, the company institutes a variable pay plan, for staff members in Work Level 1 and Work Level 2, Variable Pay is based completely on individual performance outcomes and for staff members in Work Level 3 and above the plan is based on documented annual corporate milestones translated into annual departmental and individual goals and performances. The performance contributions in the individual and corporate goals are rewarded every quarter. Below table is one of the examples of variable pay scheme. Managers in India Managers are one of the core head of a company with a significant impact in terms of their implementation in international companies. A manager should build a good rapport with his employees and moreover he should be kind and if any problem arises he should handle it carefully as many of the employees future hangs with him. There is a saying like, â€Å"Good managers gives good business†. Managers are exceedingly excellent and they have their own strengths in companys point of view. Strengths as follows like communication skills, managing a team, convincing employees, motivation and etc. Employees work harder and their work will not be notified as more of internal politics takes place. Let me give u an example to support my statement. Eg- Mr A works in, â€Å"MT† company for 5 years and he does not have good skills to support his tenure in the company, he was staying only because he had good rapport in the higher level management and Mr B joins Mr A as a colleague in the same department 3 years earlier, after 2 years there was an requirement for senior position where Mr B had all the requirements to support his 2 years stay in the company, management took a bad decision by recruiting Mr A stating that he had better work experiences when compared with Mr B. This is how mangers in the company hire an existing employee to a next level even though employee has good skills and all the qualifications to match the job profile, they would rather go to an employee who has only experience and not anything else. The final area of consideration in human resource management is pay and reward in perception relating to cross culture Cross culture issues come in the organisation level, the simple reason is that companies operates in different countries organizes their daily activities or business differently. Cross culture takes place when company goes for globalisation. One of the major competitions that the companies in India encounter is that in the domestic market, for instance, that international firms now faces a stiff competition from goods produced in India by imports and MNCs. Cross culture differences causes a great challenge to HRM Factors affecting industrial relations, loyalty, productivity etc are the attitude of the employers, values, outlooks, beliefs and the social factors. Its a never ending process and there is no stoppage to pick the cross cultural differences as they are many. We can differences in the labour mobility and inter personal factors. Let me give a best example. In UK we can find that head of the company or boss will be called as MR or by name but in our country addressing a boss by name would not be received Attitude towards employment Attitude varies from one individual to another individual, in the same way attitude of employers and employees in different country changes. We have heard about, â€Å"Fire and Hire policy†, as it is common in many countries but in some countries they follow lifetime employment. Earlier we (India) were following lifetime employment and employees will have right to change job as they preferred without giving any opportunities to newcomers by creating a surplus manpower and in these situations it is great difficult in dislodging inefficient employees. However the good news is that we are changing to the foreign culture by implementing Fire and Hire Policy. Salary Salary is nothing but a sizeable amount which is paid to employees of the company which may be fixed or variable. Money plays a major part in everyones life and it has become an essential resource just like water and air where we cant live without it. In India salary is not fixed for all the employees even though staffs in the same team work together, there lot of differences which really hurts in a big time. This is because of internal politics among employees and management, in this case not only management has to be blamed but also employees who uses personal force like emotions, love or attachments. Recommendations or influence Recommendations play an important role in India. For instance an employee, who does not have any management skills and ability to work in a company, still will be recruited to work due to the influence of higher authorities like politician, senior workers in the organisation and etc. When compared to other parts of the world, the entire management system is purely based on the individual working skill and attitude. Performance Appraisal Performance appraisal is nothing but the assessment of employees performance and meeting the set targets. In India appraisal is done on yearly basis and employees will be intimidated by the pay increase from the management. We have skilled labours and pay is not compensated with that skills. By evaluating employees performance management takes all the necessary aspects into consideration like metrics which should always be green and not even amber is entertained. Before performance appraisal, managers would speak in such a way that better appraisals are given to the workers and get the job done even on weekends where salary is not counted for that day. They would also tell that they will look after the future growth in the company but fail to do so even though they employees have brilliant track records. Once appraisals are done managers does not even listen to employees feedback on appraisals. The following chart demonstrates increase in HRA, Current Allowance and Medical Allowance and there is no difference in Basic Salary even though performance appraisal in increased by 4% Compensation and rewards Compensation entails salary and other benefits, salary refers to the wage or salary the employees earn, the reason for compensation is that employees work harder which will influence the attitudes and behaviours. In other words its just like a motivation or energising employees to perform at the highest well. Compensations are just said but its not given. Managements Decision Management takes decision only in companys point of view and not in employees perspective. Before taking decision even suggestions from the employees are not welcomed. Even employees do understand its not necessary to consult in the entire cases but to some extent it has to be discussed where employees are involved in the work. An individual opinion does not count even though we (employees) are called as company assets. Employee Relations Good employee relations will be recognised with the good rapport and team building environment but in India employee relations are not as very good as it was earlier. Employees are not valued as they are underrated even though they perform well. Recommendations Each and every employee should be treated equally with no variances All the employees must be treated equally with respect and there should not be any variances. It means that management sets up company policies stating that there should be no discrimination, harassment of any employee either directly or indirectly with respect to race, culture, nationality, marital status and age etc. However employees do not follow and creates hassle in the organisation by not following the ethics and principles. Manager should build good rapport with the employees There are several factors which contribute to build rapport with the employees. Managers earn their respect by respecting the employees. If an employee does not perform well or fail to meet the target, discus the problems that they face in an informal way and support them when they are down and out. Have an informal talks when needed than formal talks, they should not neglect their work as priority should be given to employees work than anything else. A manager should entertain to have open discussions Manager is not the only person who works in the organisation but there are many of the employees, staffs and workers work above or under him. Good decision yields good business to the company so when managers take decision he should take decisions in management point of view and with the employees perspective in a better way. Minimum wage act as per Government of India Revised wage is Rs 100 per day and it is not properly designed to lower categories of people working in the organisation such as security, housekeeping department, etc. Some people do not know what our minimum wages is and company utilizes the resources very well, as majority of the employees are illiterate. Government of India should ban consultancies or agencies who operates illegally Consultancy is a recruitment centre where people are trained and recruited on behalf of the company. There are number of consultancies in India and its rapidly growing, People who lack skills can even join the company by paying huge amount of money and consultancies are misusing it in the name of recruitment. Where as in other countries the role is to forward the resume to the company and their work stops. Employees should be compensated with better pay Awards and reward is not given to the individuals who works in the company and their work is not recognized by the top level management. Skilled labours are not paid properly for their work. Most of the MNC companies have their employees to sign a contract or just like a bonded labour which is illegal in India but management follows the same and interestingly employees signs the contract because of stiff competition in the market and risk of not getting the desired job. Compensations are not paid fully and correctly in time during emergencies. During training period and internship programmes trainee should be given atleast minimum wages to satisfy the basic needs Salary structure should be well organised by the management Management should implement good performance appraisals as in India we can find that whenever appraisals are done only with respect to HRA, medical and travelling allowances, no changes are made in the basic salary. Management plays a hidden role in fixing the basic salary to the employees, as it should fix different levels of basic pay as per the role and designation in the company. So whenever an employee moves forward to the next level, he should be accompanied with respect to the salary structures as per the requirements of the specified designation demands. References Armstrong, M. (1997) People and Organisation. London Henderson, I. (2008) Human Resource Management. London: CIPD Johnson, R. (2004) The Practice of Cultural Studies. London: SAGE Perkins,Stephen J. Shortland, Susan M. (2006) Strategic International Human Resource Management. London: CIPD Sharma, a. Khandekar, A. (2006) Strategic Human Resource Management. London: SAGE Thomas J Bergmann Vida G Searpello (2000) 4th edn. Compensation Decision Making. London: Willy McCourt Derek Eldridge (2003) Global Human Resource Management. London: (n. d.) [online] available from [04.04.10] (n. d.) [online] available from [08.04.10] (n. d.) 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