Assume that you are being recruited by a company (Time Warner Inc.) for one of its managerial positions. The position is in a field of your professional expertise, and involves some financial responsibilities. Naturally, you feel undecided at first. On the one hand, you are not familiar with the company. You do not wish to be part of a “bad” company. On the other hand, you can research about the company to familiarize yourself with it. The offer is generous and you are eager to contribute to and grow with a “good” company. You have to do some research and analysis before deciding to join the company or not. The following are some questions addressing governance and financial concerns that you consider before making up your mind. Answer each of the following questions, to reach a conclusion at the end.
1) GOVERNANCE ENVIRONMENT
Assess the governance environment of the firm by considering its governance and management structure. Your discussion could incorporate board directors’ information, including the competence, and independence of board directors. Your discussion could also incorporate auditors’ information and analysts’ reports. Additional information may be obtained from the firm’s Annual Report (for example the MD&A Section, or the CEO’s message, or the Chairman’s message).
2) AGENCY CONFLICTS
Continue to assess the governance environment of the firm by considering conflicts of interest (or agency conflicts). What are agency conflicts? Provide two examples of conflicts of interest in the company (agency theory can be used as supporting theory) and analyze the conflicts situation. Explain how the company can use incentives and financial reporting to mitigate the conflicts of interest you described.
each part no more than 500 words.