Institutional Holdings and Corporate Governance

Institutional Holdings and Corporate Governance CHAPTER IV As noted earlier, the need for corporate governance arises from the potential conflicts of interest among participants (stakeholders) in corporate structure. These are often referred as agency problems arise from two main sources. First, different participants have different goals and preferences. Second, the participants have imperfect information as to each others actions, knowledge and preferences. Berle and Means (1932) addressed these conflicts by examining the separation of ownership and control. They noted that this separation, in the absence of other corporate governance mechanisms, provide executives with the ability to act in their own self-interest rather than in the interest of shareholders. However, executives activities are potentially constrained by numerous factors that constitute and influence the governance of the corporations that they manage. These factors can be thought of as either internal control mechanisms (such as the board) or external control mechanisms (s uch as the market for corporate control). An increasingly important external control mechanism affecting governance worldwide is the emergence of institutional investors as equity owners. Although institutional investors are the predominant players in some countries financial markets and are therefore important in corporate governance, yet the ownership  structures and other governance characteristics differ across markets. These differences are attributable in part to legal and regulatory systems and in part to the manner in which the markets have evolved. These characteristics will continue to vary across countries, leading to differences in the role and influences of institutional investors in corporate governance. Previous researchers have shown that because of the costs involved, only large shareholders have the incentive to provide extensive monitoring of management. Whether institutions as large shareholders should, or will, provide such monitoring depends in part on the constraints to which they are subjected, their objectives, and their preferences for liquidity. Keeping the above into consideration, it is pertinent to examine the intricacies of institutional holdings in the governance matters of Indian corporates. Many a time, institutional holdings pre-empts good corporate governance still at other times, good corporate governance endues institutional investment in the firm. The ongoing debate as to the institutional holdings and the corporate governance is very live or interactive in the academics these days too. The results of earlier studies are inconclusive as to the deterministic value of the one or the other. In the present study, Corporate Governance Score index has been developed on the basis of key characteristics of Standard and Poors Transparency and Disclosure Benchmark to rate sampled firms in terms of corporate governance. The institutional holdings in terms of equity investment has been expressed in percentages to total investment and comparatively, in terms of the relative composition of the institutional equity investment. This chapter makes a detailed analysis of the dynamics of corporate governance and the institutional holdings in the following three perspectives: 4.1) Dynamics of institutional holdings and its composition 4.2) Relationship between Institutional Holdings (explanatory variable) and the Corporate Governance (dependent variable) 4.3) Relationship between the Corporate Governance (explanatory variable) and Institutional Holdings (dependent variable) The results obtained for the sampled in this regard are reported, in an analytical frame, here as under: 4.1.1) Status of Institutional Holdings: The results obtained for sampled companies as regard to the status of institutional holdings in the sampled companies during the study period 2004-08 are summarized in table no. 4.1 given below: Table 4.1 Institutional Holdings in the Sampled Companies Institutional Holdings (%) Number of Companies 2004 N (%) 2005 N (%) 2006 N (%) 2007 N (%) 2008 N (%) Below 5 61 30.5 53 26.5 46 23.0 46 23.0 47 23.5 5-10 34 17.0 31 15.5 30 15.0 26 13.0 27 13.5 10-15 30 15.0 34 17.0 22 11.0 25 12.5 22 11.0 15-26 37 18.5 40 20.0 43 21.5 43 21.5 42 21.0 26-50 36 18.0 38 19.0 54 27.0 55 27.5 55 27.5 Above 50 02 1.0 04 2.0 05 2.5 05 2.5 07 3.5 Total 200 100 200 100 200 100 200 100 200 100 The information inputs reported in the present table reveals that the proportions of institutional holdings in the sampled companies have increased over the years. The numbers of companies with larger proportions of institutional holdings have been increasing and the numbers of companies with smaller proportions of holdings have been declining over the study period. As institutions have above 50 percent holdings in only 1 percent companies in 2004, where as in the last year of the study period, it increased to 3.5 percent. Similarly, institutions have holdings from 26 to 50 percent in 18 percent companies in 2004 that rises to 27.5 percent companies in 2008. The same trend follows for the companies in which institutions have holdings from 15 to 26 percent. The decreasing number of companies with relatively lower institutional holdings also validates it. As institutions have less than 5 percent stake in 30.5 percent companies in 2004, which reduced to only 23.5 percent companies in 2008. Similarly, institutions have holdings up to 10 percent in 17 percent companies that reduced to 13.5 percent in the last year of the study period. Thus, it is observed that institutional investors have been increasing their stake in the sampled companies over the study period. Hence, it is inferred that institutional investors have been consistently getting more interested in the sampled companies over the study period. 4.1.2 Constituents of Institutional Holdings: As noted earlier, Institutional holdings have been further classified into three categories i.e., Mutual Fund, (Banks, Financial Institutions and Insurance Companies) and Foreign Institutional Investors. The results obtained for the sampled companies as regard to the status of Mutual Funds holdings in relation to the total shareholdings and to the total institutional investors in the sampled companies during the study period 2004-08 are summarized in part (a) and part (b) of the table no. 4.2 given below: Table 4.2 (a) MF Holdings in Relation To Total Shareholdings Mutual Fund Holdings (%) Number of Companies 2004 N (%) 2005 N (%) 2006 N (%) 2007 N (%) 2008 N (%) Below 5 140 70.0 143 71.5 117 58.5 113 56.5 119 59.5 5-10 42 21.0 34 17.0 52 26.0 54 27.0 41 20.5 10-15 14 7.0 14 7.0 22 11.0 23 11.5 29 14.5 15-20 03 1.5 07 3.5 07 3.5 07 3.5 07 3.5 Above 20 01 0.5 02 1.0 02 1.0 03 1.5 04 2.0 Total 200 100 200 100 200 100 200 100 200 100 Table 4.2 (b) MF Holdings in Relation to Total Institutional Holdings Mutual Funds Holdings (%) Number of Companies 2004 N (%) 2005 N (%) 2006 N (%) 2007 N (%) 2008 N (%) 0-20 96 48.0 104 52.0 100 50.0 103 51.5 101 50.5 20-40 55 27.5 38 19.0 41 20.5 50 25.0 47 23.5 40-60 22 11.0 21 10.5 24 12.0 14 7.0 23 11.5 60-80 09 4.5 18 9.0 19 9.5 16 8.0 17 8.5 Above 80 18 9.0 19 9.5 16 8.0 17 8.5 12 6.0 Total 200 100 200 100 200 100 200 100 200 100 The information inputs reported in part (a) of the present table depict that mutual funds have increased their proportions of shareholdings in relation to the total shareholdings over the study period. The number of sampled companies with higher proportions of mutual funds holdings has been increasing over the study period. Similarly, the number of sampled companies with lower proportions of mutual funds holdings has been decreasing over the same period. As mutual funds have more than 20 percent holdings in 0.5 percent companies in 2004, which increased to 2 percent companies at the end of the study period. Similarly, Mutual Funds have holdings to the extent of 20 percent only in 1.5 percent companies in 2004 that increased to 3.5 percent companies in 2008. It is also observed that there were only 14 companies in 2004 in which mutual funds holdings were from 10 to 15 percent, which increased to more than double at the end of the study period. It is also validated by the observations of the companies in which mutual funds have lower stake. There were 70 percent companies in which mutual funds had less than 5 percent holdings and the proportion of companies with such holdings reduced to 59.5 percent in 2008. Hence, it is inferred that mutual fund companies have become more interested in the sampled companies over the study period. The information inputs reported in part (b) of the present table reveal out that there is no consistency in the investment pattern of mutual funds in the sampled companies over the study period. Mutual fund holdings in relation to total institutional holdings have remained more or less between zero and 20 percent in about 50 percent companies. On an average in 23 percent companies, mutual funds hold 20 to 40 percent shares. Mutual Funds reduced their holdings in 20 to 40 percent category in sampled companies over the study period. Where as there has not been major change in the number of companies with 40 to 60 percent mutual fund holdings. On the other hand, mutual funds have increased their stake from 60 to 80 percent in sampled companies over the study period. There are 9 companies with such holdings, which increased to 17 companies in 2008. But the number of sampled companies with mutual funds holdings more than 80 percent has gone down over the study period. As in 2004, there ar e 9 percent companies that reduced to 6 percent at the end of the study period. Hence, no inference can be drawn about the investment behaviour of mutual funds in relation to the total institutional holdings in sampled companies over the study period. The results obtained for sampled companies as regard to the status of Banks, FIs and ICs holdings in relation to the total shareholdings and total institutional holdings in the sampled companies during the study period 2004-08 are summarized in part (a) and part (b) of the table no. 4.3 given below: Table 4.3 (a) Banks, FIs and ICs Holdings in Relation To Total Shareholdings Bank, FI and IC Holdings (%) Number of Companies 2004 N (%) 2005 N (%) 2006 N (%) 2007 N (%) 2008 N (%) Below 5 127 63.5 135 67.5 142 71.0 139 69.5 141 70.5 5-10 36 18.0 28 14.0 27 13.5 34 17.0 29 14.5 10-15 19 9.5 24 12.0 19 9.5 18 9.0 18 9.0 15-20 09 4.5 08 4.0 07 3.5 04 2.0 08 4.0 Above 20 09 4.5 05 2.5 05 2.5 05 2.5 04 2.0 Total 200 100 200 100 200 100 200 100 200 100 Table 4.3 (b) Banks, FIs and ICs Holdings in Relation to Total Institutional Holdings Banks, FIs and ICs Holdings (%) Number of Companies 2004 N (%) 2005 N (%) 2006 N (%) 2007 N (%) 2008 N (%) 0-20 70 35.0 90 45.0 103 51.5 99 49.5 99 49.5 20-40 34 17.0 34 17.0 41 20.5 41 20.5 34 17.0 40-60 29 14.5 30 15.0 16 8.0 23 11.5 37 18.5 60-80 21 10.5 13 6.5 17 8.5 15 7.5 08 4.0 Above 80 46 23.0 33 16.5 23 11.5 22 11.0 22 11.0 Total 200 100 200 100 200 100 200 100 200 100 The information inputs reported in the part (a) of the present table depicts that the proportions of Banks, Financial Institutions and Insurance Companies in the sampled companies have decreased over the years. The numbers of companies with lower proportions of these holdings have been increasing and the numbers of companies with higher proportions of holdings have been decreasing over the study period. As in 63.5 percent companies, Banks and others hold less than 5 percent shares in 2004 while in 2008, 70.5 percent companies have the same holdings reflecting that over the study period, the above category of institutional investors have shown less interest in the sampled companies. Similarly, Banks and others hold up to 10 percent of total shareholdings in 36 companies which reduced to 27 in the year 2006 and finally to 29 companies in the year 2008. Likewise, the number of companies with more than 20 percent holdings has reduced from 4.5 percent in 2004 to 2 percent in 2008. Thus, i t is observed that Banks, FIs and ICs have withdrawn their substantial holdings in some companies while number of companies with marginal holdings has increased. Hence, it is inferred that Banks, FIs and ICs are getting less interested in the sampled companies over the study period. The information inputs reported in the part (b) of the present table depict the results coherent with the results shown in part (a) as Banks, Financial Institutions and Insurance Companies have decreased their holdings in relation to total institutional holdings in the sampled companies over the study period as well. They have more than 80 percent holdings in 23 percent companies in 2004 but in the last year of the study period, it was just in 11 percent companies. Similarly, these investors had 60 to 80 percent holdings in 21 companies in 2004, but in 2008, the number of companies with such holdings reduced to only 8 companies. The same is validated by the proportional increase in the number of companies with relatively lower holdings. Banks and others held to the limit of 20 percent shares in 70 companies in 2004 and in 2008, the number of companies with such holdings rose to 99. These investors have shown more interest in increasing their holdings from 40 percent to 60 percent in the sampled companies over the study period as they had such holdings in 14.5 percent companies in 2004 that increased to 18.5 percent in the last year of the study period. Thus, it is observed that the above-mentioned investors are gradually reducing their stakes to the lower levels in proportion to total institutional holdings in the sampled companies over the study period. Hence, it is inferred that Banks, FIs and ICs have been loosing interest in the sampled companies. The results obtained for sampled companies as regard to the status of FII holdings in relation to the total shareholdings and to the total institutional investors in the sampled companies during the study period 2004-08 are summarized in part (a) and part (b) of the table no. 4.4 given below: Table 4.4 (a) FII Holdings in Relation To Total Shareholdings FII Holdings (%) Number of Companies 2004 N (%) 2005 N (%) 2006 N (%) 2007 N (%) 2008 N (%) Below 5 133 66.5 114 57.0 103 51.5 100 50.0 92 46.0 5-10 29 14.5 30 15.0 24 12.0 24 12.0 36 18.0 10-15 17 8.5 22 11.0 23 11.5 23 11.5 26 13.0 15-20 09 4.5 13 6.5 15 7.5 25 12.5 18 9.0 20-26 12 6.0 21 10.5 35 17.5 28 14.0 28 14.0 Total 200 100 200 100 200 100 200 100 200 100 Table 4.4 (b) FII Holdings in Relation to Total Institutional Holdings FII Holdings (%) Number of Companies 2004 N (%) 2005 N (%) 2006 N (%) 2007 N (%) 2008 N (%) 0-20 115 57.5 83 41.5 74 37.0 69 34.5 62 31.0 20-40 20 10.0 35 17.5 33 16.5 28 14.0 39 19.5 40-60 29 14.5 36 18.0 33 16.5 34 17.0 43 21.5 60-80 23 11.5 25 12.5 35 17.5 40 20.0 33 16.5 Above 80 13 6.5 21 10.5 25 12.5 29 14.5 23 11.5 Total 200 100 200 100 200 100 200 100 200 100 The information inputs reported in the part (a) of the present table reveals that the proportions of FII holdings in relation to total shareholdings in the sampled companies have increased over the years. The numbers of companies with higher proportions of FII holdings have been increasing and the numbers of companies with smaller proportions have been decreasing over the study period. As FIIs have 20 to 26 percent holdings in only 6 percent companies in 2004, where as in the last year of the study period, it increased to 14 percent. Similarly, FIIs have holdings from 15 to 20 percent in 9 companies in 2004 that got doubled to 18 companies in 2008. The same trend follows for the companies with FII holdings from 10 to 15 percent. FIIs had such holdings in 17 companies only in 2004 but in the last year of the study period, it increased to 26 companies. The decreasing number of companies with relatively lower FII holdings also validates it. In nutshell, the FIIs have been consistently i ncreasing their stake in relation to the total shareholdings in the sampled companies over the study period. Hence, it is inferred that institutional investors have been consistently getting more interested in the sampled companies over the study period. The information inputs reported in the part (b) of the present table also depict results consistent with the results shown for part (a). The proportion of FII holdings in relation to the institutional holdings in the sampled companies has also increased over the years. As institutions had above 80 percent holdings in only 6.5 percent companies in 2004, where as in the last year of the study period, it increased to 11.5 percent companies. Similarly, FIIs had holdings from 60 to 80 percent in 23 companies in 2004 that increased to 33 companies in 2008. The same trend follows for the companies with FII holdings from 40 to 60 percent. The decreasing number of companies with relatively lower FII holdings also validates it. As FIIs have less than 20 percent stake in 57.5 percent companies in 2004 which reduced to only 31 percent companies in 2008. Hence, it is inferred that FIIs have shown more interest in the sampled companies over the study period. Resume It can be observed from the result outputs of the first section that the institutional investors have increased their proportional holdings in the companies over the years. The number of sampled companies is consistently increasing with higher institutional holdings where as the number of companies are decreasing with lower proportions of institutional holdings. The mutual fund investors have also increased their holdings in relation to the total shareholdings over the study period. The number of companies with higher mutual fund holdings has been increasing over the years. Similarly, the number of companies with lower mutual fund holdings has been decreasing over the study period. But the results of observations of mutual fund holdings in relation to total institutional holdings state otherwise. Mutual funds have increased their proportions of holdings to the total shareholdings in the sampled companies over the study period but it is not so in relation to the total institutional ho ldings. Therefore, the investment pattern of mutual funds is not clear. Where as Banks, Financial Institutions and Insurance Companies have decreased their proportional holdings in the sampled companies over the study period. There has been decline in the number of sampled companies with higher proportion of the Banks, FIs and ICs holdings. Validating the same, the numbers of companies with lower proportion of above holdings have been increasing over the study period. The results are consistent for the proportion of Banks, FIs and ICs in relation to total institutional holdings as well. To the contrary, foreign institutional investors have increased their proportional holdings in the sampled companies over the years. The number of companies is increasing with higher FII holdings and the number of companies is decreasing with lower proportion of FII holdings. The results are similar in relation to the total institutional holdings as well. Hence, at the end of the section it is inferr ed on the basis of result outputs that institutional investors in total and foreign institutional investors are getting more interested in the sampled companies over the study period. Banks, financial institutions and insurance companies are getting less interested in the same companies over the study period. And the results are inconclusive for the mutual funds. 4.2.1 Status of Corporate Governance Score in Sampled Companies: The Corporate Governance status of sampled companies is depicted in table 4.5. Total sampled of 200 companies has been divided into four quartiles of 50 companies each. The first quartile shows the company codes with highest corporate governance scores with in the range of 58 to 76 with the average score of 62.5. The second quartile shows the company codes with higher corporate governance scores with in the range of 52 to 58 with the average score of 54.3. The third quartile shows the company codes with lower corporate governance scores with in the range of 46 to 52 with the average score of 48.7. The fourth quartile shows the company codes with lowest corporate governance scores with in the range of 26 to 46 with the average score of 40.04. Table 4.5 Status of Corporate Governance in Sampled Companies Sampled Companies Number of Companies Sampled Company (Code) Range Average Governance Score Q1 50 2,5,6,11,13,15,21,26,27,28,29,37,39, 41,42,47,48,53,56,68,69,71,72,75,76,7778,79,84,86,88,91,93,96,97,98,102, 104,106,119,124,132,135,147,171,173180,189,194,198 58-76 62.5 Q2 50 10,17,18,30,31,33,34,36,38,45,46,52, 54,55,57,58,60,61,62,63,64,65,80,85, 100,101,103,108,117,118,121,125, 134,142,149,150,156,160,167,170, 175,177,179,183,184,185,186,187, 190,197 52-58 54.3 Q3 50 1,3,4,9,14,16,19,20,23,40,43,44,50, 59,66,70,73,74,82,83,92,94,99,105, 107,109,110,113,115,120,123,123, 127,129,130,137,139,151,152,154, 155,162,163,165,169,182,188,192, 196,200 46-52 48.7 Q4 50 7,8,12,22,24,25,32,35,49,51,81,87, 89,90,95,111,112,114,116,122,126, 128,131,133,136,138,140,141,143, 144,145,146,148,153,157,158,159, 161,164,166,168,172,174,176,178, 181,191,193,195,199 26-46 40.04 4.2.2 Relationship between institutional holdings and corporate governance: The results obtained in this regard are reported in an analytical frame in table no. 4.6 as under: Part (a) of the present study table reveals out the (%) institutional holdings along with corporate governance score for the study period 2004-08. Part (b) of the table depicts the regression parameters as regard to institutional holdings and corporate governance score Table 4.6 (a) Institutional Holdings and Corporate Governance Institutional Holdings (%) Corporate Governance Score 2004 2005 2006 2007 2008 N Average N Average N Average N Average N Average 0-10 95 47.84 84 47.44 76 46.74 72 47.06 74 47.42 10-25 64 53.50 70 52.79 62 52.21 63 51.44 60 51.53 25-50 39 56.51 42 56.43 57 56.32 60 56.37 59 55.80 Above50 02 50.50 04 56.00 05 55.00 05 52.60 07 54.43 200 200 200 200 200 Table 4.6 (b) Institutional Holdings and Corporate Governance Institutional Holdings (%) Corporate Governance Score 2004 2005 2006 2007 2008 Constant 47.18 46.98 46.64 46.64 47.05 b Value 0.43 0.43 0.43 0.43 0.40 SE 0.84 0.86 0.91 0.91 0.91 R2 0.19 0.19 0.18 0.18 0.16 t-value 6.75* 6.73* 6.63* 6.63* 6.21* D/W 1.825 .825 1.868 1.84 1.78 Predictor: Institutional Holdings; Dependent Variable: Corporate Governance Score *Significant at 5 percent level The information inputs reported in part (a) of the present table reveals out that the larger proportions of institutional holdings (to the level of 50 percent) have higher corporate governance score in sampled companies over the study period. Similarly, the smaller proportions of institutional holdings have lower governance scores in the sampled companies over the study period. The sampled companies in which institutional holdings are from 25 to 50 percent have the average corporate governance score of 56.51 points in 2004, 56.32 points in 2006 and 55.80 points in 2008. These score points are highest in all the years. Where as lower governance scores are observed for lower proportions of institutional holdings. As the sampled companies in which institutional holdings are to the level of 10 percent have poor average governance scores. They are 47.84 score points in 2004, 46.74 score points in 2006 and 47.42 score points in 2008. Similarly, the sampled companies with 10 to 25 percent i nstitutional holdings have higher corporate governance scores than the companies with lower holdings and lower governance scores than the companies with higher institutional holdings over the study period. It can be inferred from the above results that there is very strong and positive relationship between institutional holdings and Corporate Governance. The statistical significance of these findings through regression analysis is reported in the part (b) of the present table. The parameters also validate the above inference, as the degree of dependence between two variables is higher over the study period. All the values are also considered significant (a=0.05) in terms of t-value over the study period. D/W value is near 2 in all the five years indicating the regression results are reliable. 4.2.3 Relationship between mutual funds holdings and corporate governance: The results obtained in this regard are reported in an analytical frame in table no. 4.7 as under: Part (a) of the present study table reveals out the (%) mutual funds holdings along with corporate governance score for the study period 2004-08. Part (b) of the table depicts the regression parameters as regard to mutual funds holdings and corporate governance score Table 4.7 (a) MF Holdings and Corporate Governance Mutual Fund Holdings Corporate Governance Score 2004 2005 2006 2007 2008 (%) N Average N Average N Average N Average N Average 0-5 140 50.5 143 51.0 117 50.9 113 50.6 119 50.3 5-10 42 51.8 34 50.9 52 52.0 54 52.5 41 53.6 10-15 14 55.2 14 54.2 22 51.4 23 Institutional Holdings and Corporate Governance Institutional Holdings and Corporate Governance CHAPTER IV As noted earlier, the need for corporate governance arises from the potential conflicts of interest among participants (stakeholders) in corporate structure. These are often referred as agency problems arise from two main sources. First, different participants have different goals and preferences. Second, the participants have imperfect information as to each others actions, knowledge and preferences. Berle and Means (1932) addressed these conflicts by examining the separation of ownership and control. They noted that this separation, in the absence of other corporate governance mechanisms, provide executives with the ability to act in their own self-interest rather than in the interest of shareholders. However, executives activities are potentially constrained by numerous factors that constitute and influence the governance of the corporations that they manage. These factors can be thought of as either internal control mechanisms (such as the board) or external control mechanisms (s uch as the market for corporate control). An increasingly important external control mechanism affecting governance worldwide is the emergence of institutional investors as equity owners. Although institutional investors are the predominant players in some countries financial markets and are therefore important in corporate governance, yet the ownership  structures and other governance characteristics differ across markets. These differences are attributable in part to legal and regulatory systems and in part to the manner in which the markets have evolved. These characteristics will continue to vary across countries, leading to differences in the role and influences of institutional investors in corporate governance. Previous researchers have shown that because of the costs involved, only large shareholders have the incentive to provide extensive monitoring of management. Whether institutions as large shareholders should, or will, provide such monitoring depends in part on the constraints to which they are subjected, their objectives, and their preferences for liquidity. Keeping the above into consideration, it is pertinent to examine the intricacies of institutional holdings in the governance matters of Indian corporates. Many a time, institutional holdings pre-empts good corporate governance still at other times, good corporate governance endues institutional investment in the firm. The ongoing debate as to the institutional holdings and the corporate governance is very live or interactive in the academics these days too. The results of earlier studies are inconclusive as to the deterministic value of the one or the other. In the present study, Corporate Governance Score index has been developed on the basis of key characteristics of Standard and Poors Transparency and Disclosure Benchmark to rate sampled firms in terms of corporate governance. The institutional holdings in terms of equity investment has been expressed in percentages to total investment and comparatively, in terms of the relative composition of the institutional equity investment. This chapter makes a detailed analysis of the dynamics of corporate governance and the institutional holdings in the following three perspectives: 4.1) Dynamics of institutional holdings and its composition 4.2) Relationship between Institutional Holdings (explanatory variable) and the Corporate Governance (dependent variable) 4.3) Relationship between the Corporate Governance (explanatory variable) and Institutional Holdings (dependent variable) The results obtained for the sampled in this regard are reported, in an analytical frame, here as under: 4.1.1) Status of Institutional Holdings: The results obtained for sampled companies as regard to the status of institutional holdings in the sampled companies during the study period 2004-08 are summarized in table no. 4.1 given below: Table 4.1 Institutional Holdings in the Sampled Companies Institutional Holdings (%) Number of Companies 2004 N (%) 2005 N (%) 2006 N (%) 2007 N (%) 2008 N (%) Below 5 61 30.5 53 26.5 46 23.0 46 23.0 47 23.5 5-10 34 17.0 31 15.5 30 15.0 26 13.0 27 13.5 10-15 30 15.0 34 17.0 22 11.0 25 12.5 22 11.0 15-26 37 18.5 40 20.0 43 21.5 43 21.5 42 21.0 26-50 36 18.0 38 19.0 54 27.0 55 27.5 55 27.5 Above 50 02 1.0 04 2.0 05 2.5 05 2.5 07 3.5 Total 200 100 200 100 200 100 200 100 200 100 The information inputs reported in the present table reveals that the proportions of institutional holdings in the sampled companies have increased over the years. The numbers of companies with larger proportions of institutional holdings have been increasing and the numbers of companies with smaller proportions of holdings have been declining over the study period. As institutions have above 50 percent holdings in only 1 percent companies in 2004, where as in the last year of the study period, it increased to 3.5 percent. Similarly, institutions have holdings from 26 to 50 percent in 18 percent companies in 2004 that rises to 27.5 percent companies in 2008. The same trend follows for the companies in which institutions have holdings from 15 to 26 percent. The decreasing number of companies with relatively lower institutional holdings also validates it. As institutions have less than 5 percent stake in 30.5 percent companies in 2004, which reduced to only 23.5 percent companies in 2008. Similarly, institutions have holdings up to 10 percent in 17 percent companies that reduced to 13.5 percent in the last year of the study period. Thus, it is observed that institutional investors have been increasing their stake in the sampled companies over the study period. Hence, it is inferred that institutional investors have been consistently getting more interested in the sampled companies over the study period. 4.1.2 Constituents of Institutional Holdings: As noted earlier, Institutional holdings have been further classified into three categories i.e., Mutual Fund, (Banks, Financial Institutions and Insurance Companies) and Foreign Institutional Investors. The results obtained for the sampled companies as regard to the status of Mutual Funds holdings in relation to the total shareholdings and to the total institutional investors in the sampled companies during the study period 2004-08 are summarized in part (a) and part (b) of the table no. 4.2 given below: Table 4.2 (a) MF Holdings in Relation To Total Shareholdings Mutual Fund Holdings (%) Number of Companies 2004 N (%) 2005 N (%) 2006 N (%) 2007 N (%) 2008 N (%) Below 5 140 70.0 143 71.5 117 58.5 113 56.5 119 59.5 5-10 42 21.0 34 17.0 52 26.0 54 27.0 41 20.5 10-15 14 7.0 14 7.0 22 11.0 23 11.5 29 14.5 15-20 03 1.5 07 3.5 07 3.5 07 3.5 07 3.5 Above 20 01 0.5 02 1.0 02 1.0 03 1.5 04 2.0 Total 200 100 200 100 200 100 200 100 200 100 Table 4.2 (b) MF Holdings in Relation to Total Institutional Holdings Mutual Funds Holdings (%) Number of Companies 2004 N (%) 2005 N (%) 2006 N (%) 2007 N (%) 2008 N (%) 0-20 96 48.0 104 52.0 100 50.0 103 51.5 101 50.5 20-40 55 27.5 38 19.0 41 20.5 50 25.0 47 23.5 40-60 22 11.0 21 10.5 24 12.0 14 7.0 23 11.5 60-80 09 4.5 18 9.0 19 9.5 16 8.0 17 8.5 Above 80 18 9.0 19 9.5 16 8.0 17 8.5 12 6.0 Total 200 100 200 100 200 100 200 100 200 100 The information inputs reported in part (a) of the present table depict that mutual funds have increased their proportions of shareholdings in relation to the total shareholdings over the study period. The number of sampled companies with higher proportions of mutual funds holdings has been increasing over the study period. Similarly, the number of sampled companies with lower proportions of mutual funds holdings has been decreasing over the same period. As mutual funds have more than 20 percent holdings in 0.5 percent companies in 2004, which increased to 2 percent companies at the end of the study period. Similarly, Mutual Funds have holdings to the extent of 20 percent only in 1.5 percent companies in 2004 that increased to 3.5 percent companies in 2008. It is also observed that there were only 14 companies in 2004 in which mutual funds holdings were from 10 to 15 percent, which increased to more than double at the end of the study period. It is also validated by the observations of the companies in which mutual funds have lower stake. There were 70 percent companies in which mutual funds had less than 5 percent holdings and the proportion of companies with such holdings reduced to 59.5 percent in 2008. Hence, it is inferred that mutual fund companies have become more interested in the sampled companies over the study period. The information inputs reported in part (b) of the present table reveal out that there is no consistency in the investment pattern of mutual funds in the sampled companies over the study period. Mutual fund holdings in relation to total institutional holdings have remained more or less between zero and 20 percent in about 50 percent companies. On an average in 23 percent companies, mutual funds hold 20 to 40 percent shares. Mutual Funds reduced their holdings in 20 to 40 percent category in sampled companies over the study period. Where as there has not been major change in the number of companies with 40 to 60 percent mutual fund holdings. On the other hand, mutual funds have increased their stake from 60 to 80 percent in sampled companies over the study period. There are 9 companies with such holdings, which increased to 17 companies in 2008. But the number of sampled companies with mutual funds holdings more than 80 percent has gone down over the study period. As in 2004, there ar e 9 percent companies that reduced to 6 percent at the end of the study period. Hence, no inference can be drawn about the investment behaviour of mutual funds in relation to the total institutional holdings in sampled companies over the study period. The results obtained for sampled companies as regard to the status of Banks, FIs and ICs holdings in relation to the total shareholdings and total institutional holdings in the sampled companies during the study period 2004-08 are summarized in part (a) and part (b) of the table no. 4.3 given below: Table 4.3 (a) Banks, FIs and ICs Holdings in Relation To Total Shareholdings Bank, FI and IC Holdings (%) Number of Companies 2004 N (%) 2005 N (%) 2006 N (%) 2007 N (%) 2008 N (%) Below 5 127 63.5 135 67.5 142 71.0 139 69.5 141 70.5 5-10 36 18.0 28 14.0 27 13.5 34 17.0 29 14.5 10-15 19 9.5 24 12.0 19 9.5 18 9.0 18 9.0 15-20 09 4.5 08 4.0 07 3.5 04 2.0 08 4.0 Above 20 09 4.5 05 2.5 05 2.5 05 2.5 04 2.0 Total 200 100 200 100 200 100 200 100 200 100 Table 4.3 (b) Banks, FIs and ICs Holdings in Relation to Total Institutional Holdings Banks, FIs and ICs Holdings (%) Number of Companies 2004 N (%) 2005 N (%) 2006 N (%) 2007 N (%) 2008 N (%) 0-20 70 35.0 90 45.0 103 51.5 99 49.5 99 49.5 20-40 34 17.0 34 17.0 41 20.5 41 20.5 34 17.0 40-60 29 14.5 30 15.0 16 8.0 23 11.5 37 18.5 60-80 21 10.5 13 6.5 17 8.5 15 7.5 08 4.0 Above 80 46 23.0 33 16.5 23 11.5 22 11.0 22 11.0 Total 200 100 200 100 200 100 200 100 200 100 The information inputs reported in the part (a) of the present table depicts that the proportions of Banks, Financial Institutions and Insurance Companies in the sampled companies have decreased over the years. The numbers of companies with lower proportions of these holdings have been increasing and the numbers of companies with higher proportions of holdings have been decreasing over the study period. As in 63.5 percent companies, Banks and others hold less than 5 percent shares in 2004 while in 2008, 70.5 percent companies have the same holdings reflecting that over the study period, the above category of institutional investors have shown less interest in the sampled companies. Similarly, Banks and others hold up to 10 percent of total shareholdings in 36 companies which reduced to 27 in the year 2006 and finally to 29 companies in the year 2008. Likewise, the number of companies with more than 20 percent holdings has reduced from 4.5 percent in 2004 to 2 percent in 2008. Thus, i t is observed that Banks, FIs and ICs have withdrawn their substantial holdings in some companies while number of companies with marginal holdings has increased. Hence, it is inferred that Banks, FIs and ICs are getting less interested in the sampled companies over the study period. The information inputs reported in the part (b) of the present table depict the results coherent with the results shown in part (a) as Banks, Financial Institutions and Insurance Companies have decreased their holdings in relation to total institutional holdings in the sampled companies over the study period as well. They have more than 80 percent holdings in 23 percent companies in 2004 but in the last year of the study period, it was just in 11 percent companies. Similarly, these investors had 60 to 80 percent holdings in 21 companies in 2004, but in 2008, the number of companies with such holdings reduced to only 8 companies. The same is validated by the proportional increase in the number of companies with relatively lower holdings. Banks and others held to the limit of 20 percent shares in 70 companies in 2004 and in 2008, the number of companies with such holdings rose to 99. These investors have shown more interest in increasing their holdings from 40 percent to 60 percent in the sampled companies over the study period as they had such holdings in 14.5 percent companies in 2004 that increased to 18.5 percent in the last year of the study period. Thus, it is observed that the above-mentioned investors are gradually reducing their stakes to the lower levels in proportion to total institutional holdings in the sampled companies over the study period. Hence, it is inferred that Banks, FIs and ICs have been loosing interest in the sampled companies. The results obtained for sampled companies as regard to the status of FII holdings in relation to the total shareholdings and to the total institutional investors in the sampled companies during the study period 2004-08 are summarized in part (a) and part (b) of the table no. 4.4 given below: Table 4.4 (a) FII Holdings in Relation To Total Shareholdings FII Holdings (%) Number of Companies 2004 N (%) 2005 N (%) 2006 N (%) 2007 N (%) 2008 N (%) Below 5 133 66.5 114 57.0 103 51.5 100 50.0 92 46.0 5-10 29 14.5 30 15.0 24 12.0 24 12.0 36 18.0 10-15 17 8.5 22 11.0 23 11.5 23 11.5 26 13.0 15-20 09 4.5 13 6.5 15 7.5 25 12.5 18 9.0 20-26 12 6.0 21 10.5 35 17.5 28 14.0 28 14.0 Total 200 100 200 100 200 100 200 100 200 100 Table 4.4 (b) FII Holdings in Relation to Total Institutional Holdings FII Holdings (%) Number of Companies 2004 N (%) 2005 N (%) 2006 N (%) 2007 N (%) 2008 N (%) 0-20 115 57.5 83 41.5 74 37.0 69 34.5 62 31.0 20-40 20 10.0 35 17.5 33 16.5 28 14.0 39 19.5 40-60 29 14.5 36 18.0 33 16.5 34 17.0 43 21.5 60-80 23 11.5 25 12.5 35 17.5 40 20.0 33 16.5 Above 80 13 6.5 21 10.5 25 12.5 29 14.5 23 11.5 Total 200 100 200 100 200 100 200 100 200 100 The information inputs reported in the part (a) of the present table reveals that the proportions of FII holdings in relation to total shareholdings in the sampled companies have increased over the years. The numbers of companies with higher proportions of FII holdings have been increasing and the numbers of companies with smaller proportions have been decreasing over the study period. As FIIs have 20 to 26 percent holdings in only 6 percent companies in 2004, where as in the last year of the study period, it increased to 14 percent. Similarly, FIIs have holdings from 15 to 20 percent in 9 companies in 2004 that got doubled to 18 companies in 2008. The same trend follows for the companies with FII holdings from 10 to 15 percent. FIIs had such holdings in 17 companies only in 2004 but in the last year of the study period, it increased to 26 companies. The decreasing number of companies with relatively lower FII holdings also validates it. In nutshell, the FIIs have been consistently i ncreasing their stake in relation to the total shareholdings in the sampled companies over the study period. Hence, it is inferred that institutional investors have been consistently getting more interested in the sampled companies over the study period. The information inputs reported in the part (b) of the present table also depict results consistent with the results shown for part (a). The proportion of FII holdings in relation to the institutional holdings in the sampled companies has also increased over the years. As institutions had above 80 percent holdings in only 6.5 percent companies in 2004, where as in the last year of the study period, it increased to 11.5 percent companies. Similarly, FIIs had holdings from 60 to 80 percent in 23 companies in 2004 that increased to 33 companies in 2008. The same trend follows for the companies with FII holdings from 40 to 60 percent. The decreasing number of companies with relatively lower FII holdings also validates it. As FIIs have less than 20 percent stake in 57.5 percent companies in 2004 which reduced to only 31 percent companies in 2008. Hence, it is inferred that FIIs have shown more interest in the sampled companies over the study period. Resume It can be observed from the result outputs of the first section that the institutional investors have increased their proportional holdings in the companies over the years. The number of sampled companies is consistently increasing with higher institutional holdings where as the number of companies are decreasing with lower proportions of institutional holdings. The mutual fund investors have also increased their holdings in relation to the total shareholdings over the study period. The number of companies with higher mutual fund holdings has been increasing over the years. Similarly, the number of companies with lower mutual fund holdings has been decreasing over the study period. But the results of observations of mutual fund holdings in relation to total institutional holdings state otherwise. Mutual funds have increased their proportions of holdings to the total shareholdings in the sampled companies over the study period but it is not so in relation to the total institutional ho ldings. Therefore, the investment pattern of mutual funds is not clear. Where as Banks, Financial Institutions and Insurance Companies have decreased their proportional holdings in the sampled companies over the study period. There has been decline in the number of sampled companies with higher proportion of the Banks, FIs and ICs holdings. Validating the same, the numbers of companies with lower proportion of above holdings have been increasing over the study period. The results are consistent for the proportion of Banks, FIs and ICs in relation to total institutional holdings as well. To the contrary, foreign institutional investors have increased their proportional holdings in the sampled companies over the years. The number of companies is increasing with higher FII holdings and the number of companies is decreasing with lower proportion of FII holdings. The results are similar in relation to the total institutional holdings as well. Hence, at the end of the section it is inferr ed on the basis of result outputs that institutional investors in total and foreign institutional investors are getting more interested in the sampled companies over the study period. Banks, financial institutions and insurance companies are getting less interested in the same companies over the study period. And the results are inconclusive for the mutual funds. 4.2.1 Status of Corporate Governance Score in Sampled Companies: The Corporate Governance status of sampled companies is depicted in table 4.5. Total sampled of 200 companies has been divided into four quartiles of 50 companies each. The first quartile shows the company codes with highest corporate governance scores with in the range of 58 to 76 with the average score of 62.5. The second quartile shows the company codes with higher corporate governance scores with in the range of 52 to 58 with the average score of 54.3. The third quartile shows the company codes with lower corporate governance scores with in the range of 46 to 52 with the average score of 48.7. The fourth quartile shows the company codes with lowest corporate governance scores with in the range of 26 to 46 with the average score of 40.04. Table 4.5 Status of Corporate Governance in Sampled Companies Sampled Companies Number of Companies Sampled Company (Code) Range Average Governance Score Q1 50 2,5,6,11,13,15,21,26,27,28,29,37,39, 41,42,47,48,53,56,68,69,71,72,75,76,7778,79,84,86,88,91,93,96,97,98,102, 104,106,119,124,132,135,147,171,173180,189,194,198 58-76 62.5 Q2 50 10,17,18,30,31,33,34,36,38,45,46,52, 54,55,57,58,60,61,62,63,64,65,80,85, 100,101,103,108,117,118,121,125, 134,142,149,150,156,160,167,170, 175,177,179,183,184,185,186,187, 190,197 52-58 54.3 Q3 50 1,3,4,9,14,16,19,20,23,40,43,44,50, 59,66,70,73,74,82,83,92,94,99,105, 107,109,110,113,115,120,123,123, 127,129,130,137,139,151,152,154, 155,162,163,165,169,182,188,192, 196,200 46-52 48.7 Q4 50 7,8,12,22,24,25,32,35,49,51,81,87, 89,90,95,111,112,114,116,122,126, 128,131,133,136,138,140,141,143, 144,145,146,148,153,157,158,159, 161,164,166,168,172,174,176,178, 181,191,193,195,199 26-46 40.04 4.2.2 Relationship between institutional holdings and corporate governance: The results obtained in this regard are reported in an analytical frame in table no. 4.6 as under: Part (a) of the present study table reveals out the (%) institutional holdings along with corporate governance score for the study period 2004-08. Part (b) of the table depicts the regression parameters as regard to institutional holdings and corporate governance score Table 4.6 (a) Institutional Holdings and Corporate Governance Institutional Holdings (%) Corporate Governance Score 2004 2005 2006 2007 2008 N Average N Average N Average N Average N Average 0-10 95 47.84 84 47.44 76 46.74 72 47.06 74 47.42 10-25 64 53.50 70 52.79 62 52.21 63 51.44 60 51.53 25-50 39 56.51 42 56.43 57 56.32 60 56.37 59 55.80 Above50 02 50.50 04 56.00 05 55.00 05 52.60 07 54.43 200 200 200 200 200 Table 4.6 (b) Institutional Holdings and Corporate Governance Institutional Holdings (%) Corporate Governance Score 2004 2005 2006 2007 2008 Constant 47.18 46.98 46.64 46.64 47.05 b Value 0.43 0.43 0.43 0.43 0.40 SE 0.84 0.86 0.91 0.91 0.91 R2 0.19 0.19 0.18 0.18 0.16 t-value 6.75* 6.73* 6.63* 6.63* 6.21* D/W 1.825 .825 1.868 1.84 1.78 Predictor: Institutional Holdings; Dependent Variable: Corporate Governance Score *Significant at 5 percent level The information inputs reported in part (a) of the present table reveals out that the larger proportions of institutional holdings (to the level of 50 percent) have higher corporate governance score in sampled companies over the study period. Similarly, the smaller proportions of institutional holdings have lower governance scores in the sampled companies over the study period. The sampled companies in which institutional holdings are from 25 to 50 percent have the average corporate governance score of 56.51 points in 2004, 56.32 points in 2006 and 55.80 points in 2008. These score points are highest in all the years. Where as lower governance scores are observed for lower proportions of institutional holdings. As the sampled companies in which institutional holdings are to the level of 10 percent have poor average governance scores. They are 47.84 score points in 2004, 46.74 score points in 2006 and 47.42 score points in 2008. Similarly, the sampled companies with 10 to 25 percent i nstitutional holdings have higher corporate governance scores than the companies with lower holdings and lower governance scores than the companies with higher institutional holdings over the study period. It can be inferred from the above results that there is very strong and positive relationship between institutional holdings and Corporate Governance. The statistical significance of these findings through regression analysis is reported in the part (b) of the present table. The parameters also validate the above inference, as the degree of dependence between two variables is higher over the study period. All the values are also considered significant (a=0.05) in terms of t-value over the study period. D/W value is near 2 in all the five years indicating the regression results are reliable. 4.2.3 Relationship between mutual funds holdings and corporate governance: The results obtained in this regard are reported in an analytical frame in table no. 4.7 as under: Part (a) of the present study table reveals out the (%) mutual funds holdings along with corporate governance score for the study period 2004-08. Part (b) of the table depicts the regression parameters as regard to mutual funds holdings and corporate governance score Table 4.7 (a) MF Holdings and Corporate Governance Mutual Fund Holdings Corporate Governance Score 2004 2005 2006 2007 2008 (%) N Average N Average N Average N Average N Average 0-5 140 50.5 143 51.0 117 50.9 113 50.6 119 50.3 5-10 42 51.8 34 50.9 52 52.0 54 52.5 41 53.6 10-15 14 55.2 14 54.2 22 51.4 23

Extreme Sports Motivation

Extreme Sports Motivational Factors Lawrence Cannon December 4, 2011 PE 5880 Abstract In the 1970s, extreme sports had been growing rapidly since its introduction. However, there has been little research done on extreme sport participants. In specific, the reason why consumers participate in extreme sports has not yet been investigated, although the number of participants and spectators of extreme sports is rapidly growing. Since motivation is a significant factor of sport participation behavior, it is essential for the sport marketer to understand psychological needs and motivations of extreme sport participants.The purpose of this study is to analyze motivational factors of people who become involved in extreme sports. The researchers modified and applied the scale of sports participant motivation. The original scale includes forty one items which represent many motivational factors like achievement, competition, social facilitation, skill mastery, physical fitness, risk-taking, af filiation, aesthetics, aggression, value development, self-esteem, self-actualization, and stress release.A total of several samples will be included in the current study. The researcher collected the cases at the X Game Sports and Freestyle Motocross World Championships held in the United States. A chain of ANOVA and MANOVA tests will contain the data analyses. The hypothesis will suggest that extreme sport participants have a high level of motivation in fun and imitation, which are two more structures added to the original scales.The analysis of the data may also reveal that motivation of extreme sport participants vary across gender and past experience. This study will advance the knowledge base of consumer motivation research in the field of sport marketing and provides leaders in the extreme sport industry with meaningful implications. At the end of the day, the result of present studies will support the extreme sports industry in predicting the trend of action sports consumer behavior. IntroductionExtreme sports are â€Å"activities that either ideologically or practically provide alternatives to mainstream sports and mainstream sport values† (Rinehart, 2000, p 506). The increased number of events and participants in extreme sports support the trend of growth in extreme sports (Liberman, 2004; Ostrowski, 2002). In the 2002 statistics, about eighty-six million people were participating in extreme sports (Ostrowski, 2002). According to American Sports Data, within the U. S. port industry, extreme sport generated one-third of sporting goods sales, which totaled to more than $14 billion (Liberman, 2004). Although the overall number of sport participants in the U. S. has increased about ten percent over the last decade, the number of participants and spectators in dominant sports such as basketball and volleyball has decreased (Stotlar, 2002). This trend in the sport industry further supports that emerging sport activities such as extreme sports gain t heir popularity by becoming mainstream sports (Kress, 2003; Ostrowski, 2002).While the increased interest in motivational factors draws scholars to conduct research to investigate psychological principles of dominant sport participants, research on sport consumers in extreme sports has not been a main focus of investigation within academic area of sport management and marketing. Hereafter, there is very little information in the literature regarding the characteristics of extreme sports and its consumer’s behavior. Considering the current trend and the future prospect of extreme sports, scientific and systematic analysis of sport consumers in the extreme sport industry needs to be conducted.In particular, in order to continue and improve the profitability and productivity of the extreme sport market, sport marketers should have better understanding of the fundamental needs and wants of extreme sports participants. Needs of Study The study of motivation in sports has been cond ucted in various segments such as general physical activities. As the market becomes competitive within the extreme sport industry, the lack of experiential research on sport consumers, the results will widen the gap between the academic and the practical field of knowledge regarding extreme sport consumers.To fill this gap within the sport industry and sport study, there is just as much need to explore the motivation of sport consumption. Without any understanding of the motives of sport customers, sport marketers cannot successfully achieve their marketing outcomes. Thus, an investigation of what motivates sport consumption would be the first step for future development of the action sport industry. Purpose The purpose of this study is to analyze motivational factors of people who become involved in extreme sports.This study will advance the knowledge base of consumer motivation research in the field of sport marketing and provide implications for sport marketers within the emergi ng sport industry. This study is meaningful because the consumption motivation provides a more in-depth useful tool for determining the behavior of consumers than asking â€Å"why† (Beck, 1990). The Significance of the Study The goal of this study is to develop a better understanding of extreme sports consumers and action sport itself, then further investigate motivational factors of participants in action sports.Moreover, this research contributes to the extreme sport industry and the field of sport marketing by developing a knowledge base of extreme sport participants. Literature Review The literature review on the extreme sports industry regards the demographics, trends, characteristics of the sport consumer behavior and motivation of spectators, as well as participation in general sports. Through the process of reviewing motives of sport participants, the researcher will investigate the growth factors of extreme sports in business and the following importance of the motiv ation study: What is extreme sports?Who are targets? Why do people participate in extreme sports as consumers? What is the value of the motivational factors in sport concepts? Extreme sports are defined as a relatively new form of sport or â€Å"a combination of extraordinary individual achievement and unmatched personal enjoyment† (Rinehart & Sydnor, 2003, p. 3). Another interpretation for extreme sports is mostly individual sports that have risk, danger or unconventional rules or techniques which differ from dominant team sports (Bennett, Henson & Zhang, 2002). While dominant team sports like ootball and baseball are rooted in a traditional value such as cooperation, teamwork, character-building and group competition. The various types of sports that are called extreme sports are roller-blading, windsurfing, sky diving, dancing, surfing, BMX, mountain biking, eco-challenging, kayaking, white water sports, climbing, surfing, skateboarding, extreme skiing and snowboarding (Ri nehart & Sydnor, 2003). Thus, extreme sports participants or athletes often perform daredevil acrobatic stunts which are dangerous at high speed.They tend to show off skills for spectators and stimulate viewers to try to be like. Motivation is defined as an act of instance of motivating, or providing with a reason  to act in a certain way which serves as a factor in determining an individual’s behavior or social conduct in a given situation. As a mentioned that the motive of motivation study for consumers is based on aim to discover how influences the past or present behavior on current decision making of the consumer. In general, motivation is important tool for understanding consumer behavior.There are some words that have been introduced to the general public, such as; â€Å"dizzying,† â€Å"hyper caffeinated,† or â€Å"edgy, adrenaline- inducing pursuits† are used to describe their experience with extreme sports. They are conversant with the languag e of dominant sports (Spiegel, 1998). In the year 2003, Howe describe some extreme sports as having grown out of the board sport culture of snowboarding, derived from surfing and skateboarding (Howe, 2003). In the same way, there are many examples of new unoriginal typical sports like; BMX racing and mountain biking are rooted in cycling.Others are barefoot water skiing stems from traditional water skiing. In-line skating was developed from roller skating. In the journal article â€Å"Gender Differences in Beliefs about the Influence of Ability and Effort in Sport and Physical Activity† their study was to explore the different gender in reasoning about the relationships between natural ability, effort, practice, and final skill level, performance across sixteen physical activities at both recreational levels. Their participants were one hundred fifty three college students that had enrolled six physical activity classes.They completed two questionnaires. Their results indicat ed that in physical activity domains, male students tended to have a much better natural tempo ability that as a more significant for successful skill level and performance as female students did. Their beliefs seemed to vary for activities that are gender-linked. For all the participants, natural ability was viewed as more important at the recreational level. A strategy for practitioners and coaches was to use encouragement beliefs for effectiveness of developing a challenging for conception of sports as gender-typed and promoting the concept of sports for all.In the journal article â€Å"The Extreme Sports of Research†, Mr. Bartoletti discusses the steps shared from several members of the â€Å"Team Extreme Research† group and how their methods and practices went. The group talked about how extreme sports are having a major impact on youth sport activities. School-age athletes are attracted to the fun and excitement of extreme sports such as snowboarding, BMX cycling , and skateboarding. One of the original extreme sporting events, pole vaulting, is a unique and exciting event that has been part of the scholastic track and field program for more than half a century.What I found in â€Å"Situational state balances and participation motivation in youth sport: A reversal theory perspective† Their purpose of their study was to examine the relationship between situational state balances and motives for sport and physical activity participation in adolescents using the theoretical framework of reversal theory. Their participation motives and the interacting factors of their situational state balances, gender, and level of participation were examined. The secondary school students were ages about fourteen to twenty years old who participated in competitive or recreational sport.The factor analysis were the participation motives yielded factors to which ANOVAs and MANOVAs were applied with situational state balance, gender, and participation leve l as independent variables. Their factor analysis resulted in seven motive factors: status, team, friend, excitement, challenge, skill, energy release, fitness, and situational factors. Their ANOVAs and MANOVAs indicated significant differences in the sport motives between the situational state balances, genders, and levels of participation, and between pairs of situational state balance groups in males and females of competitive and recreational level.Methodology The purpose of this is to identify suitable methodological procedures. The methodology is described be the relation to the following aspects of the study: survey instrument scale, the research of the questionnaire and ANOVAs and MANOVAs data analysis procedures. Questions 1) What are the extreme sports motivational factors for the participants? 2) How many different motivational factors are there in extreme sports by gender and experience? Proceed of Study I will apply a survey instrument which was developed by McDonald, M ilne and Hong, in 2003.This will be examined to measure motivational factors of extreme sports participants because the existing scale is focused on motivations of both several sports participants and spectators. The survey instrument was modified by wording changes from existing scale through a field test and panel of experts and item purification through a trial test. As a second step for modifying the existing scale, a trial test was employed to test reliability of the survey instrument.The revised instrument by panel of experts was administrated to a representative sample of the target population. The researcher selected a convenience sample of students from the Sport Management classes of a large University. The participants of trial test will not be included in the final sample. The format for the survey instrument will be a seven-point format ranging from â€Å"1-10 grading scale. † With one being the lowest and ten begin the highest. Then a questionnaire will be appli ed of two parts.First, respondents will be asked to provide their demographic information and experiences regarding to extreme sports, such as gender, ethnic background, age, level of participants in action sports, a period of time that participation in extreme sports and type of extreme sports what they have participated in. The second part contained items of motivational factors in relation to participation in extreme sports. The survey instrument contains several items with many motivation scales. The researcher will scheduled for data collection from extreme sport competition at the X Game Sports, Freestyle Motocross World Championships.This competition, part of the Extreme Sports Championships, features the season-ending World Championships events for skateboarding, BMX, inline skating and freestyle motocross. The researcher sampled from the audiences who are interest in participating in extreme sports. The size of sample will deal with the age ranges between13-35. The research er employed trained staffs to survey at the competition. Each staff will provide survey packets, each containing a questionnaire, a cover letter explaining the purpose of the study and directions for completing the questionnaire, and pens.The survey instrument includes the following information: personal information, the purpose of the study, confidentiality, directions on responding to questions, and appreciation for the respondent’s cooperation. In the actual survey, the trained staff for the survey introduces the purpose of the study and explains specific procedures and methods to the subject before the data collection to minimize the non-response data missing. At this point, the collected data will be analyzed by using ANOVA and MANOVA to identify the significance of motivational factors of action sports participants. DiscussionsIt is important for sports marketers to understand basic needs of sport consumers. In particular, it is necessary to investigate the sport consum ption motivation in extreme sport based upon their demographic and psychographic characteristics (Bennett, Henson, & Zhang, 2003). However, there has not been organized research on extreme sport consumption motivation. This study examined motivation for extreme sports participants. Sport marketers may utilize this proposal to develop effective marketing strategies like market segmentation, differentiated program service offering to satisfy the needs and wants of extreme sports consumers.These results strengthen the relation between each groups and motivation factors to contribute to sport motivation studies. The unique contribution of the present study is verifying two new motivational factors; fun, enjoyment, trend and imitation. I think that the results may show that the mean score of fun and enjoyment will be the highest for both male and female groups although there was no significant difference between these two groups. Extreme sports participants will rate their fun and enjoym ent as the most important motive and considerable effects.Thus, that I did hypothesized that some participants in extreme sports might be involved in the activities based upon their elective choice for fun and enjoyment. Also, the mean score of trend and imitation may be somewhat high for gender groups and experience groups. I have recognized that younger people who are interested in winter sports such as skiing or skating move to new sports such as snowboarding and extreme skiing. The researcher considered that younger people attempt to follow their peer group not only for fashion or music trend but also for sports activities.With this happening the researcher made a decision to try to investigate by adding the trend and imitation to the existing motivation scale. Another important finding is that different characteristics of extreme sports like fun, enjoyment, risk-taking and aesthetics were rated higher than other motivational factors by extreme sports participants including, par ticularly among male and the expert-level experience groups. This outcome suggests that sport marketers in extreme sports should develop differentiated marketing strategies focused on male participants and expert-level participants.In general, an extreme sport has been considered to be emerging sports just for our generation. However, this study suggests different point of view for sports marketers and scholars. Interestingly, all board-sports like snowboarding, skateboarding and surfing in this study, these extreme sports ranked top three among thirteen types of extreme sports. It will allow academics and practitioners in extreme sports to accompany with other leading or traditional sports because extreme sports have its origin to the board culture, which has a long history (Howe, 1998).For this reason, sport marketers at the extreme sports industry may able to use the marketing strategies for leading sports as cross-promotion for extreme sports focusing on the targeted consumers. At the end of the day, the discussion of the present study will support practioners in the extreme sports industry in predicting the consumption behavior of action sports participants. Further, the present study may lead sports marketers and managers to utilize the motives found for effective marketing strategies. Accordingly, sport marketers in extreme sports could highlight their targeted promotion with present study ideas.To promote and move the sports consumer for successful sport marketing, the motivation based knowledge is the first step to be studied by scholars. For the future studies, I will apply ethnic background groups and different extreme sports events participant groups regarding extreme sports consumption behavior. Conclusion In conclusion, understanding consumer is fundamental to the marketing concept. This research of motivations factors are an important determinant of extreme sports consumer behavior. Future research is needed to better develop these constructs an d explore how motivation can be utilized as a segmenting tool.Such an understanding might lend itself to predicting the possibility of an individual engaging in various extreme sporting activities. Finally, sport consumption is a complicated activity in which participation and imputer are often twisted. While this study examined participation and imputer separately, future research is needed to under the relations and connections between these consumptions territory. References Bartoletti, S. (2011, April, May). The extreme sport of research. The Horn Book Magazine 87. p. 24-30 Beck, R. C. (1990). The nature of motivation theory.Motivation: theories and principles (3rd ed. ). Englewood Cliffs, NJ: Prentice-Hall, Inc. Bennett, G. , Henson, R. K. & Zhang, J. (2003). Perceived status of the action sports segmentamong college students. International Sports Journal, 7(1), 95-138. Cindy, H. P. , & Lindner, Koenraad, J. (2006). Situational state balances and participation motivation in you th sport: A reversal theory perspective. British Journal of Educational Psychology 76 , 369-384. Howe, S. (1998). (Sick): A cultural history of snowboarding. New York: St. Martin’s Press. Kress, A. (2003). To the extreme.The business Journal Phoenix. 23(48). 3 Li, Weidong; Lee, Amelia M; Solmon, Melinda A. (2006). Gender differences in beliefs about the influence of ability and effort in sport and physical activity. 147-156. Liberman, N. (2004). New heights or a crash landing? Street & Smith’s Sports Business Journal,July 12-18, p 25. Ostrowski, J. (2002). Corporate America makes pitchmen of pariahs. Street & Smith’s SportsBusiness Journal. Aug. 12-18, p. 19, 26. Rinehart, R. E. (2000). Arriving sport: Alternatives to formal sports, in Jay Coakley and EricDunning (eds. ), Handbook of Sports Studies.Thousand Oaks, CA: SAGE Publication. Rinehart, R. E. & Sydnor, S. (eds. ). (2003). To the extreme: Alternative sports, inside and out. Albany, NY: State University of New York Press. Spiegel, P. (1998, December 14). Gen-X-tremist pitchmen. Forbes, 188. Sporting GoodsManufacturers Association (SMGA). (2001a). Sports Participation Top Line Report2000. North Palm Beach, FL: Sporting Goods Manufacturing Association. Stotlar, D. K. (2002). A decade of evolution: The sport industry. Sport Marketing Quarterly, 11(1), 55-58. http://www. dissertations. wsu. edu/Thesis/Fall2004/h_park_122104. pdf

Decision Making and Enron’s Control Essay

Introduction – Students, analysts and critics of modern business practice will always consider the colossal Enron collapse as an important text book case about how a lot of different things inside the company can trigger a nearly overnight downfall of a once prestigious company. If there was any Cinderella story in the world of blue chip trading and high portfolio business, Enron was the ultimate opposite, if not the witch herself who was killed by her own lethal potion. The Enron collapse resulted in the formulating of many different opinions pointing to the many different possible reasons why Enron – with all the promise and potential that it has a few years before it went south – made the nosedive that made it one of the worst disasters in the history of trade, commerce and business. There is no doubt that most of the opinions that surfaced explaining the reason why such an eventuality befell Enron placed the blame on the wrong things that the top management echelon did for the company; they are after all the one which is responsible for the present and the future of Enron. Critics looking at the Enron debacle scrutinized what happened leading to the collapse using many different perspectives and considering many different factors, both in the professional capability of the company’s leaders as well as the impact of the surrounding factors beyond Enron’s control. One of the most important facets in the debate regarding the fall of Enron is decision making. Evidently, a lot of wrong decisions were made, with one every wrong decision acting as a building block that eventually became an insurmountable wall of consequences all borne out of wrong or faulty decision making processes that yielded results that did the company more harm than good. Indeed, the decision making linchpins significant to the establishment of the case that the Enron collapse was due in some extent to the decision making aspect of the leadership strata of the company can be identified easily as it is scattered throughout the timeline of Enron’s very near and not so distant past leading to the eventual fall of the company that hid behind the faà §ade of the building the ugliness created by the qualities of its leaders that caused the chaos that burned down Enron down to meager, worthless ashes. This paper will pick the significant moments wherein the decision making capabilities and abilities of its top management leaders were at play and use these moments to establish the ethical and other considerations coming to play during the analysis of the decision making efforts of the leaders and why the outcome of such exercises led to the fall of Enron and not towards the company’s betterment, which is the main task of the company’s top executives. The paper will utilize these occasions to stress its argument regarding the role of effective, ethical and sound decision making of top executives leading to either the success or bankruptcy of companies, in this case that of Enron, and discuss key aspects of this line of thought. The paper will not criminalize the actions of the executives of Enron; rather, it will infuse inputs from other professionals regarding important aspects in the discussion of corporate decision making (ethics, result-orientation, etc). Background – Various angles have already been explored by many different individuals every time the topic of analysis is Enron and its collapse. Because of this, the paper is moving to focus on an aspect that is focused more on Kenneth Lay and the rest of his top executive clique’s personal characteristic that could have played an important role in the outcome of Enron’s operation. Decision making is both a personal characteristic as it is a professional credential, even an asset. Some people are being paid handsome amounts of money for their ability to transform decision making moments into an opportunity that provides a positive result and expected outcome for the company. Ehringer (1995) puts it simply: ‘The ability to make good decisions is the defining quality of our lives’ (Ehringer, 1995, p. 1). When Lay, Skilling, Fastow and other Enron bosses were placed in their respective positions, they were expected to exercise a high level of intuitiven ess, business acumen and professional foresight so that every decision making opportunity is met with the company’s best interest long term and short term in mind. They were where they were because those who placed them there believed that they can make decisions to which the company can benefit from. When Enron collapse, many people and organizations criticized the questioned the decision making capabilities of the top executives – was the collapse an effect of the result of the decision that they made? Was the decision made putting the benefit of the company and the employees first, or are the decisions shaped so that it benefited them first? How bad was the breach in the ethical considerations that a professional should take every time he or she makes a decision that puts the future of the company on the line? These are just some of the questions that may also be present in the minds of those who followed the Enron case. Sure there were varying degrees of deception and fraudulent acts from the part of many select individuals who sinned against Enron and its employees, but these cases would have been minimized or even averted altogether if the important decision making privileges was limited to a select few, or if the future-altering decision making capability is disseminated largely among a huge group of people that can provide a check and balance system for Enron. Roberts (2004) explained that ‘ if it is possible for others to make the decisions for a unit, then new options arise to design the decision-making process as well as the incentive schemes to get better performance on both dimensions. For example, the design might specify that a decision about a project arising in one unit that affects another would be implemented if and only if both units agree to it,† (Roberts, 2004, p.151). Enron is an energy trading firm which was performing well in the early part of its existence. By the s tart of the 21st century, the problems that the bosses were trying to hide from the public and from the employees started to stank. Soon, events unfolded like dominoes falling one after the other as a consequence of information spilling out into the public’s attention. Before 2004, the public already had a clear idea about how Enron bosses were supposedly the one responsible for the defrauding of the employees and their company shares and other benefits, as well as the one responsible for the bankruptcy of Enron. One by one, key company officials stepped out of the light and implicated a new name, which will in turn implicate a much bigger name, until the dragnet sent out to see who was accountable for the fraudulent acts in Enron caught its top bosses, including Lay, Skilling and Fastow. Many individuals faced criminal charges, and many more simply went home not just jobless but are robbed of lifetime investments which Enron bosses manipulated and soon lost because of the wrong decisions they made on how to run the company and make it prosper and grow. Examples of how Enron management made wrong decisions during decision making moments abound in the history of the company. Take for example what happened in 1987 – instead of declaring the $190 million loss the company experienced, they concealed it instead, leading to criminal charges. This habit of Enron for opting to conceal losses instead of declaring it became a dangerous vice; when Fastow was aboard Enron, the same outlook affected the decision making of Enron, leading to increase in pile of cases wherein Enron through its top management consciously made actions that defraud the employees and the public. There was also the case of poor public relations by Enron which fanned the flames of panic that removed any possible opportunity for Enron to remedy the financial situation without creating hysteria that saw many stockholders selling their stocks due to the continued falling of the stock value of Enron. Statement of Problem – The most important decision that Enron’s executives faced was not the decision on whether or not to publicly announce about the bankruptcy; in fact, there was no decision making factor during that instance since the predicament of the company has already been decided regardless of what the top executives might have opted for: they were flat out broke and the public needs to know about this, that was the situation. The true decision making moment for Enron’s bosses was the time when they were deciding what the best option to take is with regards to the financial aspect of the company, including taxes, earnings and financial loses. It was a matter of facing a decision making task that provided the Enron bosses with two options – to do the right thing, or to opt for something that is morally and ethically inappropriate. The decision reached in this particular decision making instance was laced with the hope that the option they took would be free from serious repercussions and give them enough time to fix it all up again. Unfortunately for Enron, things did not work out as planned, and the criminal liability of the Enron bosses stemmed from the fact that they decided to do something which they consciously knew was detrimental to the welfare of the Enron company and its employees. During that particular instance, Lay could have opted to do the right thing and faced the consequences – by coming clean, he may have a more sympathetic public to support him in whatever efforts he may wish to undertake to revive Enron, and not be faced with the collapsing stock value since those who can sell theirs sell it in a frantic phase to rid themselves of the stock of the company which is nearing imminent bankruptcy. This showed how the people do not give second chances to those who squander their decision making privileges by making decisions bereft of the consideration of the good of the greater many. Decision making – John Hintze (2006), in his discussion about making smart decisions during decision making, used the case of the Enron collapse to open his discussion and establish the fact that problems are something that is foreseen, something that happened nonetheless owing to bad decision making. Hintze wrote, ‘should we have seen 9/11 coming? What about the Enron collapse? The Signs were there; people pointed them out, but the appropriate steps were not taken by those in a position to do something. Why is this? Politics? Greed? Those certainly contributed, but there was something else at work here, too: A failure of common sense in decision making’ (Hintze, 2006, p. 123). Enron: Bad decision making – Nothing can prove more about how bad the decision making went inside Enron camp more convincingly than the fact the company transformed from prosperous to poor overnight. This was the general characteristic of Enron through the traits shown by its leaders that reflect the Enron personality. There were earlier discussions in the paper about snippets on instances pointing to Enron’s penchant for making bad decision or for going to the resolving of a problem utilizing an option that is more questionable. Fox (2004) explained that ‘Enron believed that its expansion into international projects were positive initiatives simply because they put the company in more potential markets. In truth, Enron made bad business decisions that weren’t supported by the deal’s economics. The bad business decisions piled up, stretching from India to Brazil, pressuring the company to do something about its finances’ (Fox, 2004,p. 307). At least at this point, Fox is not pointing at the unethical aspect of the Enron decision making machinery, just the fact that they made decisions that were bad for the future of the company, but not to the extent of deliberately sabotaging the company or putting the company in danger with all known risk for personal gain. For Fox, it was a bad call plain and simple. But the matter of the fact is that not everyone sees it the way Fox does, and there are those who believe that there were ethical breaches in the decision making in Enron among its top bosses. The (absence of) Leaders in decision-making – Decision making in retrospective is one of the common line of thinking used when investigating events that led to growth or debacle. It is because decision making played an important part in shaping the future of the company; it is here where the foundation, or lack of it, was created via the decisions the bosses made or failed to make. To trace the problems or mark significant actions resulting from decision making which eventually resulted to either the success or failure of the company, it is not only the decision making events that are looked back to; the persons that made them were also put under the microscope, and among the qualities scrutinized is their decision making ability and their other characteristics that affect their decision making attitude and behavior. Professionals debate about the idea of a good decision, a bad decision, good intentions and bad intentions and how the good and bad effect that comes into play afterwards account for the overall accountability of a person wielding the power to make decisions that will have a tremendous impact on the future of the company, something which happened in Enron via Lay, Skilling, Fastow and the rest of the top figures of the company. Acuff (2004) explains that ‘if they make a decision that might not have been the decision I would have made, and the y come and talk to me about it, we look at it and discuss it. There are a lot of different ways to skin the horse. I don’t go saying my idea is the only one that will get you where you want to go. I hold people accountable for good decision-making. If a bad outcome results from a bad decision – that’s a problem. But if a bad outcome results from a reasonable decision, then that’s business, and it could happen to anyone† (Acuff, 2004, p. 187). This was the predicament of those who are trying to evaluate the decision making actions of Enron top executives – did they make decisions, even bad decisions – with the sake of the company in mind, and gambled with their careers because they know that if their plans and actions go well, it is extremely beneficial for the company, in a very Machiavellian approach towards getting things done regardless of the means by which they did it, or were they just plain guilty of fraudulent actions? People who are burdened by the decision that impacts a lot of people is not always amenable to taking the high and moral grounds, that is why the adage about the end justifying the means, about getting things done at what ever cost, about delivering against the odds became popular because of people like the Enron bosses who (probably) acted upon their decision making duties by risking what can be a popularly bad decision. Indeed, it may be easy or even convenient for most people adversely affected by the Enron collapse to attribute the colossal corporate debacle to the top management figures of the company by criticizing their decisions as well as their faculty for sound decision making. While it is true that Enron’s top executives are responsible for the collapse of the company, it is not that easy to measure the level of ethical decision making attributes of Enron’s top brass. Goethals et al (2004) pointed out that â€Å"the complexity associated with ethical decision making and behavior, especially as it applies to leadership and the workplace, makes the construct extremely difficult to research†, adding that â€Å"Measuring an individual’s level of ethical decision making is challenging, particularly because the measurement instruments that are available have problems with priming and social-desirability effects; that is, questionnaires or other similar modes of data collection cue respondents to give answers that they believe are socially acceptable rather than answers that truly reflect their own actions or opinions (Goethals et. al., 2004, p. 461).† Proof of which is the fact that all of these executives in question are career corporate leaders even before they joined Enron; their credentials played an important role regarding their selection for a corporate position as high as theirs. Because of this, as well as the factors that affect the credibility of the ability for identification of the real public pulse regarding the persons involved in the issue, ethical decision making levels of the persons involved is hard to ascertain, making claims for questionable ethical decision making consideration of the people lose important ground and stand on insufficient set of stable legs for proof and justification. Still, there are those who believe that the level of ethics that influences the decision making capabilities of the Enron bosses are without a doubt questionable, and this includes Mimi Swartz and Sherron Watkins who was quoted in the book edited by Kathy Fitzpatrick and Carolyn B. Bronstein. In the article, it mentions about how Swartz and Watkins â€Å"blame Ken Lay, former CEO of Enron, and other company executives for privileging greed and arrogance over ethical business decisions† (Fitzpatrick and Bronstein, 2006, p. 179), the gist of the published work co-authored by the two individuals. Nalebuff and Ayres (2006) wrote that ‘the problem often arises because people ignore the costs and benefits that their decisions have on other people. We call this approach â€Å"Why don’t you feel my pain?† The more technical term for these effects is externalities. Decision makers who ignore externalities are bound to make bad decisions† (Nalebuff and Ayres, 2006, p. 67). This explanation greatly tarnishes the ethical value of the decision making ethics of Enron bosses because it shows that they are prone or inclined to make decisions even if the result of such decisions lead to negative effects that other people will experience. Niskanen (2005) believes that Lay, one of the top bosses of Enron, â€Å"should be judged on the basis of his personal actions, directions to subordinates, or the actions of subordinates that he implicitly condoned by knowing about it without attempting to correct – not on the basis of what he should have known† (Niskanen, 2005, p. 6). Lay’s condoning of actions is a result of a personal and professional decision that he made – or failed to make – and because of that, Niskanen believes that Lay is answerable for any criminal charges that would result from that particular action (or inaction). Watkins was thinking of the company and its employees and their future and hers as well, when she made the decision to let her superiors, particularly Lay, know about the possible accounting problems and the making public of the current and real financial and trade status of the company. This clearly illustrates the difference in ethics when it comes to decisio n making. Decision making, ethics and public perception – Decision making in business is not merely a power or a privilege that one can use at will without thinking of the consequences that might happen should the decision resulted into something that is considered as adversely negative and detrimental to the welfare of the employees, their jobs and the company they work for. Those who are provided with such amenity to go along with their job description should consider that it is also their responsibility to make sure that their employees and subordinates do not think that they are squandering away their decision making privilege and everything that goes along with it. This was the prevailing attitude or outlook of the Enron employees especially nearing the imminent collapse of the company. The absence of ethical consideration resulted to the losing of the credibility of the bosses of Enron because they were not careful with how they undertake their decision making tasks. While bankruptcy is something that is very difficult to accept and impacts greatly in the lives of the employees especially the rank and file blue collar workers, there is a sense of adding insult to injury during occasions wherein the employees are starting to realize that all of the unfortunate things that happen in the company and in their careers are all a result of the faulty, incompetent and unethical decision making of the top management echelon and not because the company was helpless in the onslaught of a devastating economic problem, like how companies closed down during the Great Depression despite the efforts of American businessmen to keep the different industries alive and breathing. During the collapse of Enron, the US is experiencing a very stable economy far from that which characterized US economy during the Great Depression, and is shielded securely from the impact of whatever it was that was happening in the global economic and business landscape, and so during the Enron collapse, the collective finger was pointing an accusing index digit to Enron bosses and majority of the cause of their indignation originates from the sloppy decision making capabilities of Enron bosses who lost their credibility the moment they lost Enron. Brazelton and Ammons (2002) wrote in the book they co-wrote: â€Å"The Ethics Resource Center conducted a survey in 2000 in which it learned that 43 percent of respondents believed that their supervisors are generally poor examples of honest managers, and the same number were pressured to compromise their own integrity or that of their organization during decision making. The survey also identified a strong connection between employees’ perceptions of their supervisors and their own ethical behavior (Brazelton and Ammons, 2002, p. 388).† Enron decision making: the two-pronged factors – It can be pointed out that one of the problems that happened to Enron is the ineffective of decision making among top executives – first, their top executives failed to make correct decisions when they are required to do so, and second, Enron was not fully complimented with a set of professionals which could have contributed to the decision making process, and in the process provided the possibility of infusing new or different ideas that could have altered the outcome of the decision making process. Fitzpatrick and Bronstein (2006) did not look exclusively on Enron’s bosses and the decisions they made in the management of Enron and the company’s money and asset, rather, the two editors focused on the absence of a key top managem ent personnel and took the presence of such a void as a sign that Enron is not even prioritizing the welfare of the company and its employees. The book Ethics in Public Relations: Responsible Advocacy, which includes the Enron case as one of the important case studies to point out the importance of the role of public relations, explains that â€Å"perhaps the governance of these companies was such that they did not care about their publics, and did not want the advice of senior-level public relations officer playing an active or dominant role in organizational decision making† (Fitzpatrick and Bronstein, 2006, pg 179). Conclusion – Niskanen (2005) summed up the Enron case on its characteristic of thriving in bad decisions made by its corporate leaders by saying in the book that ‘the most important lesson from the Enron collapse, however, is that Enron failed because of a combination of bad business decisions, not because its accounts were misleading’ adding that ‘the major business decisions that most contributed to its collapse were a series of bad investments, most of which were in the tra ditional asset-rich industries; the failure to reconcile two quite different business models; and the decision to focus management objectives on reported revenues and earning rather than on the present value of future cash flows’ (Niskanen, 2005, p. 6). Are they poor in decision making, or was the decision making adversely affected by other concerns and priorities outside of Enron that the results of the decision made for Enron looks like those who made the call did not even think about how this course of action will affect Enron? There are no sufficient proofs to point that the case was the latter; for a company that became seventh all in all in the Fortune 500 at least once, it is unthinkable how there will be conscious efforts to sink the company by making wrong decisions, deliberately or not. The point of the paper is not the assertion of the guild of Skilling, Lay or even Fastow, it’s the establishing of the point that decision making, when not handled properly, can turn even the most profitable company into a nose-diving wreck in a short period of time, that decision making plays an important role in how a person defines his or her life and how he or she leads a company and that because of these factors, no one should have an excuse why decision making was taken lightly and without much thought or care. All the people can see is a group of people who made wrong decisions several times, the resulting web and how they got trapped in that web, that is assuming that there was no malice or hidden agenda that the bosses perpetrated in lieu of Enron’s collapse. In the end, only Lay (now deceased) and the elite circle of the Enron executive clique will be the ones who would really know about the truth regarding ethics and the decision making in Enron leading to th e collapse of the company. Many would ask, and some would presume, the reasons as well as the level of guilt of these leaders when it comes to breaching the ethical requirements needed when undertaking decision making for a company. Regardless, the decisions they made created far reaching ripples and altered the lives of many individuals who invested not just their time, strength and life’s savings into the company but as well as their but as well as their faith and trust, which are not in shattered pieces because of the bad decisions that Enron executives made. Crawford (2006) further elaborated on the pointed by explaining that ‘bad decisions by a major company, however, cause major disruptions for all of the company’s stakeholders’. He pointed at the case of Enron as one of his examples, saying that ‘the Enron disaster, as one example, certainly had devastating impacts on the lives of most of Enron employees (including the middle managers and professionals who invested in the company-sponsored Enron 401[K] plans) and also caused suffering for many individual investors who purchased Enron stock on the open market. Thousands of other Enron stakeholders, including Enron’s suppliers and customers, also suffered,’ (Crawford, 2006, p. 26). Indeed, Enron’s decision making had a hand in how the company turned out to be. References: Acuff, Jerry and Wood, Wally (March 2004). Relationship Edge in Business: Connecting with Customers and Colleagues when It Counts. Wiley, John & Sons, Incorporated. Brazelton, Julia K. and Ammons, Janice L. (September 2002). Enron and beyond: Technical Analysis of Accounting, Corporate Governance and Securities Issues. CCH, Incorporated. Crawford, Curtis J. J. (November 2006). Compliance and Conviction: The Evolution of Enlightened Corporate Governance. XCEO, Incorporated. Ehringer, Ann G. (June 1995). Make up Your Mind: Entrepreneurs Talk about Decision Making by Ann G. Graham. Silver Lake Publishing. Fitzpatrick, Kathy, Bronstein, Carolyn B. (May 2006). Ethics in Public Relations: Responsible Advocacy. SAGE Publications. Fox, Loren. (2004). Enron: The Rise and Fall. Retrieved May 12, 2008, from http://www.wiley.com. Fusaro, Peter C., Miller, Ross M. and James, Tom (2002). What Went Wrong at Enron: Everyone’s Guide to the Largest Bankruptcy in U.S History. John Wiley and Sons. Goethals, George R., Burns, James MacGregor and Sorenson, Georgia (March 2004). Encyclopedia of Leadership. SAGE Publications. Hintze, John. (May 2006). Making Smart Decisions. Harvard Business School Press. Nalebuff, Ian Ayres (November 2006). Why Not?: How to Use Everyday Ingenuity to Solve Problems Big and Small. Harvard Business School Press. Niskanen, William A. (June 2005). After Enron: Lessons for Public Policy. Rowman & Littlefield Publishers, Inc. Roberts, John. (May 2004). The Modern Firm: Organizational Design for Performance and Growth. Oxford University Press, USA.