Part 1: Business Types

Within your group discuss business ideas in which you have an interest in starting up or an idea to expand an existing business idea be creative. Within your team pick one of these ideas and identify what organizational form you would choose and why.

Part 2: Agency Issues

For each of the following scenarios . . .

• identify whether an agency problem exists,
• what the nature of the conflict is and
• identify checks and balances that exist or could be implemented to minimize the likelihood that it will occur.

1. The people that work in the Sales Division are evaluated on the level of volume (# of units) that they sell. The people in the Manufacturing Division are evaluated on the cost per case.

2. A company decides to invest in technology that is harmful to the environment.

3. The head of the Casper division decides to pay bonuses to his staff even though they did not meet their earnings goal for the year. He says that his staff worked harder than they ever have before and its not their fault that a new competitor entered the market this year.

4. The CEO decides to hire her son without searching for alternatives.

5. A divisional manager is using the company plane for personal travel.

6. In order to meet year end goals and qualify for bonuses, one division convinces its customers to increase their order this month, saying dont worry, if you cant sell it you can return in next month.

7. The CEO heads up the compensation committee and recommends a large bonus for himself. Because the committee members report to the CEO (who also controls their bonuses) they approve it.

8. While traveling, Barry finds some confidential documents in the seat pocket in front of him that were left behind by a traveler on a previous flight. He realizes that the document contains a detailed launch plan for a new product from his primary competitor. He takes the document and shares it with his product development team and as a result they beat the competition to the market with a similar product.