Public corporations have no limited life. They are initiated to perform their activities and they cannot close easily unless the government decides to do so. The corporations have a good capital base. It can be able to easily access funds to increase its investment hence expand its activities. When the corporation is facing financial problems, the government is always ready to solve the financial problems to ensure continuity of the business.
The organization receives protection from the government. In case there is competition in the market, the government can pass laws to protect the interests of the corporation. It can do so to ensure that the corporation becomes a monopoly. This ensures that the corporation becomes the sole supplier of goods and services leading to success of the business (Madura, 2010).
There are many weaknesses associated with public corporations. In the first place, they suffer from political interference. The management of the corporations depends on political influences. Poor leadership in the corporations resulting from poorly selected leaders can affect the operations of the organizations negatively. There is the tendency to mismanage organizational funds in this organization with the hope that government will intervene and solve the problem. The performance of public corporations is therefore poor in most of the cases.
Public corporations are not suitable if they engage in production of private goods. It is important as far as it is formed to produce public goods such as roads and education. Production of private goods by public corporations can lead to inefficiencies hence high prices for the goods (Madura, 2010).
1. Corporate governance is one of the important issues that each organization should take into consideration. Some of the objectives that should be emphasized in corporate governance include reducing conflict of interests, ensure that shareholders rights are clearly defined and the assets owned by shareholders are effectively used.’
Ensuring minimal conflict of interests between the management and shareholders is of great importance. It helps to ensure that the shareholders are satisfied hence can cooperate with management to ensure success in the business activates. Conflict between management and shareholders make it difficult to make decisions hence most of the activities in cooperation are likely to fail (Gordon, 1938).
Good corporate governance should aim at informing the shareholders of their rights. This will ensure that the shareholders participate effectively in the activities of the corporation. The activities of the corporations become easy and shareholders feel satisfied.
Effective disclosure should be another objective. This means that correct information about the performance of the organization should be presented to the public. This will ensure that the public is able to make informed decisions. The shareholders are also able to evaluate the performance of their company (Gordon, 1938).
Corporate governance should also aim at ensuring good use of shareholders assets. It should ensure that the available resources are effectively utilized to benefit the shareholders who are the owners if the business.
Corporate governance should also aim at promoting the activities in the society. It is important to support the members of the society effectively considering that they are the main suppliers of raw materials to the company. If these objectives are observed, most of the stakeholders in companies will benefit and the performance of the company will improve (Gordon, 1938).
There are many obstacles associated with implementation of corporate governance. In the first place, it involves money, which the management may not be willing to budget for. Supporting development activities involves use of funds that could have been used for other purposes.
Implementing corporate governance can lead to adverse effects to the company. If some discloser were made on financial statements of a company, attracting investors would become difficult. Therefore, managers find it difficult to disclose full information about a company to the public and the shareholders.
Considering that the management will be willing to maximize their welfare, implementing corporate governance can be dangerous to the management. The management will therefore be reluctant in implementing corporate governance objectives.
2. When companies are listed in US capital market, it shows that they have the confidence to perform well. People gain confidence in these organization hence their value increases. These companies are able to increase their capital base by being listed in the financial market. All foreign companies that are listed are committed to ensuring good corporate management. Good corporate management leads to good performance of the firms hence their high value (Madura, 2011).
Many foreign companies are not willing to be listed in the market. This is due to the costs associated with being a member of the market. All members are required to obey Sarbanes Oxley law. This involves huge costs to the corporations. To avoid these costs, companies choose not to be members of the capital market.
- Cash management is important for organization because if not well managed, it can lead to insolvency hence bankrupt of firms. Preparation of cash budget is the key factor that influences effective management of funds in organizations. The budget tells the sources of funds and how they are used in the organisation. It helps identify areas were funds can be borrowed at lowest interest rates hence reducing costs to the firm. It also shows areas where surplus funds can be invested to realize the highest returns (Madura, 2011).
Management of cash in multinational companies is difficult because the organization deals with different currencies. Currency rates require management otherwise; such firms can incur huge amounts of costs. People without the knowledge to manage currency risks cannot manage cash in multinational companies.
- When cash is centrally managed centrally in MNC, resources are effectively allocated since the cash manager allocates funds to all the branches in the world considering their needs. The issue of currency risks is well recognized if management is central, hence risks can be well managed. With central management, residue funds can be invested in currencies that give the highest returns. The deficits can be borrowed with currencies that have the lowest costs (Eun, 2003).
If management of cash in MNC is decentralized, the cash managers gain experience of managing funds at local level hence efficiency in management is achieved in the long run. This management also ensures close relationships with local banks such that the MNC can borrow funds or invest the excess with these banks to receive best returns. It is however important to note that the best cash management method involves centralization of cash management activities.
Madura, J. (2010). International financial management. Australia: South-Western Cengage Learning.
Eun, C. S., & Resnick, B. G. (2003). International financial management. Boston [u.a.: Irwin/McGraw Hill.
Gordon, L. (1938). The public corporation in Great Britain. London [u.a.: Oxford Univ. Press.
Madura, J. (2011). International financial management. Mason, OH: South-Western/Cengage Learning.