Essay in Managerial Economics Example | Topics and Well Written Essays - 2250 words

In Managerial Economics - Essay Example In the banking industry therefore, these relationship in governance may be quite complicated in the sense that the regulatory oversight is very likely to compromise the alignment of incentives. Several arguments have been advanced to suggest that the huge payment packages to the executive emanate from the influence of powerful managers who design the payments as well as extracting rents from companies. On the other hand, some argue that the large pay package for the executives is a result of optimal contracting in a market that is fairly competitive especially for talents in management. The importance of regulators as Berger et al. (2000) argue is to evaluate the bank holding condition. The supervisor analyze firm on the basis of financial conditions and risk management as well as present a bank with an assessment that is confidential. The issue of supervisory rating is related to executive compensation in banks, in that weaker ratings are closely related to intensive outside monitor ing by the regulators. As such, the most favorable executive compensation design can be developed from a trade-off between risk shifting and perk consumption both of which are agency problems that the executives are faced with. Risk shifting can be said to be the risky behavior that managers undertake because of an incentive based compensation or reward. Perk compensation on the other hand, is consuming perks to the detriment of shareholders especially when there is little or no incentive based compensation for the managers. In instances where there is strong outside monitoring by the regulators, the limit risk usually shift on the managers part paid equity, consequently, an optimal design of executive compensation is achieved with improved sensitivity of pay for performance. Consequently, regulatory monitoring is capable of increasing the risk adverse behavior on the part of the executive. It therefore follows that in order for the executive to perform, their payment must be relate d to their performance. The banking industry is a unique sector in the sense that it must be able to operate within the regulatory confines (Sierra et al. 2006). The importance of government regulation cannot there be overemphasized. This is because the deposit insurance as well as system of payment ensures that the government can effective make a claimant on the assets of a bank. Discussion In the current global financial crisis, there are several causes that have been on the spotlight to explain the state. This causes as advanced include: the guiding philosophy for the global neo liberalism, the increase in the number of the subprime mortgages, and also the presence of the real estate market that is uncontrolled. That notwithstanding, it is the contention of this paper that there is more to current status than the aforementioned causes and that the main contributor to the current crisis has its roots in the problem of incentive. According to Fee & Hadlock (2003), an incentive can be defined in simple terms as a way of convincing persons to do less of the bad things and more of the good ones. It goes without saying that incentives form the basis of corporate life, especially in instance where the executives are involved, understanding them can be a key factor in addressing almost any riddle in an organization. However, the current corporate governance

Technology in the Tire Sector Essay Example | Topics and Well Written Essays - 750 words

Technology in the Tire Sector - Essay Example The industrial age of the early 20th century is rapidly giving way to the age of technology, which has also brought with it, added conveniences and freedoms which would never have been possible before. The most noticeable sphere where this phenomenon may be observed is in the transport industry. When Charles Goodyear invented vulcanized rubber way back in 1844, little did he realize that he was sowing the seed that would endow man with â€Å"wheels on his feet† and herald his entry into a world of freedom of movement with an ease that he would never have imagined. The very same vulcanized rubber is the standard material for tires today – those tires that help man to move around in the vehicles of his choice. Today, tire technology has evolved to such a point that they even contribute to lowering the pollution that is present in the atmosphere. Technology has made it possible for tires to be so engineered that they lower emissions from cars and thereby enhance fuel econo my and reduction of toxic pollutants of the atmosphere.[Fraschini, 2005]. These new tires are ecologically friendly because they work on the principle of lowering rolling resistance, which essentially means that the friction between the tires and the road is reduced. The tires have a lightweight high strength construction which aids in smooth rolling on the roads, producing a more fuel efficient engine and less emissions.[Fraschini, 2005]. Industrial development has already taken a toll on nature and the alarming increase in pollution levels due to vehicle emissions is a serious issue today. Therefore, developments in technology such as the ecologically friendly Potenza RE92 and the Bridgestone Ecopia tires[Fraschini, 2005] are welcome, because they represent an acceptable compromise between man’s urge to be on the move and the need to conserve the environment. Therefore, this is one instance where technology is beneficial and such