All posts by Greg

Do the Benefits of The Sarbanes-Oxley Act of 2002 Outweigh its Many Costs?


There is a general pattern seen in the world of finance: giant corporate fraud or scandal, resulting government investigation that inevitably is unable to prosecute those responsible, followed by lengthy governmental legislation attempting to prevent the fraud/scandal from ever happening again. In the early 2000’s this pattern played out in the form of multiple scandals such as Enron and WorldCom with resulting legislation in the form of the Sarbanes-Oxley Act of 2002.
SOX is said to be the most sweeping piece of legislature regarding financial reform since FDR’s Securities Act of 1933 and Securities Exchange Act of 1934. It attempted to restore confidence and transparency to companies’ financial statements and therefor the market as a whole. SOX was for the most part able to accomplish this goal, but not without substantial costs to public companies and the market. Compliance costs were grossly underestimated by Congress and the regulatory agencies leaving public companies with no choice but to take the hit. Additionally, there have been substantial declines in the United States’ competitive edge in the global capital markets.
This report is concluded with three suggestions to help accomplish several goals of SOX that have not yet been achieved as well as an overall answer to the question of whether or not the costs of SOX outweigh its benefits.

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Unplugging: All the Cool Kids Are Doing It


I have heard that various appliances, chargers, and electronics use electricity when they are plugged in even if they are “off.” For this reason I try to unplug things in my apartment when I know I will be gone for an extended period of time. The video below claims that 75% of the energy consumed by many electronic devices occurs when they are off but plugged in.

This article from the New York Times recounts the results from a study done by the Lawrence Berkeley National Laboratory for the Department of Energy. The study confirms that electronics use extra wattage when plugged in even though they are off. There is also a link within the article to a table that displays the estimated excess wattage used by various common household electronics.

The amount of energy used by these idle appliances is very small, however when magnified by billions of people, the amount of electricity that could be saved is more than significant. I plan on making “unplugging things” part of my routine in the morning and night. We leave things plugged in because it is an inconvenience to have to plug in our lamp or toaster every time we want to use it. If everyone could make unplugging become a habit then the collective effect could greatly impact society.

 

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Heated Roads Pave the Way to the Future


My idea that I would want Elon Musk to “invent” is heated roads.  More specifically I would want Musk to come up with a cost-effective way to heat roads and highways in order to melt snow and other inclement weather.  It is clear in recent years that weather patterns have become somewhat strange. Parts of the northeast (US) have been hit with several feet of snow. Perhaps even more worrisome is that many areas of the south have also been hit with snow, and they are not nearly as prepared to remove it.

Heated roads and highways would provide a much safer travelling experience all over the country, and potentially the world. Millions of Americans could be positively impacted by this kind of innovation.  It is not the first time this idea has been proposed. This article shows that scientists and engineers have tried to develop new kinds of roads that could melt roads, but progress has yet to really been seen. I propose a way to heat the current roads that we have now.

The most important aspect to this idea is cost-effectiveness. The cost of installing Musk’s new heating system in roads would have to be less than the current budget for snow removal services such as plows and salt.  The project must have a positive NPV. Additionally, the burden of construction would have to outweighed by the benefits of effectively safer roads. I do not possess the know-how needed to invent such a system, otherwise I would not be asking Elon Musk to invent it for me, but I would imagine that he could come up with an easy way to insert an easily heated material underneath the gravel of roads and highways that could then be activated and initiated from above ground.

If implemented properly, this system could save lives as well as make travelling easier on a daily basis in the winter time.  If Elon Musk could figure out a way to heat roads on an affordable basis, then many people could be positively impacted.

 

Featured Image: http://www.autoguide.com/auto-news/2012/11/how-to-drive-on-snow-and-ice-winter-driving-safety-tips.html

Chipotle Employee Diagnosed with PTSD from Telling Customers: “Guac is Extra”


Max Power, a 22-year old college student and Chipotle employee was checked into Golden Cross Hospital earlier this week after being diagnosed with post-traumatic stress disorder (PTSD). The second year employee claims the condition is a result of “stressful working conditions where there is a concentrated focus on alerting customers to the fact that guacamole costs $1.80 extra.”

Power started with Chipotle cleaning/clearing tables before he was promoted to working on the food line. “At first I thought it would be exciting to do something more meaningful, but I really overlooked the pressure of it all,” said Power about working on the line. He began his new experience in the last station before the cash register where he was responsible for adding the finishing touches such as cheese, lettuce, and of course, guacamole. Power says he was constantly reminded of the importance of informing each customer who requested guacamole that it was indeed $1.80 extra. Power admitted, “Most customers seemed to already know guac was extra. Many didn’t seem to care, and some actually seemed annoyed when I would tell them. I started to think it wasn’t really that big of a deal.”

Then on a rainy Monday afternoon, Power finally slipped up. He forgot to inform an elderly gentleman customer of the extra charge for guacamole. When the man realized he was charged for what otherwise seemed like just another free ingredient, he immediately become engulfed with rage. He began to scream at anyone and everyone in a Chipotle uniform until both the young girl working the cash register and the acting Manager were both in tears. “I tried to speak up but I couldn’t be heard over his curses of ‘our generation’ and reasons why we were what’s wrong with this country,” explained Power.

Other Chipotle employees say Max Power changed that day. “He barely even reacted when our Manager threatened to fire him,” said one of Power’s concerned coworkers. Power could not help but to relive the confrontation in his head. “Every time a customer would ask for guac, the roomed seemed to get 20 degrees warmer,” admitted Power. He became so nervous that sometimes he would inform customers that guacamole was extra even if they did not order it. Eventually he could no longer control the volume of his voice. One of Power’s coworkers recounts an experience where a 10-year old girl asked for guacamole and Power shouted at her in response. “He started yelling at her before she even finished asking for it: ‘IT’S EXTRA IS THAT OKAY?!?’ He was out of breath like he just ran a mile.”

Under the recommendation of his manager and parents, Max Power voluntarily took a leave from Chipotle in order to seek medical attention. Power will remain at Golden Cross Hospital for further evaluation and care. “I don’t blame the company. It is important for all customers to know about the extra charge for guac. I know it sounds silly, but I’m going to beat this.” We wish Max Power the best in his path towards recovery.

2.3 Miles Makes a Giant Difference


Fortune 500 and nationally-known companies are not the only ones who face ethical dilemmas in their decisions. Smaller and lesser-known companies also grapple with the ethical implications of both their day-day and long-term decision-making. In my Paper 2, I will take a look at the strategic decisions behind local grocery store chain, Giant Foods. In this blog post I will give a summarized version of the case and a glossed over version of the results (sort of spoiler alert but not really). Fortunately for me, my dad has a management position in Giant, so most of the information in this post is from using him as a source.

On October 10, 2014, Giant Foods opened its new store located just off of I-81 and Wertzville Road in Enola, Pennsylvania.  A few weeks previous, Giant closed its long-time successful store 2.3 miles away on Wertzville Road located in Pennsboro Commons Shopping Center.

Giant has owned the leasing rights to the land for the new store for ten years.  Approximately three years ago, the real estate developer for the land told Giant that they must do something to develop the land or else they would not be able to renew their lease for the 25-30 acre plot.  Giant was only holding the land to prevent competitors like Wegmans from entering the market, but now they were faced with a difficult decision. It was clear that Giant needed to build a new store on this plot of land, but what should they do with the existing Enola store?

Closing the old Enola store would be a significant blow to the community. That store is the heart of Pennsboro Commons, a shopping center that only exists because of the large number of customers in which Giant brings. The 2.3 miles to the new Giant would be a way bigger issue than most would think. The communities between these two areas are very different, and even more importantly, while the new Giant was technically still in Enola, it now resided in Hampden Township as opposed to the old store which was in East Pennsboro Township.  This was a major loss of tax dollars for East Pennsboro Township.

Giant’s accounting and real estate teams crunched the numbers of their ROI figures and determined that opening a new store at the new location would increase sales because they would have a new facility, closer location to the highway, and closer vicinity to the technology parkway (new local medical and corporate centers).  They also determined that there was no way to keep both stores open; especially since the majority of existing customers would simple drive 2.3 miles to the new store. Spoiler: They were wrong. Old customers were not willing to travel to the new store, and the new customers did not care for the new store. Sales figures missed projections badly (stay tuned for exact figures in Paper 2).

Giant was fully aware of the negative implications that closing the old store would have on East Pennsboro Township. They could have tried to make a compromising plan to appease the community but instead they went with the plan for most profit. Ironically, the strategy did not go as planned and Giant is left with an angry community and a less profitable store. Below are pictures from Google Images of the Pennsboro Commons shopping center layout and a picture of what the parking lot looks like before and after Giant closed its doors.

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Lessons in Business from South Park


South Park is a well-known comedy program on Comedy Central intended for mature audiences. The creators of South Park, Matt Stone and Trey Parker, use dark humor, crude language, and a wide-variety of satire in their show which is based off of the adventures of four fourth grade boys who live in a small Colorado town called South Park.

Stone and Parker take pride in their fearlessness to poke fun at any sort of popular topic whether it is a person, place, organization, religion, etc. They have invited disapproval and sometimes courses of legal action from countless entities including the Church of Scientology, the NCAA, the Roman Catholic Church, Canada, Tom Cruise, Martha Stewart, PETA, and the list goes on.

Episode 09 of season 08 is titled “Something Wall Mart This Way Comes.” The “target” of this episode is not surprisingly the multinational retail giant, Wal-Mart Stores, Inc. Stone and Parker have done multiple episodes about corporate America including taking the pro-corporation stance in Season 02, which is controversial considering their studio is located in the overwhelmingly anti-corporation area of Hollywood, California. This episode, however, shows the giant retailer in a more negative light.

The episode begins with excited anticipation from South Park’s citizens as their new Wall Mart is about to open for business. One character says, “It’s like we’re a real town now.” I find this to be one of the most truthful lines of the episode. I have personally measured a town’s “relativity” by how far away they are from the nearest Wal-Mart. I spent my summer playing baseball in a very small town in upstate New York. The town is literally called Boonville. Their nearest Wal-Mart was about 40 miles away which is the first example I would use when trying to convey the middle-of-nowhere-ness to other people.

Continuing with the episode, the people of South Park cannot stop shopping at Wall Mart because of its incredible bargains. One character boasts about having, “Enough bulk Ramen to last 1,000 winters.” One of the boys, Stan Marsh, asks his father, Randy, how Wall Mart is able to sell things for much less than South Park’s local stores. Randy replies, “It’s simple economics son, I don’t understand it at all.” This symbolizes how the average American consumer really does not understand the ins and outs of the corporations at which they shop every day.

Eventually the main street in South Park becomes a ghost-town. All of the local businesses have been forced to close because they cannot compete with the low prices of Wall Mart. The people of South Park, although hopelessly addicted to shopping at the Wall Mart which is now being portrayed with dark, ominous clouds and flashes of lightning combined with typical evil-sounding music, realize that the store needs to be stopped. They have a town meeting and agree to discontinue shopping at Wall Mart; however they cannot resist the calling of wondrous bargains from the Wall Mart which has seemed to develop its own eerie persona. Follow the link to view the clip from the episode to see how the people of South Park just cannot resist shopping at Wall Mart (could not embed video).

“Well where else was I supposed to get a napkin dispenser at 9:30 at night?” This line perfectly sums up how people think of Wal-Mart as well as how Wal-Mart wants to be thought of by people. After the town burns down the Wall Mart, another one is rebuilt and opened the very next day. The boys are determined to stop the powerful retailer and embark on an adventure to Wall Mart’s headquarters in Arkansas. Meanwhile, Randy quit his job as a geologist to become a store clerk at Wall Mart in order to receive the 10% employee discount.

The boys learn from a disheveled and regretful Wall Mart President that only way the Wall Mart can be stopped is to destroy its heart. Many have attempted this feat but no one has ever been able to restrain themselves from the amazing deals long enough to accomplish the task. Determined more than ever, the boys set out to destroy the Wall Mart in South Park. In their journey to find the heart of Wall Mart, they are ambushed with slashed prices and unbelievable deals. Miraculously, the boys find the location of the heart which is just past a huge sale for plasma screen TVs. In a dramatic unveiling process, it is revealed that the heart of the Wall Mart is simply a mirror. The true heart of the Wall Mart is the consumer. It is desire. The Wall Mart can take many forms, whether it be Target, K-mart, or even Amazon, but it is the consumer who ultimately breaths life into the giant retailer.

The message(s) in this episode could not be clearer. Many people do not support large corporations like Wal-Mart because they force smaller local shops out of business. But Wal-Mart could not have become the super power that it is without the average consumer. If they have grown from one store to become the largest retailer in the world, and people continue to flood the store, then they must be doing something right. After all, the true heart of Wal-Mart is the consumer. Their goal is not to bankrupt small businesses across the country. They simply give the consumer what they want which is an opportunity to consume while also being able to stretch their income. At the end of the episode, Randy says, “The Wall Mart is us. If we like our small-town charm more than the big corporate bullies, we all have to be willing to pay a little bit more.” This is essentially a play on Adam Smith’s Invisible Hand as the town is not suggesting government intervention; rather they suggest letting the free market system work and guide itself.

If you are like me and enjoy comedic satire then I strongly suggest watching this episode of South Park if you have not already. For another take on American capitalism, I suggest “Gnomes” which is season 02 episode 17. In this episode, Stone and Parker defend capitalism when a large coffee chain called Harbucks enters the town and threatens to put the local Tweak Bros. coffee shop out of business. For more on the actual application of South Park lessons, visit this link which is an article written by Paul A. Cantor, an English professor at the University of Virginia, who uses South Park in his lectures.

The clip from the episode can be found here

The featured image can be found here

Here is an actual embedded clip (Jordi)

The True Cost of our Tech Products


I wish I could say that this podcast really opened my eyes, but the unfortunate truth is that I was aware of much of this information before tuning in. Sure, Mike painted a more colorful picture, but I think many of us (meaning American users of these sweat shop products) already know about the long hours, cramped quarters, repetitive motions, and even suicide nets. So why is it so easy for us to look the other way? Why is it so easy for us to just see what we want to see?

I do not really have an answer to these questions. Even trying to rationalize it makes me disappointed in not only myself but everyone else like me who hears these gruesome stories and is ready to completely denounce the use of products from companies like Apple, but somehow find themselves putting their iPhones back in their pockets and moving on with their days.

Maybe it has something to do with the distance. These horrible working condition stories are happening halfway around the world. It is easy to put these images in the back of our minds when we are in our local Verizon stores excitedly picking out which new iPhone we want because our 2-year upgrade is finally due.  Maybe we don’t have a choice. We almost have to have a functioning smart phone in order to keep up in present day America, right? Are the other companies doing things much better? We almost have to assume that Samsung and HTC are doing the same thing. And plus, that is a lot of independent research for us to formulize the entire supply chain of every major tech company. We’re busy; let someone else handle that. When everyone else decides to change, that’s when we will too.

Does this rationalization sound familiar?  If a stranger came up to you and said, “I will give you a brand new iPhone for $1.00. The only catch is that a few Chinese workers will suffer over the labor required to make it for you.” Most of us would immediately decline the offer as it puts other human beings through direct suffering and pain. So why is it that we not only pay $1.00 but several hundreds of dollars for new accessories at the expense of not only a few workers but a few hundred thousand? How can we still be so eager to buy our next iPhone when we know the true cost?

1-React to Past Blog


https://stakeholder11.wordpress.com/2014/12/19/the-nfl-did-it-withhold-and-lie-about-head-injuries/

This blog post is about the NFL potentially withholding information about head injuries from its players.  I found this topic interesting because I have followed this issue relatively closely over the years and I am still not exactly sure where I stand.

Of course I think it is terrible for the NFL to hide information from former players, but then again it has been known for quite some time that repeated hard hits to the head cannot be good for someone. The NFL has taken many actions in the form of rule changes of which drastically change the game so as to improve the numbers on head injuries and concussions.  In addition to this, most players love to play the game so much, that they openly accept the negative health effects of the game.

For this reason, I think this blog post should most likely be rephrased in order to create a situation in which you imagine yourself getting an offer for your dream job but you know it will have significant negative effects on your health for the rest of your retired life; however you want the job so much that this may be worth it to you. What would you do?