The board of directors of a limited company is responsible for determining the objectives and policies of a business. It is the directors who determine the direction the business is going to take. They will need to ensure that the necessary funds are available and will appoint key staffs to whom they will delegate the authority to run the day-to-day business.
The directors are appointed by the shareholders, normally at the company’s annual general meeting, at which the chairman of the board is expected to account for their stewardship during the previous year.
Direction in business is like strategy in a war situation. The strategic decisions determine the areas in which company’s resources will be employed. Strategic decisions, made by the board of directors, are concerned with the allocation of resources. By means of tactical decisions the senior executives (appointed by the director) carry out in detail the plans approved by the board of directors.
COMPREHENSION
Ex. 14. Complete the ideas.
1. A typical corporation's structure consists of three main groups:...
2. The number of directors usually depends on the size of the business...
3. The CEO is responsible for the entire operations of the corporation...
4. The COO looks after day-to-day activities...
5. The CFO is responsible for financial performance of the corporation...
6. Corporations usually hold annual shareholder meetings...
Ex. 15. Here are the answers to some questions. What are the questions?
1. Directors, officers, and shareholders.
2. By shareholders at annual meetings.
3. On the size of the business.
4. By the corporation's board of directors.
5. For the entire operations of the corporation.
6. To the chairman and board of directors.
7. The COO.
8. At regular intervals.
9. A secretary.
10. The number of shares held by the investor.
11. When significant corporate actions require shareholder approval.
TEXTS FOR READING
Text 1
In addition to be a means of exchange money is also a means of measuring the value of human labour. Labour, in economic theory, is any work undertaken in return for a fixed payment. A mother may work very hard in caring for her children, but she receives no fixed payment. It is not therefore labour in strict economic sense.
Economists are interested in measuring the services which people render to each other. Although aware of the services which people provide for nothing, they are not concerned with such services. In economics, money is the standard by which the value of things is judged. This is an objective, scientific standard and not in any way related to standards of a religious, ethical or subjective nature.
Human labour produces both goods and services, The activities of a farm worker and a nurse are very different, but each is measurable in terms of payment received. If, however, a farmer is a self-employed and don’t receive a fixed wage from anyone else, he is in a different category from a nurse and from his own farm workers. His activities are not wholly labour. His workers receive their wages, but he receives whatever surplus (large or small) emerges from his farming. This surplus, like any surplus in industry or commerce, is what we usually call “profit”.
Employers obtain their net profits only after they have paid all expenses arising out of their business activities: interest, rentals, payments for machinery, wages and overheads generally. The surplus is not usually available only for employers and their families. Normally part of it goes to those who have provided the initial capital needed to start a business.. There is always an element of risk in providing capital for new businesses. Such business may fail. But those who provide the capital and those who run the business agree to bear the risk, but employees of such business are not expected to bear any risk. If the business is successful, the risk-taking have been justified, and invested capital earns part of the profits as a return on the investments and the period during which the capital was at risk. Capital in this instance is simply the accumulation of previous surpluses on previous business activities. In this way the past is used to finance the future. The accumulation of capital is almost always deliberate either on the part of individual citizens or on the part of the state. A certain point of the surplus achieved in any enterprise is “ploughed back” into the system in order to promote further growth.
Text 2
Different economists have exposed four views of the world:
1. The book version of classical economics.
The real world conforms to the ideal picture of economic system in which there is perfect competition and perfect information, and in which natural private forces lead to the best possible volume and composition of output, produced by the most efficient methods, and to the best possible distribution of the resulting income among the population. Since everything is already as good as it can be, there is nothing to be done.
2. The positive programme for laissez-faire.
The real world does not match the ideal picture. Competition is not perfect; information is not complete; the system is subject to fluctuations in output and to involuntary unemployment; private decisions may not be optimum because individuals don’t have incentives to take account of all the consequences of their actions; and the distribution of income may be “unjust”. These conditions could be corrected in part by government policies.
3. The negative programme for laissez-faire.
The real world would conform to the ideal picture to a satisfactory degree if the government did not intervene, but it departs substantially from the ideal picture because of unwise government policies. Although competition would not be perfect, effective competition would emerge if government did not create or protect monopolies. Private forces would generate all the information that is worth the cost to produce. The market would develop a monetary standard that would lead to reasonable economic stability. The distribution of income would be fair in the sense that people would get the income they earned. This view leaves much room for improving conditions by government action, but all the required action is negative. The government can improve conditions by not protecting monopolies, regulating the market, manipulating the currency, or interfering with the distribution of income.
4. The hopeless government.
Although the government could improve conditions by positive or negative action, that is not possible. The government is part of the real world, and the people in it who make decisions are motivated by the same desire to maximize their private welfare. Presumably their policies already reflect this, and they cannot be expected to behave differently, because they are told that would improve conditions in society. In this view, as in the first, there is nothing to be done.
The first view seems to be highly optimistic. Many would say, of course, that it is also highly unrealistic; what people want is not just the satisfaction of their wants but better wants and the economists’ optimum says nothing about the quality of wants or about their development.
The fourth view is a picture of a world that is unbelievably dismal; the world in which there is no point in striving to make it better.
But the second and third views are optimistic ones. They give the picture of the world in which there is a possibility of making conditions better by public policy. In either view, there is something to think about, argue about and do.
Text 3
Most people work to earn a living, and produce goods and services. Goods are either agricultural, or manufactured. Services are such things as education, medicine and commerce. Some people provide goods, some people provide services. Other people provide both goods and services. For example, in the same garage a man may buy a car or some services which help him maintain his car.
The work people do is called economic activity. All economic activities taken together make up the economic system of a town, a city, a country or the world. Such an economic system is a sum-total of what people do and what they want. The work people do either provides what they need or provides the money with which they can buy essential commodities. Of course, most people hope to have enough money to buy commodities and services which are non-essential but which provide some particular personal satisfaction such as toys for children, visits to the cinema and books.
The science of economics is based upon the facts of our everyday lives. Economists study our everyday lives and the general life of our communities in order to understand the whole economic system of which we are part. They try to describe the facts of economy in which we live, and to explain how it works. The economist’s methods should, of course, be strictly objective and scientific.
We need food, clothes and shelter. We probably wouldn’t go to work if we could satisfy these basic needs without working. But even when we have satisfied such basic needs, we may still want other things, such as toys, visits to the cinema and books mentioned above. Our lives might be more enjoyable if we had such things. Human beings undoubtedly have a wide and very complex range of wants. The science of economics is concerned with all our needs: with desire to have a radio as well as the basic necessity of having enough food to eat.
Not all economic systems are the same everywhere. Britain is similar to the USA. It has an economic system based on private enterprise and private supplies of capital. An important form of capital is surplus income available for investments in new business activities. Property in both the USA and Britain can be and is owned by individual citizens and these citizens exercise considerable economic freedom of choice. They can choose what they want to do and how they want to earn their living, but are not, of course, entirely free to do as they whish. They must obey the law. Otherwise, however, they can use their time, money and energy as they wish. If a person can do this, then economists say he is economically free. In all communities, of course, limits are imposed upon personal freedom.
Text 4
Four special economic zones in the south of China have been given special rights in developing foreign economic ties. The purpose is to attract foreign investments into the economy and introduce modern technology and equipment, along with new methods of management. Initially, the most active investors were rich Chinese from Hongkong and Macao. Of the new economic zones, Shenzhen, which borders on Hongkong is the biggest and fastest growing. Its area is 327.5 square kilometres.
Capital construction in the zone is at present financed by the zone itself, as well as by bank loans and foreign capital. State allocations are negligible. Construction work is being carried out by more than 100 building organizations from nine provinces of the republic and Hongkong. As for industrial enterprises, the construction of most of them is financed by foreign capital.
Special attention is being paid to financing export industries. Initially, it was believed that the entire output of the factories built on foreign capital would be exported. In practice this did not work out for a number of reasons, and at present up to two thirds of the output is sold on the domestic market.
There is no single system of industrial management in Shenzhen. At state-run factories the laws and system of the Chinese People’s Republic operate, while at factories built exclusively on foreign capital the system of creditor country prevails, but the owners are obliged to follow the local laws. The Chinese side plays no part in running these factories. Mixed companies have a joint management with a Chinese representative at its head. The number of the members of the board from each side depends on their respective capital contributions.
Special economic zones are playing a leading role in China’s policy of reviving the economy and expanding its ties with the rest of the world. They could be described as testing grounds for the new ideas and political principles of foreign economic activity. It is there that the search is being carried out for the best ways of attracting foreign investments, importing advanced technology and testing new methods of management.
What is borrowed from other countries is tested, adjusted and assessed in the zones – and only then passed on to other parts of the country. The wide use of foreign capital began in China after 1980. And by the end of October 1986 foreign investments (without loans) amounted to $5.9 billion, 80 per cent of them are sited in coastal provinces and cities.
China has already signed agreements that will bring $ 25 billion to the Chinese economy abroad.
Text 5
Belarus is not well-known in the world as for many years it has been apart of the former USSR.
Now Belarus is a sovereign state, it is a developed agricultural and industrial country.
The business circles of Belarus do not want to wait for the politicians to decide about their place in the world. Belarusian businessmen want to cooperate. Now Belarus according to many experts presents a great interest for local as well as foreign businessmen. The Republic of Belarus maintains contacts with many foreign countries in different spheres of economy. It is an exporter and importer of different goods.
Recently there appeared many joint enterprises that help to make international contacts more stable and beneficial Belarusian enterprises set up direct contacts with foreign enterprises and firms. This is a new form of cooperation as well as joint ventures and joint stock companies.
Belarusian goods, such as tractors, lorries, refrigerators, watches are exported to many countries of the world. Among import items are such goods as food stuff, footwear, clothes, high-tech goods, etc.
Belarusian business circles are ready to offer to their foreign partners a number of long-term projects. This involves investment into Belarusian economy on mutually beneficial conditions, the creation of joint ventures, cooperation with large Belarusian banks, insurance companies, commercial firms.
One of the prospective fields without which the international cooperation in Belarus will be hardly possible is the creation of joint consulting companies on legal, finance and insurance problems.
Nowadays in Belarus there are companies and organizations which help the development of international cooperation. One of such organizations is the International Association Beltrance. The main fields of activities of the Association are development of international economic cooperation, promotion of scientific and cultural exchange, business studies and publishing activities.
Being a sovereign state Belarus takes an active part in the work of many international organizations, thus promoting the development of the existing contacts and the setting-up of new ones.
Text 6
One of a small business owner’s biggest assets is his willingness to dream. However, it is organization that turns dreams into a real business. Start your business by asking yourself some basic questions, and answering them honestly.
1. Why do I want to go into business for myself?
Your first step in business is to clarify your personal goals and priorities. This might not seem to have anything to do with running a business, but it is essential. It makes you think about what you really want from life, and how your business will help you achieve it.
2. What business do I want to be in?
Whether you have already picked the business you want to start or are still looking – you probably have more options than you realize. Make a list of all the ideas and businesses that appeal to you. Instead of just one or two ideas, allow yourself to consider all kinds of possibilities. Next, take this list and evaluate each possibility based on the following criteria:
3. Is it something I would like doing?
Since running a business involves lots of time and work, it might as well be something you enjoy. After all, the more you like the activity, the more enthusiastic you’ll be about doing it every day. If you love flowers, for instance, you could consider opening a flower shop, nursery or gardening business.
4. Do I have enough experience, or the kinds of skills necessary? If not, can I acquire them?
One of the key elements for succeeding in business is knowing as much as possible about the field. If you are especially interested in business you haven’t worked in before, learn everything you can about it before starting your company.
5. Does this fill a customer needs?
Businesses exist to satisfy customer needs. Therefore, you must know who your potential customers are, what their needs are and if you can fill these needs based on your interests and experience.
6. What size business do I want?
Would you like to own a one-person business, a shop with a few employees or a chain of stores? A local business, or a company which sells and ships goods across the country, or internationally? How big a business do you need to satisfy your personal goals? What kind of management skills will you need to achieve these goals?
Starting a business you should follow four rules:
1. Choose an activity you understand.
2. Start smaller rather than larger.
3. Keep it simple.
4. Have a clear plan.
Text 7
When they hear the word “management”, most people still hear “business management”. Management did first emerge in its present form in large-scale business organizations. But we soon learned that management is needed in all modern organizations, whether they are businesses or not. In fact, we soon learned that it is needed even more in organizations that are not businesses, whether non-profit (“the social sector”), or government agencies. They need management the most precisely because they lack the discipline of the bottom line. The fact that management is not confined to business was recognized first in the USA. But it is now becoming accepted in all developed countries. We now know that management is a generic organ of the knowledge society.
During and immediately after World War II, a manager was defined as “someone who is responsible for the work of subordinates”. A manager in other words was “boss” and management was rank and power. This is probably still the definition many people have in mind when they speak of managers and management. But by the early 1950s the definition had already changed to “manager is responsible for the performance of people”. Now we know that this is also too narrow definition. The right definition is “a manager is responsible for the application and performance of knowledge”. Implicit in this definition is that we now see knowledge as the essential resources. Land, labour and capital are chiefly important as restrains. Without them even knowledge cannot produce. Without them even management cannot perform. Where there is effective management, that is, application of knowledge to knowledge, we can always obtain the other resources. Knowledge changes the structure of society. It creates new social dynamics, new economic dynamics and new policies. We have moved from knowledge to knowledge.
