Question One: Why Nations fail - so close yet so different
Different nations from around the world are endowed with different resources, which they harness to build their economies. These resources influence not only their economies but also the political significance of the state. More fundamentally, they affect the culture and values of governance that characterize public finance and governance. It is vital that corporate finance should be administered in tandem with democratic principles of governance. Unfortunately, corporate governance has been stained with vices such as nepotism, corruption, official lethargy and incompetence. Governance in economic and political institutions is directly correlated with the level of democratic maturity of a nation. Furthermore, the struggle for resource control in the corporates has detrimental effects on the nation. It is instructive to note that a nation significantly depends on its resource bases to spur economic growth. The cardinal drivers of the economy that oversee the implementation of its requisite programs are the nation’s institutions. The state will succeed only if the institutions are governed and administered with the application of democratic principles and values.
Question Two: The theory of Rentier State
External rent has a lot of influence on the business behavior of a state. This is because the state freedom of importation, which is cardinal for the growth of its economy, is not only limited in scope, but also in terms of resources. These forces states to focus their attention and channel their resource to particular sectors of the economy so as to produce commodities in order to pay its rents. This policy approach ignores other essential areas of the economy as the little resources that a country has are used in the production of the basket of commodities. The state, therefore, becomes heavily reliant on the country it is paying rent to for the production of other necessities in its economy. The trade imbalance significantly affects service delivery and the economy growth because essential sectors have been categorized as being of secondary importance. For example, a country which exports oil to developed nations heavily depends on it as its principle source of revenue instead of taxing its citizens. While this sole fund is capable of supporting the entire tax base of the state, the produce that remains to the owner after the payments of external rents are minimal, thus explaining the phenomenon why oil producing countries are not the fastest growing economies in the world, despite the relative abundance of resources.
Question Three: Understand Enron
Legal systems are not only desirable in the business arena, but rather essential in order to protect commerce, ensure certainty and promote fairness. Strong legal systems and regulations enable markets to perform exemplarily well during market downturns thus saving investors a lot of money. It is imperative to have good corporate governance in turn reducing risks occasioned by non-market factors. More fundamentally, it is not possible to attain the ideal corporate governance without legal systems and regulations. On the other hand, there are extremely dependent on the professionalism of gatekeepers. Therefore, the negative effects of legal systems and regulations are that they are vulnerable to unscrupulous managers and traders. Sinister and predatory conduct from such individuals may lead to fraud and dishonest transactions in turn harming the markets. Additionally, gatekeepers operate as intermediaries who provide investors with certification and verification services. In this sense, the personal judgment of the gatekeeper has cannot be gainsaid as they determine with finality the creditworthiness of the investors. Therefore, it is cardinal that these individuals adhere to the tenets of good administration and corporate governance to maintain the integrity of the industry.
Question Four: Case Study
It is critical that all company workers, from directors to the lowest ranked employees, to carry out their duties with high standards of professionalism, integrity, accountability and transparency. It is obvious from the case study that Daniel has breached a number of duties charged on him as the director of the Quality Sofa & Bed Ltd. He breached the duty of disclosure of any conflict of interest between individual interests and the company interests when he failed to disclose that he was the owner of the warehouse. The fact that he undervalued the warehouse is irrelevant. He also failed on his professional duty to read and understand the policy cover for their company before signing it. His negligent or intentional acts are a sign of poor corporate governance practice and he should be held liable to the loss suffered by the company. The fact that he is a chartered accountant shows that he had the capacity and ability to understand the insurance cover and that it was out of negligence that he did not read it. Daniel also engaged in corruption by offering cheaper prices to a client in order to get personal benefits. This shows a breach of the duty to carry out company obligations with integrity. He did not only break the rules governing the company, but he also broke the law. It is extremely vital for company executives to adhere to the rule of law as it provides clear guidelines that are essential in corporate governance. Failure to adhere to these guidelines attracts harsh sanctions not only from the company, but also from state laws. Quality Sofa & Bed ltd is empowered to sanction Daniel for his misconduct. The directors are at liberty to choose any form of punish that is in tandem with the company’s policy and laws of the country. More significantly, it will send a message that the company is keen to implement cardinal values, accountability, transparency and professionalism within its ranks. This will ameliorate not only the level of efficiency and productivity of the workers, but also the reputation of the company.
Works Cited
Coffee, Jr, John C. "Understanding Enron: It’s About the Gatekeepers, Stupid." Columbia Law School: The Center for Law and Economic Studies (2002): Working Paper No. 207.
Robinson, James A and Daron Acemoglu. Why Nations Fail: The Origins of Power, Prosperity and Poverty. New York: Profile Books, 2012.
Yates, Douglas Andrew. The Rentier State in Africa: Oil Rent Dependency and Neocolonialism in the Republic of Gabon. New York: Africa World Press, 1996.
