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One factor in this decision is whether the adjustment reflects the impact of exchange rates on parent currency cash flows. •A second factor is whether the local manager has the authority to hedge against exchange rate changes. Verspreiden niet toegestaan | Gedownload door Sybe klaas Kappe ([email protected])lOMoARcPSD|105219
Factors Influencing the Success of the Performance Evaluation in MNCs The success of a performance evaluation system depends on a number of factors. These include: •Integration of the system with the overall business strategy •Feedback of actual results and revision of budget •Comprehensiveness of the set of performance measures •Organizational buy-in •Reasonableness of budgeted measures •Understandability and simplicity of the system People in different cultures will react differently to the aspects of management control systems. §Example: Management control mechanisms designed in the U.S. to assign individual responsibility will not work as effectively in Japan. ›Culture affects management style ›Culture influences capital budgeting decisions (e.g. short vs. long payback) Chapter 6 – International Corporate Social Reporting (Week 4) “CSR is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.”Theories to explain CSR practices Stakeholder theory ›Disclosures made in response to stakeholder demand for environmental and social information. Verspreiden niet toegestaan | Gedownload door Sybe klaas Kappe ([email protected])lOMoARcPSD|105219
›Major problem - fails to explain different disclosures by similar industries in same geographic areas. Legitimacy theory ›Social reporting means to deal with firm’s exposure to political, economic and social pressures. ›Behavior motivated by congruence with perceived goals of society to legitimize their performance. Key Issues in CSR ›Human rights •Cooperation with paramilitary forces •Complicity in extra-judicial killings ›Poverty Alleviation •Job creation •Public revenues •Skills and technology ›Labour rights: •Child labour •Forced labour •Right to organize •Safety and health ›Environmental conditions •Water & air emissions •Climate change Current Trends in CSR Largely voluntary in most countries ›Wide diversity based on different countries’ drivers ›National culture and CSR practices: related? ›Organizational culture: •Attitude of top management towards stakeholders “Tone at the top” •Managers determine relevant audience •Foreign subsidiaries may disclose information in line with parent - not local requirements ›The rate of development of CSR internationally is slow due to economic, political, capitalism, inertia AND resistance to change by accounting profession Current State in CSR Practices and reporting ›Significant shortcomings with voluntary CSR practices. ›Biased and self-laudatory disclosures §