Youth cell phones compasny Essay Example | Topics and Well Written Essays - 1000 words

Youth cell phones compasny - Essay Example Why do you think the YCP Company had been able to grow in just over five years? The first five years of YCP were marked by strong growth for a number of reasons. An important factor is the strong growth of the market for mobile and internet technology, as this was the period of commercial introduction and fast development in these areas, so the rise in demand was strong, particularly in its chosen niche (young mobile and internet customers) and the industry still generally open to new entrants. Based on data provided, the following information was computed: YCP performance for the last five years Year ended Revenues (MUSD) No. of Subscribers Ave. rev. per subscriber 1998 80.0 100,000 800.00 1999 200.0 195,000 1,025.64 2000 270.0 330,000 818.18 2001 380.0 680,000 558.82 2002 750.0 1,970,000 380.71 The first three columns were data provided, form which the average revenue per subscriber was computed in the last column. It was evident that from the third year onwards, the sales growth a chieved by YCP was on the basis of attracting new volume by lowering prices. While the cost figures are not given for us to compute the breakeven point, it is sufficient to note that by 2001, the firm was offering its services for prices below its introductory rates in 1998, which may indicate that the company is operating at below breakeven prices. 2) What impression have you formed of corporate governance in YCP Company? For the first two years, there appeared to be no indication of major lapses in corporate governance. ... failure, is irregular in the case of YCP because the bonuses are explicitly stated to be based on the appreciation of the company’s stock value rather than on its earnings, which is an untenable basis on which to compute executive compensation. Executive pay and bonuses are anchored on the firm’s earnings, not its market capitalization; therefore, this is a matter to be investigated by the Securities and Exchange Commission. 3) What is your opinion of the ownership structure in YCP, in light of the fact co-administrators Kong and Watson retain 60% of the voting equity. Can group of small shareholders make a significant contribution to the governance of the company? What about large shareholders? As far as ownership structure is concerned, there is no legal or ethical problem in Kong and Watson holding 60% of the equity. A strong controlling interest properly discharged can even articulate business strategy more clearly and create a stronger business (Ozer, et al., 2010, p. 18). It is clear that based on voting rights, Kong and Watson clearly have controlling ownership of the firm. There should be no conflict of interest, however, in their being members of the board, as the board represents the shareholders’ interests which is their own. Being members of the board, however, they are charged with the duty of due diligence and of acting in the interests of all shareholders, not only their own. This does not mean that groups of small shareholder or even large (though minority) shareholders are powerless against decisions but the majority shareholders that are patently inimical to the corporation’s interests. They still are entitled to a full disclosure and complete information about how the company is run, violation of which could be the basis for litigation. SEC