A Case Study of Joint Venture Banks in Nepal Essay

Using the data set published by joint venture banks in their annual reports, and NRB in its supervision annual reports, this paper examines the financial health of joint venture banks in the CAMEL framework. The health check up conducted on the basis of publicly available financial data concludes that the health of joint venture banks is better than that of the other commercial banks. In addition, the perusal of indicators of different components of CAMEL indicates that the financial health of joint venture banks are not so strong to manage the possible large scale shocks to their balance sheet and their health is fair. THE HISTORY OF MODERN commercial banking industry dates back to 1937 A.D in which year Nepal Bank Ltd. was incorporated. Till 1984, financial sector was closed to private sector and foreign investors. HMG/Nepal started to liberalize the financial sector in the first half of the 1980s. But it speeded up this process only in early 1990s. Private sector rushed into the finance industries especially after the restoration of democracy in 1990. Most of the commercial banks came into operation during the decade of 1990s. Government of any countries highly monitors and controls the finance industry even in the liberalized market economy. Government does so due to its high gravity in the national economy, and to build up the confidence of private sector in its financial system. Nepal Rastra Bank (NRB) as an apex monetary authority of the country started to monitor and control the finance industry especially at the end of the 1990s by issuing the directives to the financial institutions (FIs). It initiated the offsite and onsite supervision of FIs to maintain their sound financial health and to build up  the confidence of private sector in the liberalized financial system and protect the interest of the investors. It has adopted the CAEL (capital adequacy, asset quality, earning and liquidity) system to check up the health of FIs. It has yet to use the CAMELS to evaluate the financial performance and check up the financial health. Independent outsiders also can not use all components of CAMELS to check up the financial health of FIs in Nepal due to the full disclosures of required financial information to outsiders. NRB dictated FIs to disclose the financial information in uniform way only in the fiscal year (FY) 2001/02. In this paper, attempt has been ma de to check up the financial health of joint venture banks in the framework of CAMEL. 1. Rationale of Regular Health Check up of Commercial Banks Not only the commercial banks but also any FIs require regular health check up to maintain the confidence of private sector in financial system of the country and protect the interest of depositors, lenders, shareholders and other stakeholders. The gravity of the importance of sound financial sector has increased tremendously after the international financial turmoil of the second half of the 1990s. International monetary authorities such as International Monetary Fund and international FI like the World Bank have underpinned the need of healthy financial sector to build up the confidence of private sector in the liber41 The Journal of Nepalese Business Studies alized financial system. Therefore, they have directed their member countries to reform the financial sector and conduct the regular health check up of FIs through onsite and offsite supervision. International FIs like the World Bank and Asian Development Bank (ADB) are supporting the projects run in the vein of reforming process of the financial sector of different countries. For example, the World Bank is constantly providing the technical and financial support to reengineer NRB and restructure Nepal Bank Ltd. and Rastriya Banijya Bank (NRB 2005). Health of financial sector depends on the health of individual FIs. In addition, individual FI’s health counts on the myriad macro and micro factors. Among the macro factors, political stability and the real sector growth are vital. The financial health of FIs can not sustain without the political stability and sustainable real sector growth with sound health. However, the intensity of contagious effect of these macro variables may vary from one individual FI to another. Therefore, health of individual FI should be checked up regularly to know the intensity of such effect. Health of an individual FI is a function of multiple factors such as quality of its assets, liquidity position, capital base, management quality, market sensitivity and earnings. All these factors affect the different types of risk to an individual FI. Different types of risks: credit risk, interest rate risk, liquidity risk, market risk, off-balance sheet risk, foreign exchange risk, sovereign risk, technology, operational risk, insolvency risk, affect the health of an individual FI adversely if they are not managed in sustainable manner (Saunders and Cornett 2004). A number of factors such as quality of assets, financial market condition, foreign exchange market, composition of assets, financial health of its clients, profitability, capital adequacy, affect the degree of these risks. Financial health check-up of an individual institution should be made regularly to detect the adverse effect of these risks on its health. Micro-prudential indicators such as capital adequacy, asset quality, management soundness, earning and profitability, liquidity, sensitivity to market risk, and market based indicators like market price of financial instruments, credit ratings are used as indicators of the sound health of an individual FI (Evan and others 2000). These indicators are explained at length in the ensuing section of this paper. 2. Theoretical Prescription of CAMELS Framework The Basle Committee on Banking Supervision of the Bank of International Settlements (BIS) has recommended using capital adequacy, assets quality, management quality, earnings and liquidity (CAMEL) as criteria for assessing a FI in 1988 (ADB 2002). The sixth component, market risk (S) was added to CAMEL in 1997 (Gilbert, Meyer and Vaughan 2000). However, most of the developing countries are using CAMEL instead of CAMELS in the performance evaluation of the FIs. The central banks in some of the countries like Nepal, Kenya use CAEL instead of CAMELS. CAMELS framework is a common method for evaluating the soundness of FIs. This system was developed by regulatory authorities of the U.S banks. The Federal Reserve Bank, the Comptroller of the Currency and the Federal Deposit Insurance Corporation all use this system (McNally 1996). Monetary authorities in the most of the countries are using this system to check up the health of an individual FI. In addition, International Monetary Fund also is using the aggregated indicators of individual FIs to assess the financial system 42 Health Check-up of Commercial Banks soundness of its member countries as part of its surveillance work (Hilbers, Krueger and Moretti 2000). 2.1 Capital Adequacy CAMELS framework system looks at six major aspects of an FI: capital adequacy, asset quality, management soundness, earnings, liquidity, and sensitivity to market risk (Hilbers, Krueger and Moretti 2000). The first component, capital adequacy ultimately determines how well FIs can manage with shocks to their balance sheets. Thus, it tracks capital adequacy ratios that take into account the most important financial risks—foreign exchange, credit, and interest rate risks—by assigning risk weightings to the institution’s assets. For the purpose of capital adequacy measurement, bank capital is divided into Tier I and Tier II. Tier I capital is primary capital and Tier II capital is supplementary capital. In Nepalese context, Tier I (core/primary) capital includes paid-up capital, share premium, non-redeemable preference share, general reserve fund, accumulated profit, capital redemption reserve, capital adjustment fund, and other free reserve. Amount of the goodwill, fictitious assets, investment in the financial instruments issued by an organized organization in excess to the limit specified by NRB, and investment in the financial instruments issued by the organizations having the own financial interest is deducted from the sum of all elements of the primary capital to arrive at the core capital. Similarly, Tier II (supplementary) capital comprises of general loan loss provision, assets revaluation reserve, hybrid capital instruments, subordinated term loan, exchange equalization reserve, excess loan loss provision, and investment adjustment reserve. Thus, the total capital of commercial banks is the sum of core capital and supplementary capital (NRB 2005). Leverage ratio can be used to measure the capital adequacy of a bank. This is the ratio of bank’s book value of core capital to the book value of its assets. The higher ratio shows the higher level of capital adequacy. The U.S.A. Federal Deposit Insurance Corporation Improvement Act (FDICIA) of 1991 has fixed the five target zones: i. 5 percent and above ii. 4 percent and above iii. under 4 percent, iv. under 3 percent, v. 2 percent and less, of leverage ratio. The leverage ratio falling in the first zone implies that bank is well capitalized. Similarly, the leverage falling in the second zone shows that bank is adequately capitalized. The leverage falling in the last three zones indicates that bank is inadequately capitalized and regulators should take prompt corrective action to bring the capital to the desirable level (Saunders and Cornett 2004). The leverage ratio stated in the foregoing discussion is simple capital to assets ratio. In other words, assets are not risk adjusted. The 1993 Basel Accord enforced the capital ratio to risk adjusted assets of commercial banks. According to this accord, core capital must equal to or exceed 4 percent of the risk weighted assets of the commercial banks. Similarly, the amount of the supplementary capital should not exceed the amount of the core capital and the total capital must equal or exceed 8 percent of risk weighted assets (Saunders and Cornett 2004). NRB initially fixed the core capital at the level of 4.5 percent of the risk weighted assets and total capital at the level of 9 percent of risk weighted assets of the commercial banks (NRB 2058). For the current FY2005/06, the mandatory levels of core capital and total capital are 6 percent and 12 percent of risk weighted assets of commercial banks. But NRB has strictly directed all commercial banks that the amount of the supplementary capital should not be in excess to the amount of the core capital (NRB 2005). 43 The Journal of Nepalese Business Studies 2.2 Asset Quality Credit risk is one of the factors that affect the health of an individual FI. The extent of the credit risk depends on the quality of assets held by an individual FI. The quality of assets held by an FI depends on exposure to specific risks, trends in non-performing loans, and the health and profitability of bank borrowers—especially the corporate sector. We can use a number of measures to indicate the quality of assets held by FIs. ADB suggests these measures—loan concentration by industry, region, borrower and portfolio quality; related party policies and exposure on outstanding loan, approval process of loan, check and balance of loans; loan loss provision ratio; portfolio in arrear; loan loss ratio; and reserve ratio—of checking the quality of assets of an FI (ADB 2002). NRB uses composition of assets, nonperforming loan to total loan ratio, net nonperforming loan to total loan ratio as the indicators of the quality of assets of commercial banks (NRB 2005. NRB has directed the commercial banks in regards to the concentration of the loan. Any licensed FI can grant the fund base loan to a single borrower or borrowers related to the same business group up to the 25 percent of its primary capital. In the same vein, it can provide the non-fund base loan up to 50 percent of its core capital (NRB 2005). Similarly, it has directed FIs to classify the loans into performing loan and nonperforming loans. The loans that are not due and 3 months past due fall in the class of performing loans/performing assets and others do in the non-performing loans. Further, non-performing loans are classified into three groups: substandard, doubtful, and bad debt/ loss (for detail classification see NRB directive 2/061/62). Commercial banks have to make 1 percent provision for pass loan/performing loan, 25 percent for substandard loan, 50 percent for doubtful loan and 100 percent for bad loan (NRB 2005). Non-performing assets in the total assets of commercial banks was 22.77 percent in the FY 2003/04. But the percentage of non-performing assets of an individual commercial bank varies from 0.76 percent to 57.64 in the same fiscal year. But the normal international standard of the percentage of non-performing assets is 5-8 percent of the total assets. 2.3 Management Quality Sound management is key to bank performance but is difficult to measure. It is primarily a qualitative factor applicable to individual institutions. Several indicators, however, can jointly serve as an indicator of management soundness. Expenses ratio, earning per employee, cost per loan, average loan size and cost per unit of money lent can be used as a proxy of the management quality. ADB recommends cost per unit of money lent as a proxy of management quality. But this can not be used as an indicator of management quality in Nepal. Since the data on amount of the total loan mobilized during a particular FY is not available in published financial statements and annual reports. As stated earlier, NRB has skipped up this component of CAMELS in the performance evaluation of commercial banks (see NRB 2005). 2.4 Earning Performance Earning capacity or profitability keeps up the sound health of an FI. Chronically unprofitable FI risks insolvency on one hand and on the others, unusually high profitability can reflect excessive risk taking of an FI. There are different indicators of profitability. Return on assets, return on equity, interest-spread ratio, earning-spread ratio, gross margin, 44 Health Check-up of Commercial Banks operating profit margin and net profit margin are commonly used profitability indicators. NRB uses return on total assets as an indicator of profitability of a commercial bank. In addition, it uses the absolute measures such as interest income, net interest income, noninterest income, net non-interest income, non-operating income, net non-operating income and net profit, to evaluate the profitability of a commercial bank (NRB 2005). 2.5 Liquidity Liquidity risk threats the solvency of FIs. In the case of commercial banks, first type of liquidity risk arises when depositors of commercial banks seek to withdraw their money and the second type does when commitment holders want to exercise the commitments recorded off the balance sheet. Commercial banks have to borrow the additional funds or sell the assets at fire sale price to pay off the deposit liabilities. They become insolvent if sale price of the assets are not enough to meet the liability withdrawals. The second type of liquidity risk arises when demand for unexpected loans can not be met due to the lack of the funds. Commercial banks can raise the  funds by running down their cash assets, borrowing additional funds in the money markets and selling off other assets at distressed price. Both liability side liquidity risk (first type risk) and asset side liquidity risk (second type risk) affect the health of commercial banks adversely. But maintaining the high liquidity position to minimize such risks also adversely affects the profitability of FIs. Return on highly liquid assets is almost zero. Therefore, FIs should strike the tradeoff between liquidity position and profitability so that they could maintain their health sound. Commercial bank’s liquidity exposure can be measured by analyzing the sources and uses of liquidity. In this approach, total net liquidity is worked out by deducting the total of uses of liquidity from the total of sources of liquidity. Similarly, BIS maturity laddering model can be used to measure the liquidity of a commercial banks. In addition, different liquidity exposure ratios such as borrowed funds to total assets, core deposit to total assets, loans to deposits, and commitments to lend to total assets are used to measure the liquidity position of a commercial bank (Saunders and Cornett 2004). NRB uses total loan to total deposit ratio, cash and equivalents to total assets ratio, cash and equivalents to total deposit ratio, NRB balance to total deposit ratio to measure the liquidity position of commercial banks in the course of the performance evaluation of commercial banks (NRB 2005). 2.6 Sensitivity to Market Risk Commercial banks are increasingly involved in diversified operations such as lending and borrowing, transaction in foreign exchange, selling off assets pledged for securities and so on. All these are subject to market risk like interest rate risk, foreign exchange rate risk, and financial asset and commodity price risk. The health of an FI more sensitive to market risk is more hazardous than that of less sensitive. Foreign exchange risk, interest rate risk, equity price risk, and commodity price risk are the indicators of sensitivity to market risk. 3. Methodology At present, all together 17 commercial banks are in operation. Out of this, Rastriya Banijya Bank is fully owned by HMG/Nepal while in case of Nepal Bank Ltd, HMG/Nepal is the major shareholder. There are six joint venture banks in collaboration with the foreign investment partners and remaining are fully owned by Nepalese investors. For the purpose 45 The Journal of Nepalese Business Studies of this study, the population has been defined in term of joint venture commercial banks. So the population of this study is six. For the purpose of this study, 3 banks—Nabil Bank Limited (Nabil), Nepal SBI Bank Ltd. (NSBI) and Standard Chartered Bank Nepal Limited (SCBN), were selected randomly (for sampling frame and sample refer to Appendix 1). This study is based on the historical data disclosed by annual reports of commercial banks. NRB has dictated the commercial banks to disclose the financial information in the prescribed format since the FY 2001/02. So, the comparison of financial performance of commercial banks each other is only possible only the FY 2000/01 onward.1 Most of the commercial banks have yet to hold the annual general meeting and publish their annual report for the FY 2004/05. So, it is not possible to include this FY in the study. Therefore, this study covers the last four consecutive fiscal years—from the FY 2000/01 through FY 2003/04. The analysis of this study is entirely based on the CAMELS framework. As stated in theoretical prescription, health check up of any FIs in this framework is concentrated in the six components: capital adequacy, asset quality, management quality, earning, liquidity and sensitivity to market. But in this study, the last component has been dropped due to the presence of much more complication. So, analysis of financial health of joint venture banks is carried out in the framework of CAMEL. Indicators of each component also have been used according to the financial data disclosed in annual reports of sampled joint venture banks. So, complicated indicators of each component of CAMEL framework of checking up the health of the banks have been skipped up in this study (for the indicators of each component refer to Appendix 2). 4. Analysis of Financial Health of Commercial Banks This section of this paper analyses the indicators of the financial health of sampled joint venture banks in the CAMEL framework. As stated in methodology, all indicators of the financial health of FIs have not be worked out and analyzed, only the indicators permitted by the publicly available comparable financial data have been used to analyze the financial health of the sampled banks. The ensuing section presents the analysis of different indicators of sound health of an FI in the context of joint venture banks in Nepal. 4.1 Capital Adequacy As stated earlier, leverage ratio, core capital ratio, total capital ratio and supplementary capital ratio are used as the indicators of capital adequacy of an FI. Leverage ratios of sampled banks, in general, show that joint venture banks are well capitalized and they are strong enough to mange the shock to balance sheet. Since the leverage ratios of sampled banks during the study periods are greater than 5 percent. Conventionally, leverage ratio of 5 percent or greater than 5 percent indicates that commercial banks are well capitalized. The indicators: TCR, CCR and SCR, of capital adequacy of joint venture banks also corroborate with the implication of leverage ratio. In general, all banks under study have met the capital adequacy ratio as directed by NRB. Only NSBI has not met the minimum capital requirement as directed by NRB in the FY 2000/01 and FY 2003/04. In these fiscal years, its TCR and CCR are lower than that of minimum ratio specified by NRB. Similarly, in the Financial information for the FY2000/01 were extracted from the annual reports of the sample banks. But this was not possible in Nabil Bank Ltd. Capital of commercial banks in Nepal is negative due to the heavy amount of negative capital of two public sector banks: Nepal Bank Ltd. and Rastriya Banijya Bank. Capital of these two banks is negative due to the heavy accumulated losses. Thus, the public sector banks have yet to meet the capital adequacy requirements as required by NRB. But private sector banks have, in general, met the capital adequacy requirement. The comparison between the capital fund to risk weighted assets ratio of each individual joint venture bank with the aggregate capital fund ratio of private sector commercial banks (IAR) implies that joint venture banks have stronger capital base than that of other private sector banks in general. In addition, average capital fund ratio of joint venture banks during the study period hovers around 14 percent. This is higher than the minimum ratio specified by NRB. This clearly implies that joint venture banks are complying with the directive of NRB on the requirement of the capital base of commercial banks. As stated in the foregoing analysis, banks under study are well capitalized and they are complying with the directive of NRB on capital adequacy ratio. But their capital base relative to the risk weighted assets is not so strong. According to the international rating convention, total capital should be greater than 19.5 percent of the total risk weighted assets of commercial banks in order to be a strong capital base. But none of the banks under study has the capital fund greater than 19.5 percent of the total risk weighted capital. As indicated by TCR, on the average, capital adequacy of joint venture banks is fair during the study period. Total capital adequacy ratio less than 15 and equal to 12 indicates that capital adequacy is fair and on the average this ratio falls within this range. 47 The Journal of Nepalese Business Studies 4.2 Asset Quality It is obvious from the theoretical prescription that the health of commercial banks largely depends on the quality of assets held by them, and quality of the assets relies on the financial health of their borrowers. As stated earlier, many indicators can be used to measure the quality of assets held by commercial banks. But, here, only two simple indicators— non-performing asset ratio and loan loss reserve ratio—are used to measure the quality of assets being held by banks. The increasing trend of these ratios shows the deteriorating quality of commercial bank assets. In general, 5 percent to 10 percent of non-performing assets is considered as satisfactory level of quality of bank assets, Table 2: Indicators of Asset Quality of Sampled Banks

Business Ethics (Nestle Company) Essay

Introduction Nestle is the world’s dominating health and nutrition company which is still now committing their promises to the people every day, everywhere by promising ‘Good Food, Good Life’ to their consumers to enhance lives with good foods and beverages. The development of Nestle was formed in the 1905 through the mergers and acquisitions of the Anglo-Swiss Milk Company, by the brothers George Page and Charles Page, and Farine Lactee Henri Nestle, by Henri Nestle. The company was then named after Henri Nestle in the year of 1866. The constant growing and developing of Nestle have successfully made them a famous brand and most people do recognize the existence of them in today’s world. Nestle’s portfolio has literally cover most of the foods and beverages category for instance, baby foods, bottled water, cereals, chocolate and confectionery, coffee, culinary, chilled and frozen foods, dairy, drinks, food service, healthcare nutrition, ice cream, petcare, sport nutrition and weight management. Identification Stakeholders Nestle’s engagement of stakeholders is based on their Creating Shared Value (CSV), which is allowing them to identify and determine emerging issues, to share the responses among the stakeholders and to continue to drive performance improvements. Nestle’s stakeholders can be categorized into three major groups. First group is the group of political which consists of Global Business Leaders, Non-profit Organizations (NGOs), Academics, International Organization, and Government Official. This particular group serves the common interests with Nestle which is in sharing the fresh thoughts and ideas on behalf of how the NGOs, governments and businesses can work closely together in order to eliminate the barrier between developments goals and commercial needs. Second group is the group of experts in social and environmental area that is relevant to Nestle’s field. This group is to communicate Nestle’s approaches towards the people and environment and collect and examine feedbacks based on CSV efforts and plans. Last group is the group of farmers, traders and key processors that contribute help in agriculture resources of Nestle. This interest in this group is to give the supports to farmers and  encourage sustainable development in agriculture worldwide. In addition to this, the stakeholders of Nestle are also relatively supportive to the CSV and were also highly corresponding about the issues, interests and specific areas of concern for example, the growing importance of climate change, the uprising challenges of both under-nutrition and obesity, the reduction of biodiversity from deprived land management, the competition between agriculture land and water resources from biofuels, child labour and also insufficient opportunity and attention given to support the vital role of women in agriculture. Ethical Issues Despite of being a well-known company, however, the Nestle Company has been boycotted and been listed one of the companies that is doing unethical acts which cause harm towards the consumers or their workers. Based on studies and researches, several cases and incidents have been investigated in regards of Nestle doing unethically. Marketing Strategy According to press releases and also Baby Milk Action (2012), one of the Nestle’s present marketing strategies are to discourage the ‘breastfeeding’ of mother to child. In additional to this, Nestle is also adding several logos and labels in the support of advertising reflect to consuming their products, in this case which is baby foods, is more ‘healthy’ and ‘effective’ than consuming mother’s breast milk and this leads to a moral issues for the mothers. On top of that, Nestle is also by this advertisement generalizing that babies who are being breastfed, therefore, are more likely to become sick due to the poor condition of the mother. These advertisements can be misled to exaggeration which is by marking facts with unsupported evidences. Besides that, the unethical act in exaggerating of the advertising continues where the Nestle Company is targeting on health workers with the claims of their newly formulated formula ‘The Gold’ in their foods and beverages which could possibly reduce diarrhea, cure brain and eye development and also strengthen the immune system. Several investigations was required by the World Health Assembly in order to examine the ‘effectiveness’ of ‘The Gold’ formula, however, been rejected by Nestle Company due to the reason of their research and  development is strictly private and confidential. Last but not least, the Baby Milk Action is also questioning about the false reporting that Nestle has been reported towards their baby food products. The United Reformed Church has spotted Nestle have violated several International Codes of Marketing Breast-Milk Substitutes, unfortunately, it was being false reported in their policy statements and reports saying the acts of Nestle doing has no harm towards their consumers, however, it does actually harms health. The investigation is still on going, but it has been dismissed constantly. ‘Nestle has gone to great lengths to enhance its corporate image but its disdain for the International Code’, says Yeong Joo Kean, legal advisor of International Code Documentation Centre. This supports that Nestle, in the desperation of enhancing brand images, however, violates several to exchange the success of its company by putting harm towards their consumers. Major Factors That Impact the Issue There are many factors that impact the ethical issue of Nestle, from social, economic and legal side. In another word, the unethical issues and actions of a company is always caused by the impacts from outside. Firstly, social factors affected the ethical issue of Nestle’s exaggeration advertising on its products. There are 3 reasons why Nestle exaggerate their advertisements and they are the market dominate, effectiveness of advertising and lack of consumers knowledge. Advertisements are effective because the range of advertising is very wide in the areas such as television, radio and online. An advertisement is easier to reach people in many different ways and easier to catch up people’s attention by using emotion and over exaggeration (Simmons, 2012). Besides that, according to Euromonitor International Plc (2010), Nestle is dominating in foods and beverages market. The effective of Nestle’s brand name and the consumer loyalty is high; therefore, consumers are easier to believe the products from Nestle without any rational judgments. At the same time, there are lack of knowledge on the ingredient and the effects of the products from Nestle because those ingredients used are not be able for people to see and only based on the verification. However, those verifications can only be forged by Nestle. Based on the factors above, Nestle exaggerate their advertisement by saying that their baby milk is better than breastfeeding in order to encourage people consume  more on their products. Another major factor is economy and it is explained by the ethical issues of Nestle is due to the demand of their product and also the desires of increase market share and revenues. Nestle aimed to maximize their profits and ignore the social responsibility of provide the truth of their products to their stakeholders (Shaw & Berry, 2010). The needs from economy growth on Nestle drove them into ethical issue which exaggerate their products and attract people to consume and increase the interest of the shareholders. Legal factor also impacted on the ethical issues of Nestle. As mentioned before, several investigations was required by the World Health Assembly in order to examine the ‘effectiveness’ of ‘The Gold’ formula† but has been rejected by Nestle because they said the formula is private and confidential. Nestle protected their formula by legal system and this resulted in unjudged of the effectiveness of their products. The real effects of â€Å"The Gold Formula† are covered by Nestle and encouraged the ethical issue of exaggeration advertising. Relevant Ethical Theories and Concepts As from the case regarding the boycott towards Nestle that were raised by the baby milk action organization, Nestle were said to be an unethical company as they used deceptive advertising to target the 3rd world countries while they are having language and literally barriers. (Kinnaird, 2011) Corporate Social Responsibility (CSR) has the twin effects of improving both short term and long-term corporate performance, furthermore, helps improve financial performance, enhance brand image and an increases the ability to attract and retain the best workforce. For a business to be successful in the long term it has to create value, not only for its shareholders but also for society. As mentioned by Nestle, the organizations’ approach is based on a long-term view, creating significant value to the society and also to maximizes the shareholder’s value as well as profit (Nestlà ©Ã¢â‚¬â„¢s Corporate Business Principles, 2012) but as a matter of fact, in 1974, Nestle started to sell infant formula at developing countries and has a result of malnutrition and caused death of babies. Nestle did not fulfilled the  responsibility to have an obligation to benefit the society at large. (Kinnaird, 2011) Kenneth Arrow mentioned that â€Å"there are two types of situation in which the simple rule of maximizing profit is socially inefficient: the case in which the costs are not paid for, as in pollution, and the case in which the seller has considerably more knowledge about his product than the buyer.† From the view of business, Ne stle were said supported by this statement as they are providing a wider range of choices to their customers. However, in the case where Nestle used deceptive advertising towards the market had led their consumer to a harmful situation. Hence they were then boycotted by the baby milk action organization. An organization with ethical responsibility is more likely to build a good reputation, which is more likely to bring financial rewards over the long term, and since Nestle’s view is aiming for long term, they should stop the trend of decreasing breastfeeding and advertising exaggerated formula to their customer. In the 3rd world countries, most of the citizens are not educated and aware of the knowledge of bottle-feeding as compared to breast-feeding. Thus advertisement promoted by Nestle might seem very deceiving to them and tend to believe that the formula product is beneficial to their children. From the theory of Post MacPherson (Shaw, 2011) that clarify the liability of manufacturers as well as the retailers, â€Å"due-care† concept which is â€Å"idea that consumers and sellers equal and that the consumer’s interests are particularly vulnerable to being harmed by the manufacturer, who has knowledge and expertise the consumer does not have.† At the same time, manufacturers bear the heaviest responsibility to prevent the customer from being injured by defective products. Analysis of the available Options In the world of business, it is always the decision between narrow and broad view. Milton Friedman argued that business has no social responsibilities other than to maximize profit. (Shaw, 2011) Nestle by then were boycott by the baby milk organization is due to their turning point in their business as they aimed to create significant value to the society but apparently they are only focusing on maximizing the organization and the shareholder’s profit and marched towards the narrow view aspect and abandoned the obligation of bringing positive value to the society. As a matter of fact,  Nestle had come out with a framework that look into the CSR in terms of creating shared value with developments by Mark Kramer together with Professor Michael Porter of Harvard Business School. In short, creating social and environmental benefit is the key of making an organization’s competitive over other organization in the long-term, says Kramer (2006) Recommendation and Conclusions As mentioned above, Nestle has arisen social problems whereas the babies who fed on the baby milk powder are tend to become sick, in serious case of poverty, babies are dying compared to those breastfed babies. In order to defuse these social problems, Nestle should give more attention to these problems. With the issues mentioned as the deceptive advertising, society’s benefits are being reduced. They are not understanding about how the product is really providing the benefits that offered to the product users. In some case, they are lack of knowledgeable about what the advertisement is proposing due to different conditions which experienced by some countries such as the language and culture barriers. Therefore, Nestle should work against the deceptive advertising and provide more accurate information for the customers. They need to share a common goal and to get through the various aspects of the product development, manufacturing influences, customer’s benefits and the knowledge in order to link between the Nestle’s approach of Creating Shared Values. Apart from that, Nestle need has a need to build up back its company’s confidence and the trust among the company’s products with the customers. Due to the deceive advertising and defective products that brings harm to the infant, customer are becoming less trust on the company’s products and even the brands. In order to rebuild the customer’s perceptions towards the company, Nestle can come out with some new marketing strategies to promote their products. As an example, they can improve their product strategy where the ambiguous details shown on the packaging. They can improve the labels and packaging to provide more information about the baby milk powder, even in more different language based on the market country accordingly. Besides that, they can practices on their promotion strategy to promote the products itself as telling more information to the customers, publics and enable the company to answer the customers’ questions about the ambiguous details that they receive. Therefore, customer can know more about the product, in turn, confidence and trust towards the company is being enhanced. To cut a long story short, boycotts are often lead a company to face problems in earning their profits and position themselves in the market as well as maintain a good relationship with the customers who are purchasing the certain products. At the same time, they do face ethical dilemma which are bringing negative impacts to the society and in turn, it brings harm to the company. In the eyes of others, they are making priority in profit maximization; however, they have ignored the corporate social responsibility which is playing an important role in the business. In order to retain the company’s reputation, several strategies as to reduce the ethical dilemma situations, needed to be done for longer-term effects, no matter to the company or the society. Companies must not only focus on the boycott, but also work into the path of changing the rules in the product development. Bibliography Action, B. M. (2012, April 24). Protecting Breastfeeding. Retrieved October 16, 2012, from Why target Nestlà © with the boycott?: http://info.babymilkaction.org/nestlebriefing Kean, Y. J. (2005). NESTLÉ AND THE INTERNATIONAL CODE:. An analysis by the International Code Documentation Centre. Klein. J. G., Smith. N. C. & John. A. (2002). Why We Boycott: Consumer Motivations for Boycott Participation and Marketer Responses. Centre for Marketing Working Paper. No (2). 701 Nestlà ©. (2012). Nestlà © Good Foods, Good Life . Retrieved October 16, 2012, from http://www.nestle.com/Pages/Nestle.aspx Kinnaird, E. (2011 Ð ¹Ã ¸Ã » 22-March ). Nestle Infant Formula Case. From Prezi: Make Your Presentation Zoom: http://prezi.com/r2gtyqwc1gmn/copy-of-nestle-infant-formula-case/ Nestlà ©Ã¢â‚¬â„¢s Corporate Business Principles. (2012). Retrieved from Nestlà ©: http://www.nestle.com/AboutUs/BusinessPrinciples/Pages/BusinessPrinciplesHome.aspx Shaw, W. H. (2011). Business Ethics. Boston, Uni ted States of America: Wadsworth, Cencage Learning. Simmons, L. (2012). Why Advertising Is So Effective. Retrieved October 16, 2012, from Netplaces.com: http://www.netplaces.com/addiction-recovery/cultural-lures-and-addiction/why-advertising-is-so-effective.htm YUNIKA Corp. (2010). Reasons Why Advertising

Microbiology Lab Report Example | Topics and Well Written Essays - 7500 words

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Nursing Image Analysis Essay Example | Topics and Well Written Essays - 500 words

Nursing Image Analysis - Essay Example In Strong Medicine there is the crew of the leading actors, from which only one character is a registered nurse. The other nurses that appear in this show are in supportive roles. Due to this fact, Peter Riggs is shown taking the active role in the proceedings, while the background actors playing nurses usually aren't the objects of the operator's attention. They are shown primarily to create the feeling of reality of the things that take place on the screen, as most of the audience knows that doctors don't spend most of their time with patients, and that there are other medical workers who satisfy minor patients' needs. In Strong Medicine the nurses on the background are usually shown engaged in their professional practice, while Peter Riggs, one of the leading characters is also depicted in various non-professional situations. In most cases it is a nurse, who provides the actual nursing care, but it sometimes happens that the doctors also do the nursing chores, such as providing physical, psychological and social comfort to the patients. In the episodes where both physicians and nurses act, the physicians seem to be in control of the situation, but it is also shown that the nurses understand the patients' need better than the physicians do.

How to improve the poor customer service rating Research Proposal

How to improve the poor customer service rating - Research Proposal Example This research will help readers take corrective action in relation to customer satisfaction and improve their customer service rating. The increased use of Interactive Voice Response Systems (IVRs) has hindered personal interaction between consumers and the service providers, leading to dissatisfaction and discontentment of consumers. Therefore, there is a need to rectify this problem and divert to more consumer interactive models of customer service. The goal of this investigate is to provide an interactive customer service model that will increase customer service and in turn increase customer satisfaction and service ratings. Case studies have shown that by eliminating the barrier between customers and service providers, the customers feel more appreciated and better served. It has also been proven that this increases customer retention rates. This will be done by adopting a face to face sale of company’s products to consumers, a process that will be very interactive through product sampling, answer query session and feedback about the product. The customer will be able to interact personally with the service provider and ask questions about the product i.e. how it works, what ingredients have been used to make it, what its limitations are, how long the product will serve the customer among other questions the customer might have. This solution will also enable the customer feel well served since his/her complains/concerns will be handled immediately without the hustle of having to follow up through phone calls. By eliminating barriers, more customer interactive model will be adopted that will hel p accomplish the first objectives of this research, i.e., to make customer service interactive and also the second objective by ensuring that customers are satisfied with services provided. Most customers are not satisfied with the service they

Economics of Leisure Essay Example | Topics and Well Written Essays - 1750 words - 2

Economics of Leisure - Essay Example He believed that the remaining hours could be in pursuit of writing, printing and innovation. In 1930s, John Maynard Keynes, one of the neo-classical economists predicted that people would only need to work for less than 15 hours in a week by 2030. 84 years after Keynes prediction, it appears that people are working even more hours with the advancement of technology. Questions asked by neo classical economists are whether the trends conform to economic priori as adopted by the classical. The discussion in this paper will negate the notion that advancement in technology associated with economic growth results into high leisure hours. It will also discuss the reasons as to why this happens. Economic development which entails the advancement of nation’s institutions has leisure at its focal point. Most nations that are on the take off mainly focus on the economic growth and not development. The developed countries on other hand are mainly focused on enhancing the living standards of its people. It means that leisure remains at the focal point. Despite this, people from these countries still have reduced number of leisure hours. There are however a number of reasons that causes increase and reduced working and leisure hour respectively (Gary 2007). Firstly, the development of technology entails the advancement of consumer goods. Most people are often amazed by new technological advancement such as personal computer, digital camera, internet among other technologies. Therefore, the only way people must maintain this level of technology is to work more hours (Cooke 1994). Research has proved that people will rarely stop working when they have free time, instead they will yearn to get more. As human makes money, there will be a need to make more. Most people have realised that working faster will give them an opportunity to make more money. Through this, most people have realized that their ability of

IKEA Stores Layout and Sizes Assignment Example | Topics and Well Written Essays - 2500 words

IKEA Stores Layout and Sizes - Assignment Example It was impressed upon his young mind that the most should be made out of the limited resources and that the essentials of modern living may be acquired at reasonable cost. From the time he set up his first business in the 1930s and registered as IKEA in 1943, Kamprad’s overriding strtegy was to adopt every cost-cutting solution that did not compromise quality and innovative ideas (Ikea.com, 2012). The diagram that follows shows IKEA’s key strategic thrusts by which it seeks to flesh out Kamprad’s vision. Central to the strategy is the simple and creative design which is well-received by the market; it is distributed through large stores with a wide range of products, all priced inexpensively, designed in flat packs, and requiring customer assembly. IKEA’s Strategic Direction (http://sites.google.com/site/faizahmadali/IKEA.JPG) The manner by which the stores provide customer accessibility to a wide selection of useful products, and the manner by which the p roducts are inexpensively priced, easily stored and transported through flat packed boxes, and engage end-user participation in their assembly all contribute to customer engagement through low cost, durable quality, and aesthetic appeal. 2. Three organizational tensions, and how the strategic direction addresses them. The diagram on the next page shows a strategic map of the company, identifying in blue the central goal of providing furniture and accessories for the home, the four principal strategic objectives arranged in a square around the goal, and the elements that support the goal and objectives. http://www.monografias.com/trabajos89/strategy-michael-porter/image011.jpg The elements that contribute to the realization of the objectives or goals provide clues to various organizational tensions between the firm and its stakeholders, due to factors both internal and external to the organisation. By tension is meant the existence of clashing interests between stakeholders and the c ompany. For IKEA, some customers have taken issue with (and even ridiculed) the manner by which IKEA products presume the customers’ adequate capability in assembling the product. This creates tension in the need to design easy-to-assemble units vis-a-vis the need to engage customer participation in the assembly process. Internal IKEA store layout featuring products’ flatpack design (Facenda, 1999) A second source of tension is the need to create a variety of designs, which clashes with the need to reduce manufacturing costs. Ordinarily, cost reduction is best achieved through product standardization, rather than product diversification needed to produce a variety of products . By seeking to diversify but at the same time mass-produce, tensions are created between the production unit of the firm and the marketing unit which identifies the variety of product lines offered in IKEA stores. Finally, a third source of tension is in the size of IKEA stores and its repercussi ons upon the community. The size of IKEA stores are as a rule large enough to enable customers to access all possible

To develop an understanding of what has happened in Brazil or Canada Assignment

To develop an understanding of what has happened in Brazil or Canada or China over the last two years - Assignment Example It is important to point out that Canada strategized on the way forward as far as the aforementioned achievements are concerned. In particular, Canada targeted economic transformation for better economic results, enhanced domestic and international partnerships, and effective resource management by the government through the central bank (Fitzpatrick, 2014). These strategies further sought the collaboration and involvement of the Canadian people as the sole beneficiaries of the government’s economic efforts. Successful running of the Canadian economy is evident through the effective and efficient balance between the outlined economic goals and strategies. With objectives and strategies at hand, the government moved to implement its operations in regards to enhancing Canada’s economic performance. The first move was directed towards government institutions that serve the Canadian society at different levels. In this move, the critical factor was Canada’s diverse society. The government mobilized resources through its agencies to reach out to the people and promote diversity, and inclusion. In essence, every member of the society was crucial in the recent Canadian economic transformation. Secondly, the government and all its agencies support the notion of cooperative relationships. Different players in the economy contribute to national economic progress, an aspect that led the government to reconsider its relationship with these parties. As a result, the government, through the central bank, set aside adequate resources that further develop a relationship of cooperation and collaboration. The outcome was more cohesive and consistent economic progress in many sectors of the Canadian economy. Most importantly, the last two years saw the Canadian government enhance its practice of treaty management for strong economic growth (OECD, 2014). In essence, treaty management encompasses agreements that are

Effective ways to improve communication Essay Example for Free

Effective ways to improve communication Essay Teenagers and their parents need to increase their communication in order to have a strong relationship. It is very important that they cooperate so that they can reach a common goal. Some tips to improve communication for parents are being there for their teenager children, learning to talk while in motion, risk making a change, being honest, sharing their hopes and dreams, and creating a comfortable environment by listening. Some methods for teenagers are opening up and sharing about their thoughts and feelings with their parents. There are several ways to improve the communication between teenagers and parents. Parents need to find quality time out of their busy schedule to talk with their children. Parents should take advantage of everyday opportunities or plan a simple activity for just themselves and their children, such as watching television. Talking to teenagers is basically the same thing as talking to adults. Most teenagers are overstressed, overworked, preoccupied and, in many cases, just simply distant from their parents. They need lively adults who are present and awake. In this way, parents could spend time with their children, engaging in activities that suit their age and interests. Teenagers always seem to be on the move. Teenagers are action machines because they do not like sitting still. They have the added distraction of being inside bodies pulsing with energy and strength. If parents really want to connect with a teenager, they need to get active with them, such as challenging them to a basketball game. Teenagers know their parents as well as their values, rules and weaknesses. They also know just what to say and how to maneuver around their parents. The problem is that they do not really expect their parents to ever change the way they think or act. Teenagers thrive on surprise and love to think odd thoughts. Parents should try to be a little surprising and do something completely unexpected and unpredictable. Young adults appreciate the opportunity to relate in a way that was completely unpredictable and different for their parents. Young adults deserve honest answers and explanations because this is what  strengthens the childrens ability to trust. By being open and honest, parents can express their values in a caring way. Parents do not often want to show their mistakes and past errors because they are unwilling to seem imperfect. Parents should tell teenagers some of their own secrets and try to be outgoing. They should try and set an example for their teenagers so that the teenagers will learn from their honesty. Although parents should always communicate with their teenagers, they have to remember not to talk too much. Teenagers hate listening to long lectures. Parents need to avoid repetition of lectures which might bore teenagers. Also, parents should not continue on about different subject that the teenagers are not ready to hear. Teenagers dont have much of a past, and so they live in the future. Parents need to capture what it is that rivets teenagers attention the most their imagination pertaining to the future and whats important to them. Not many parents will sit down with their children and openly discuss the future without any boundary, agenda or parental rigidity. Teenagers will search until they find someone who will dream with them. They will look forward to the opportunity to explore their future with someone they truly care about and who really wants to hear about their dreams. Parents should always create a climate in which the teenager feels free to discuss anything. In order to create an atmosphere in which teenagers can ask any questions without the fear of consequences, parents need to be encouraging, supportive and positive. This will show teenagers that the parents can be of help in solving problems, and they will not be fearful of speaking out. Parents need to take them away from places and things that can distract them. They have to listen attentively because when parents talk to teenagers after careful listening, they are more informed and aware of the situation. Parents need to remember that young adults need an open mind and some guidance during adolescence more than any other period in their lives. If they fear that their parents will discourage them from being truthful by displaying disappointment and disapproval, they will pull away fast and will not return that easily. Parents have to be curious and ask questions about  teenagers ideas and feelings to get to know them and their world. Parents should be prepared to just listen and accept the simple truth that teenagers feel what they feel, no matter how irrational it may sound. It is important for teenagers and their parents to find ways to communicate their point of view, which will encourage the other person to listen. They need to avoid blaming the other person and not be judgmental. They should stay in the present and not refer to the past. They have to look for solutions together and be prepared to compromise. These are some ways to improve communication between parents and teenagers.

The United States Constitution Essay Example for Free

The United States Constitution Essay Introduction The Revolutionary War had come to a satisfactory conclusion, and no particular cause of urgency gripped the delegates to the Constitutional Convention, as they gathered in Philadelphia in the spring of 1787. The Continental Congress conducted all functions of the central government since the commencement of its first session in September of 1774, on the heals of the Boston Port Act. News of this latest move of the British Parliament, which ordered the closing of Bostons harbor pending the repatriation of losses suffered by the East India Company on account of Bostons infamous tea party, reached American shores in May of that year (Rakove 21). The rallying cry during the American Revolution was for American sovereignty to establish independence from Britain, while the major issues that motivated that cry centered on the protection of colonial property from the long arm of the British Parliament. Acts of Parliament in the 1760s and 1770s, such as the disturbingly invasive Stamp Act of 1765, struck many colonists as overly demanding, and intolerable violations of local control (Keane 89). While the Stamp Act was particularly inflammatory, Parliament passed numerous acts during this period, including the Sugar Act of 1764, the Declaratory Act and Townshend Acts from 1767 to 1769, and the Boston Port act of 1774 (Rakove 22). The predominant substance of these acts was taxation; the mother country felt such taxes should be expected from the colonists to assure they contributed their share toward supporting the empire and preserving the benefits all English citizens enjoyed from this empire. The safeguarding of global trade provided a prominent example; it augmented the wealth of the empire and her mercantile class. Parliament regulated this trade, and protected its continuation by the provision of war ships. But the extractions of wealth Britain demanded from her American colonists to support the empire were not seen as justified by many in America. Britain was embroiled in a long-standing war against France. The colonists believed they were being taxed excessively to support this war effort. Many colonists felt they paid their dues to the empire by suffering direct exposure to the French and Indians during recent conflicts, and resented the additional imposition of greater taxation (Keane 88). They demanded greater local control over the levels of revenue to be submitted to Britain, and an exclusive right to determine the means of collecting that revenue. Many patriots, such as Samuel Adams, worked for years to pull together a more unified American resistance to British claims. On the heals of the Boston Port Act, Adams noted that American response to it suddenly wrought a Union of the Colonies which could not be brought about by the Industry of years in reasoning on the necessity of it for the Common Safety (Rakove 40). Urgency beset the delegates as they gathered to coordinate a response to recent onerous Parliamentary measures, and government under the First Continental Congress got underway. Within a year they shifted from evaluating diplomatic responses to coordinating the American military preparedness for war against British troops. By the summer of 1776, they issued the Declaration of Independence, declaring for King and country that reform, compromise, and reconciliation no longer sufficed. Events now necessitated a clean break with the mother country. The Continental Congress, operating under the framework established by the Articles of Confederation, fulfilled American requirements for centralized government through the successful completion of the Revolutionary War in 1783, and until the fateful spring of 1787 (Bowen). What conditions caused the delegates gathered for the convention in Philadelphia in 1787 to propose a radically different government? What motivated them to propose the dissolution of the Continental Congress, and suggest that the sovereignty of their respective states be usurped by a newly formulated national government? How did issues of control over property enter into this dynamic? This paper examines and gives answers to these questions. Conditions Leading Up to the Constitution Radical in nature and revolutionary in result, the proposal formulated by the Convention of 1787 far exceeded the evolutionary goals set forth in the guidance given to delegates prior to their arrival. The state legislatures, firmly sovereign under the Articles, did not send delegates in the expectation that the result would be a Federal government subjecting the states to the will of a national sovereign. The Continental Congress sanctioned the Philadelphia convention for the sole and express purpose of revising the Articles of Confederation (Bowen 4). Instead of revising the Articles, the proposal emanating from the Convention turned the Articles into a dead letter, upon its adoption by state ratification conventions. Moreover, the delegates formulated a government so radically different in nature that its breadth and scope was not even contemplated as a realistic possibility by the population at large in the Spring of 1787 (Larson). Defects of the existing system, more than the pleasure of free intellectual discourse, provided the principle motivation for the delegates to generate the solutions contained in the new Constitution.  Ã‚   Two prominent problem areas compelled them to formulate this radical proposal for change. First, vices of the state governments, which could not be adequately restrained under the existing system, resulted in numerous problems motivating reform (Madison 4). The second set of forces at work for change was the insurmountable limitation besetting the Continental Congress in its effort to carry out its assigned functions. These forces formed pincers of change operating on the delegates. Property rights played an important role in both arms of these pincers. Many delegates at the Convention believed that the state governments often abused their authority by unjustly impacting private property rights; they looked for opportunities to curb these abuses through a newly formulated national power (Nedelsky 22-23).   Additionally, the Continental Congress lack of authority over property contributed substantially to its ineffectiveness. Restrictive trade measures pursued by both Britain and France within a year of the Treaty of Paris proved to be more detrimental to American interests than the British retention of forts on the new countrys frontier.   Britain discriminated against American commerce in numerous ways, including the closure of its own ports and those of the West Indies to ships from her lost colony. Such provocations should have been met with retaliatory commercial measures. Unfortunately, the Continental Congress lacked the authority to coordinate such measures, and since the impacts of various options fell with different force upon each state, no particular option would be readily agreed to or complied with by the various legislatures. While the British parliament coordinated trade policy to punish American commercial interests, the Americans could not coordinate a retaliatory policy to force the British to reverse their practices (Mee 30). Secure access to the Mississippi River was pivotal to the issue of commerce for all inhabitants of the Western frontier, and proved to be another source of consternation for those counting on the Continental Congress for solutions.  Ã‚   The movement of products to ports from interior lands relied on shipping them down the Mississippi, through the Gulf of Mexico, to ports on the Atlantic Ocean. Relying on over-land routes to ports on the Atlantic was unpractically expensive, in 1784, Spain declared that the Mississippi closed to American navigation (Keane 94-5). In addition to grappling with Mississippi navigational rights, Congress was also attempting to guide the development and settlement of Western lands. Setting up the framework of the nations expansion to the West, and the admission into the Confederacy of future states resulting from this settlement, was another key challenge facing Congress. As settlers streamed to the West, they required protection from the native populations, who were typically displaced without fair compensation, and who often heckled and attacked settlements in response (Mee 207-208).   Protection for such settlers could not be provided in earnest, due to the ever-present incapacity of Congress to find funds to appropriate to the cause, as well as substantial disagreement about the details of how Western settlement should proceed. During American history around the time of the crafting of the Constitution, poverty very likely did mean sloth and idleness (Bowen 70). At that time, land was an abundant resource and three-quarters of Americans earned their living in agricultural pursuits. Labor was relatively scarce; no large pool of unemployed people existed to keep downward pressure on wages. Eligibility to vote during this period typically required that one own enough property to qualify as a freeholder. Most citizens possessed property exceeding these prescribed thresholds. Robert Morris, one of the nations leading financiers, and a delegate to the Convention, estimated that ninety percent of those otherwise eligible to vote in America met the requirements to be considered freeholders (Nedelsky 77). To qualify as a freeholder in Virginia for the first elections held under the new Constitution, a white male over twenty-one years of age needed to own either fifty acres of property, or twenty-five acres with a house (Labunski 152). Even poor immigrants could normally find work that paid well enough to allow them to accumulate adequate savings to purchase land. Americans of the revolutionary era were particularly susceptible to political arguments stressing property rights. Easy availability of land had long characterized colonial society, and by the time of the revolutionary crisis the ownership of land was widespread. Indeed, this broad distribution of property was one of the most distinctive features of colonial life, in marked contrast with the situation in England. Even landless persons could reasonably hope to become owners eventually (Labunski 160-3). Achieving any reform through amending the Articles of Confederation required the agreement of all thirteen states. All prior attempts at amendments failed to achieve such a consensus. Rhode Island did not send delegates to the Convention, and for years openly admitted that the state had no interest in allowing modifications to the Articles. While the delegates ostensible purpose was to propose an evolution to government under the Articles, such a path already had a track record of failure. The performance of the state governments caused much concern. The Continental Congress lacked the authority to check the transgressions of the states or carry out essential national functions on their own accord (Bowen 235). These conditions convinced the gathering delegates that action was required. Many of their most significant concerns with governmental operations at the state level and national level were connected to the issue of property rights. The Founding Fathers gathered in Philadelphia with a desire to retain a government founded on the republican principle of majority rule, while also formulating new safeguards for the protection of property beyond those present under state governments. Previous attempts at evolution proving fruitless, the delegates turned to revolutionary proposals in pursuit of these aims. Constitutional Convention As Madison entered the Pennsylvania State House to attend the Constitutional Convention, in May of 1787, he struggled to resolve the tension between formulating a republican government based on the will of the majority, and preserving justice for the minority in matters of personal liberties, such as the protection of property. Establishing a strong enough tether to protect the minority from such measures while still preserving republican principles would not be easy. What steps did the framers take in establishing a republic to protect property rights from being plundered by the majority? They successfully pursued both explicit language to protect property, and a structural design that implicitly lead to the protection of property. The resulting construction left many particular questions about property unanswered, but bestowed to future generations a government framework that rested on republican principles while also assuring a relatively high level of protection for the rights of the propertied minority.  Ã‚   The success of Madison and his compatriots at this endeavor, in the form of our Constitution, placed American government on a strong foundation from which to proceed (Labunski 189-94). The Constitution contains explicit language establishing authorities related to property rights and safeguards for the protection of private property. Before addressing the way the new governments structural design implicitly protects the rights of those holding property, these explicit provisions will be reviewed. They are predominantly located in Article I of the Constitution, which outlines the legislative framework of the new government. The framers aimed to place significant new limits on the ability of states to enact legislation assaulting property rights or redistributing property, such as the troublesome wave of debtor relief laws states subjected creditors to in the years following the Revolutionary War. Language in Article I, Section 10, established specific restrictions on the power of states.   Included therein was a prohibition on forcing creditors to accept payment tendered in anything other than gold or silver coin, also known as specie (Larson 198). Section 8 of Article I, which delineated the powers given to the new national Congress, granted that body the power to coin money and regulate its value, while Section 10 prohibited the states from doing so.   This language took aim at the notorious practice of printing money, which often turned out to be valueless, and forcing creditors to accept it as payment for debt. The framers also attempted to protect the property of creditors from plunder by reinforcing contractual obligations binding debtors and creditors (Ely 45). In a move destined to have far-reaching implications relative to the sanctity of contract law, and its importance in protecting propertied interests under all contractual arrangements, Section 10 prohibited states from enacting any law impairing the obligation of contracts (Larson 207). These provisions, along with the assurance provided under Article VI that all debts valid under the Confederation remained enforceable under the Constitution, were all efforts to protect the property of creditors. They shielded the minority creditor class from the political muscle the debtor class brandished so successfully under the Articles of Confederation. The regulation of commerce impacts private property, by influencing its value in numerous ways and providing a venue for its fair trade. As with the production of coins, the framers both explicitly granted Congress the power to regulate commerce, and prohibited states from interfering with such regulations. The previous section explored many of the areas in which the limited authority the Continental Congress exercised over commerce between states and with foreign powers caused difficulties.   The gathering of the Philadelphia Convention of 1787 followed a Convention held in Annapolis, Maryland in 1786, which gathered primarily for the propose of proposing amendments to the Articles of Confederation that would allow for the national regulation of commerce (Larson 207). Delegates from only five states arrived at the Annapolis Convention; such meager participation made it clear that any substantive measures emanating from the gathering would be stillborn. But, instead of dispersing with no action at all, Madison and others present called on the states to send delegates to Philadelphia nine months later to devise such further provisions as shall appear to them necessary to render the constitution of the federal government adequate to the exigencies of the Union (Rakove 374). The weak Continental Congress could not prevent such measures, and commercial regulations between the various states and between states and foreign powers often despoiled the value of property by establishing regulations to assist some groups with little regard for the interests of others. The explicit limits in Section 10 on state powers included language clarifying that states could not lay any imposts on imports or exports or enter into any compacts with other states without the consent of Congress. Particularly important to delegates from the land-rich southern states, Section 9, which spelled out specific limits on the power of the national Congress, provided protection for the propertied agrarian interests by banning any tax on exports (Ely 43-4). The state governments demonstrated their lack of resolve to provide adequate protections to property rights under the Articles of Confederation. In all the areas discussed above, delegates attempted to remedy this within the republic being constructed by explicitly placing matters in the hands of the national government and limiting the power of state legislatures. Madison feared this would not be enough, and worked hard to achieve another safeguard from the destructive power of the states. While constructing a government based on the principle of majority rule inherently resulted in some threat to the personal liberties of the minority, Madison believed the new national government afforded better protection for such liberties than the state governments. He therefore fought to provide the national government with the power to veto any measures passed by the state legislatures, as a means of holding the untrustworthy state governments in check (Labunski 247). On the issue of taxation, those desiring more power be shifted to the central government won a major victory at the Philadelphia Convention. Experience under the Articles of Confederation demonstrated that for the national government to be effective, it must not be left to rely on the willingness of the states to provide revenue. Unlike the issues above, no language would prevent states from taking action in the area of taxes; this would be an area of mutual responsibility. The list of powers explicitly granted to Congress in Article I, Section 8, begins with the power to lay and collect taxes, duties, imposts, and excises (Larson 205). Under the Articles of Confederation, the central government lacked the means of carrying out most measures, because the states often refused to provide funds when requisitioned to do so. Alexander Hamilton, in Federalist Paper #15, claimed that this inability to raise revenue by acting directly on citizens was the great and radical vice in the construction of the existing confederation (108). The delegates agreed with Hamilton and others that this limitation must be remedied to allow any central government to operate effectively. Many believed the best solution would leave the power of direct taxation only in the hands of the state government, and grant a coercive power to the national government, by which it might force the states to comply with requisitions. However, the Federalists believed this position to fanciful, pointing out that coercing states resulted inevitably in coercing actual citizens. In mustering military force against a state that did not fulfill a requisition, it would inevitably be the citizens of that state receiving the blows, for example. The state, an ephemeral geo-political entity, can not itself be coerced (Doughtery 171). Worse yet, any measures meant to induce obedience would inevitably punish indiscriminately. It would not be only those unwilling to pay their share of a requisition in a state that would suffer from such measures. Applying coercive measures could not be a surgical exercise of carving out only the malignant specimen. It would instead be like a knight charging toward a phalanx landing his blow upon any member of the line present at the end of his lance. All citizens of a state would be subject to the suffering resulting from any coercive measures. Ratification of The Constitution Vesting the central government with the ability to raise taxes and thereby redistribute property directly, without working through the states, required achieving a proper balance between providing the central government with inadequate power and excessive power.  Ã‚   The resulting compromise required that any direct taxation by the national government would be apportioned according to population, which shielded those with land wealth from shouldering exorbitant shares of federal expenditures (Ely 43-4). Despite the efforts of those at the Convention, the issue of taxation proved to be one of the most contentious issues during the Constitution ratification debates held in each state. In the debate leading up to the slim margin of victory for the Federalists supporting the Constitutions ratification, the Anti-Federalists kept bringing this issue to the surface as a prominent example of the new governments excessive power. After this vote, the Virginians turned to developing Constitutional amendments to forward to the new government for consideration and adoption. The vote to forward an amendment limiting the central governments ability to directly tax passed by a wider margin than the vote on the ratification of the Constitution itself, indicating that even some of its supporters harbored concerns about giving the new government such power (Labunski 115). Though the word slave does not appear in the Constitution, three specific provisions strengthening the hands of slave-owners in the protection of their property interests were granted, in an effort to attain Southern support for the resulting document. First, it was agreed in Article I, Section 9, that importation of such persons as any of the states now existing shall think proper to admit could not be regulated by Congress prior to 1808 (Larson 206). Second, language in Article IV established that fugitive slaves must be returned to their owners, even in the event they cross state lines. While these two provisions treated slaves as property, the third provision dealt with determining the strength of each states representation in the House of Representatives. Southern delegates wanted them counted as people in formulating the distribution of representatives in Congress, to assure the adequate protection of their interests at the national level. On this last point, the delegates reached a compromise of counting three-fifths of the slave population for the purposes of Congressional apportionment (Larson 208). These provisions all strengthened the position of slave owners, and substantiate the claim that slavery was more clearly and explicitly established under the Constitution than it had been under the Articles (Ely 46).   However, it would be a mistake to accuse the delegates to the Convention of being oblivious to the moral implications of slavery. Indeed, the ability to hold other humans as slaves under established property law placed vexing restraints on the delegates ability to claim that property rights flow out of natural law. No one in 1787 defended the ownership of slaves as included among the natural rights of property. And yet most of the framers believed that since slavery existed as a matter of positive law, slave owners could claim the right to have their property secure. This painful reminder that not all positive rights of property were natural rights, or perhaps even consistent with natural rights, meant that the arguments for the security of property could not simply rely on claims of natural right (Nedelsky 153). It would be more accurate to conclude that slavery protections were an inevitable extension of the general importance the delegates placed on property rights, than to reach the conclusion that slavery itself was hotly contested, and that property protections grew out of any overarching debate on the topic of slavery. Many present at the Convention despised the peculiar institution, and most were morally uncomfortable with it, but accepted its existence as an extant political reality. Its management was incidental to the larger issue of protecting property rights in general, and its existence limited the ability of the delegates to claim that those protections flowed inextricably from mans natural rights (Larson). The framers achieved a desirable balance on the issue of property rights in the development of the Constitution. They enhanced the autonomy of individuals living under the resulting government by their efforts to balance governments power over property against the rights of individuals over property.   They substantially enhanced the power of the central government over property compared to government under the Articles of Confederation, while curbing the ability of state governments to impact property. They retained republican principles such as the rule of the majority. Thereby, no individual possessed absolute control over property. Nobody could think of themselves as a king with rights to property granted by God, and count on complete immunity from governmental impacts on property or redistribution of property (Ely). On the other side of the balance, explicit language and implicit structural safeguards were established to protect property rights and other essential liberties for everyone, even those in the minority. No large republics existed when the framers did this work, so they could not simply draw on the experience of others. They were familiar with a long history of monarchs and nobility holding onto power and wielding it to protect their property rights. They were also familiar with government under the Confederation, which brought the benefits of republican government to the citizens of America, but did not adequately safeguard property from the political agenda of a majority looking to improve their position at the expense of property owners. In the Constitution, the founders achieved a desirable balance, and succeeded in constructing a government that preserved republican virtues while also protecting minority liberties, such as the protection of property rights. Conclusion The framers of the Constitution placed a high priority on protecting the rights of individuals to acquire, accumulate, and appropriate property. Balancing the protection of property rights with the establishment of a national government founded on the republican principle of upholding the interests of the majority provided a key challenge for the members of the Constitutional Convention. The Articles of Confederation left sovereign power in the hands of each of the confederated states. The state constitutions, while far from uniform, all provided republican forms of government. As such, state legislative bodies responded readily to the outcries of their constituents. The majority wielded substantial power to achieve their aims, regardless of the justice of their cause. This often resulted in a lack of protection for the property of the more affluent minority, as they struggled against the will of the majority to redistribute property. The Founding Fathers judged many state legislative actions, pursued by the will of the majority, to be an unscrupulous taking of property from one group to benefit another. In particular, debtor relief acts, passed in the wake of the Revolutionary War, often heavily favored the debtor class over the propertied financiers of the war effort. The delegates that gathered at the Philadelphia Convention in May 1787, felt compelled to formulate a government providing greater protection for individual property rights. At the same time, they remained committed to retaining a system predicated on republican principles. No legitimate republican government could simply disregard the will of the majority by placing a cabal of the propertied few perpetually in power. The structure and operation of the government that grew out of the Constitution they created came about in no small measure due to efforts to balance tension between protecting the rights of individuals to safeguard property, and the rights of a republican government to exercise control over property for the benefit of the majority of the public. Viewed within the context of their place in history, the compromises they established in response to this tension were appropriately crafted to enhance the autonomy of those citizens living under the resulting government. Bibliography Bowen, Catherine Drinker. Miracle at Philadelphia: The Story of the Constitutional Convention May to September 1787. Boston, Massachusetts: Little, Brown and Company, 1986. Ely, James. The Guardian of Every Other Right: A Constitutional History of Property Rights. New York: Oxford University Press, 1990. Keane, John. Tom Paine, A Political Life. Boston, Massachusetts: Little, Brown and Company, 1995. Labunski, Richard. James Madison and the Struggle for the Bill of Rights. New York: Oxford University Press, 2006. Larson, Edward F. and Michael P. Winship, Eds. The Constitutional Convention: A Narrative from the Notes of James Madison. New York: The Modern Library, 2005. Madison, James. Vices of the Political System of the United States, 1787, Teaching American History, 2007 http://www.teachingamericanhistory.org/library/index.asp?document=802 Mee, Charles L. The Genius of the People. New York: Harper Row, 1987. Nedelsky, Jennifer. Private Property and the Limits of American Constitutionalism. Chicago: University of Chicago Press, 1990. Rakove, Jack N. The Beginnings of National Politics. New York: Alfred A. Knopf, 1979.