Reference no: EM131043300

Problem 1:

President Roosevelt signed the Social Security Act on August 14, 1935. Taxes were collected for the first time in January 1937, and the first one-time, lump-sum payments were made that same month. Under the law, Social Security paid retirement benefits to the primary worker only. A 1939 change in the law added survivors' benefits and benefits for the retiree's spouse and children. In 1956, disability benefits were added.

As an American, you earn Social Security credits when you work in a job in which you pay Social Security taxes. The credits are based on your earnings. During your working years, your wages are posted to your Social Security record, and you receive earnings credits based on those wages. These credits determine eligibility for retirement benefits or for disability or survivors benefits if you should become disabled or die.

Each year, the amount of earnings needed for a credit rises as average earnings levels rise. The maximum number of credits you can earn is four per year. The credits you earn remain on your Social Security record even if you change jobs or have no earnings for a while.

Special rules for earning Social Security coverage apply to certain types of work. If you are self-employed, you earn Social Security credits the same way employees do. However, special rules apply if you have net annual earnings of less than $400. If you are in the military, you earn Social Security credits the same way civilian employees do. You also may receive additional earnings credits under certain conditions. Other kinds of work also have special rules about how you earn credits. Some of these jobs are domestic work, farm work, or work for a church or church-controlled organization that has been exempted from payment of Social Security taxes.

The number of credits you need to be eligible for benefits depends on your age and the type of benefit. For retirement benefits, everyone born in 1929 or later needs 40 credits to be eligible for retirement benefits; people born before 1929 need fewer credits.

Given all of the press about governmental entitlement programs, and the possibility that Social Security will be unsustainable in 30 years, if you could make a change, what would it be (and why)?

Problem 2:

Individuals can minimize their loved ones' pain associated with their death by writing a will. A will specifically instructs your executor or personal representative regarding what is to be done with your estate. A will is especially important if you have dependent children. Without a will, the court will make decisions without regard to your intentions. Although estate lawyers draw up most wills, you can buy computer software to develop your will. It is suggested that you ask a lawyer to review the document for accuracy and intent, and to have the self-made will notarized to reduce contestability by others. So do you have a will? How was it prepared?
 
You are the newly promoted Manager of Operations at LongTech, Inc., an international communications company that manufactures, integrates, and installs communication equipment in terrestrial stations around the world. The customer base is approximately 65% government customers and 35% private service providers (telephone companies, internet service providers, etc.) who are licensed to operate by their governments.

You have been in the job for a few weeks, and your boss asks you to put together some priorities for future operational guidelines. You are required first to research the internal functions of the organization and then to make a few recommendations about what should be done when. As part of the exercise, you have just returned from a three-week fact-finding tour of all the firm's business operations.

The company is a medium-sized manufacturing company, headquartered in Hagerstown, MD, with business operations and offices in the US, Italy, Denmark, Australia, China, and Japan. Manufacturing is located in the US and Vietnam; high-end product components are manufactured in Hagerstown, MD and then shipped to Vietnam, where low-end products and all assembly are conducted. All finished products are shipped from Vietnam to the regional offices. Each office serves its region with specialized staffs for finance and accounting, legal and contracts, sales, engineering, and after-sales support.

Sales breakdown is as follows:

1. US: 10%
2. Europe and Middle East: 25%
3. Africa: 10%
4. Asia: 40%
5. Australia: 5%
6. South America: 10%

Annual revenues are about $75,000,000.

Up until 3 years ago, this was a family business, but the second generation of the family sold the business to a private equity group and it is now a private corporation. The investors have a medium-term goal to grow the company to about $100,000,000 annual revenue and then to go public and to be listed on NASDAQ.

As you review operations worldwide, you see discrepancies in business practices in each business center. There is no uniform method of accounting except at the highest levels of corporate reporting There is no uniform requirement to abide by FCPA or OECD guidelines regarding corruption or bribery. There is no uniform way to manage the supply chain and the supply chain is not centralized so that one group can benefit from the activities of any others. Accounts payable payments vary from region to region. Accounts receivable issues plague every business unit. Salaries and responsibilities for different levels of employees are not uniform. In summary, instead of this being one company, it looks more like six independent companies managed with very little oversight from Headquarters. Nonetheless, the company is profitable and has met every financial and business goal that the board of directors has established.

In your recent grand tour of the company's operations in every region, you sensed that the local management of each business unit appreciated that HQ did not impose overbearing requirements on the local offices and that each unit was allowed to "do its own thing".

Nonetheless, you believe that some centralization is necessary for many reasons. Supply chain issues concern you, as do the A/P and A/R issues. There are too many independent banking relationships, and Long Tech can't achieve any economies without a strong money-center bank assisting them. You also suspect, but you can't prove, that some of the business units bend the few rules that are in place, and that some form of bribery may have been in play in a few, very competitive awards recently. You strongly believe that some central control should be established to include an ethical code of conduct, more training and education in both FCPA and OECD guidelines, and sensitivity to local laws and regulations regarding bribery and corruption. You cannot be dissuaded that some form of regular compliance review for each business unit should be established.

You also have concerns about the cost of such a set of programs and you don't want to be seen as a "goody two shoes from corporate" who is taking away the independence that has come with decentralization. In short, you know that "if it ain't broke, don't fix it", but you sense that without some control, Long Tech will be unprepared for problems when they arise.

What do you prioritize for Long Tech? How do you make the argument to senior management that it is important to have controls in place and that centralization in some form is beneficial to the overall firm's performance? On the one hand, you want to move quickly and, on the other hand, you don't want to be perceived as overbearing.