American Airlines
Discuss how senior management's short-term focus on stock price in a publically traded company can lead to unethical behavior.
If senior management has a short-term focus on stock price as its central motivation, that can lead to unethical behavior. The role of management is to increase the wealth of the shareholders (Friedman, 1970), something that must be done over long run, not the short run. A short-run focus on the stock price does not have to be mutually exclusive to building long-run value, but it often is. Management may either utilize strategies that favor a small short-term return over a broader long-term improvement or it may engage in various forms of accounting fraud to make the company appear more profitable than it actually is. The former is more of a policy choice; it may not be unethical as much as it is stupid. The latter is unethical and all times and sometimes illegal as well. Pursuing means of misleading the markets in order to boost a share price is counter to the pursuit of long-term value, so senior managers would be violating their duty of care to the shareholders in such a situation.
2. American Airlines has historically manipulated its earning by deferring aircraft maintenance. Discuss how this behavior may be unethical to both its shareholders and customers.
Hughes and Schlangenstein (2010) point out that American was fined $24.2 million in 2010 for its practice of delaying maintenance on its flights. This practice is undertaken to avoid spending that money, and the reduction in expenses boosts the profit of the company. While the delayed maintenance finds its way to the balance sheet as a deferred liability, it stays off the income statement. This gives the airline the appearance of being more profitable than it actually is.
This practice is unethical to the shareholders because it is misleading. The company has a duty to produce financial statements that accurately reflect the financial condition of the company, and arguably this tactic counters that. Essentially, while the deferred maintenance is still on the books, it is buried in an obscure corner of the balance sheet -- probably explained only in the notes -- rather than being...
American Airlines AMR is the parent company of American Airlines and American Eagle and represents a poor investment opportunity for many reasons. AMR lost 761 million dollars in 2004 with more bad news expected. AMR and the airline industry in general are affected by two negative industry dynamics, high fuel costs on the supply side and low revenue yields on the demand side (Chakravorty, 2005). Jet fuel accounts for twelve to
Asia-Pacific carriers and routes are expected to earn a large profit, Latin America to be the only region to deliver a third consecutive year of profits; while North America, Europe, the Middle East will post far lower than average profits, with Africa likely experiencing a $100 million loss (IATA, 2011). Works Cited American Airlines Receives Texas Commission on Environmental Quality. (2006, May 11). Retrieved from Airline Industry Information Service: http://findarticles.com/p/articles/mi_m0CWU/is_2006_May_11/ai_n16359869/ American Airlines.
American Airlines Recently, American Airlines filed bankruptcy protection in order to allows it to continue operating. While bankruptcy for a company or a person is not looked well upon, it seems that there is a double standard when the operation of private companies is compared to methods used by the U.S. Government to stay afloat, such methods may also look askance at its extreme measures to remain solvent and to continue
American Airlines/U.S. Airways merger issues In January 2012 U.S. Airways Group, the parent company of U.S. airways, expressed interest in acquiring AMR Corporation, American Airlines parent company. This merger would add 1.5 billion dollars in revenue reduce competition in various cities and create one of the largest airlines in aviation history. For shareholders and workers this is a great thing. Some of the benefits are more destinations, more flights and the
In order to reach and maintain this business standards, the company has created a set of basic rules for itself, regarding the respect for the customer and the ethic principles. One of the sources of competitive advantage that the company benefits from is represented by its Human Resources policy. The importance of the relation that the company has with the members of its staff is worth underlining. One third of
AMERICAN AIRLINES AND U.S. AIRWAYS MERGER PLEASE ASSIGN THIS PAPER TO BETTY 2115322 QUESTION MUST BE TYPED IN BOLD AND NUMBERED Assignment 2: Mergers Acquisitions Due Week 6 worth 200 points Use Internet research a publicly traded company United States undergone a merger acquisition (3) years. Examine the circumstances that resulted in the merger or acquisition for the selected company. Speculate on two (2) reasons why the resulting decision to merge or
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