Essay --

Before Augustus, there was Julius Caesar. Caesar appointed himself as dictator for life in Rome. Caesar declared himself all powerful and had control over the entire government. However, Brutus and Cassius assassinated Caesar because they believed he was becoming too powerful and had created a monarchy. Caesar was the granduncle of Augustus and because of this, Augustus wanted to avoid a connection with Caesar roots in becoming a dictator. Augustus avoided a tyranny and he could eliminate the risk of being assassinated like Caesar. In turn, Augustus put on a facade of seeming as though he was not becoming all-powerful. In order to deceive the government, Augustus denied any attempts that were given to him to take the throne as an authoritarian and continued to do great things for the will of the people, to be seen in a good light. While putting on a disguise for the Senate and the people, he made it seem as though power was in the hands of the Senate, when in actuality, he was consol idating power into his own hands. Augustus was seen as the savior of the people of Rome during the time of starvation. In the Res Gestae, Augustus explains that he declined the offer of being king by the people and the senate; he further states, â€Å"I did not decline at a time of the greatest scarcity of grain the charge of the grain-supply†¦I freed the entire people, at my own expense.† Augustus refused to take the throne because it would make him seem as though he was a dictator, similar to Julius Caesar. Instead, to gain the people’s respect, he entice the Roman people. According to Tacitus, an action of this gratitude was one form of gaining the people trust and keeping the Senate in the shadows of his true plan. Tacitus, though, sheds some negative... ... as though he was, no one could challenge his authority. Augustus persuaded the Roman people and Senate through briberies that he was not all-powerful, but a good person. He wanted everyone to see him as no less than the average Roman person. Through Res Gestae written by Augustus, he shows his lavish gifts and the ways in which he declined the throne a few times to move away from becoming Julius Caesar regiment. However, many people such as Dio Cassius and Tacitus were not fooled by his ways and knew that he had a plan the entire time to have absolute power, similar to that of Caesar. The Senate and magistracies were weaker under Augustus’ rule because he had maintained the Senate powers in his own hands. Due to this, many people did not oppose him. In the end, Augustus formed a monarch and use discretion to not show the people and the Senate of his true tactics.

Agency Problem – Essay

I partially agree with the statement that managers have a severely limited amount of discretion to pursue actions inconsistent with shareholder wealth maximization. By investing in a company, shareholders aim to maximize their wealth and achieve portfolio diversification. The objective of managers is assumed to be to further these interests by maximizing the firm’s share value. This can be achieved by taking on projects with positive NPV and good management of short-term capital and long-term debt. However, shareholders and managers are assumed to want to maximize their utilities; so this objective may not always be the priority for managers as they may rather prefer to maximize their own wealth or further other personal interests of theirs. This conflict of interest between the two is an example of the principal agent problem. The principal agent problem occurs due to two reasons. The first is the separation of ownership from control – the principal or the shareholders may own a corporation but it is the agent or manager who holds control of it and acts on their behalf. This gives managers the power to do things without necessarily being ‘detected’ by shareholders. The second is that shareholders may not possess the same information as the manager. The manager would have access to management accounting data and financial reports, whereas the shareholders would only receive annual reports, which may be subject to manipulation. Thus asymmetric information also leads to moral hazard and adverse selection problems. The following are areas where the interests of shareholders and managers often conflict: Managers may try to expropriate shareholders’ wealth in a number of ways. They may over consume perks such as using company credit cards for personal expenses, jet planes etc. †¢Empire building: Managers may pursue a suboptimal expansion path for the firm. They may expand the firm at a rationally unfeasible rate in order to increase their own benefits at the cost of shareholders’ wealth. †¢Managers may be more risk ave rse than shareholders who typically hold diversified portfolios. †¢Managers may not have the same motivation as shareholders, likely due to a lack of proper incentives. Managers may window dress financial statements in order to optimize bonuses or justify sub optimal strategies The principal agent problem normally leads to agency costs. This has been identified by Jensen and Meckling(1976) as the sum of: 1. Monitoring costs: Costs incurred by the shareholders when they attempt to monitor or control the actions of managers. 2. Bonding costs: Bonding refers to contracts that bond agents' performance with principal interests by limiting or restricting the agent’s activity as a result. The cost of this to the manager is the bonding cost. 3. The residual loss: Costs incurred from divergent principal and agent interests despite the use of monitoring and bonding. However the manager’s discretion is quite limited in practice. There are a number of internal and external solutions to agency costs for shareholders. Internal: †¢Well-written contracts ensure that there are fewer opportunities for managers to over consume perks. †¢An external board of directors could be appointed to monitor the efforts and actions of managers. This board would have access to information and considerable legal authority over management. It could thus safeguard information and represent shareholder interests in the company. †¢The board could hire independent accountants to audit the firm’s financial statements. If the managers don’t agree to changes proposed by auditors, the auditors issue a qualified opinion. This signals that managers are trying to hide something, and undermines investor confidence. †¢Compensation packages where the reward to the manager is linked to firm performance. This includes performance related bonuses and the payments of shares and share options. Ambitious, lower managers are a threat to the jobs of inefficient, evading ones. External: †¢The lenders of a company also monitor; a bank for instance would track the assets, earnings and cash flows of the company it provides a loan to. †¢Managerial labor market: Poor managers may not get another job or get a much poorer one. Ultimately the most important indicator to the labor market of managerial performance is share price. †¢Capital Markets – A falling share price increases the threat of a take-over, which can often result in redundancies. More concentrated shareholding by outsiders can lead to monitoring by them and improve managerial performance. However there are a few problems with these solutions though, which make it possible for managers to circumvent them to a small extent. In order to keep the share price high, managers may focus more on short term profitability at the cost of long term profitability. They may use gimmicks to temporarily boost the share price and neglect spending on research, development and H. R. They may also provide sub standard products and cease providing services for old, or relatively less important products in order to reduce costs and make a quick profit. This damages the company’s reputation, reduces its competitiveness in the future and thus affects long-term shareholder value negatively. While block holders may act as external monitoring mechanisms, they can also have private incentives to go along with management decisions, which may be detrimental to firm performance. Writing better contracts may reduce the problem of asymmetric information, but not fully solve it. This is because the design of such contracts is technically infeasible due to various reasons such as the difficulty of foreseeing all future contingencies. Dispersed shareholders often do not exercise the few controlling rights that they have. This leads to a free rider problem where shareholders would prefer to let other shareholders do the task of monitoring as they cannot justify spending on it over the few shares that they each own. In order to resist takeovers, managers may design contracts that compensate them in the event of loss of control due to the takeover. They may also undertake targeted repurchases and devise a poison pill, which changes the fundamental aspects of the corporate rules without the knowledge of shareholders. While incentive schemes such as shares and share options are effective, they are still reactive in the sense that they provide no mechanism for preventing mistakes or opportunistic behavior. Managers may continue to focus mainly on quarterly goals rather than the long term as they are allowed to sell the stocks after exercising their options. By focusing on quarterly performance, managers could boost the stock price and avail higher personal profits on their subsequent sale of stock. Managers may also sell their shares as soon as they are high, leading people to think that they lack confidence in their own operations. This may adversely affect share price. Share options also increase the risk of EPS dilution from an increase in shares outstanding. Managers may often ‘window dress’ financial statements as the company must be seen to perform well in order to improve share valuations. They may report inaccurate information, especially if their short-term rewards outweigh their long term ones such as pensions. It also encourages shareholder approval, and so would lead to less difficult AGM’s. Many managers may hide the true value of assets in order to hide the losses they incurred while buying them. Window dressing also involves managers presenting statistics such that they highlight the perceivably best bits about the company’s performance and avoid emphasis on the worst aspects of the previous year’s business. Other common practices of this include disguising liquidity problems and fraudulent representation of liabilities. This gross misrepresentation of debts has been seen with Enron in the US, where $billions of long-term liabilities were hidden off the balance sheet. Its executive Jeffery Skiller, initiated the use of mark to market accounting, while hoping to meet Wall Street expectations. Enron ultimately became bankrupt while its shareholders suffered huge losses. Despite having model board of directors and a talented audit committee, Enron’s managers were able to make it attract large sums of capital to fund a questionable business model and hype its stock to unsustainable levels. Worldcom, a telecommunications company in the US, inflated profits by disguising expenses as investment in assets and inflated revenues with bogus accounting entries from corporate, unallocated revenue accounts. In mid 2000, its stock price began to decline and CEO Bernard Ebbers persuaded WorldComà ¢â‚¬â„¢s board of directors to provide him corporate loans and guarantees of over $400 million to cover his margin calls on Worldcom stock. The board had hoped that the loans would avert the need for Ebbers to sell the substantial amounts of WorldCom stock that he owned, as this would have further reduced the stock's price. However, the company ultimately went bankrupt and Ebbers was ousted as CEO in April 2002. The shareholders suffered massive losses as they watched World Com’s stock price plummet from $60 to less than 20 cents. Thus, we can see that while there is room for managers to indulge in personal wealth maximization, it is quite difficult to do so. Usually, the solutions tend to be adequate enough to correct the conflicts, and restrict manager’s discretion.

From Stars to White Dwarfs the Saga of a Sun-like Star

White dwarfs are curious objects. Theyre small and not very massive (hence the dwarf part of their names) and they radiate mainly white light. Astronomers also refer to them as degenerate dwarfs because theyre really the remnants of stellar cores that contain very dense, degenerate matter. Many stars morph into white dwarfs as part of their old age. Most of them began as stars similar to our own Sun. It seems rather odd that our Sun would somehow turn into a weird, shrinking mini-star, but it will happen billions of years from now. Astronomers have seen these weird little objects all around the galaxy. They even know what will happen to them as they cool: theyll become black dwarfs.   An artist impression of a white dwarf star in orbit with pulsar PSR J2222-0137. It may be the coolest and dimmest white dwarf ever identified. (Larger version available at: https://public.nrao.edu/images/non-gallery/2014/c-blue/06-23/ColdRemnant.jpg). B. Saxton (NRAO/AUI/NSF) The Lives of the Stars To understand white dwarfs and how they form, its important to know the life cycles of stars. The general story is pretty simple. These giant seething balls of superheated gases form in clouds of gas and shine by the energy of nuclear fusion. They change throughout their lifetimes, going through different and very interesting stages. They spend most of their lives  converting hydrogen to helium and producing heat and light. Astronomers chart these stars in a graph called the main sequence, which  shows what phase they are in their evolution. The Sun will someday evolve into a white dwarf. NASA/SDO Once stars get to be a certain age, they transition to new phases of existence. Ultimately, they die in some fashion and leave behind fascinating pieces of evidence about themselves. There are some really exotic objects that really massive stars evolve to become, such as black holes and neutron stars. Others end their lives as a different type of object called a white dwarf. Creating a White Dwarf How does a star become a  white dwarf? Its evolutionary path depends on its mass. A high-mass star—one with eight or more times the mass of the Sun during the time its on the main sequence—will explode as a supernova and create a neutron star or black hole. Our Sun isnt a massive star, so it, and stars very similar to it, become white dwarfs, and that includes the Sun, stars lower mass than the Sun, and others that are somewhere between the mass of the Sun and that of the supergiants. Massive stars die in supernova explosions like this one. The leftovers of this star will not form a white dwarf, but instead have created a rotating neutron star called a pulsar. Hubble Space Telescopes view of the Crab Nebula supernova remnant. NASA/ESA/STScI Low-mass stars (those with about half the Suns mass) are so light that their core temperatures never get hot enough to fuse helium into carbon and oxygen (the next step after hydrogen fusion). Once a low-mass stars hydrogen fuel runs out, its core cannot resist the weight of layers above it, and it all collapses inward. Whats left of the star will then compress into a helium white dwarf—an object made mainly of helium-4 nuclei How long any star survives is directly proportional to its mass. The low-mass stars that become helium white dwarf stars would take longer than the age of the universe to get to their final state. They cool very, very slowly. Therefore no one has seen one actually cool completely down, yet and these oddball stars are quite rare. Thats not to say they dont exist. There are some candidates, but they typically appear in binary systems, suggesting that some kind of mass loss is responsible for their creation, or at least for speeding up the process. The Sun will Become a White Dwarf We do see many other white dwarfs out there that began their lives as stars more like the Sun. These white dwarfs, also known as degenerate dwarfs, are the endpoints of  stars with main sequence masses between 0.5 and 8 solar masses. Like our Sun, these stars spend most of their lives fusing hydrogen into helium in their cores. Our star will swell to become a red giant on its way to becoming a white dwarf surrounded by a planetary nebula. B. Jacobs/Wikimedia Commons Once they run out of their hydrogen fuel, the cores compress and the star expands to become a red giant. It heats up the core until helium fuses to create carbon. When the helium runs out, then the carbon starts to fuse to create heavier elements. The technical term for this process is the triple-alpha process: two helium nuclei fuse to form beryllium, followed by the fusion of an additional helium creating carbon.) Once all the helium in the core has been fused, the core will compress again. However, the core temperature will not get hot enough to fuse carbon or oxygen. Instead, it stiffens, and the star enters a second  red giant phase. Eventually, the stars outer layers are gently blown away and form a planetary nebula. Whats left behind is the carbon-oxygen core, the heart of the white dwarf. Its very likely that our Sun will start this process in a few billion years.   Theres a white dwarf at the heart of the Ring Nebula. This is a Hubble Space Telescope image. The Ring Nebula consists of a white dwarf at the center of an expanding shell of gases expelled by the star. It is possible our star could end up like this. NASA/ESA/STScI. The Deaths of White Dwarfs: Making Black Dwarfs When a white dwarf stops generating energy via nuclear fusion, technically its no longer a star. Its a stellar remnant. Its still hot, but not from the activity in its core. Think of the last stages of a white dwarfs life as more like the dying  embers of a fire. Over time it will cool, and eventually get so cold that will become a cold, dead ember, what some call a black dwarf.  No known white dwarf has gotten this far yet. Thats because it takes billions and billions of years for the process to occur. Since the universe is only about 14 billion years old, even the first white dwarfs havent had enough time to completely cool down to become black dwarfs.   Key Takeaways All stars age and eventually evolve out of existence.Very massive stars explode as supernovae and leave behind neutron stars and black holes.Stars like the Sun will evolve to become white dwarfs.A white dwarf is the remnant of a stellar core that has lost all its outer layers.No white dwarfs have cooled completely in the history of the universe. Sources NASA, NASA, imagine.gsfc.nasa.gov/science/objects/dwarfs1.html.Stellar Evolution, www.aavso.org/stellar-evolution.â€Å"White Dwarf | COSMOS.†Ã‚  Centre for Astrophysics and Supercomputing, astronomy.swin.edu.au/cosmos/W/white dwarf. Edited by Carolyn Collins Petersen.