3.2.3. Company systems
The corporate governance: The multiple ATRAC’s locations require the presence of an effective control mechanism to ensure the appropriate execution of the company’s strategy. The current ATRAC’s several managerial layers allow the proper execution of the chosen strategy. The situation that the company’s locations despite of several managerial levels and cross reporting system have a
tendency towards cost or differentiation models suggests that the potential challenge hides in the top managerial level; the president, VP and GM are promoting the different types of strategies. Thus, the current control system on the low and middle managerial level is quite effective and represents the ATRAC’s strength, while the corporate governance seems to be a company’s weakness. By pursuing both alternatives, ATRAC needs to reassess the corporate governance.
Both alternatives suggest more authority given to the GM. In addition, the first alternative goes further to transform WE operations into an independent business entity. The control of the president and the VP over independent WE operations can be executed by creating the Risk Management Policy and reviewing an Audit System that will allow to oversee and monitor the management and the performance of the new business entity in compliance with the corporate risk management policy.
First, the risk management policy needs to include comprehensive reporting system which seeks to identify, at the earliest opportunity, any significant business risks. Secondly, The policy needs to include an executive limitations such as the conditions to avoid and what should not occur.
The comprehensive reporting system needs to underpin written certifications given by the GM to the president and VP each half year that the WE’s (Alternative 1) or ATRAC’s (Alternative 2) financial reports fairly reflect its financial condition and operational results, are in accordance with relevant accounting standards, and that the risk management and internal compliance and control system is operating efficiently and effectively in all material respects.
In summary, the risk management policy and the revised auditing system will ensure the proper execution of the new company’s strategy and address the possible arguments and the potential disagreements over the control.
Compensation System: ATRAC’s managerial, sales and service compensation system is based on performance. The performance-based compensation system that increases competitiveness represents ATRAC’s current strength; however the averaging (WE and LT segments) compensation pay system that doesn’t allow the retention of the top paid personnel needed for differentiation, and overpays in the LT segment, which can be served by a cheaper workforce represents the company’s weakness.
The corporate governance: The multiple ATRAC’s locations require the presence of an effective control mechanism to ensure the appropriate execution of the company’s strategy. The current ATRAC’s several managerial layers allow the proper execution of the chosen strategy. The situation that the company’s locations despite of several managerial levels and cross reporting system have a
tendency towards cost or differentiation models suggests that the potential challenge hides in the top managerial level; the president, VP and GM are promoting the different types of strategies. Thus, the current control system on the low and middle managerial level is quite effective and represents the ATRAC’s strength, while the corporate governance seems to be a company’s weakness. By pursuing both alternatives, ATRAC needs to reassess the corporate governance.Both alternatives suggest more authority given to the GM. In addition, the first alternative goes further to transform WE operations into an independent business entity. The control of the president and the VP over independent WE operations can be executed by creating the Risk Management Policy and reviewing an Audit System that will allow to oversee and monitor the management and the performance of the new business entity in compliance with the corporate risk management policy.
First, the risk management policy needs to include comprehensive reporting system which seeks to identify, at the earliest opportunity, any significant business risks. Secondly, The policy needs to include an executive limitations such as the conditions to avoid and what should not occur.
The comprehensive reporting system needs to underpin written certifications given by the GM to the president and VP each half year that the WE’s (Alternative 1) or ATRAC’s (Alternative 2) financial reports fairly reflect its financial condition and operational results, are in accordance with relevant accounting standards, and that the risk management and internal compliance and control system is operating efficiently and effectively in all material respects.
In summary, the risk management policy and the revised auditing system will ensure the proper execution of the new company’s strategy and address the possible arguments and the potential disagreements over the control.
Compensation System: ATRAC’s managerial, sales and service compensation system is based on performance. The performance-based compensation system that increases competitiveness represents ATRAC’s current strength; however the averaging (WE and LT segments) compensation pay system that doesn’t allow the retention of the top paid personnel needed for differentiation, and overpays in the LT segment, which can be served by a cheaper workforce represents the company’s weakness.
The first alternative addresses the existing differences between WE and LT markets by separating the activities into independent businesses. By pursuing the second Alternative, ATRAC needs to concentrate on the activities in LT that allows higher pay to the personnel. That could be achieved by dropping the low cost brands and products; and partially by outsourcing the lowest profitable and the lowest value services such as the basic and routine maintenance.Comparing two alternatives, the first one is easier to implement. The second alternative requires some adjustments (products and services) to make it work.
Summary of the alternatives: The proper execution of both alternatives requires some adjustments on a corporate level. In case of the first alternative, the adjustments need to emphasis the risk management policies and reporting system. In case of the second alternative, ATRAC needs to reassess its core activities in the LT market that will allow harmonizing the compensation system between WE and LT operations.
to be continued:
corporate governance compensation system case analysis forklift industry
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