Maintaining a Flexible Payout Policy in a Mature Industry: The Case of Crown Cork and Seal in the Connelly Era

This case study suggests that the payment of cash dividends may not be essential to the long-run success of even mature companies. A mature company in a mature industry, the Crown Cork and Seal Company did not pay any common dividends during John Connelly's 33-year tenure as chairman and CEO. During that period (from 1957 to 1990), the company used stock repurchases along with a compensation policy featuring low executive salaries and generous executive stock options to motivate and execute a focused business strategy. Under the leadership of Connelly, Crown was rescued from what appeared to be certain bankruptcy to become one of the most profitable firms in its industry. Debt was immediately paid down, preferred stock was retired, and the firm's operations were revamped and streamlined. Instead of following the diversification strategies of larger industry peers, Crown's strategy was focused and driven by profit margin and customer service. This strategy eventually led Crown to invest internationally and acquire one of its major rivals. In addition to significant equity ownership by Crown's management and board members, the company's board had a remarkable number of “outsiders” and representatives from international operations, creating a culture that was outward-looking as well as cohesive. And without paying a dollar of dividends—a practice that many finance scholars believe imposes a necessary discipline on mature companies—Crown both preserved its financing flexibility and produced a remarkable record of increases in both profits and market value.     

Performance appraisal and culture: practice and attitudes in Hong Kong and Great Britain

This article compares the practice of and attitudes towards performance appraisal for managerial and professional staff in Hong Kong and Britain, and considers the extent to which actual practice and employee preferences are in alignment. Findings suggest that appraisal may be more widespread in Hong Kong than in Britain. However, British appraisal tends to be more participative and to place greater emphasis on discussing objectives, development and career plans. Hong Kong appraisals appear to be more directive and Hong Kong respondents perceive a higher level of 'negative' appraiser behaviour. In spite of this, Hong Kong respondents show if anything slightly more confidence in the utility of appraisal than do British respondents. They show stronger support for appraisal's use for reward and punishment and less support for the objectives-setting and training and development uses than do the British sample. Hong Kong respondents are more likely than their British counterparts to favour involving a more senior manager in appraisal, and they are less likely to prefer more frequent appraisals. There was little evidence that Hong Kong respondents had a stronger preference for group-based appraisal criteria, although they did show more support than the British sample for the use of personality as a basis for appraisal. Overall, the suggestion is that appraisal has been adopted in Hong Kong organizations but that the practice of appraisal has been adapted to suit the cultural characteristics of the society.     

USING DISCOUNTED CASH FLOW ANALYSIS IN AN INTERNATIONAL SETTING: A SURVEY OF ISSUES IN MODELING THE COST OF CAPITAL

Based on the results of a recent survey of University of Chicago Graduate School of Business alumni, the authors of this article suggest that prevailing corporate practice in valuing overseas investments reflects a flawed understanding of finance theory. Although the survey finds that almost all respondents use the discounted cash flow (DCF) method in some fashion or another, there is significant variation both in the application of DCF and in the weighting that different groups assign to DCF in dealing with segmented markets. Of greater interest, the survey also shows that, as the complexity and uncertainty involved in valuation tasks increases, practitioners appear to place greater reliance on heuristics, or conventional rules of thumb. And in relying on heuristics as perceived risk increases, the authors warn, “people tend to become less consistent, less systematic, and less rigorous in the methods they use to measure and evaluate risk.” Also of interest to the authors, many practitioners doing international valuations appear to be unwitting adherents to a “multi-factor” asset pricing model. For, in addition to traditional market factor proxies, they tend to incorporate country-specific risks, such as political and sovereign risk, into the discount rate. The authors attribute this practice to the implicit (and generally mistaken) assumption that there is a significant relationship between systematic risk and the degree of foreign market segmentation. Following presentation of their survey results, the authors explore several important issues surrounding international cost of capital. Perhaps most important is the degree of market “segmentation” and how it affects the pricing model (whether a global or a local version of the CAPM, for example) used to calculate the cost of capital. The article provides a framework to help practitioners decide which pricing model is appropriate for valuing a given investment. Moreover, since the cost of capital affects EVA-type measures of operating performance that are often used in performance evaluation schemes, the framework also can be used to guide senior management in thinking about the proper hurdle rates for their overseas business units.     

Motivations of educational tourists in non-English-speaking countries: the role of languages

ABSTRACT

Learning a language or improving one’s foreign language skills may be a key motivator for students to decide to participate in an exchange program as well as choose the destination for their studies. Nevertheless, studies on educational tourism are limited, and there is no research on the motivations of students visiting non-English-speaking countries. To fill this gap, this paper aims to examine the motivations of university students in non-English-speaking destinations by using the push-and-pull framework. Primary data were collected through an online survey from 190 and 205 students who participated in mobility programs in a Spanish university and in a German university respectively. Empirical findings reveal that languages are a key motivating factor for either growing personally through cultural enrichment, or growing professionally. Furthermore, these data allow generic recommendations so that the destinations can attract a larger number of international students.     

The governance of transport and climate change

Climate change is one of the key global policy issues of our time. Transport is the sector from which it has been hardest to cut emissions and, to make substantial progress in the future, action will be required at all levels of government from international to local. The governance of transport within this already challenging arena is further complicated by the existence of different structures for the management of transport modes and variations in formal governance structures across countries and regions.This paper examines the prospect for deep cuts in CO₂ emissions from transport through an examination of the key policy levers for change and considering the governance issues that surround them. The focus of the paper is the United Kingdom, and in particular England and Scotland. The UK is the first country to have a legally binding internal obligation to meet carbon dioxide reduction targets and this has prompted significant activity in both governance institutions and delivery. The research uses a multi-level governance framework to understand the policy environment in England and Scotland, capturing both the range of spatial actors and the influence of sectoral actors in what is a complex polity.It is concluded that the policy approach currently appears constrained by a desire to divide accountability by formal institutional structures, thus failing to tackle the dispersed nature of travel and the national and international nature of businesses. There is currently a lack of clarity about the tiering of responsibilities between spatial levels and there is therefore a comparative lack of commitment to the potential for demand management and travel reduction strategies to contribute to carbon reduction. Carbon reduction policies are also influenced by strong industry lobbies whose goals may not be fully aligned with carbon reduction strategies. The profusion of actors engaged in climate change policy seems to dilute rather than promote effective policy making.