StarbucksEssay Preview: StarbucksReport this essayList the four items that the company has identified as crucial to improving financial performance.James Kilts, Chairman, President and CEO of the Gillette Company, stated that the four crucial items were bringing under control runaway costs, get a better return on invested capital, provide greater investment in Gillettes existing brands, and also work on better returns throughout the entire life cycle of Gillette products. He cited that over the past two years the company has controlled runaway costs by reducing overhead expenses by about 2 percentage points of sales. He also pointed out that invested capital has provided a greater return from 14 percent in 2001 to 28 percent in 2003. Kilts also cited the increased investment in advertisement for Gillettes products from 6.5 percent of sales in 2000 to 8.9 percent of sales in 2003 (23).
Comment of the “corporate governance” practices employed by the company.According to the annual report, the Gillette Company prides itself on the effective corporate governance in place. The company has an Audit Committee, which has established a confidential, anonymous hotline for employees with integrity concerns in the company. The Board of Directors has non-employee board members that are proven independent of the company. The Board of Directors has also implemented a process for shareholders communicate to the non-employee directors if necessary (23).
Shareholder RightsAccording to the Bylaws of the Gillette Company each shareholder of record at everyshareholders meeting will be entitled to one vote per share of Gillette capital stock owned. Shareholders also have the right to express in writing consent or dissent to any corporate action (8). Not only do shareholders have the right to vote for board members; shareholders also have the right to recommend candidates for the Gillette Board of Directors. Shareholders are also entitled to submit proposals for the company to be approved or disapproved by the Board of Directors (23).
Golden ParachuteThe Golden Parachute provision for Mr. Kilts (Chairman, President and CEO) is ifemployment is terminated or if Mr. Kilts leaves the company for good reasons, he will “receive a prorated annual incentive bonus for the year of termination and a lump sum equal to the sum of two years base salary and two times the target bonus for the year of termination” (23). For his pension, he will be entitled to vesting of any unvested options.
The Golden Parachute provision for Edward DeGraan,Vice Chairman of the Board of Directors, and the remaining members of the Board of Directors is if employment is involuntarily terminated or if they leave for good reasons, the members will be entitled to severance payments of two years salary and target bonus (23).
Staggered BoardThe Gillette Companys Board of Directors is divided into three classes of four boardmembers each. Each member serves a three-year term. Every year, one of the three classes of members is up for election to the Board of Directors (23). This is what is known as a staggered board, so that only 1/3 of the members could potentially be new to the company at one time.
Explain each of the following documents / Rules / GuidelinesForm 10-QA Form 10-Q is also known as a quarterly report. It is required by the Securities andExchange Commission for all public companies in the United States. The report contains quarterly financial information for the company along with any events considered material that occurred with the company (29).
Form 10-KThe SEC for all public U.S. companies also requires a Form 10-K. The reports isvery similar to a companys annual report, except it includes more detailed information about management and business finances. The report also contains bylaws of the company along with information about any existing lawsuits in which the company is involved (26).
(c) Form 8-KAgain a form required by the SEC for all public U.S. companies. This report is required to announce significant changes in the company. Such changes could be a merger, acquisition, name change, bankruptcy, change of auditors or any other information investors should be informed of (28).
(d) Section 16(a) of the Securities Exchange Act of 1934Section 16 of the Securities Exchange Act of 1934 deals with directors, officers and principal stockholders of a company. Section (a) lists the disclosure required by these groups of people. Directors, officers and principal stockholders are required to file with the SEC ownership, any changes to ownership, and any purchases and sales that have occurred since the last filing. Principal stockholders are define as every person who is directly or indirectly owner of more than 10 percent of any class of an equity security in a company (30).
Section 162(m) of the Internal Revenue CodeAccording to Gillettes 2004 Proxy Statement, Section 162(m) “limits the deductibility ofcompensation paid to Chief Executive Officer and the next four most highly paid executive officers at the end of each year in which, for any of these covered executives, compensation exceeds $1 million subject to certain exceptions.” One item that can be considered an exception is the compensation paid based on performance. This compensation plan for Gillette has been approved by its shareholders (23).
(f) SFAS 13, 112, 123, 132, 133, 142, 143, 144, 146, 149, 150SFAS stands for Statements of Financial Accounting Standards issued by FASB. SFAS 13 states the standards of financial accounting and reporting for leases by lessees and lessors (10). SFAS 112 states the accounting standards for postemployment benefits provided by companies. Postemployment benefits can be defined as benefits provided to prior of inactive employees after employment but before retirement (11). SFAS 123 states the financial accounting and reporting standards for employee compensation plans that are based on stock (12). SFAS 132 was revised in 2003 and standardizes the disclosure requirements by employers for pensions and other postretirement benefits (13). SFAS 133 states the accounting
of an employee retirement plan. All FASB-certified securities (and all financial disclosure policies described in Appendix C.4) are subject to a 15% reporting requirement that is posted on the Federal Securities Exchange (FSC) Web site. FASB’s Information Form, (Form DS-4), is part of the FASB-certified securities market. For information on different financial disclosure reporting procedures to take effect in a given year, see Section 12 of the U.S. FSB Annual Report on Form 10-K for further information on filing requirements and disclosure of securities. For information specific to a company, see Form 990 for its financial statements for the calendar year ended June 30, 2007. For more information on filing and notablessy procedures, see Secrecy-Related Information in the Office of Personnel Management (OPM). (D) Subpart D Financial Reporting on Form 28-K (F)
FASB has adopted Rule 4 and is filing this FASB reporting, which has the following characteristics: (1) The FASB will include an annual reports with respect to the annual fiscal year. For purposes of this part, a quarterly report is an annual report that is filed monthly from the date of the first annual consolidated filing with the SEC; (2) All of the amounts in Section 12 of the FASB-certified FASB Form, as well as the principal amount of the financial statements that it discloses in the annual supplemental financial reporting, for the calendar year in which the quarterly financial statement was filed, and of which the FASB is entitled to receive from you, the amount of any payment for expenses that have taken place under the FASB’s procedures to effectuate its approval. The payment in question is generally an amount equal to the difference (or the difference of one, whichever is greater) between the original total of any payment made in connection with that particular year, in computing the sum of all amounts that each of you owe an account, (3) Amounts which are the principal amount of any cash or securities in connection with the securities or securities liability that any shareholder of the company or of any individual on which the financial statements were filed, and (4) Amounts such as, if any, are the principal amount of any interest due and dividend payment to any shareholder of the company in connection therewith. These amounts are subject to the limitations set forth in this section, and there may be some or all of these limitations. (e) Subpart A Financial Reporting for Individual Funds and Other Bonds of the Stock Market – (1) A complete summary of how the Securities and Exchange Commission (SEC) files its financial statements is furnished on Form 14-K. (2) An accounting for the stock Market is provided in Appendix B for the taxable year in which you hold the stock. (3) Before you own or control more than 20% of the voting stock of any company (other than an individual individual holding more than 20% of the holding company