Annie Dillard “The Chase”

In Annie Dillard’s autobiography â€Å"The Chase†, she emphasizes and uses great detail in her different writing techniques to make the scenes in the story feel more alive or realistic. The attention of detail can be seen with her intense use of transitions and active descriptions in the actual chase scene. Dillard also uses tone and language of the characters to make the story feel more like actual real time events. In the first paragraph of â€Å"The Chase†, the narrator of the story a seven year old girl is informing the audience about the game of football.She says â€Å"It was all or nothing† (Dillard 121). Basically stating that in football you have got to give all of your effort and not hesitate at all if you want to make the tackle and stop the offense. This do or die attitude is reflected later in the story during the chase scene. It is also the climax of the story. Being that a bunch of kids are together unsupervised, there is going to be some tro uble. That is exactly what happens next. The children are all gathered during a winter snowy day making snowballs next to a street throwing them at passing cars. Its wide black door opened; a man got out of it running. He didn’t even close the car door. † This kind of unexpected thrill we can all relate to. Dillard adds even more by putting in the little details that make the reader feel the anger of this man and the feeling of we’re caught by the children that we have all felt as a kid is described in that same quote. By using these details in the story the reader can put themselves into the shoes of the characters.Dillard uses lots of active descriptions that are very real throughout the chase scene. She uses actual street names like Edgerton Avenue, Lloyd Street, Willard and Lang. This use of actual real names of streets makes the story. The reader can almost get lost in the chase itself with Dillard’s use of rapid transitions like up, around, under, th rough, down some, across, smashed. After the chase is over and the children are caught the reader feels tired

Ancient Chinese Inventions and Contributions

Ancient Chinese Inventions and Contributions Humanities 111 Professor Abstract The following paper will show the contributions from ancient Chinese culture is amazing. There are many inventions and contributions that trace back to ancient Chinese culture. The top ten inventions and contributions continue to keep giving in today’s society. Ancient Chinese has contributed to helping jobs to exist, fight wars, and contribute to the overall public lives with their inventions and contributions.We as people living life and going about our business never really take the time to think about where and who has invented the joys we experience on a daily basis. One example is our very own boy scouts, go on a big jamboree every year. They normally go camping and hiking. A compass is used during this time frame. If you were to ask the average boy scout, who invented the compass? Many could not tell who or when was the compass invented. Ancient Chinese four most useful contributions or inven tions created were gun powder, the compass, paper making, and printing.These four inventions are very unique in their own way. I will explain why these four are the most useful inventions created by ancient Chinese. One of the few destructive inventions of ancient Chinese civilization was that of gunpowder. The discovery of gunpowder led to the invention of firearms and revolutionized battlefields in the Asian Continent. Chinese alchemists, whom were searching for an elixir of life, accidentally discovered the explosive property of gunpowder sometime around 9th century AD. By the end of the 10th century, Asian powers had introduced grenades, crude bombs and firearms onto battlefields.Use of cannons and bigger fire arms also became prevalent. (Yinke Deng, 2005) The compass was one of the most important technological developments in ancient China due to the fact that it promoted and aided exploration that was initiated by Chinese rulers. The development of the compass made China the f irst imperial power in the world. The Chinese empire was indeed termed as an imperial power until the end of monarchy in China and the royal place was also known as the Imperial Palace. The exact era or dynasty during which the Chinese invented the technology of paper manufacturing is uncertain.It is certain that the technology led to many more advancements as it facilitated scholars, philosophers and writers of Chinese civilization. Paper that was invented in ancient China was not only used as a medium of writing, but creative Chinese innovators also used it as a raw material for manufacturing bags as well as paper currency. Paper making can be traced down to the Han dynasty, which ruled from 202 BC to 220 AD, when court official Cai Lun set out to the task of making paper. He deployed mulberry, bast fibers, and waste material such as old rags and hemp waste. Yinke Deng, 2005) Lun also made use of fishing nets to bind the materials together. Some archaeological findings however, su ggest that paper in ancient China may have been invented during the 8th century BC. The invention of printing is regarded as one of the most important inventions, due to the fact that it made books cheaper. Cheaper books ensured an educated society. Many dynasties of courtiers and scholars from ancient China contributed to the development of the printing press. Printing technology started evolving sometime around 868 BC, with the printing of the first printed book titled The Diamond Sutra.The book was printed with the help of the wood block printing. It had become a very advanced technology by the end of the Song dynasty. Writer Shen Kuo, who was also a courtier of Songs, promoted the use of printing for the spread of knowledge. Bi Sheng, who was an artisan, invented the movable ceramic printing. Inventors like Hua Sui also attempted to invent the metal castings and rollers for movable printing. There are eight to ten useful inventions and contributions from the ancient Chinese that are still in use today.The ten ancient Chinese useful inventions or contributions are paper currency, row crops, deep drilling for gas, fireworks, gun powder, the flame thrower, the parachute, the wheel barrow, rudder, and the compass. Chinese inventions have contributed to mankind in many ways. Many of their discoveries start out in one form and can branch out to three or more end products. The four inventions or contributions from the ancient Chinese that have had the most impact on many countries and even changed the course of history to a certain extent were paper currency, gun powder, the parachute, and deep drilling for gas.I believe them to be the most ingenious and innovative of inventions. Paper currency changed the ways of handling money. The times of having to carry gold coins and precious metals to purchase goods and services were over. Before paper currency lugging gold and precious metals around was risky and hard to conceal. Paper currency is lightweight, discrete, a nd still exists in society today. As well as currency, the ways that gun powder has changed society are many. Gun powder has contributed to the gun, fireworks, and explosives of many types.The usage is wide ranged and without the use gun powder wars would have been a lot harder to win and a lot more primitive in style. It is hard to imagine the civil war without the use of musket guns and cannons. The invention of the parachute have also helped in many ways. Parachutes have saved many pilots’ lives. When an air plane fails in the sky or during a war when a plane is shot down, pilots can parachute to safety. Parachutes have facilitated the United States troops with fighting wars on enemy territories. Deep drilling for gas has helped many countries to better utilize their own resources.Deep drilling for gas has helped the United States in the fight to go green and help the environment. The deep drilling for gas technique has given many Americans jobs in the past and present, an d it is responsible for a considerable amount of America’s income. The ancient Chinese have invented and contributed to the discovery of many things used in society today. The one invention I cannot live without is paper currency. Money is what makes the world go round. I use money every day for many different reasons. On a daily basis, I use money (paper currency) to purchase gas, lunch, and beverages.On a weekly basis I use paper currency to rent DVDs, go to the movies, take my wife out to dinner, and get my haircut. It has changed and facilitate the world drastically. Paper currency is in circulation from many different countries and all vary in value and designs. References Yinke Deng. (October 2005). Ancient Chinese Inventions. China. China Intercontinental press Suzanne Morgan Williams. (January 1997). Made in China: Ideas and Inventions from Ancient China. Berkley, California. Pacific Press. (2008). Invention of Paper. Retrieved from http://www. culture-4-travel. com/i nvention-of-paper. html.

Identify several reasons entrepreneurial organizations seek Essay

Identify several reasons entrepreneurial organizations seek opportunities for innovation - Essay Example izations seek an innovation opportunity is because since they are new and bringing a sense of change within them, finding new pathways is quintessential towards their basis. If they do not change, they might become stagnant within their tasks immediately and hence their work domains would suffer immensely. The need is to pinpoint where anomalies are and how best to get rid of them. The aspect of newness must not appear as a deterrent towards completing tasks in an able and effective way. This is the need of the hour as far as the entrepreneurial organizations are concerned and more so today. The second reason belongs to the employees since they are not well aware and require new avenues for help and assistance as far as their work manifestations is related. As they are a part of an entrepreneurial organization, they might not be at ease with a number of work tasks which other employees from varied organizations are already educated about (Prabhu, 1999). Hence innovation helps their cause to move ahead with full throttle and at breakneck speed. The employees must be trained and if this training does not come about under the aegis of the entrepreneurial organization, they could be sent off to other training institutes or organizations so that when they come back, they are well aware of how entrepreneurial organizations essentially work and what is expected of them in the long run. The third reason why entrepreneurial organizations require innovation is because they have to follow the footsteps of their competitors which could both be huge organizations as well as small companies. The need is sought to compare the domains of this entrepreneurial organization with these other business regimes to solicit success within their own realms. If the competitors are far ahead of these entrepreneurial organizations, then this means that the latter have to make amends, and for that they must go to any limit to make sure that their progress and development is manifested in a

Socrates and Meletus reagrading Socrate's trial Essay

Socrates and Meletus reagrading Socrate's trial - Essay Example The first argument was that the Miletus argued that the Socrates were corrupting the young people and deserved purnishment (Doug 30). Through the secrete acquisition of occupation, the Socrates predicted that the son would equally be disgraceful of the propensity, therefore, would advance in the career and the Athens were to defend themselves, thus became uncontrolled and insolent (Doug 31). Linking the arguments to admission, a student who is secretly admitted at the institution secretly, without the formal approval of the authority, might do well in the academic discipline he/she is perusing. This indicates that the perfect pursuit of the career depends on the individual’s determination and interest, mot the mode of admission. However, most people believe that the admission procedure depicts that success of the student, thus, a real fallacy. In fact, when one lacks substantial evidence against the other fellow, he/she does not have the capability of victimizing the person on the unjustified wrong. This implies that, the evidence has to prove reliable before holding one responsible for the

Commodity paper Essay Example | Topics and Well Written Essays - 750 words

Commodity paper - Essay Example From the manufacturing facility to the client, a bicycle may pass through a variety of processes that could be hard to define unless one understands the merits and demerits of globalization. Various prototypes emerged over the years. The initial bicycle model had two large tires with pedals added to move it around. However, the dwarf version that led to the current bicycle was a prototype J.K Starley produced in 1885. The aim was to reduce the difficulties noted when trying to steer and pedal at the same time (Glaskin, 2013). Latter versions were now concerned with the increasing of comfort and making the bicycle easy to pedal and as a source of transportation. Today, bicycles are categorized based on dynamics, performance, and functions. This means that coming up with the full frame of a bicycle will require the utilization of certain features that will define the end product. As such, certain aspects of globalization may come to play when dealing with the assemblage or manufacture of certain parts, leading to either increased purchase costs for the client or reduced operational costs for the company (Bathurst, 2011). Whichever way the balance strikes, the important th ing is to understand that the benefits accrued will depend on several aspects of the global market. Manufacturing of a bicycle includes the assemblage of certain aspects such frames, gearing systems, steering, seats, brakes, suspensions and tires, and accessories. The process could be costly given the accessibility of raw materials, and that may implying outsourcing of products from various countries (Bathurst, 2011). Globalization has made it easy to reach out to various companies in least developed nations and attain the same product for almost half the price or even less. This shows that the company will have lower operational costs that may allow them to produce more at lower costs and higher profits. Just as noted by Rivoli (2009), the bicycles coming from various international

Project charter,WBS,Scope changes Assignment Example | Topics and Well Written Essays - 750 words

Project charter,WBS,Scope changes - Assignment Example Firstly, in order to cut down on expenses, renewable energy will not require reinvesting in after the initial installation or investment. In this case, the project does not consider making of renewable sources of energy, but rather providing identified industries with consultancy and recommendation on the type and amount to invest in in order to cut down on energy costs while at the same time promoting an environment free from industrial contaminants such as CO2. The opportunity lying under this project is that industries such as manufacturing, mining, and agriculture can use various alternative energy sources for both large and small scale production. However, while providing the environment analysis of the identified industries, the consultation service will be backed by industry analysis and the role played by specific industries in promoting global warming and other energy-associated environment challenges. With a business environment that promotes corporate social responsibility, this project will provide solutions to contemporary problems that nurture environment activists hindering the productivity of some industries. To reduce customer resistance to modern products produced unethically based on their effect on the environment, this project will provide the corporate environment with a bargaining advantage on consumer products manufactured or processed using safer energy alternatives (e.g Wave Oscillation). The approximate budget for the project initiation to completion is $10,000 covering equipment of use (computer system and statistical software), transport in the conduction of onsite analysis, proposal drafting and communication to identified industries. The approximate period is 5 weeks. Each week considered one industry and the time is used applied in primary research of the industry’s effect on social order while identifying two companies within. The

What do you think he would have said is the mission assigned to the Essay

What do you think he would have said is the mission assigned to the people of the United States by God in 2010 - Essay Example His teachings mainly revolved around human rights and reduction of social injustices. He was more of a voice of the poor and wanted political parties to not to include church for their own personal interests (Brockman). According to a survey it was seen that 55% people of U.S.are true followers of religion still many a times conflicts are seen between the government of U.S, churches and other religious groups regarding the actual meaning of Christianity and religious freedom. It has been observed that people may believe in God but they do not remember the actual teachings of Jesus. When we talk about what Romero would say to the people of America regarding their mission by God then it would be spread to a large number of areas because today America has lost its way not only in forgetting the principles of humanity, social justice and equality but they have also forgotten to share happiness and love with each other. Today in U.S., it is seen that people are not much keen to celebrate the holy occasions. If he was living today he would have definitely invited people to celebrate these occasions for they were set by God with the aim to remember the sacrifice their ancestors did in the name of religion. He in his first pastoral letter had invited the Salvadorans to celebrate Easter as it was the coming of the Holy Spirit of love and truth. He would have also called upon the churches existing in America to identify the importance of Easter, for Easter was born from the side of the Christ. Also, reminding them about the main elements of Church which are to create community drenched in love for Christ, accept his preaching and to support Church and the grace of Easter (Romero, The Easter Church). He believed that if Church acts the right way the whole nation can be brought back on the right path. He always wanted church to concentrate on purifying the hearts of people and helping those who

Cloud solutions Essay Example | Topics and Well Written Essays - 750 words

Cloud solutions - Essay Example This essay intends to gain the knowledge of cloud solutions that are being adopted by majority of the organizations in the modern scenario with the aim of attaining significant benefits. It has been quite apparent that a majority of IT managers belonging to various organizations are interested in pursuing cloud solutions so that advanced and integrated technologies can prevail by a considerable level. Thus, this essay will discuss about informational environmental influences and impacts once a cloud solution is deployed within a specific organization. It can be apparently observed in this modern day context that a majority of the IT managers are much keen towards following cloud solution systems within their respective organizations. In this similar concern, according to the survey conducted by The Unisys and Center for Digital Government, most of the governmental organizations are either adopting the cloud computing solutions or planning to adopt the same for attaining significant benefits. This can be justified with reference to the fact that cloud solution is adopted due to the reason that it helps the governmental organizations to come into direct interaction with the customers. With the rise of the advanced technology in the modern world, the expectations as well as the preferences of the customers are also raising at large. In such cases, the customers can be benefited through cloud solutions as they can come into direct interaction with the governments and solve all their queries or doubts regarding any sort of subject mat ter. Above all, deployment of cloud solutions aids the governmental organizations in assuring the maintenance of security and safety of both the governmental affairs and information of the customers (Wood, â€Å"Survey: Government Continues to Pursue Cloud Solutions†). The adoption of cloud solutions has become one of the recent common

Personal and Professional Development Essay Example | Topics and Well Written Essays - 1000 words

Personal and Professional Development - Essay Example Secondly, there is increased productivity and one of high quality due to efficiency in performance. Self-management is crucial in enabling an individual to follow set rules. This essay primarily entails information on the personal and professional organization. In addition, the study involves an investigation of the ways people can learn to identify suitable methods for development. Further, there are some suggestions on how concerned individuals can encourage lifelong learning in personal and professional context. Finally, the essay evaluates the benefits of self-managed learning for both the individual as well as the organization. Personal and professional development Personal development refers to the action of a particular individual to advance through various activities necessary for bringing awareness of one’s potential. Personal development is responsible for ensuring that an individual has all the requisites for actual job performance. Professional development refers t o the advancement of individual performance through specialization in a particular field. Professional development is crucial for personal development, as it takes into account advancement in a person’s career and impact on the organization (Bubb & Earley 2007, p. 42). It helps one to acquire high-tech skills useful in overall performance. The outcome of professional development is one exhibiting quality work. ... Secondly, personal and professional development is essential for the performance of the organization, which is through placement of skilled personnel in different departments after a scrutiny of the skills that one has. Additionally, personal and professional development acts as a tool for designing and setting organizational objectives. It also helps leaders learn about their weak side when dealing with workers (Tomlinson 2004, p. 119). Finally, personal and professional development helps individuals develop a better perception concerning the differences between them and others within the organization. These objectives are in line with skillful tactics of focusing on what is best is achievable in the organization within a certain period. Recommendation on how people could learn to identify suitable methods for development Individuals, whether working in organizations or venturing into small business entities need to learn more about essential methods for development. The reason for learning about the methods is that people desire to grow and that they need their businesses to grow on the positive side of the economy. There are various ways helping one to identify the best development methods to apply. For instance, one should have better leadership styles. Leadership is important especially in a large organization where an individual (specifically a manager), has to help set objectives related to performance towards completion of set targets. There is also management of conflict, which is of significance when an individual has to have a good relation with the environment. Conflict management helps individual set objectives that are achievable by the employees within

Progressive Era Through the Great Depression Essay

Progressive Era Through the Great Depression - Essay Example During the above period, some historical turning points were felt by the Americans. Progressivism came about in the early 20th century as a varied inclination, different in various parts of the State and including all members from political parties. The period became the country’s first leading mindset to support state intervention in free market and in individual liberty in every sphere and at all levels (Perry & Manners, 2006). Moreover, the period made a history in a quick expansion for American capitalism, while at the same time the ruling class soared confidence. Leading economists declared that the era of slumps and booms was a past, and it was time for the US economy to experience permanent prosperity. All these proclamations were made during the 1920s, but before the progressive era was over, the worst depression had hit the US economy. The 1929 stock market collapse which manifested the start of the great depression brought in a period of submersion for almost the ent ire working class. As a result of government intervention in free market, major businesses made more profits while wages continued to be low and workers failed to buy the goods they contributed in production. The banking and financial systems were not regulated and some banks had crashed during the 1920s. Automotive and construction industries, whose business had boomed during the progressive era slowed down at the great depression (Hofstadter, 2011). By the year 1919, when the United States’ congress approved the 19th amendment to grant full voting rights to women, 13 out of 16 states in the west had already granted full suffrage to women. Wyoming was the first state to grant suffrage to women in 1869. In contrast, Eastern and southern states, suffragists had the ability to win the voting right before the federal amendment only in two states that is in Michigan in 1918 and New York in 1917. One of the key reasons for the women’s right was the idiosyncratic circumstanc es in all the suffrage states. The fact that the West was the forerunner in granting the rights suggests a number of common social conditions at work in the Western region, contrary to the other regions (Perry & Manners, 2006). Presidents Roosevelt, Wilson, and Taft all adopted the progressive reform spirit in the legislation that they campaigned for, and in their view of the federal regime’s role in the life of the state. Despite attempting to continue with Roosevelt’s basic directions and policies, Taft’s presidency was not smooth, and a sour rift developed between them and within their party, paving way for Democrat Woodrow Wilson. One of the legislation was the spirit of progressivism. Regardless of divergent concerns and philosophical differences, progressives held to many basic doctrines. They were hopeful about human nature as they tried to humanize and adjust to big politics and businesses. They believed in the significance of direct intervention in citi zens’ lives and wanted the government by all means to actively participate in manifesting reform. All these presidents were driven by their protestant ethics to reform the state using science techniques (Hofstadter, 2011). The Underwood tariff reduced the levy charged on imports and included a new income tax. Thus, the lost revenue was replaced by the tax, authorized by the 16th constitutional amendment. On the other hand, Wilson reforms were not just targeted at Wall Street, but he

Proposal to avoid managerial derailment and failure Essay Example for Free

Proposal to avoid managerial derailment and failure Essay Southwest Airlines strict adherence to its mission to provide the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride, and company spirit is a key factor to the company’s success (About Southwest Airlines Co, 2013). The airlines ability to commit to employees to provide them with a stable work environment that ensures equal opportunity for learning and personal growth. Southwest prides itself on allowing all within the company to be creativity and innovative to help improve the effectiveness of Southwest Airlines. The most important benefit, employees will be provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Southwest Customer. Southwest uses an unorthodox leadership style created by Herb Kelleher. The basic idea is that the organization works like an upside down pyramid. The upper management is at the bottom and supports the front line employees, who are the experts. This strategy works for Southwest Airlines because management decisions are made by everyone in the organization, not just the head executives. The company’s emphasis on creativity and innovation bodes well for a company that stresses free will over structure and titles (About Southwest Airlines Co, 2013). While Southwest Airlines offers the bare minimum in flight options, it does meet and exceed customer expectations when it comes to service. They base their model on the motto, which states that if theyre happy, satisfied, dedicated, and energetic, theyll take real good care of the customers. When the customers are happy, they come back. And that makes the shareholders happy, (About Southwest Airlines Co, 2013). Southwest Airlines have managed to keep a happy medium between labor unions and contract employees by maintain a healthy relationship with its employees. It is an added benefit to offer employees longer hours with more than just competitive pay. Southwest has had the ability to succeed because of the vision to realize and obtain its goals in business. The focus on bare essentials for flight is the catalyst for its low cost business model. A low cost plane with short travel between major cities has equally allowed Southwest Airlines to focus on a specific type of consumer. The customer base for Southwest Airlines is largely the business class will take service or luxury when it comes to being efficient and cost effective. The ability to focus that theidea that customers, can be satisfied without having expensive options available for them, Southwest Airlines has successfully lured those consumers away from the bigger airlines. Combined with the influences of the internet, Southwest Airlines can continue to excel in the industry by bypassing travel agents and their fees ensuring to avoid any managerial derailments or failures. Reference About Southwest Airlines. (2011). Retrieved October 12, 2013, from Southwest Airlines: http://www.southwest.com/html/about-southwest/index.html

Commodity Futures and Markets

Commodity Futures and Markets Chapter 1 Introduction to Commodity Market What is â€Å"Commodity†? Any product that can be used for commerce or an article of commerce which is traded on an authorized commodity exchange is known as commodity. The article should be movable of value, something which is bought or sold and which is produced or used as the subject or barter or sale. In short commodity includes all kinds of goods. Indian Forward Contracts (Regulation) Act (FCRA), 1952 defines â€Å"goods† as â€Å"every kind of movable property other than actionable claims, money and securities†. In current situation, all goods and products of agricultural (including plantation), mineral and fossil origin are allowed for commodity trading recognized under the FCRA. The national commodity exchanges, recognized by the Central Government, permits commodities which include precious (gold and silver) and non-ferrous metals, cereals and pulses, ginned and un-ginned cotton, oilseeds, oils and oilcakes, raw jute and jute goods, sugar and gur, potatoes and onions, coffee and tea, rubber and spices. Etc. What is a commodity exchange? A commodity exchange is an association or a company or any other body corporate organizing futures trading in commodities for which license has been granted by regulating authority. What is Commodity Futures? A Commodity futures is an agreement between two parties to buy or sell a specified and standardized quantity of a commodity at a certain time in future at a price agreed upon at the time of entering into the contract on the commodity futures exchange. The need for a futures market arises mainly due to the hedging function that it can perform. Commodity markets, like any other financial instrument, involve risk associated with frequent price volatility. The loss due to price volatility can be attributed to the following reasons: Consumer Preferences: In the short-term, their influence on price volatility is small since it is a slow process permitting manufacturers, dealers and wholesalers to adjust their inventory in advance. Changes in supply: They are abrupt and unpredictable bringing about wild fluctuations in prices. This can especially noticed in agricultural commodities where the weather plays a major role in affecting the fortunes of people involved in this industry. The futures market has evolved to neutralize such risks through a mechanism; namely hedging. The objectives of Commodity futures: * Hedging with the objective of transferring risk related to the possession of physical assets through any adverse moments in price. Liquidity and Price discovery to ensure base minimum volume in trading of a commodity through market information and demand supply factors that facilitates a regular and authentic price discovery mechanism. * Maintaining buffer stock and better allocation of resources as it augments reduction in inventory requirement and thus the exposure to risks related with price fluctuation declines. Resources can thus be diversified for investments. * Price stabilization along with balancing demand and supply position. Futures trading leads to predictability in assessing the domestic prices, which maintains stability, thus safeguarding against any short term adverse price movements. Liquidity in Contracts of the commodities traded also ensures in maintaining the equilibrium between demand and supply. * Flexibility, certainty and transparency in purchasing commodities facilitate bank financing. Predictability in prices of commodity would lead to stability, which in turn would eliminate the risks associated with running the business of trading commodities. This would make funding easier and less stringent for banks to commodity market players. Benefits of Commodity Futures Markets:- The primary objectives of any futures exchange are authentic price discovery and an efficient price risk management. The beneficiaries include those who trade in the commodities being offered in the exchange as well as those who have nothing to do with futures trading. It is because of price discovery and risk management through the existence of futures exchanges that a lot of businesses and services are able to function smoothly. 1. Price Discovery:-Based on inputs regarding specific market information, the demand and supply equilibrium, weather forecasts, expert views and comments, inflation rates, Government policies, market dynamics, hopes and fears, buyers and sellers conduct trading at futures exchanges. This transforms in to continuous price discovery mechanism. The execution of trade between buyers and sellers leads to assessment of fair value of a particular commodity that is immediately disseminated on the trading terminal. 2. Price Risk Management: Hedging is the most common method of price risk management. It is strategy of offering price risk that is inherent in spot market by taking an equal but opposite position in the futures market. Futures markets are used as a mode by hedgers to protect their business from adverse price change. This could dent the profitability of their business. Hedging benefits who are involved in trading of commodities like farmers, processors, merchandisers, manufacturers, exporters, importers etc. 3. Import- Export competitiveness: The exporters can hedge their price risk and improve their competitiveness by making use of futures market. A majority of traders which are involved in physical trade internationally intend to buy forwards. The purchases made from the physical market might expose them to the risk of price risk resulting to losses. The existence of futures market would allow the exporters to hedge their proposed purchase by temporarily substituting for actual purchase till the time is ripe to buy in physical market. In the absence of futures market it will be meticulous, time consuming and costly physical transactions. 4. Predictable Pricing: The demand for certain commodities is highly price elastic. The manufacturers have to ensure that the prices should be stable in order to protect their market share with the free entry of imports. Futures contracts will enable predictability in domestic prices. The manufacturers can, as a result, smooth out the influence of changes in their input prices very easily. With no futures market, the manufacturer can be caught between severe short-term price movements of oils and necessity to maintain price stability, which could only be possible through sufficient financial reserves that could otherwise be utilized for making other profitable investments. 5. Benefits for farmers/Agriculturalists: Price instability has a direct bearing on farmers in the absence of futures market. There would be no need to have large reserves to cover against unfavorable price fluctuations. This would reduce the risk premiums associated with the marketing or processing margins enabling more returns on produce. Storing more and being more active in the markets. The price information accessible to the farmers determines the extent to which traders/processors increase price to them. Since one of the objectives of futures exchange is to make available these prices as far as possible, it is very likely to benefit the farmers. Also, due to the time lag between planning and production, the market-determined price information disseminated by futures exchanges would be crucial for their production decisions. 6. Credit accessibility: The absence of proper risk management tools would attract the marketing and processing of commodities to high-risk exposure making it risky business activity to fund. Even a small movement in prices can eat up a huge proportion of capital owned by traders, at times making it virtually impossible to payback the loan. There is a high degree of reluctance among banks to fund commodity traders, especially those who do not manage price risks. If in case they do, the interest rate is likely to be high and terms and conditions very stringent. This posses a huge obstacle in the smooth functioning and competition of commodities market. Hedging, which is possible through futures markets, would cut down the discount rate in commodity lending. 7. Improved product quality: The existence of warehouses for facilitating delivery with grading facilities along with other related benefits provides a very strong reason to upgrade and enhance the quality of the commodity to grade that is acceptable by the exchange. It ensures uniform standardization of commodity trade, including the terms of quality standard: the quality certificates that are issued by the exchange-certified warehouses have the potential to become the norm for physical trade. Chapter 2 History of Evolution of commodity markets Commodities future trading was evolved from need of assured continuous supply of seasonal agricultural crops. The concept of organized trading in commodities evolved in Chicago, in 1848. But one can trace its roots in Japan. In Japan merchants used to store Rice in warehouses for future use. To raise cash warehouse holders sold receipts against the stored rice. These were known as â€Å"rice tickets†. Eventually, these rice tickets become accepted as a kind of commercial currency. Latter on rules came in to being, to standardize the trading in rice tickets. In 19th century Chicago in United States had emerged as a major commercial hub. So that wheat producers from Mid-west attracted here to sell their produce to dealers distributors. Due to lack of organized storage facilities, absence of uniform weighing grading mechanisms producers often confined to the mercy of dealers discretion. These situations lead to need of establishing a common meeting place for farmers and dealers to transact in spot grain to deliver wheat and receive cash in return. Gradually sellers buyers started making commitments to exchange the produce for cash in future and thus contract for â€Å"futures trading† evolved. Whereby the producer would agree to sell his produce to the buyer at a future delivery date at an agreed upon price. In this way producer was aware of what price he would fetch for his produce and dealer would know about his cost involved, in advance. This kind of agreement proved beneficial to both of them. As if dealer is not interested in taking delivery of the produce, he could sell his contract to someone who needs the same. Similarly producer who not intended to deliver his produce to dealer could pass on the same responsibility to someone else. The price of such contract would dependent on the price movements in the wheat market. Latter on by making some modifications these contracts transformed in to an instrument to protect involved parties against adverse factors such as unexpected price movements and unfavorable climat ic factors. This promoted traders entry in futures market, which had no intentions to buy or sell wheat but would purely speculate on price movements in market to earn profit. Trading of wheat in futures became very profitable which encouraged the entry of other commodities in futures market. This created a platform for establishment of a body to regulate and supervise these contracts. Thats why Chicago Board of Trade (CBOT) was established in 1848. In 1870 and 1880s the New York Coffee, Cotton and Produce Exchanges were born. Agricultural commodities were mostly traded but as long as there are buyers and sellers, any commodity can be traded. In 1872, a group of Manhattan dairy merchants got together to bring chaotic condition in New York market to a system in terms of storage, pricing, and transfer of agricultural products. In 1933, during the Great Depression, the Commodity Exchange, Inc. was established in New York through the merger of four small exchanges the National Metal Exchange, the Rubber Exchange of New York, the National Raw Silk Exchange, and the New York Hide Exchange. The largest commodity exchange in USA is Chicago Board of Trade, The Chicago Mercantile Exchange, the New York Mercantile Exchange, the New York Commodity Exchange and New York Coffee, sugar and cocoa Exchange. Worldwide there are major futures trading exchanges in over twenty countries including Canada, England, India, France, Singapore, Japan, Australia and New Zealand. Chapter 3 India and the commodity market History of Commodity Market in India:- The history of organized commodity derivatives in India goes back to the nineteenth century when Cotton Trade Association started futures trading in 1875, about a decade after they started in Chicago. Over the time datives market developed in several commodities in India. Following Cotton, derivatives trading started in oilseed in Bombay (1900), raw jute and jute goods in Calcutta (1912), Wheat in Hapur (1913) and Bullion in Bombay (1920). However many feared that derivatives fuelled unnecessary speculation and were detrimental to the healthy functioning of the market for the underlying commodities, resulting in to banning of commodity options trading and cash settlement of commodities futures after independence in 1952. The parliament passed the Forward Contracts (Regulation) Act, 1952, which regulated contracts in Commodities all over the India. The act prohibited options trading in Goods along with cash settlement of forward trades, rendering a crushing blow to the commodity derivatives market. Under the act only those associations/exchanges, which are granted reorganization from the Government, are allowed to organize forward trading in regulated commodities. The act envisages three tire regulations: (i) Exchange which organizes forward trading in commodities can regulate trading on day-to-day basis; (ii) Forward Markets Commission provides regulatory oversight under the powers delegated to it by the central Govern ment. (iii) The Central Government- Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution- is the ultimate regulatory authority. The commodities future market remained dismantled and remained dormant for about four decades until the new millennium when the Government, in a complete change in a policy, started actively encouraging commodity market. After Liberalization and Globalization in 1990, the Government set up a committee (1993) to examine the role of futures trading. The Committee (headed by Prof. K.N. Kabra) recommended allowing futures trading in 17 commodity groups. It also recommended strengthening Forward Markets Commission, and certain amendments to Forward Contracts (Regulation) Act 1952, particularly allowing option trading in goods and registration of brokers with Forward Markets Commission. The Government accepted most of these recommendations and futures trading was permitted in all recommended commodities. It is timely decision since internationally the commodity cycle is on upswing and the next decade being touched as the decade of Commodities. Commodity exchange in India plays an important role where the prices of any commodity are not fixed, in an organized way. Earlier only the buyer of produce and its seller in the market judged upon the prices. Others never had a say. Today, commodity exchanges are purely speculative in nature. Before discovering the price, they reach to the producers, end-users, and even the retail investors, at a grassroots level. It brings a price transparency and risk management in the vital market. A big difference between a typical auction, where a single auctioneer announces the bids and the Exchange is that people are not only competing to buy but also to sell. By Exchange rules and by law, no one can bid under a higher bid, and no one can offer to sell higher than someone elses lower offer. That keeps the market as efficient as possible, and keeps the traders on their toes to make sure no one gets the purchase or sale before they do. Since 2002, the commodities future market in India has experienced an unexpected boom in terms of modern exchanges, number of commodities allowed for derivatives trading as well as the value of futures trading in commodities, which crossed $ 1 trillion mark in 2006. Since 1952 till 2002 commo dity datives market was virtually non- existent, except some negligible activities on OTC basis. In India there are 25 recognized future exchanges, of which there are three national level multi-commodity exchanges. After a gap of almost three decades, Government of India has allowed forward transactions in commodities through Online Commodity Exchanges, a modification of traditional business known as Adhat and Vayda Vyapar to facilitate better risk coverage and delivery of commodities. The three exchanges are: National Commodity Derivatives Exchange Limited (NCDEX) Mumbai, Multi Commodity Exchange of India Limited (MCX) Mumbai and National Multi-Commodity Exchange of India Limited (NMCEIL) Ahmedabad.There are other regional commodity exchanges situated in different parts of India. Legal framework for regulating commodity futures in India:- The commodity futures traded in commodity exchanges are regulated by the Government under the Forward Contracts Regulations Act, 1952 and the Rules framed there under. The regulator for the commodities trading is the Forward Markets Commission, situated at Mumbai, which comes under the Ministry of Consumer Affairs Food and Public Distribution Forward Markets Commission (FMC):- It is statutory institution set up in 1953 under Forward Contracts (Regulation) Act, 1952. Commission consists of minimum two and maximum four members appointed by Central Govt. Out of these members there is one nominated chairman. All the exchanges have been set up under overall control of Forward Market Commission (FMC) of Government of India. National Commodities Derivatives Exchange Limited (NCDEX) National Commodities Derivatives Exchange Limited (NCDEX) promoted by ICICI Bank Limited (ICICI Bank), Life Insurance Corporation of India (LIC), National Bank of Agriculture and Rural Development (NABARD) and National Stock Exchange of India Limited (NSC). Punjab National Bank (PNB), Credit Ratting Information Service of India Limited (CRISIL), Indian Farmers Fertilizer Cooperative Limited (IFFCO), Canara Bank and Goldman Sachs by subscribing to the equity shares have joined the promoters as a share holder of exchange. NCDEX is the only Commodity Exchange in the country promoted by national level institutions. NCDEX is a public limited company incorporated on 23 April 2003. NCDEX is a national level technology driven on line Commodity Exchange with an independent Board of Directors and professionals not having any vested interest in Commodity Markets. It is committed to provide a world class commodity exchange platform for market participants to trade in a wide spectrum of commodity derivatives driven by best global practices, professionalism and transparency. NCDEX is regulated by Forward Markets Commission (FMC). NCDEX is also subjected to the various laws of land like the Companies Act, Stamp Act, Contracts Act, Forward Contracts Regulation Act and various other legislations. NCDEX is located in Mumbai and offers facilities to its members in more than 550 centers through out India. NCDEX currently facilitates trading of 57 commodities. Commodities Traded at NCDEX:-  · Bullion:- Gold KG, Silver, Brent  · Minerals:- Electrolytic Copper Cathode, Aluminum Ingot, Nickel Cathode, Zinc Metal Ingot, Mild steel Ingots  · Oil and Oil seeds:- Cotton seed, Oil cake, Crude Palm Oil, Groundnut (in shell), Groundnut expeller Oil, Cotton, Mentha oil, RBD Pamolein, RM seed oil cake, Refined soya oil, Rape seeds, Mustard seeds, Caster seed, Yellow soybean, Meal  · Pulses:- Urad, Yellow peas, Chana, Tur, Masoor,  · Grain:- Wheat, Indian Pusa Basmati Rice, Indian parboiled Rice (IR- 36/IR-64), Indian raw Rice (ParmalPR-106), Barley, Yellow red maize  · Spices:- Jeera, Turmeric, Pepper  · Plantation:- Cashew, Coffee Arabica, Coffee Robusta  · Fibers and other:- Guar Gum, Guar seeds, Guar, Jute sacking bags, Indian 28 mm cotton, Indian 31mm cotton, Lemon, Grain Bold, Medium Staple, Mulberry, Green Cottons, , , Potato, Raw Jute, Mulberry raw Silk, V-797 Kapas, Sugar, Chilli LCA334  · Energy:- Crude Oil, Furnace oil, Thermal Coal, Brent Crude Oil, Natural Gas, Gasoline, Heating Oil Multi Commodity Exchange of India Limited (MCX) Multi Commodity Exchange of India Limited (MCX) is an independent and de-mutulized exchange with permanent reorganization from Government of India, having Head Quarter in Mumbai. Key share holders of MCX are Financial Technologies (India) Limited, State Bank of India, Union Bank of India, Corporation Bank of India, Bank of India and Cnnara Bank. MCX facilitates online trading, clearing and settlement operations for commodity futures market across the country. MCX started of trade in Nov 2003 and has built strategic alliance with Bombay Bullion Association, Bombay Metal Exchange, Solvent Extractors Association of India, pulses Importers Association and Shetkari Sanghatana. MCX deals wit about 100 commodities. Commodities Traded at MCX:-  · Bullion:- Gold, Silver, Silver Coins,  · Minerals:- Aluminum, Copper, Nickel, Iron/steel, Tin, Zinc, Lead  · Oil and Oil seeds:- Castor oil/castor seeds, Crude Palm oil/ RBD Pamolein, Groundnut oil, Mustard/ Rapeseed oil, Soy seeds/Soy meal/Refined Soy Oil, Coconut Oil Cake, Copra, Sunflower oil, Sunflower Oil cake, Tamarind seed oil,  · Pulses:- Chana, Masur, Tur, Urad, Yellow peas  · Grains:- Rice/ Basmati Rice, Wheat, Maize, Bajara, Barley,  · Spices:- Pepper, Red Chili, Jeera, Cardamom, Cinnamon, Clove, Ginger,  · Plantation:- Cashew Kernel, Rubber, Areca nut, Betel nuts, Coconut, Coffee,  · Fiber and others:- Kapas, Kapas Khalli, Cotton (long staple, medium staple, short staple), Cotton Cloth, Cotton Yarn, Gaur seed and Guargum, Gur and Sugar, Khandsari, Mentha Oil, Potato, Art Silk Yarn, Chara or Berseem, Raw Jute, Jute Goods, Jute Sacking,  · Petrochemicals:- High Density Polyethylene (HDPE), Polypropylene (PP), Poly Vinyl Chloride (PVC)  · Energy:- Brent Crude Oil, Crude Oil, Furnace Oil, Middle East Sour Crude Oil, Natural Gas  · Whether:- Carbon (CER), Carbon (CFI) National Multi Commodity Exchange of India Limited (NMCEIL) National Multi Commodity Exchange of India Limited (NMCEIL) is the first de-mutualised Electronic Multi Commodity Exchange in India. On 25th July 2001 it was granted approval by Government to organize trading in edible oil complex. It is being supported by Central warehousing Corporation Limited, Gujarat State Agricultural Marketing Board and Neptune Overseas Limited. It got reorganization in Oct 2002. NMCEIL Head Quarter is at Ahmedabad. Chapter 4 INTERNATIONAL COMMODITY EXCHANGES Futures trading is a result of solution to a problem related to the maintenance of a year round supply of commodities/ products that are seasonal as is the case of agricultural produce. The United States, Japan, United Kingdom, Brazil, Australia, Singapore are homes to leading commodity futures exchanges in the world. The New York Mercantile Exchange (NYMEX):- The New York Mercantile Exchange is the worlds biggest exchange for trading in physical commodity futures. It is a primary trading forum for energy products and precious metals. The exchange is in existence since last 132 years and performs trades trough two divisions, the NYMEX division, which deals in energy and platinum and the COMEX division, which trades in all the other metals. Commodities traded: Light sweet crude oil, Natural Gas, Heating Oil, Gasoline, RBOB Gasoline, Electricity Propane, Gold, Silver, Copper, Aluminum, Platinum, Palladium, etc. London Metal Exchange:- The London Metal Exchange (LME) is the worlds premier non-ferrous market, with highly liquid contracts. The exchange was formed in 1877 as a direct consequence of the industrial revolution witnessed in the 19th century. The primary focus of LME is in providing a market for participants from non-ferrous based metals related industry to safeguard against risk due to movement in base metal prices and also arrive at a price that sets the benchmark globally. The exchange trades 24 hours a day through an inter office telephone market and also through a electronic trading platform. It is famous for its open-outcry trading between ring dealing members that takes place on the market floor. Commodities traded:- Aluminum, Copper, Nickel, Lead, Tin, Zinc, Aluminum Alloy, North American Special Aluminum Alloy (NASAAC), Polypropylene, Linear Low Density Polyethylene, etc. The Chicago Board of Trade:- The first commodity exchange established in the world was the Chicago Board of Trade (CBOT) during 1848 by group of Chicago merchants who were keen to establish a central market place for trade. Presently, the Chicago Board of Trade is one of the leading exchanges in the world for trading futures and options. More than 50 contracts on futures and options are being offered by CBOT currently through open outcry and/or electronically. CBOT initially dealt only in Agricultural commodities like corn, wheat, non storable agricultural commodities and non-agricultural products like gold and silver. Commodities Traded: Corn, Soybean, Oil, Soybean meal, Wheat, Oats, Ethanol, Rough Rice, Gold, Silver etc. Tokyo Commodity Exchange (TOCOM):- The Tokyo Commodity Exchange (TOCOM) is the second largest commodity futures exchange in the world. It trades in to metals and energy contracts. It has made rapid advancement in commodity trading globally since its inception 20 years back. One of the biggest reasons for that is the initiative TOCOM took towards establishing Asia as the benchmark for price discovery and risk management in commodities like the Middle East Crude Oil. TOCOMs recent tie up with the MCX to explore cooperation and business opportunities is seen as one of the steps towards providing platform for futures price discovery in Asia for Asian players in Crude Oil since the demand-supply situation in U.S. that drives NYMEX is different from demand-supply situation in Asia. In Jan 2003, in a major overhaul of its computerized trading system, TOCOM fortified its clearing system in June by being first commodity exchange in Japan to introduce an in-house clearing system. TOCOM launched options on gold futures, the firs t option contract in Japanese market, in May 2004. Commodities traded: Gasoline, Kerosene, Crude Oil, Gold, Silver, Platinum, Aluminum, Rubber, etc Chicago Mercantile Exchange:- The Chicago Mercantile Exchange (CME) is the largest futures exchange in the US and the largest futures clearing house in the world for futures and options trading. Formed in 1898 primarily to trade in Agricultural commodities, the CME introduced the worlds first financial futures more than 30 years ago. Today it trades heavily in interest rates futures, stock indices and foreign exchange futures. Its products often serves as a financial benchmark and witnesses the largest open interest in futures profile of CME consists of livestock, dairy and forest products and enables small family farms to large Agri-business to manage their price risks. Trading in CME can be done either through pit trading or electronically. Commodities Traded: Butter milk, Diammonium phosphate, Feeder cattle, frozen pork bellies, Lean Hogs, Live cattle, Non-fat Dry Milk, Urea, Urea Ammonium Nitrate, etc Chapter 5 How Commodity market works? There are two kinds of trades in commodities. The first is the spot trade, in which one pays cash and carries away the goods. The second is futures trade. The underpinning for futures is the warehouse receipt. A person deposits certain amount of say, good X in a ware house and gets a warehouse receipt. Which allows him to ask for physical delivery of the good from the warehouse. But some one trading in commodity futures need not necessarily posses such a receipt to strike a deal. A person can buy or sale a commodity future on an exchange based on his expectation of where the price will go. Futures have something called an expiry date, by when the buyer or seller either closes (square off) his account or give/take delivery of the commodity. The broker maintains an account of all dealing parties in which the daily profit or loss due to changes in the futures price is recorded. Squiring off is done by taking an opposite contract so that the net outstanding is nil. For commodity futures to work, the seller should be able to deposit the commodity at warehouse nearest to him and collect the warehouse receipt. The buyer should be able to take physical delivery at a location of his choice on presenting the warehouse receipt. But at present in India very few warehouses provide delivery for specific commodities. Following diagram gives a fair idea about working of the Commodity market. Today Commodity trading system is fully computerized. Traders need not visit a commodity market to speculate. With online commodity trading they could sit in the confines of their home or office and call the shots. The commodity trading system consists of certain prescribed steps or stages as follows: I. Trading: At this stage the following is the system implemented- Order receiving Execution Matching Reporting Surveillance Price limits Position limits II. Clearing: This stage has following system in place- Matching Registration Clearing Clearing limits Notation Margining Price limits Position limits Clearing house. III. Settlement: This stage has following system followed as follows- Marking to market Receipts and payments Reporting Delivery upon expiration or maturity. Chapter 6 Investments in Commodities How to invest in a Commodities? With whom investor can transact a business? An investor can transact a business with the approved clearing member of previously mentioned Commodity Exchanges. The investor can ask for the details from the Commodity Exchanges about the list of approved members. What is Identity Proof? When investor approaches Clearing Member, the member will ask for identity proof. For which Xerox copy of any one of the following can be given a) PAN card Number b) Driving License c) Vote ID d) Passport What statements should be given for Bank Proof? The front page of Bank Pass Book and a canceled cheque of a concerned bank. Otherwise the Bank Statement containing details can be given. What are the particulars to be given for address proof? In order to ascertain the address of investor, the clearing member will insist on Xerox copy of Ration card or the Pass Book/ Bank Statement where the address of investor is given. What are the other forms to be signed by the investor? The clearing member will ask the client to sign a) Know your client form b) Risk Discloser Document The above things are only procedure in character and the risk involved and only after understanding the business, he wants to transact business. What aspects should be conside Commodity Futures and Markets Commodity Futures and Markets Chapter 1 Introduction to Commodity Market What is â€Å"Commodity†? Any product that can be used for commerce or an article of commerce which is traded on an authorized commodity exchange is known as commodity. The article should be movable of value, something which is bought or sold and which is produced or used as the subject or barter or sale. In short commodity includes all kinds of goods. Indian Forward Contracts (Regulation) Act (FCRA), 1952 defines â€Å"goods† as â€Å"every kind of movable property other than actionable claims, money and securities†. In current situation, all goods and products of agricultural (including plantation), mineral and fossil origin are allowed for commodity trading recognized under the FCRA. The national commodity exchanges, recognized by the Central Government, permits commodities which include precious (gold and silver) and non-ferrous metals, cereals and pulses, ginned and un-ginned cotton, oilseeds, oils and oilcakes, raw jute and jute goods, sugar and gur, potatoes and onions, coffee and tea, rubber and spices. Etc. What is a commodity exchange? A commodity exchange is an association or a company or any other body corporate organizing futures trading in commodities for which license has been granted by regulating authority. What is Commodity Futures? A Commodity futures is an agreement between two parties to buy or sell a specified and standardized quantity of a commodity at a certain time in future at a price agreed upon at the time of entering into the contract on the commodity futures exchange. The need for a futures market arises mainly due to the hedging function that it can perform. Commodity markets, like any other financial instrument, involve risk associated with frequent price volatility. The loss due to price volatility can be attributed to the following reasons: Consumer Preferences: In the short-term, their influence on price volatility is small since it is a slow process permitting manufacturers, dealers and wholesalers to adjust their inventory in advance. Changes in supply: They are abrupt and unpredictable bringing about wild fluctuations in prices. This can especially noticed in agricultural commodities where the weather plays a major role in affecting the fortunes of people involved in this industry. The futures market has evolved to neutralize such risks through a mechanism; namely hedging. The objectives of Commodity futures: * Hedging with the objective of transferring risk related to the possession of physical assets through any adverse moments in price. Liquidity and Price discovery to ensure base minimum volume in trading of a commodity through market information and demand supply factors that facilitates a regular and authentic price discovery mechanism. * Maintaining buffer stock and better allocation of resources as it augments reduction in inventory requirement and thus the exposure to risks related with price fluctuation declines. Resources can thus be diversified for investments. * Price stabilization along with balancing demand and supply position. Futures trading leads to predictability in assessing the domestic prices, which maintains stability, thus safeguarding against any short term adverse price movements. Liquidity in Contracts of the commodities traded also ensures in maintaining the equilibrium between demand and supply. * Flexibility, certainty and transparency in purchasing commodities facilitate bank financing. Predictability in prices of commodity would lead to stability, which in turn would eliminate the risks associated with running the business of trading commodities. This would make funding easier and less stringent for banks to commodity market players. Benefits of Commodity Futures Markets:- The primary objectives of any futures exchange are authentic price discovery and an efficient price risk management. The beneficiaries include those who trade in the commodities being offered in the exchange as well as those who have nothing to do with futures trading. It is because of price discovery and risk management through the existence of futures exchanges that a lot of businesses and services are able to function smoothly. 1. Price Discovery:-Based on inputs regarding specific market information, the demand and supply equilibrium, weather forecasts, expert views and comments, inflation rates, Government policies, market dynamics, hopes and fears, buyers and sellers conduct trading at futures exchanges. This transforms in to continuous price discovery mechanism. The execution of trade between buyers and sellers leads to assessment of fair value of a particular commodity that is immediately disseminated on the trading terminal. 2. Price Risk Management: Hedging is the most common method of price risk management. It is strategy of offering price risk that is inherent in spot market by taking an equal but opposite position in the futures market. Futures markets are used as a mode by hedgers to protect their business from adverse price change. This could dent the profitability of their business. Hedging benefits who are involved in trading of commodities like farmers, processors, merchandisers, manufacturers, exporters, importers etc. 3. Import- Export competitiveness: The exporters can hedge their price risk and improve their competitiveness by making use of futures market. A majority of traders which are involved in physical trade internationally intend to buy forwards. The purchases made from the physical market might expose them to the risk of price risk resulting to losses. The existence of futures market would allow the exporters to hedge their proposed purchase by temporarily substituting for actual purchase till the time is ripe to buy in physical market. In the absence of futures market it will be meticulous, time consuming and costly physical transactions. 4. Predictable Pricing: The demand for certain commodities is highly price elastic. The manufacturers have to ensure that the prices should be stable in order to protect their market share with the free entry of imports. Futures contracts will enable predictability in domestic prices. The manufacturers can, as a result, smooth out the influence of changes in their input prices very easily. With no futures market, the manufacturer can be caught between severe short-term price movements of oils and necessity to maintain price stability, which could only be possible through sufficient financial reserves that could otherwise be utilized for making other profitable investments. 5. Benefits for farmers/Agriculturalists: Price instability has a direct bearing on farmers in the absence of futures market. There would be no need to have large reserves to cover against unfavorable price fluctuations. This would reduce the risk premiums associated with the marketing or processing margins enabling more returns on produce. Storing more and being more active in the markets. The price information accessible to the farmers determines the extent to which traders/processors increase price to them. Since one of the objectives of futures exchange is to make available these prices as far as possible, it is very likely to benefit the farmers. Also, due to the time lag between planning and production, the market-determined price information disseminated by futures exchanges would be crucial for their production decisions. 6. Credit accessibility: The absence of proper risk management tools would attract the marketing and processing of commodities to high-risk exposure making it risky business activity to fund. Even a small movement in prices can eat up a huge proportion of capital owned by traders, at times making it virtually impossible to payback the loan. There is a high degree of reluctance among banks to fund commodity traders, especially those who do not manage price risks. If in case they do, the interest rate is likely to be high and terms and conditions very stringent. This posses a huge obstacle in the smooth functioning and competition of commodities market. Hedging, which is possible through futures markets, would cut down the discount rate in commodity lending. 7. Improved product quality: The existence of warehouses for facilitating delivery with grading facilities along with other related benefits provides a very strong reason to upgrade and enhance the quality of the commodity to grade that is acceptable by the exchange. It ensures uniform standardization of commodity trade, including the terms of quality standard: the quality certificates that are issued by the exchange-certified warehouses have the potential to become the norm for physical trade. Chapter 2 History of Evolution of commodity markets Commodities future trading was evolved from need of assured continuous supply of seasonal agricultural crops. The concept of organized trading in commodities evolved in Chicago, in 1848. But one can trace its roots in Japan. In Japan merchants used to store Rice in warehouses for future use. To raise cash warehouse holders sold receipts against the stored rice. These were known as â€Å"rice tickets†. Eventually, these rice tickets become accepted as a kind of commercial currency. Latter on rules came in to being, to standardize the trading in rice tickets. In 19th century Chicago in United States had emerged as a major commercial hub. So that wheat producers from Mid-west attracted here to sell their produce to dealers distributors. Due to lack of organized storage facilities, absence of uniform weighing grading mechanisms producers often confined to the mercy of dealers discretion. These situations lead to need of establishing a common meeting place for farmers and dealers to transact in spot grain to deliver wheat and receive cash in return. Gradually sellers buyers started making commitments to exchange the produce for cash in future and thus contract for â€Å"futures trading† evolved. Whereby the producer would agree to sell his produce to the buyer at a future delivery date at an agreed upon price. In this way producer was aware of what price he would fetch for his produce and dealer would know about his cost involved, in advance. This kind of agreement proved beneficial to both of them. As if dealer is not interested in taking delivery of the produce, he could sell his contract to someone who needs the same. Similarly producer who not intended to deliver his produce to dealer could pass on the same responsibility to someone else. The price of such contract would dependent on the price movements in the wheat market. Latter on by making some modifications these contracts transformed in to an instrument to protect involved parties against adverse factors such as unexpected price movements and unfavorable climat ic factors. This promoted traders entry in futures market, which had no intentions to buy or sell wheat but would purely speculate on price movements in market to earn profit. Trading of wheat in futures became very profitable which encouraged the entry of other commodities in futures market. This created a platform for establishment of a body to regulate and supervise these contracts. Thats why Chicago Board of Trade (CBOT) was established in 1848. In 1870 and 1880s the New York Coffee, Cotton and Produce Exchanges were born. Agricultural commodities were mostly traded but as long as there are buyers and sellers, any commodity can be traded. In 1872, a group of Manhattan dairy merchants got together to bring chaotic condition in New York market to a system in terms of storage, pricing, and transfer of agricultural products. In 1933, during the Great Depression, the Commodity Exchange, Inc. was established in New York through the merger of four small exchanges the National Metal Exchange, the Rubber Exchange of New York, the National Raw Silk Exchange, and the New York Hide Exchange. The largest commodity exchange in USA is Chicago Board of Trade, The Chicago Mercantile Exchange, the New York Mercantile Exchange, the New York Commodity Exchange and New York Coffee, sugar and cocoa Exchange. Worldwide there are major futures trading exchanges in over twenty countries including Canada, England, India, France, Singapore, Japan, Australia and New Zealand. Chapter 3 India and the commodity market History of Commodity Market in India:- The history of organized commodity derivatives in India goes back to the nineteenth century when Cotton Trade Association started futures trading in 1875, about a decade after they started in Chicago. Over the time datives market developed in several commodities in India. Following Cotton, derivatives trading started in oilseed in Bombay (1900), raw jute and jute goods in Calcutta (1912), Wheat in Hapur (1913) and Bullion in Bombay (1920). However many feared that derivatives fuelled unnecessary speculation and were detrimental to the healthy functioning of the market for the underlying commodities, resulting in to banning of commodity options trading and cash settlement of commodities futures after independence in 1952. The parliament passed the Forward Contracts (Regulation) Act, 1952, which regulated contracts in Commodities all over the India. The act prohibited options trading in Goods along with cash settlement of forward trades, rendering a crushing blow to the commodity derivatives market. Under the act only those associations/exchanges, which are granted reorganization from the Government, are allowed to organize forward trading in regulated commodities. The act envisages three tire regulations: (i) Exchange which organizes forward trading in commodities can regulate trading on day-to-day basis; (ii) Forward Markets Commission provides regulatory oversight under the powers delegated to it by the central Govern ment. (iii) The Central Government- Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution- is the ultimate regulatory authority. The commodities future market remained dismantled and remained dormant for about four decades until the new millennium when the Government, in a complete change in a policy, started actively encouraging commodity market. After Liberalization and Globalization in 1990, the Government set up a committee (1993) to examine the role of futures trading. The Committee (headed by Prof. K.N. Kabra) recommended allowing futures trading in 17 commodity groups. It also recommended strengthening Forward Markets Commission, and certain amendments to Forward Contracts (Regulation) Act 1952, particularly allowing option trading in goods and registration of brokers with Forward Markets Commission. The Government accepted most of these recommendations and futures trading was permitted in all recommended commodities. It is timely decision since internationally the commodity cycle is on upswing and the next decade being touched as the decade of Commodities. Commodity exchange in India plays an important role where the prices of any commodity are not fixed, in an organized way. Earlier only the buyer of produce and its seller in the market judged upon the prices. Others never had a say. Today, commodity exchanges are purely speculative in nature. Before discovering the price, they reach to the producers, end-users, and even the retail investors, at a grassroots level. It brings a price transparency and risk management in the vital market. A big difference between a typical auction, where a single auctioneer announces the bids and the Exchange is that people are not only competing to buy but also to sell. By Exchange rules and by law, no one can bid under a higher bid, and no one can offer to sell higher than someone elses lower offer. That keeps the market as efficient as possible, and keeps the traders on their toes to make sure no one gets the purchase or sale before they do. Since 2002, the commodities future market in India has experienced an unexpected boom in terms of modern exchanges, number of commodities allowed for derivatives trading as well as the value of futures trading in commodities, which crossed $ 1 trillion mark in 2006. Since 1952 till 2002 commo dity datives market was virtually non- existent, except some negligible activities on OTC basis. In India there are 25 recognized future exchanges, of which there are three national level multi-commodity exchanges. After a gap of almost three decades, Government of India has allowed forward transactions in commodities through Online Commodity Exchanges, a modification of traditional business known as Adhat and Vayda Vyapar to facilitate better risk coverage and delivery of commodities. The three exchanges are: National Commodity Derivatives Exchange Limited (NCDEX) Mumbai, Multi Commodity Exchange of India Limited (MCX) Mumbai and National Multi-Commodity Exchange of India Limited (NMCEIL) Ahmedabad.There are other regional commodity exchanges situated in different parts of India. Legal framework for regulating commodity futures in India:- The commodity futures traded in commodity exchanges are regulated by the Government under the Forward Contracts Regulations Act, 1952 and the Rules framed there under. The regulator for the commodities trading is the Forward Markets Commission, situated at Mumbai, which comes under the Ministry of Consumer Affairs Food and Public Distribution Forward Markets Commission (FMC):- It is statutory institution set up in 1953 under Forward Contracts (Regulation) Act, 1952. Commission consists of minimum two and maximum four members appointed by Central Govt. Out of these members there is one nominated chairman. All the exchanges have been set up under overall control of Forward Market Commission (FMC) of Government of India. National Commodities Derivatives Exchange Limited (NCDEX) National Commodities Derivatives Exchange Limited (NCDEX) promoted by ICICI Bank Limited (ICICI Bank), Life Insurance Corporation of India (LIC), National Bank of Agriculture and Rural Development (NABARD) and National Stock Exchange of India Limited (NSC). Punjab National Bank (PNB), Credit Ratting Information Service of India Limited (CRISIL), Indian Farmers Fertilizer Cooperative Limited (IFFCO), Canara Bank and Goldman Sachs by subscribing to the equity shares have joined the promoters as a share holder of exchange. NCDEX is the only Commodity Exchange in the country promoted by national level institutions. NCDEX is a public limited company incorporated on 23 April 2003. NCDEX is a national level technology driven on line Commodity Exchange with an independent Board of Directors and professionals not having any vested interest in Commodity Markets. It is committed to provide a world class commodity exchange platform for market participants to trade in a wide spectrum of commodity derivatives driven by best global practices, professionalism and transparency. NCDEX is regulated by Forward Markets Commission (FMC). NCDEX is also subjected to the various laws of land like the Companies Act, Stamp Act, Contracts Act, Forward Contracts Regulation Act and various other legislations. NCDEX is located in Mumbai and offers facilities to its members in more than 550 centers through out India. NCDEX currently facilitates trading of 57 commodities. Commodities Traded at NCDEX:-  · Bullion:- Gold KG, Silver, Brent  · Minerals:- Electrolytic Copper Cathode, Aluminum Ingot, Nickel Cathode, Zinc Metal Ingot, Mild steel Ingots  · Oil and Oil seeds:- Cotton seed, Oil cake, Crude Palm Oil, Groundnut (in shell), Groundnut expeller Oil, Cotton, Mentha oil, RBD Pamolein, RM seed oil cake, Refined soya oil, Rape seeds, Mustard seeds, Caster seed, Yellow soybean, Meal  · Pulses:- Urad, Yellow peas, Chana, Tur, Masoor,  · Grain:- Wheat, Indian Pusa Basmati Rice, Indian parboiled Rice (IR- 36/IR-64), Indian raw Rice (ParmalPR-106), Barley, Yellow red maize  · Spices:- Jeera, Turmeric, Pepper  · Plantation:- Cashew, Coffee Arabica, Coffee Robusta  · Fibers and other:- Guar Gum, Guar seeds, Guar, Jute sacking bags, Indian 28 mm cotton, Indian 31mm cotton, Lemon, Grain Bold, Medium Staple, Mulberry, Green Cottons, , , Potato, Raw Jute, Mulberry raw Silk, V-797 Kapas, Sugar, Chilli LCA334  · Energy:- Crude Oil, Furnace oil, Thermal Coal, Brent Crude Oil, Natural Gas, Gasoline, Heating Oil Multi Commodity Exchange of India Limited (MCX) Multi Commodity Exchange of India Limited (MCX) is an independent and de-mutulized exchange with permanent reorganization from Government of India, having Head Quarter in Mumbai. Key share holders of MCX are Financial Technologies (India) Limited, State Bank of India, Union Bank of India, Corporation Bank of India, Bank of India and Cnnara Bank. MCX facilitates online trading, clearing and settlement operations for commodity futures market across the country. MCX started of trade in Nov 2003 and has built strategic alliance with Bombay Bullion Association, Bombay Metal Exchange, Solvent Extractors Association of India, pulses Importers Association and Shetkari Sanghatana. MCX deals wit about 100 commodities. Commodities Traded at MCX:-  · Bullion:- Gold, Silver, Silver Coins,  · Minerals:- Aluminum, Copper, Nickel, Iron/steel, Tin, Zinc, Lead  · Oil and Oil seeds:- Castor oil/castor seeds, Crude Palm oil/ RBD Pamolein, Groundnut oil, Mustard/ Rapeseed oil, Soy seeds/Soy meal/Refined Soy Oil, Coconut Oil Cake, Copra, Sunflower oil, Sunflower Oil cake, Tamarind seed oil,  · Pulses:- Chana, Masur, Tur, Urad, Yellow peas  · Grains:- Rice/ Basmati Rice, Wheat, Maize, Bajara, Barley,  · Spices:- Pepper, Red Chili, Jeera, Cardamom, Cinnamon, Clove, Ginger,  · Plantation:- Cashew Kernel, Rubber, Areca nut, Betel nuts, Coconut, Coffee,  · Fiber and others:- Kapas, Kapas Khalli, Cotton (long staple, medium staple, short staple), Cotton Cloth, Cotton Yarn, Gaur seed and Guargum, Gur and Sugar, Khandsari, Mentha Oil, Potato, Art Silk Yarn, Chara or Berseem, Raw Jute, Jute Goods, Jute Sacking,  · Petrochemicals:- High Density Polyethylene (HDPE), Polypropylene (PP), Poly Vinyl Chloride (PVC)  · Energy:- Brent Crude Oil, Crude Oil, Furnace Oil, Middle East Sour Crude Oil, Natural Gas  · Whether:- Carbon (CER), Carbon (CFI) National Multi Commodity Exchange of India Limited (NMCEIL) National Multi Commodity Exchange of India Limited (NMCEIL) is the first de-mutualised Electronic Multi Commodity Exchange in India. On 25th July 2001 it was granted approval by Government to organize trading in edible oil complex. It is being supported by Central warehousing Corporation Limited, Gujarat State Agricultural Marketing Board and Neptune Overseas Limited. It got reorganization in Oct 2002. NMCEIL Head Quarter is at Ahmedabad. Chapter 4 INTERNATIONAL COMMODITY EXCHANGES Futures trading is a result of solution to a problem related to the maintenance of a year round supply of commodities/ products that are seasonal as is the case of agricultural produce. The United States, Japan, United Kingdom, Brazil, Australia, Singapore are homes to leading commodity futures exchanges in the world. The New York Mercantile Exchange (NYMEX):- The New York Mercantile Exchange is the worlds biggest exchange for trading in physical commodity futures. It is a primary trading forum for energy products and precious metals. The exchange is in existence since last 132 years and performs trades trough two divisions, the NYMEX division, which deals in energy and platinum and the COMEX division, which trades in all the other metals. Commodities traded: Light sweet crude oil, Natural Gas, Heating Oil, Gasoline, RBOB Gasoline, Electricity Propane, Gold, Silver, Copper, Aluminum, Platinum, Palladium, etc. London Metal Exchange:- The London Metal Exchange (LME) is the worlds premier non-ferrous market, with highly liquid contracts. The exchange was formed in 1877 as a direct consequence of the industrial revolution witnessed in the 19th century. The primary focus of LME is in providing a market for participants from non-ferrous based metals related industry to safeguard against risk due to movement in base metal prices and also arrive at a price that sets the benchmark globally. The exchange trades 24 hours a day through an inter office telephone market and also through a electronic trading platform. It is famous for its open-outcry trading between ring dealing members that takes place on the market floor. Commodities traded:- Aluminum, Copper, Nickel, Lead, Tin, Zinc, Aluminum Alloy, North American Special Aluminum Alloy (NASAAC), Polypropylene, Linear Low Density Polyethylene, etc. The Chicago Board of Trade:- The first commodity exchange established in the world was the Chicago Board of Trade (CBOT) during 1848 by group of Chicago merchants who were keen to establish a central market place for trade. Presently, the Chicago Board of Trade is one of the leading exchanges in the world for trading futures and options. More than 50 contracts on futures and options are being offered by CBOT currently through open outcry and/or electronically. CBOT initially dealt only in Agricultural commodities like corn, wheat, non storable agricultural commodities and non-agricultural products like gold and silver. Commodities Traded: Corn, Soybean, Oil, Soybean meal, Wheat, Oats, Ethanol, Rough Rice, Gold, Silver etc. Tokyo Commodity Exchange (TOCOM):- The Tokyo Commodity Exchange (TOCOM) is the second largest commodity futures exchange in the world. It trades in to metals and energy contracts. It has made rapid advancement in commodity trading globally since its inception 20 years back. One of the biggest reasons for that is the initiative TOCOM took towards establishing Asia as the benchmark for price discovery and risk management in commodities like the Middle East Crude Oil. TOCOMs recent tie up with the MCX to explore cooperation and business opportunities is seen as one of the steps towards providing platform for futures price discovery in Asia for Asian players in Crude Oil since the demand-supply situation in U.S. that drives NYMEX is different from demand-supply situation in Asia. In Jan 2003, in a major overhaul of its computerized trading system, TOCOM fortified its clearing system in June by being first commodity exchange in Japan to introduce an in-house clearing system. TOCOM launched options on gold futures, the firs t option contract in Japanese market, in May 2004. Commodities traded: Gasoline, Kerosene, Crude Oil, Gold, Silver, Platinum, Aluminum, Rubber, etc Chicago Mercantile Exchange:- The Chicago Mercantile Exchange (CME) is the largest futures exchange in the US and the largest futures clearing house in the world for futures and options trading. Formed in 1898 primarily to trade in Agricultural commodities, the CME introduced the worlds first financial futures more than 30 years ago. Today it trades heavily in interest rates futures, stock indices and foreign exchange futures. Its products often serves as a financial benchmark and witnesses the largest open interest in futures profile of CME consists of livestock, dairy and forest products and enables small family farms to large Agri-business to manage their price risks. Trading in CME can be done either through pit trading or electronically. Commodities Traded: Butter milk, Diammonium phosphate, Feeder cattle, frozen pork bellies, Lean Hogs, Live cattle, Non-fat Dry Milk, Urea, Urea Ammonium Nitrate, etc Chapter 5 How Commodity market works? There are two kinds of trades in commodities. The first is the spot trade, in which one pays cash and carries away the goods. The second is futures trade. The underpinning for futures is the warehouse receipt. A person deposits certain amount of say, good X in a ware house and gets a warehouse receipt. Which allows him to ask for physical delivery of the good from the warehouse. But some one trading in commodity futures need not necessarily posses such a receipt to strike a deal. A person can buy or sale a commodity future on an exchange based on his expectation of where the price will go. Futures have something called an expiry date, by when the buyer or seller either closes (square off) his account or give/take delivery of the commodity. The broker maintains an account of all dealing parties in which the daily profit or loss due to changes in the futures price is recorded. Squiring off is done by taking an opposite contract so that the net outstanding is nil. For commodity futures to work, the seller should be able to deposit the commodity at warehouse nearest to him and collect the warehouse receipt. The buyer should be able to take physical delivery at a location of his choice on presenting the warehouse receipt. But at present in India very few warehouses provide delivery for specific commodities. Following diagram gives a fair idea about working of the Commodity market. Today Commodity trading system is fully computerized. Traders need not visit a commodity market to speculate. With online commodity trading they could sit in the confines of their home or office and call the shots. The commodity trading system consists of certain prescribed steps or stages as follows: I. Trading: At this stage the following is the system implemented- Order receiving Execution Matching Reporting Surveillance Price limits Position limits II. Clearing: This stage has following system in place- Matching Registration Clearing Clearing limits Notation Margining Price limits Position limits Clearing house. III. Settlement: This stage has following system followed as follows- Marking to market Receipts and payments Reporting Delivery upon expiration or maturity. Chapter 6 Investments in Commodities How to invest in a Commodities? With whom investor can transact a business? An investor can transact a business with the approved clearing member of previously mentioned Commodity Exchanges. The investor can ask for the details from the Commodity Exchanges about the list of approved members. What is Identity Proof? When investor approaches Clearing Member, the member will ask for identity proof. For which Xerox copy of any one of the following can be given a) PAN card Number b) Driving License c) Vote ID d) Passport What statements should be given for Bank Proof? The front page of Bank Pass Book and a canceled cheque of a concerned bank. Otherwise the Bank Statement containing details can be given. What are the particulars to be given for address proof? In order to ascertain the address of investor, the clearing member will insist on Xerox copy of Ration card or the Pass Book/ Bank Statement where the address of investor is given. What are the other forms to be signed by the investor? The clearing member will ask the client to sign a) Know your client form b) Risk Discloser Document The above things are only procedure in character and the risk involved and only after understanding the business, he wants to transact business. What aspects should be conside

Critical Reflection On Corporate Social Responsibility Projects Accounting Essay

Critical Reflection On Corporate Social Responsibility Projects Accounting Essay The aim of this paper is to provide a critical reflection considering the ethical point of view of the CSR projects which companies are increasingly launching with the global emerging trend of corporate social responsibility in the business world today. The purpose is to evaluate the objectives of these campaigns, comparing if they are rather actions targeting profits or/and better corporate image or if they are truly altruistic actions driven by the increase of the concern involving the global issues nowadays. WHAT IS THE PURPOSE OF A CORPORATION? Indubitably, this question has been widely discussed for many years, as great theorists show different point of views, arguing that either the primary objective of an organization is to maximize value or to be devoted to its mission and essentially satisfy the stakeholders needs. Basically there are two main theories: shareholder value theory and stakeholder theory. The first one argues that the only objective of a company is to maximize profit and generate value to its shareholders. At the other extreme is the stakeholder theory, which suggests that the organization not only should make profits and create value to the shareholders but also please their stakeholders, such as customers, employees, suppliers, local communities, and society at large. (Morgan Stanley, 2008) One of the earliest precursors of the shareholder value theory is Milton Friedman that emphasized once: So the question is, do corporate executives, provided they stay within the law, have responsibilities in their business activities other than to make as much money for their stockholders as possible? And my answer to that is, no they do not. (Friedman, 1974) On the other hand, Dave Packard the co-founder of the Hewlett Packard proposed a distinctive cause for company existence: I think many people assume, wrongly, that a company exists simply to make money. While this is an important result of a companys existence, we have to go deeper and find the real reason for our being. As we investigate this, we inevitably come to the conclusion that a group of people get together and exist as an institution that we call a company so that they are able to accomplish something collectively that they could not accomplish separatelythey make a contribution to society, a phrase which sounds trite but is fundamental. (Packard, 2002) The ground of the stakeholder theory is not far from the corporate responsibility concept or trend, which undeniably attract much attention in the last years. As the theory, CSR objective is to determine all the stakeholders and pursue a balance between the main concerns and goals of each one of those (Morgan Stanley, 2008). While Friedmans and Packards points of views represent extremes opinions, others have promoted a mid-term approach. Peter Drucker, for example argued that a middle ground is essential for one business to be considered successful as illustrated on the statement bellow: A business that does not show a profit at least equal to its cost of capital is socially irresponsible; it wastes societys resources. Economic profit performance is the base without which business cannot discharge any other responsibilities, cannot be a good employer, a good citizen, a good neighbor. But economic performance is not the only responsibility of a business Every organization must assume responsibility for its impact on employees, the environment, customers, and whomever and whatever it touches. That is social responsibility. (Drucker, 1954) All in all, the fact is that there are many diverse opinions among specialists and executives. Therefore, in my opinion the CSR of one company is influenced mainly according to the beliefs and values of its leaders, especially the CEO, rather than the mission statements of the organization. CORPORATE SOCIAL RESPONSIBILITY IS INCREASING AS A TREND BUT DECREASING WITHIN COMPANIES Before analyzing more extensively the corporate social responsibility as a trend within the companies, I truly believed that the CSR practices were substantially increasing. However after reading the 2008 Morgan Stanley publication about the topic, I was surprised with the results. Considering the methodology utilized by Morgan Stanley, It seems that the overall real concern of CSR is decreasing over the last 15 years. Although the organizations might be investing more in CSR projects, the damage/harmfulness caused by the companies is increasing on larger scale. So, this means that the negative actions are not being covered by CSR practices. Instead, the careless with CSR is increasing much more than the projects as could be analyzed in the table below. KLD defines a set of potential strengths (for example, charitable giving) and a set of potential concerns (e.g., hazardous waste). For each company, KLD assigns a value of 1 if the strength or concern exists and a 0 otherwise. (Morgan Stanley, 2008) In conclusion, besides the strengths are increasing, the concerns are rising more rapidly and the net value of the strengths minus concerns is decreasing each year. Evidently, that the result presented could be argued and probably other studies with different methodologies could show diverse outcomes. However, I personally like the methodology because not only shows what companies are doing well but also consider what they are doing wrong. Nevertheless, in my opinion does not matter if they are investing more if they are depreciating even more. Even though, companies are not emphasizing CSR as I would expected so, unquestionably the trend is increasing within the society, followed by the pressure for new management practices and concerns with the environment. A good evidence to illustrate that hypothesis is the rise of the relevance and coverage of this topic at the universities. One study conducted by Lisa Jones Christensen in 2007, aimed to further investigate the importance of CSR, Ethics and Sustainability at the top 50 global MBA programs. The results showed that 84% of the schools that responded oblige students to take courses of one or all of these subjects. Even more 25% represented a stand-alone course. Comparing with The Ethics Resource Center study conducted in 1988, when 75% of Ethics, CSR, and Sustainability Education were a required part of the program and only 5% of the MBA programs required a separate course on ethics. (Christensen, Peirce, Hartman, Hoffman, Carrier, 2007) Summarizing, in my point of view CSR is a relevant subject and it is an increasing trend among the society, however companies are not giving the importance they should to these practices. Moreover, as will be presented on the next section, companies could gain more profits with a different approach of CSR. COMPANIES INVEST IN CSR AS MEANS TO MAXIMIZING VALUE OR TO DO THE RIGHT THING AS AN END ITSELF? As Michael Jensen discuss in the article Value Maximization, Stakeholder Theory, and the Corporate Objective Function, published by the Journal of Applied Corporate Finance in 2001, there are two alternative reasons for organizations to finance CSR initiatives. The first one is known as the moral theory, which CSR considers organizations as good corporate citizens by losing profits when necessary to serve other stakeholders, including society at large (Jensen, 2001). Above all, corporations have responsibilities to their customers, employees, and communities that should be given at least equal priority with their economic goals for their shareholders. On the other hand, the economic theory for CSR suggests it as a positive-NPV investment. More simply, presume CSR as the same as any business investment decision: Invest in all essential stakeholders if there are expected returns, at least equivalent to the cost of capital. (Morgan Stanley, 2008) Nevertheless, the main question to address is why companies are investing in CSR? For economic reasons, expecting returns, or they are really concerned and are investing with moral arguments? To answer that question, once again I will reference the Morgan Stanley study. The article states the premise that corporations that are more disposed to reduce shareholder returns for stakeholders would probably invest not only to increase their CSR strengths but also to decrease their CSR concerns. In other words, those organizations would adopt the idea of First, do not harm. Therefore, such companies would make efforts both to increase their CSR strengths and reduce their CSR concerns. In contrast, companies concerned with the returns of the investment in CSR would give priority on building their strengths, as many of them do it to make a public demonstration of ones progress, instead of focusing their efforts to address the weaknesses. Especially because usually is very costly to eliminate many CSR concerns. As I predicted, the results shows that companies invest on CSR projects primarily to maximize value rather than endorse stakeholder commitments as an end in itself. This means that businesses are financing CSR to strengthen their attributes instead of eliminating the CSR concerns. However, the most interesting factor is that the same research found that companies with more CSR strengths or fewer CSR weaknesses presented higher returns. This suggests that financing CSR initiatives generates profit and long-term value maximization, as could be observed in the graph below. Even more, companies which focus on reducing the concerns and thinks primarily on the stakeholders rather than profits, in a long run makes better results that corporations which allocate resources on strengthen their CSR attributes and have the economic approach. In other words, being ethic and altruistic considering the investments is more profitable! (Morgan Stanley, 2008) (Morgan Stanley, 2008)