Principles of Business Assignment Example | Topics and Well Written Essays - 500 words

Principles of Business - Assignment Example The result might have been conflicts of interest that had negative effects on the financial health of the company. According to the company’s federal tax returns, financial dealings with companies that were owned by board members cost UPMC $10 million. $5 million worth of transactions between businesses connected to the board members were reported in the tax records (Roche Jr., 2010). In reviewing the financial activity, the concept of corporate governance becomes relevant. It is defined as the standards which are deemed as appropriate in the running of the company. Because the management of UPMC engaged in cozy business deals with insiders, costing the company $10 million, it clearly was not recommended by the corporate governance system. The concept of fair market value is also relevant. Because the transactions were affected by the board members’ relationships as reported by the press, the financial activity might not have been conducted at fair market value. A finan cial transaction is conducted at fair market value when the transaction happens at the rate that is set by the market mechanism. Because UPMC awarded contracts to the board members’ companies at favored rates, it cost the company $10 million, resulting in $489 million losses in 2009.