Critical Thinking Paper Executive Compensation

Introduction In recent years, management scholars, policy makers, and mainstream media commentators have debated over the high levels of executive compensation, inquiring whether they are consistent with other important variables such as shareholder interests, firm performance, national and international economic projections, and employee pay (Gong 1; Moriarty 235).Advertising We will write a custom essay sample on Critical Thinking Paper: Executive Compensation specifically for you for only $16.05 $11/page Learn More Although most advocates of the high levels of executive compensation, especially for CEOs, argue that the suitability of compensation is determined through the market process of wage negotiation rather than a simple process of introspection (Kaplan 5; Kolb 679), it is the interest of this paper to demonstrate that CEOs are grossly overpaid despite the incapacity of many to deliver long-term results for the organisation. Issue The problem is that CEOs are grossly overpaid as an incentive to deliver long-term results for the organisation, yet available literature demonstrates that the current compensation practices for CEOs in many countries globally only motivate them to maximise short-term profits at the expense of long-term benefit (Gong 2), hence the need for governments to implement regulations to limit executive compensation. Recent statistics demonstrate that â€Å"in 2006, the median total compensation of the top U.S. CEOs was $10.1 million. This is 314 times the $32,142 earned by the median full-time private industry worker in the U.S. in 2006† (Moriarty 235). Yet, despite the high compensation packages for CEOs, majority of the executives are unable to maximise the value of the firms’ revenues while minimising costs (Kolb 679-680). Competing Claims While many scholars have argued against the high compensation practices for CEOs, a substantial number argue that executives are rightly remunerated s ince pay for the typical CEO is to a large extent driven by existing market forces. Jeffrey Moriarty, cited extensively in executive pay literature, projects a valid argument that CEOs must respect their fiduciary duties, and therefore must be morally obligated â€Å"to reject excessive compensation from the firms they lead, even when such compensation is the outcome of an entirely arm’s length negotiation† (Kolb 679). This scholar argues that organisations may be unable to maximise their value and competitiveness due to high compensation practices for CEOs, hence calls for a minimum effective compensation or â€Å"maximum morally permissible compensation† necessary to attract, retain, and motivate CEOs to maximise the value of the organisations in the delivery of long-term results.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Additionally, it is common practice that CEOs receiving very high compensation packages would forego a project with positive net present value (NPV) if such a project causes them to fall short of the current quarter consensus forecast, and instead choose to invest in a short-term project that generates higher short-term returns in order to illustrate a perception of greater ability and hence justify their hefty payouts and market value. In the long-term, however, â€Å"stock price will drop due to sacrificed long-run profit for short-term profit, and CEO wealth will be negatively affected when the CEO holds a large number of stocks or stock options† (Gong 2). This assertion demonstrates why financial institutions, such as Frontier Bank and First Commercial Bank, have failed despite being led by highly remunerated CEOs. A major counterargument is that â€Å"while CEO pay has increased substantially since the early 1990s, the pay of other talented and fortunate groups has increased by at least as much† (Kaplan 6). Additionally, advocates for high CEO pay suggest that it would be immoral to reduce the pay when all indicators demonstrate that the productivity of a country’s economy has increased considerably over the years (Bogle 23; Ozkan 262). Criteria The recent credit market turmoil, corporate scandals, as well as the abuse of the 2008 golden parachute clause, provides the basis for claiming that CEOs are grossly overpaid despite their incapacity to deliver long-term results for their respective organisations. Reasons and Evidence It can be argued that hefty pay packages for CEOs do not translate into extemporary performance for the firm as well as enhancement of shareholder value in the long-term (Moriarty 238). In the recent credit market turmoil, CEO Charles Prince of Citigroup lost his job after the financial service firm lost hundreds of millions of dollars in poor performance related to prioritising short-term profits over long-term profits (Kaplan 6). In 2007, the second- highest paid Wall Street boss, Stanley O’Neil of Merrill Lynch, was forced to resign after running the financial institution to a near collapse due to shaky mortgages. Available figures indicate that O’Neal’s 2006 pay was approximately $48 million, second on Wall Street only to the $54.3 million earned by Goldman Sachs Group Inc. CEO Lloyd C. Blankfein† (Associated Press para. 9). In 2008, James Cayne of Bear Stearns was left with no option than to sell his shares in the troubled investment bank for a meagre $61 million (from a net worth of more that $1 billion), not mentioning that Bear’s shareholders suffered profound losses after the firm’s forced sale to JPMorgan Chase (Thomas para. 1-2). Although Cayne took home $34 million in pay, the former CEO and Board Chairman engaged in corporate malpractices to conceal the true state of affairs at Bears before its collapse (Kaplan 8).Advertising We will write a custom essay sample on Critical Thinking Paper: Executive Compensation specifically for you for only $16.05 $11/page Learn More It can also be argued that overpaying CEOs and other board members does not translate into well-run and managed organisations that have the capacity to improve shareholder value and performance over the long-term. Despite having highly remunerated CEOs at the helm, Enron and WorldCom collapsed due to financial scandals related to insider trading and shady accounting practices (Moriarty 237). Their collapse demonstrates that the CEOs never practiced value-based management (Avantika 29) and that the pay-for-performance strategy normally used to calculate pay packages for CEOs is not necessarily functional (Bogle 22; Ozkan 260). Further afield, the morale of many employees and shareholders is adversely affected by collapsing firms when they employ the Golden Parachute clauses to give substantial benefits to a CEO in the event that one firm is acquired by another, or the CEO’s contract is terminated immaturely (Banker et al 5). For example, ex-Merrill CEO Stanley O’Neil was given a lump sum of $161.5 million when the investment bank went under even after critics questioned his role in worsening the financial performance and shareholder value of the firm (Associated Press para. 1). Quantifier The above reasons, along with the alluded evidence, validate the argument that CEOs are grossly overpaid despite their incapacity to deliver long-term results to the organisation, and the scenario is worsened by the fact that CEOs ultimately receive huge allowances during the termination of their contracts even after putting their respective firms on a path towards obscurity. Conclusion From the analysis, it is evident that huge pay packages for CEOs do not necessarily translate into capacity to deliver long-term results for the organisation in terms of performance and improvement in shareholder value. The case scenarios highlighted (i.e., Mer rill Lynch, Bear Stearns, Citigroup, Enron and WorldCom) are a sharp indicator of the difficulties in linking high executive compensation to positive firm performance and improvement in shareholder value. Although advocates of high executive compensation cite market forces as the main reason for this trend, stakeholders need to take caution not to remunerate CEOs highly for short-term gains while compromising the long-term benefits of the organisation. Works Cited Associated Press. â€Å"Ex-Merrill Lynch CEO to Walk Out with $161.5M.† NBC News 30 Oct. 2007. Web.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Avantika, Tomar. â€Å"Global Recession and Determinants of CEO Compensation: An Empirical Investigation of Listed Indian Firms.† Advances in Management. 4.12 (2011): 27-37. Business Source Premier. Web. Banker, Rajiv D., Maseko N. Darrough, Rong Huang and Jose M. Plehn-Dujowich. â€Å"The Relation between CEO Compensation and Past Performance.† The Accounting Review. 88.1 (2013): 1-30. Business Source Premier. Web. Bogle, John C. â€Å"Reflections on CEO Compensation.† Academy of Management Perspectives. 22.2 (2008): 21-25. Business Source Premier. Web. Gong, James Jianxin. â€Å"Examining Shareholder Value Creation over CEO Tenure: A New Approach to Testing Effectiveness of Executive Compensation.† Journal of Management Accounting Research. 23.1 (2011): 1-28. Business Source Premier. Web. Kaplan, Steven N. â€Å"Are U.S. CEOs Overpaid?† Academy of Management Perspectives. 22.2 (2008): 5-20. Business Source Premier. Web. Kolb, Robert. â€Å"Must CEOs be Saints? Contra Monarty on CEO Abstemiousness.† Business Ethics Quarterly. 21.4 (2011): 679-691. Business Source Premier. Web. Moriarty, Jeffrey. â€Å"How much Compensation can CEOs Permissibly Accept?† Business Ethics Quarterly. 19.2 (2009): 235-250. Business Source Premier. Web. Ozkan, Neslihan. â€Å"CEO Compensation and Firm Performance: An Empirical Investigation of UK Panel Data.† European Financial Management. 17.2 (2011): 260-285. Business Source Premier. Web. Thomas, Landon. â€Å"Down $900 Million or More, the Chairman of Bears Sells.† New York Times 28 March 2008. Web. This essay on Critical Thinking Paper: Executive Compensation was written and submitted by user Jason Mcbride to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.

Free Essays on Analysis Of Sharon Olds, “Leningrad Cemetery, Winter Of 1941”

Analysis of Sharon Olds, â€Å"Leningrad Cemetery, Winter of 1941† In the poem, â€Å"Leningrad Cemetery, Winter of 1941,† Sharon Olds describes a cemetery during World War II. The 900-day siege on Leningrad began in September of 1941 and there were countless casualties to be buried during that winter. During the winter the ground freezes and makes it next to impossible to dig the graves. The winter of 1941 is described as, â€Å"that winter the dead could not be buried.† The ground is too hard to dig and the gravediggers are over tired and over worked. The war has killed so many people that the gravediggers are too weak to dig and they are also very hungry because food is scarce during war. The poem is vividly describing how horrible war can be. The language used in the poem is strong and descriptive. The corpses are described as being transported by children’s sleds. This description shows how all innocence during wartime is lost. The sadness that this inflicts on the children will never go away, their innocence is lost forever. The poem describes corpses wanting to be brought back alive. â€Å"A hand reaching out with no sign of peace.† That line purely shows how these soldiers were not ready to die; they still had their lives to live. Our sadness as witnesses to the war is nothing compared to the sadness of the dead who cannot witness anything. This poem symbolizes an important time in history. At the same time this poem can be used to describe the horror of all war. The war in Leningrad was a horr ible time and many lives were lost. Sharon Olds is trying to show us just how horrible war can be.... Free Essays on Analysis Of Sharon Olds, â€Å"Leningrad Cemetery, Winter Of 1941† Free Essays on Analysis Of Sharon Olds, â€Å"Leningrad Cemetery, Winter Of 1941† Analysis of Sharon Olds, â€Å"Leningrad Cemetery, Winter of 1941† In the poem, â€Å"Leningrad Cemetery, Winter of 1941,† Sharon Olds describes a cemetery during World War II. The 900-day siege on Leningrad began in September of 1941 and there were countless casualties to be buried during that winter. During the winter the ground freezes and makes it next to impossible to dig the graves. The winter of 1941 is described as, â€Å"that winter the dead could not be buried.† The ground is too hard to dig and the gravediggers are over tired and over worked. The war has killed so many people that the gravediggers are too weak to dig and they are also very hungry because food is scarce during war. The poem is vividly describing how horrible war can be. The language used in the poem is strong and descriptive. The corpses are described as being transported by children’s sleds. This description shows how all innocence during wartime is lost. The sadness that this inflicts on the children will never go away, their innocence is lost forever. The poem describes corpses wanting to be brought back alive. â€Å"A hand reaching out with no sign of peace.† That line purely shows how these soldiers were not ready to die; they still had their lives to live. Our sadness as witnesses to the war is nothing compared to the sadness of the dead who cannot witness anything. This poem symbolizes an important time in history. At the same time this poem can be used to describe the horror of all war. The war in Leningrad was a horr ible time and many lives were lost. Sharon Olds is trying to show us just how horrible war can be....

Topic list in the file Essay Example | Topics and Well Written Essays - 2250 words

Topic list in the file - Essay Example By the end of the 20th century, there was a complete turnaround of gender norms comprising of mixed and reversed roles among both genders from the reserved gender roles that were exhibited and practiced at the onset of the 20th century. This paper will analyze the characteristics of the 20th century gender norms and the way these norms were enforced and justified by both genders. On the first phase of the analysis, gender norms that surfaced in the first half of the 20th century will be discussed, each with their respective enforcements. This phase contains significant gender evolutionary milestones like women suffrage, and women’s increased responsibility in acting as subordinates to men during the first and second World Wars. The second phase that constitutes the second half of the 20th century displays more dynamism in gender norms reconstruction. These go on till finally, there is a form of gender norm balance and satisfaction from both ends at the end of the 20th century. The need for a more aligned gender norm definition does not stop, as the same plea flows over into the 21st century. The conclusion of the defined characters will be succeeded with a brief explanation of the challenges that were encountered in a continual bid to adopt and accept the changes in gender norms through the 20th century. Gender norms transition: 1900 – 1950 The onset of the 20th century carried itself along with the strict gender norms that were adhered to at the close of the 19th century. The increased industrial age had amplified the disparities in the gender norms where the men were categorized as the society’s producers and the women classed as protectors of the comfort havens the men came to roost after their daily works. The women in the society thus maintained a low profile in the society with their area of confinement maintained as the household where they took care of the children, prepared food, and carried out other household chores that would ta ke away that burden from their men’s activity list (Ryan 34). In the years that preceded the 1920s, women’s suffrage was the key fight by women that aimed at giving the native-born American woman the power to participate in politics and the right to vote. This fight had persisted during the last 40 years of the 19th century with associations such as the American Women’s Suffrage Association (AWSA) by Lucy Stone and Henry Blackwell in 1869 and National Women’s Suffrage Association (NWSA) by Susan B. Anthony and Elizabeth Cady Stanton in the same year. The cries for women’s suffrage were initially ignored by the chauvinistic-dominated male administration. The years between 1910 and 1920 marked the most active years for the fighting for women’s right to vote and emphasized by an active lobbyist, Catt, who utilized her personal relation skills to obtain more than 500,000 signatures attesting for women’s suffrage. Since the advent of polit ics, it was a preserve of men whose position in politics was justified by claims of them being able enough to make decisions. Further, it was alleged that women were too religious to soil their morality in politics, which was allegedly dirty. It was preferred that they kept their sanctity and helped uphold the moral values in families and the society (Ryan 58). After many years of activism, 1922 was the year of victory when women participated for

Veganism Essay Example | Topics and Well Written Essays - 500 words

Veganism - Essay Example People like puppies, so they keep them in their laps, but would often forget to put them in the shelter when it’s raining out there. People who keep donkeys to use them as a means to travel and transport luggage over the cartridges beat them with lashes to make them run faster. So many animals are treated this way including horses, donkeys, ponies, and camels. People keep the dog for their safety, but when some dog catches a disease, he is shot dead! All life long, dogs bark at the outsiders for the protection of their masters, and the masters kill them when the dogs become useless. These are all cases of direct and overt subjugation of animals’ rights. Humans have also caused great loss to animals through their environment-unfriendly activities. Thousands of species of animals have become extinct as a result of the ever-increasing global warming. Humans happen to be the fundamental cause of this rise in temperature that has spoiled the natural habitat of thousands of a nimals. An in-depth analysis of the kind of treatment humans have given to the animals suggests that humans have largely been unfair to the animals and have always suppressed them. Animals are as much part of nature as are humans and they are as much creation of God as are humans. In light of these facts, it is a moral obligation upon every human being to take care of the animals. I have decided to become a vegan. This would enable me to take objective measures to protect the animals and provide them with a healthy and safe environment to live in.

Importance of understanding personality in psychology

Importance of understanding personality in psychology In the field of psychology it is most important to understand the personality of an individual. Personality helps sum up the values, actions, perceptions and behaviour, these can differ from person to person. There are a number of theories that are being used to understand people and have been around for many years, the five Psychological concepts used are Behaviourist, Humanistic, Cognitive, Psychodynamic and the Biological psychology. This assignment will cover two of the five approaches; they are the Behaviourist and Humanistic approach. Behaviourists primarily focus on peoples observable behaviour, experiences and their learning process to understand individuals. According to behaviourists ones behaviour does not depend on what goes on inside the mind and also believe if asked about their feelings it is very likely they could be providing misleading information. They also trust that behaviour is learnt either by imitation of others or repeating behaviour that has brought an award or a punishment; peoples interaction with the environment. Operant and Classical conditioning is two theories within the behaviourist theory. Operant conditioning according B.F Skinner (1936) is a learning method that arises through rewarding or punishing one for their behaviour. Classical conditioning which was discovered by Ivan Pavlov (1903) is said to be a learning procedure that is raised by a natural stimulus and an environmental stimulus. Watson and Rayner (1920) did a controlled experiment and recorded on videotapes. Watson wanted to take Pavlovs research from animals and test it on humans. This experiment was called Little Albert. Albert was 9 months old when he was tested for reactions towards various stimulis that were presented to him. Albert was shown white rat, a rabbit, a dog, a monkey, with masks, cotton wool, and burning newspapers. It was said he showed no fear towards the three animals. What Albert did respond negatively to was the loud noise that came from the hammer being struck against a steel bar, Albert cried when he heard it. When Albert was a little over 11months he was tested again in another controlled experiment, he was presented with a white rat and the steel bar was stuck by a hammer, this experiment was carried out 7 times over 7 weeks. When Albert was presented with a white rat, he would burst into tears not only that but Albert only had to see the white rat and he would show every sign of fear towards the white rat. Albert grew to fear the white rat, he also grew a fear for all fury things and the hammer was no longer needed to get Albert crying. (Watson, John B. Rayner, Rosalie. (1920). Conditioned emotional reactions. Journal of Experimental Psychology, 3, 1-14). This classically conditioned experiment was a great success as it proved to be right. Some may agree believe that the behaviourist approach is more accurate than the Humanistic approach as it is considered scientific, and there is data that is collected by the researchers that prove to be a success. This approach being classed as scientific tells us that many experiments have been carried out to prove the accuracy of the approach and it has a backbone and isnt just assumptions of what might be going on in the mind and how if influences our everyday behaviour. Pavlov showed existence of the behaviourist approach when he by accidently discovered that the dog produced more saliva when he saw the lab assistant because he had learnt to associate the lab assistant with food. Watson approved of Pavlovs observations and wanted to connect it to human psychology and did so by performing the Little Albert experiment (1920). This experiment being done successfully, may be classed as double confirmation to some as they may believe that human and animals are alike in some sense because they adapt to their environment and learn to behave according to that environment. The behaviourist theory could be classed as biased. For example Watson and Pavlov conducted their experiment in laboratory conditions which means the Independent variable (IV) was controlled and manipulated by the experimenter to measure the dependent variable (DV). The dependent variable may be accurately measured but its sense of realism has been taken away and very little free will is left. Humanistic psychology could also be referred to as the third force in psychology, its theories that conflict the Behaviourist theories. The humanistic perspectives are more concerned and are interested in how peoples behaviours can be influenced by a persons emotions and thoughts. How one feels and how others see an individual is what they believe shapes peoples behaviour, interested in what goes on internally rather than the external factors. Humanistic approach believes that personality is what shapes human behaviour and comparing it to animals is dehumanising as each individual is unique and does not go by animalistic urges. Each social interaction helps develop ones personality. Carl Rogers and Abraham Maslow are the main theorists who portray the Humanistic approach. Carl Rogers (1959) has claimed that the meaning of behaviour basically, is personal. One needs to feel appreciated and accepted by their environment and not only that but needs to be surround by people who they can talk to and would listen and understand them, he believed that if people arent surrounded by these social factors then relationships and healthy personalities will not develop. Satisfying yourself by achieving your personal goals, personal wishes and personal desires in life is where self-actualization takes place. He believes that a person can only do this when their ideal self and self imagine is congruent; the humanistic term for this is a fully functioning person. Abraham Maslow (1970) created a Hierarchy of needs pyramid which starts off with one needing to satisfy the lower needs before being able to achieve self actualization. The pyramid starts off with the basic needs such as physiological needs, safety needs, love and belongingness, Esteem needs, then goes on to the growth needs such as cognitive needs, aesthetic needs. Once these needs are seen to a person is able to realise the full potential and become everyone one can become. Behaviourist and humanist approach both recognise that humans nature to respond to whatever the situation whether it is internally or externally. Another similarity with the two approaches is they both take note of other individuals and ones experience and relation with them. They have more difference than similarities On one hand the Behaviourist approach does not see peoples ability to think but believe they have the ability to react, just like an animal. On the other hand, for the humanistic, peoples behaviour is believed to relay on being able to fulfil their needs and responsibilities, development of ones self and their self awareness. The behaviourists believe what shapes behaviour is ones response to natural stimulis and behaviour can be reshaped using Operant and Classical conditioning. As for the Humanistic beliefs ones behaviour is developed by their social interactions (Family, friends, environment and etc) Humanistic see an individual as unique, every person is unique and have their internal reasons for the behaviour, and do not believe that all behaviour is shaped by external factors; comes from within the mind.

Comparison of Eastern and Western Philosophers

[Comparison of Eastern and Western Philosophers ] Comparison of Eastern and Western Philosophers I will compare the Western philosopher Socrates to the Eastern philosopher Lao Tzu. These two philosophers had some things in common with their ideas and philosophies that they pursued. Socrates was a western philosopher that lived in Athens Greece and Lao was thought to be from what is now known as the Hunan province of China. Socrates Socrates lived in Athens which was a city that taught it was better to solve problems through debate rather than violence. It was because of this environment he grew up in that he became a great debater and strived to discover something important, namely, the essential nature of knowledge, justice, beauty, goodness, and, especially, traits of good character such as courage (McGraw-Hill, pg. 37, 2008) . He believed that power was not attained through wealth or physical strength but rather it was achieved through discussion or debate. The Delphi Oracle is said to have pronounced Socrates the wisest of people. To Socrates this meant he was aware of his own ignorance not that he was the wisest man in the world. Socrates made many enemies after this because he set out to find a man wiser than him and exposed many of them as frauds this brought about his demise as he was sentenced to death for corrupting young men's minds. Even though it is said by Plato that he could have gotten out of prison he choose to remain there because by living in Athens he agreed to live by their laws. Lao Tzu Lao Tzu believed that it was not through intervention but rather through understanding of how it functions. He also believed that the foundation of life was through peace and not through strife. The wise ruler, Lao Tzu believed, understands that violence is a last resort and knows that it can often be avoided by anticipation, by reconciling potential enemies and resolving difficulties when they first arise. Lao also believed it was through deeds done for others and not doing just the things that benefited himself that would define a person. This thought is best supported by a quote from his views on virtue where he stated The superior man hoards nothing. The more he uses for the benefit of others, the more he possesses himself. The more he gives to his fellow men, the more he has of his own (McGraw-Hill, pg. 538, 2008). The absence of selfish desires is the secret to his virtue. What Socrates and Lao Tzu had in common Both Socrates and Lao Tzu thought that even the wisest of humans is still ignorant. Both held that to act on that ignorance under the pretense that it is knowledge is folly that leads not to progress and betterment within the individual and society but to the opposite effect( McGraw-Hill, pg. 536, 2008). Even though both Socrates and Lao Tzu believed in fighting for injustices. Both Socrates and Lao both believed that it is best to settle things through talking and that war should be a last resort because violence only causes more tension and a retaliatory type reactions. In conclusion we can see that there similarities and differences in how these philosophers went about getting their messages across to others Socrates was more open and engaging in his desire to find true knowledge and meaning and used his gift of debate to engage others to find a better solution. Where Lao believed in just letting things happen and unfold as they may and what happens is what is meant to happen. Both of these philosophers were alike in the fact that they both strongly believed in only using force as a last resort. As both of these types of philosophy's have many good points I am more proponed to agree with western philosophy because I think like Socrates it is important to stick to what one truly believes as long as it is not detrimental to anyone else. Because if one's life is going to have meaning then we have to stick to what we believe because at the end of the day what really matters is how we feel about ourselves. If we compromise what we believe because of how others see us then our lives mean nothing. There is a very good poem by an unknown author called The Man in the Mirror in this poem the author states that at the end of the day the only thing that matters is that we can look at ourselves in the mirror and like what we see. References Moore, B. N. ; Bruder, K. (2008). Philosophy: The power of ideas (7th ed. ). Boston: McGraw-Hill.

Implied Warranties Case Study

Implied Warranties Case Study Implied Warranties FACTS: Peter and Tanya Rothing operated Diamond R Stables near Belgrade, Montana, where they bred, trained and sold horses. Arnold Kallestad owns a ranch in Gallatin County, Montana, where he grows hay and grain, and raise Red Angus cattle. For more than twenty years, Kallestad has sold between 300 and 1,000 tons of hay annually, sometimes advertising it for sale in the Bozeman Daily Chronicle. In 2001, the Rothing’s bought hay from Kallestad for $90 a ton.They received a delivery on April 23. In less than two weeks, at least nine of the Rothings’ horses exhibited symptoms of poisoning that was diagnosed as botulism. Before the outbreak was over, nineteen animals died. Robert Whitlock, associate professor of medicine and the director of the Botulism Laboratory at the University of Pennsylvania concluded that the Kallestad’s hay was the source. The Rothing’s filed a suit in a Montana state court against Kalle stad, claiming in part, breach of the implied warranty of merchantability.Kallestad asked the court to dismiss the claim on the grounds that, if botulism had been present, it had been in no way foreseeable. ISSUE: Should the court grant this request? Why or why not? [Rothing v. Kallestad, 337 Mont. 193. 159. P. 3d22 (2007)] DECISION: The court should not grant Kallestad’s request for dismissal because he breached his contract with the Rothings and failed to honor the implied warranty of merchantability. In addition, Kallestad should be ordered to reimburse or compensate the Rothings for the goods and products they’ve lost due to the defective product they received from Arnold Kallestad’s ranch.REASONS: From a personal standpoint, Arnold Kallestad may have not known the true conditions of the hay he sold to Peter and Tonya Rothing. For more than two decades Kallestad provided quality alfalfa hay at a competitive price. This, from what the facts tell us, is the fi rst major incident to occur within their business relationship. All the other purchases of hay were perfectly fine and free of disease and toxins. This isolated incident could be viewed as an unforeseeable accident. From a legal standpoint, Peter and Tonya Rothing have the law on their side.The Rothings claimed Kallestad breached the implied warranty of merchantability which is defined as â€Å"a warranty that goods being sold or lease are reasonably fit for the general purpose for which they are sold or leased, are properly packaged and labeled, and are of proper quality. The warranty automatically arises in every sale or lease of goods made by a merchant who deals in goods of the kind sold or leased† (Miller and Gaylord 360). The goods in question would be the alfalfa hay Kallestad harvested from his property annually.For the purpose of this case, goods are defined as â€Å"at  Ã‚ §Ã‚  Ã‚  30-2-105(1), MCA, to mean:  Ã‚  all things (including specially manufactured goo ds)  which are movable at the time of identification to the contract for sale  other than the money in which the price is to be paid, investment securities †¦ and things in action† (asci. uvm. edu). Kallestad would be considered a merchant of these goods because he has sold 300 to 1,000 tons of hay every year and advertises his product in the local newspaper on a regular basis.Therefore, it is established In Arnold Kallestad’s testimony, he admitted the hay the Rothings received were second cuttings and properly treated and dried. He also admitted â€Å"the hay was exposed to moisture during the winter months and that, one winter, a ditch near the stacked hay overflowed causing water to go along the west side of the stack of hay and then onto the road† (asci. uvm. edu). During this possible exposure, the overflow of water could have contained toxins from the soil or standing water located on Arnold Kallestad’s ranch, and contaminated the hay sold to Peter and Tonya Rothing.According to the U. S. National Library of Medicine, â€Å"Clostridium botulinum  is found in soil and untreated water throughout the world† which may be where the botulism came from (nlm. nih. gov). As for the compensation for the goods and products lost due to the defective hay sold to the Rothings, Kallestad is held liable refunding all monies paid for the purchase of the hay. In addition to the refund, he must also remit monies for the clean-up of infected areas on Diamond R. Stables, veterinary bills for services rendered, and compensation for the 19 animals killed as a result of the hay infected with botulism. Botulism: MedlinePlus Medical Encyclopedia. †Ã‚  U. S National Library of Medicine. Ed. Linda J. Vorvick, MD and Jatin M. Vyas, MD, PhD. U. S. National Library of Medicine, 24 Aug. 2011. Web. 05 Mar. 2012. . Miller, Roger LeRoy. , and Gaylord A. Jentz. Business Law Today: The Essentials: Text & Summarized Cases: E-commerce, Legal , Ethical, and International Environment. 9th ed. Mason, OH: South-Western Cengage Learning, 2011. Print. â€Å"Rothing v. Kallestad. †Ã‚  Department of Animal Science (ASCI): University of Vermont. The University of Vermont. Web. 04 Mar. 2012. .