business

Dan Solin: The 401(k) Rip-off May Be Ending

by Dan Solin on April 17, 2012

Huffington Post…

It has long been my view that 401(k) plans are a national disgrace. They are rife with conflicts of interest between those who “advise” them and the participants who contribute to them. The investment options in the plan are chosen through a cozy, complicated and little understood process by which mutual funds make payments to brokers and insurance companies in order to get selected for a coveted place in the line-up of funds from which participants are required to make their selections. In any other context, these payments would be called bribes. In the 401(k) industry, they are known as “revenue sharing payments”, justified by tortured logic intended to obscure their real purpose, which is to populate these plans with expensive, actively managed funds likely to underperform index funds of comparable risk over the long term. The inner workings of the 401(k) system are shrouded in secrecy and mired in complexity, which is exactly the way the securities industry wants to keep it. There has been little scrutiny of how investment options are actually selected for inclusion in the plan. Justice Louis D. Brandeis famously stated that “sunlight is said to be the best of disinfectants”. 401(k) plans have been operating in very dense fog. Lawsuits challenging this unsavory process have had mixed results. Most have been dismissed as having no legal merit. Some have been quietly settled. None have gone to a trial on the merits, until now. Tussey v. ABB, Inc ( Case No. 2:06-CV-04305-NKL) is a class action brought in the United States District Court for the Western District of Missouri, Central Division, by present and former employees of ABB, Inc, who were participants in two 401(k) plans. The plans included mutual funds managed by Fidelity Investments. Affiliates of Fidelity served as investment adviser to the mutual funds in the plan and as recordkeeper to the plans. After a four week trial, U.S. District Judge Nanette K. Laughrey issued an extensive opinion. She found that ABB and Fidelity “… violated their fiduciary duties to the Plan when they failed to monitor recordkeeping costs, failed to negotiate rebates for the Plan from either Fidelity or other investment companies chosen to be on the PRISM platform, selected more expensive share classes for the PRISM Plan’s investment platform when less expensive share classes were available, and removed the Vanguard Wellington Fund and replaced it with Fidelity’s Freedom Funds.” The Court was especially critical of the process employed by the Pension Review Committee to replace the Vanguard Wellington Fund with Fidelity’s Freedom Funds. The Court noted the stellar, long term track record of the Wellington Fund. It found that the “… recommendation to add the Freedom Funds to the Plan’s investment platform and remove the Wellington Fund despite its excellent performance record was motivated in part by his desire to decrease the fees that ABB was paying and to maintain the appearance that the employees were not paying for the administration of the Prism Plan.” So much for acting in the best interest of the plan participants. As compensation for the misconduct of the plan fiduciaries, the Court assessed damages of $36.9 million and left open the possibility of awarding attorney fees to the plaintiffs. I contacted ABB and was told by their representative that it “strongly disagreed” with the decision and was “considering its options, including an appeal.” Dan Solin is a senior vice president of Index Funds Advisors. He is the New York Times bestselling author of “The Smartest Investment Book You’ll Ever Read,” “The Smartest 401(k) Book You’ll Ever Read,” “The Smartest Retirement Book You’ll Ever Read” and “The Smartest Portfolio You’ll Ever Own.” His new book is “The Smartest Money Book You’ll Ever Read.” The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. Returns from index funds do not represent the performance of any investment advisory firm. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Readers who require investment advice should retain the services of a competent investment professional. The information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell any securities or class of securities mentioned herein. Furthermore, the information on this blog should not be construed as an offer of advisory services. Please note that the author does not recommend specific securities nor is he responsible for comments made by persons posting on this blog.

See the article here:
Dan Solin: The 401(k) Rip-off May Be Ending

Find our Weekly Commercial Real Estate, Private Equity and Fund Newsletters at www.WeeklyBrief.net

Gerald McEntee: Let’s Get Women Out of the Red

by Gerald McEntee on April 17, 2012

Huffington Post…

Workers are under attack and women are bearing the brunt of it when it comes to pay . Who’s to blame? Corporate-backed politicians typified by Wisconsin Governor Scott Walker. Last week, in the dead of night, Walker signed a piece of legislation that rolls back progress on pay equity in his state, where women make only 75 cents for every dollar a man earns doing the same job. (Wisconsin’s rate was already worse than the disheartening national average of 77 cents on the dollar.) Walker’s legislation repeals a 2009 law that made it easier for victims of wage discrimination to have their day in court. His action adds another to the growing list of reasons Wisconsin voters want to recall him this June . Republican presidential hopeful Mitt Romney has yet to denounce Walker’s anti-worker, anti-women action. Recently, Romney’s campaign officials were stumped by a reporter’s question on the topic. The reporter asked if Romney supports the Lilly Ledbetter Fair Pay Act , the first law President Barack Obama signed, making it easier for women to sue in wage discrimination cases. Campaign officials were silent, then said only, “We’ll get back to you on that.” No public official should have to stop and think about pay equity. It’s the right thing to do. And it’s the smart thing to do. When women do not get paid fairly, we all suffer. Yet in places like Wisconsin, the systematic attacks on women’s pay and voices continue. Walker’s so-called “budget repair” bill passed last year broke the livelihoods of many women in the state, where the resulting layoffs and pay cuts disproportionally hit working women. Leah Lipska, a member of AFSCME Local 1 in Wisconsin, told her story in a letter to the Washington Post . She wrote, “Aside from my full-time job with the state, I have been forced to take a part-time job at a local pizza place. Even that’s not enough to make up for my decrease in pay since Governor Walker’s law. I got so far behind on my car payments, I had to ask my parents for help. I’ve even had to go to the local food pantry. [Walker] is no hero; he’s stolen our American Dream.” Nationwide, the reality of pay inequity for women of color is even bleaker. African-American women make about 72 cents for every dollar earned by a white man. Latina women, only 62 cents. In the 1970s, pay equity emerged as one of the most significant issues confronting women. AFSCME members in San Jose, Calif., staged the first pay equity strike , and AFSCME members in Washington state reaped the benefits of the largest pay equity court settlement to date. We have made some strides as a nation, through pay equity agreements at the bargaining table and in state and local legislatures. But progress has been far too slow and much too scarce. Today, pay equity remains so troubling an issue that President Barack Obama talked about it in this year’s State of the Union address. “An economy built to last is one where we encourage the talent and ingenuity of every person in this country,” Obama said. “That means women should earn equal pay for equal work.” Wisconsin gubernatorial recall candidate Kathleen Falk echoed these words recently. “As a woman, as a mother who worked full-time while raising my son, I know first-hand how important pay equity and health care are to women across Wisconsin.” Today, AFSCME members across the country are wearing red . We are wearing red because we, like Falk, know how important pay equity is. We are wearing red to stand in solidarity with the women we work with every day, the women who make America happen. We are wearing red to get women out of the red. “Another day, another 77 cents on the dollar,” doesn’t have a nice ring to it. We must finish what we started in the 1970s. We must stop the corporate-backed politicians who are trying to rewind history. We must make sure women earn equal pay for equal work.

Original post:
Gerald McEntee: Let’s Get Women Out of the Red

Find our Weekly Commercial Real Estate, Private Equity and Fund Newsletters at www.WeeklyBrief.net

Sarah Damaske: Equal Pay Day: In the Wake of the So-Called "Mommy Wars" Renewal and Partisan Attacks on Equal Pay Bills

April 17, 2012

Equal Pay Day comes this year in the midst of the renewal of the so-called “mommy wars” on the one hand, and a blatant attack on equal pay rights bills on the other. Last week, Hilary Rosen set off a media maelstrom when she said that Mitt Romney’s wife, Ann, “has never actually worked a day in her life.” Just a week before (and to much less fanfare), Wisconsin Gov. Scott Walker repealed Wisconsin’s Equal Pay law and one of the state senate Republicans, Glenn Grothman, was quoted as saying, “You could argue that money is more important for men, anyways.” Both have serious implications for the equal pay cause. The National Committee on Pay Equity started Equal Pay Day in 1996 to bring more public attention to the gender wage gap, the difference between what an average full-time, year-round, male worker earned and what the average full-time, year-round, female worker earned. In 1996, the difference was 73.8 cents to the dollar and, today, the difference is about 77.4 cents. Not a terribly huge improvement over the last 16 years. Researchers have long noted that a number of factors can partially explain the gender wage gap. Notably, women and men tend to work in different industry sectors and different occupations within industry, which can explain a sizable portion of the gap. But differences in pay for various occupations may be due to whether jobs are associated with women or men. In other words, while occupational differences may explain some of the gender wage gap, the pay scale for different occupations is connected to whether or not the occupations are made up of mostly men or mostly women. And as sociologist Paula England and economist Nancy Folbre found in their research , women are more likely to work in caring fields, which offer relatively poor pay given the skill and education necessary for much of this work. Devaluing the hard work of acting as a primary caregiver of children not only dismisses the unpaid labor done in the home, it also contributes to the struggle of the millions of paid female laborers who work in caring fields and find that their work is neither recognized nor justly rewarded. Calling this past week’s maelstrom a renewal of the “mommy wars” dodges the real issue: Caregiving, whether done unpaid in the home or for pay outside of it, is not particularly valued in this country and women (whether in the labor market or not) suffer the brunt of this. Differences in pay are likely also connected to bias. Having children often increases men’s wages, according to research from sociologist Rebecca Glauber , but it often decreases women’s wages and women working in low-wage jobs face the toughest wage penalties for motherhood, as sociologists Michelle Budig and Melissa Hodges found . When Grothman argued, “Money is more important for men,” he may have been tapping a generally unspoken belief — that a woman’s salary is less necessary to her family than is her spouse’s. But, these beliefs are a remnant of times gone by in which men were primary breadwinners and women were primary homemakers (although as historian Stephanie Coontz has noted, even during the 1950s, this gender divide was never as big a phenomenon as we remember it to be). Today, only 20 percent of children are raised in families with a traditional breadwinning father and stay-at-home mother. Most children, then, live in families that depend on the wages of women, and one-third of children live in single-mother households and are most at risk of living in poverty. The National Women’s Law Center reports that bridging the gender wage gap would give the average full-time working woman’s family the money to pay for an additional 4 months’ supply of groceries, 5 months’ of childcare, 3 months’ rent and utilities, 5 months’ health insurance premiums, 4 months’ student loan payments, and 5 tanks of gas. Addressing the wage gap would go a long way in increasing women’s economic security, as well as the financial security of their families. In 2010, all Senate Republicans voted against considering the Paycheck Fairness Act. As both President Obama and presidential hopeful Governor Romney continue to vie for women’s votes, it would be nice to see some serious proposals from the candidates about how to bridge the wage gap.

Read the full article →

Al Norman: Wal-Mart’s ‘Terrifying’ Attack on the First Amendment

April 16, 2012

Cathy Kern is somewhat of a folk hero in North Tonawanda, N.Y. But if you ask folks at city hall, or at Wal-Mart corporate headquarters, what they think of Cathy Kern, you’ll get the opposite response. Over the past six years, Kern and other anti-Wal-Mart activists have filed 5 lawsuits that effectively staved off the development of a Wal-Mart superstore in their community. Ultimately Wal-Mart prevailed, and their huge store is now in its final stages of completion. North Tonawanda (NT) is located midway between Buffalo and Niagara Falls, in Niagara County. There are already 6 Wal-Mart’s within 16 miles of NT, including a supercenter in Niagara Falls 9 miles away. In November, 2006, Wal-Mart submitted an application to the City to construct a 183,000 square foot superstore. In May, 2008, the city’s Planning Commission approved the environmental impact statement, and by September, 2008, the site plan was approved. Kern and other NT residents formed a group called NT First, and filed a lawsuit to annul the Planning Commission’s decision. In June, 2009 the state court did annul the site plan approval, saying that the city was required by its own code to submit a stormwater pollution prevention plan — which had not been done. The court sent the case back to the city to complete. Between November, 2009 and July, 2010, Kern et al. filed three more lawsuits against Wal-Mart, each raising a different point of law. In the fourth lawsuit, Wal-Mart and the City filed a motion to impose sanctions against Kern and her lawyer, David Seeger, for “frivolous” litigation. In September, 2010, Judge Ralph Boniello, III dismissed the fourth lawsuit, and permitted Wal-Mart and the city to seek the sources of Kern’s funding. Boniello ruled that the lawsuit was “filled with re-statements of matters previously litigated and half-truths [and] has only served to further delay the project and cause the Respondents to incur additional legal fees.” Boniello added: “In fact [Wal-Mart and the City] have raised the possibility that such delay tactics are consistent with a national campaign allegedly funded by outside groups whose sole goal is to block Wal-Mart developments.” The Judge ordered Kern and Seeger to produce their funding sources and NT First membership names, or face contempt of court. In a letter dated December 9, 2010 , Attorney Seeger informed the Judge that the group NT First had “terminated its existence,” ended its representation by Seeger, and liquidated its checking account balance of $13.22 — donating it to The Salvation Army. Seeger noted that under New York law, “an unincorporated association’s financial exposure is limited to those assets held by it and for it through its members.” Seeger noted, “The Association, now that it has laid bare its financial records [and] membership lists… has no reason to continue its existence, and no means to afford any further legal representation.” Seeger told the Court that the members of NT First “remain concerned that Wal-Mart, in furtherance of its nationwide campaign to legally attack its opponents, will attempt to force additional disclosures and otherwise terrify its member and officers.” Attorney Seeger warned, “The First Amendment secures Petitioners members’ various First Amendment freedoms including… the right to petition the government for redress of grievances.” Citing the Citizens United case, Seeger wrote: “disclosure of donations and funding is off limits, except upon a demonstration of compelling state interest.” Citing three U.S. Supreme Court cases between the NAACP and the State of Alabama (1959 to 1964), Seeger argued that unincorporated associations are immune from state scrutiny of memberships lists. “At bottom,” Seeger said, “Wal-Mart is not entitled to the requested disclosure, unless there is a compelling state interest overriding the First Amendment Protection.” In June, 2011, a group called The Clean Water Advocates of Western New York , led by Cathy Kern, filed a fifth lawsuit under the Clean Water Act in federal court. This suit was originally filed against Wal-Mart, North Tonawanda, and the N.Y. State Department of Transportation. A U.S. District Court Judge signed a consent decree requiring the NYSDOT to comply with its stormwater permit. To fight her contempt charges, Cathy Kern is now represented by Buffalo civil rights attorney Frank T. Housh. “When Wal-Mart began an illegal, permitless construction of its Superstore,” Housh told me, “North Tonawanda First did what citizens groups are supposed to do: they petitioned the Courts for relief. Their efforts were hugely successful. Wal-Mart and its rubber-stamp local government were forced to get a construction permit, divulge its plans to the public, and follow the procedures in the Clean Water Act.” Housh says because of this success, “my clients have been targeted for reprisal. Put simply, Wal-Mart is seeking the bankruptcy and public humiliation of a woman in her sixties who lives alone with her cats because she succeeded in making them follow the law. They want her ruined life to stand as an object lesson to anyone who believes the rules which apply to everyone else apply to the world’s largest corporation.” Judge Boniello has made it clear, Housh says, that he may order Kern to pay hundreds of thousands of dollars in fees to Wal-Mart’s attorneys. Boniello’s Order was stayed pending an appellate court ruling on the propriety of the Judge’s Order, which should be issued in the next few weeks. In December of 2010 — three months after Justice Boniello’s decision to allow Wal-Mart to pursue NT First documents — the New York Daily News reported that Wal-Mart had donated $10,000 to the Niagara County Republican Committee. NT Mayor Robert G. Ortt, and NT City Attorney Shawn Nickerson — both strong proponents of the Wal-Mart project — are Niagara County Republican office holders. So is Justice Ralph Boniello, III, who was elected to the Niagara County Supreme Court in 2001. As of 2010, Boniello’s salary is $146,700. The Republican Judge is up for re-election in 2014. Wal-Mart has used its legal muscle countless times to appeal local zoning decisions to the county courts, to the appeals courts, and beyond. The corporation has more lawsuits than men’s suits. In North Tonawanda, Wal-Mart’s hounding of local residents for legal fees, membership lists and donor lists, is just another attempt by a 1 percent corporation to chill public participation and to narrow the First Amendment freedoms not just of Cathy Kern — but of citizen activists everywhere across America. Al Norman is the founder of Sprawl-Busters. He has been helping communities fight big box sprawl for almost 20 years. His latest book, Occupy Walmart will be released in early May.

Read the full article →

Geri Stengel: Closing the Leadership Gap

April 16, 2012

What gives? As the Women Entrepreneurs as Economic Drivers, a report from the Kauffman Foundation shows, getting those women-owned businesses on a high-growth track would energize our sluggish economy. But it’s not happening. Why? I’ve been asking women who haven’t been stopped what they think the barriers are and here’s what they say: Dream bigger. When women start a businesses, they think too far ahead, to the day when they’ll be managing a family as well as a business.They opt for career paths that seem safer and more flexible than running a major corporation. Liz Elting, CEO and founder of global language service provider TransPerfect, advocates another tack: Go for broke when you are young and have nothing to lose. Don’t worry about what your life will be like in 10 years. Dream big and follow your dreams. When your business grows, so do your options for work/life balance. And being a high-powered CEO doesn’t mean you can’t be a good mom. “If you want to have a family and run a business, you can — and a growing number of us do,” says Elting. Be tough. Nice girls please people. CEOs have to make tough decisions, from firing people to cutting services. In a man, that’s being strong; in a woman it is seen as being bitchy. “If you want everyone to like you, you will have a hard time doing what is necessary,” Elting says. Wake up the men. At home, men must share in household responsibilities, recognizing that the woman’s career is as valuable as the man’s. At work, men need to be more inclusive. Networking events shouldn’t just be guy things. Deals are done in informal settings after the conference or out of the office — on golf courses and in the corporate box at the ball game. Yes, some women like sports, but a lot are left out of that schmoozing and dealing. It’s not that men are circling the wagons; they’re just not thinking it through. They’re losing, too, when possibly great deals get left at the clubhouse. Support each other. Whether in peer groups, such as the Women Presidents’ Organization, or through mentoring women starting out, women need to support and mentor each other. As Sheila Lirio Marcel, CEO of Care.com says, “We must lift as we climb, bring others along with us and collect talented people as we rise.” Men know how to network. Women seem to be falling behind . That needs to change. Change the way business is done. Let’s start firms that don’t follow the same old businesses model; let’s build a model that can accommodate the differing needs of GenY, parents, Type A workers and those who want to work reduced hours. You can retain and grow talent by being flexible — flexible about taking a year off for family without losing a rung on the career ladder; flexible in working hours; flexible about telecommuting. If we don’t restructure business culture, we’re going to keep losing the talented people we’ve paid money to train. Rosalie Mandel, principal of the alternative investments accounting firm Rothstein Kass, has changed the culture of her company. “Our firm had the vision to see the benefits of flexible scheduling — and it’s never said no. We’ve had an official flex policy since 1999,” she said in an article for The Glass Hammer . Changes now, in attitudes, awareness and culture could end the stagnation of small women-led businesses and make them into the economic drivers we need. For more articles about high-growth women entrepreneurs, visit Guiding the Way for Women Entrepreneurs , Ventureneer’s curated source for information women entrepreneurs can use to power-up their businesses.

Read the full article →

Rory O’Connor: Facebook Is Not Your Friend

April 15, 2012

“Imagine… that you knew which sites — or what news stories — people you trust found useful and which they disliked,” David Kirkpatrick wrote in the June 11, 2007 issue of Fortune magazine. “This isn’t fantasy. Facebook might make it possible, and soon. Yes, the social-networking site college kids spend so much time on — the one you thought was just about hooking up — could turn out to be more important than any of us thought.” Kirkpatrick, who was then Fortune ‘s Senior Editor for Internet and Technology, went on to write the best-selling The Facebook Effect: The Inside Story of the Company That is Connecting the World , the definitive book on the company. He was prescient. In a startlingly short period of time, Facebook did make it possible for you to find those trusted and useful news sites and stories — along with much, much more. Now, with Facebook facing growing scrutiny in advance of its IPO next month, which is expected to value the Internet giant at $100 billion, the question of trust looms even larger. True, the social networking giant has made it easier than ever before to find trusted friends and followers, who can now create, curate, aggregate and distribute news and information with an unprecedented ease, as I detail in my new book Friends, Followers and The Future : How Social Media are Changing Politics, Threatening Big Brands and Killing Traditional Media . But is Facebook itself, the billion dollar baby whose rapid growth has yet to be slowed by continuing controversy over the privacy of its more than 800 million users, itself worthy of our trust? Can we rely on its wunderkind CEO Mark Zuckerberg, who has repeatedly pronounced privacy to be outmoded and argued that we are living in a new era beyond it, to safeguard our interests? Despite our differing — some would say competing — concerns, should we regard Facebook and Zuckerberg as our friends? After all, the online social network, which offers its tools, technologies, and services at no cost, makes profit primarily by using heretofore private information it has collected about you to target advertising. And Zuckerberg has repeatedly made sudden, sometimes ill conceived and often poorly communicated policy changes that resulted in once-private personal information becoming instantly and publicly accessible. As a result, once-latent concerns over privacy, power and profit have bubbled up and led both domestic and international regulatory agencies to scrutinize the company more closely. In one case, consumer protection groups, including the Electronic Privacy Information Center (EPIC) and fourteen others, filed a 2009 unfair-trade complaint with the Federal Trade Commission (FTC) accusing Facebook of unfair and deceptive trade practices that “violate user expectations, diminish user privacy, and contradict Facebook’s own representations.” It said that Facebook’s decisions to disclose previously restricted “personal information to the public” had violated users’ expectations, diminished their privacy, and contradicted its own representations. It asked the FTC to order the company to “restore privacy settings that were previously available… and give users meaningful control over personal information,” to investigate Facebook’s trade practices, require the company to restore privacy settings that were previously available and force it to “give users meaningful control over personal information.” Facebook settled in November 2011 by agreeing to refrain from making any further deceptive privacy claims, to obtain consumers’ approval before changing the way it shares their data, and to undergo independent third-party auditing for 20 years. Shortly after the uproar subsided, however, renewed concerns over privacy and trust began to shake the brand again. This privacy blunder centered on Facebook’s belated admission that it was still tracking the web pages its members visited, even after they have logged out of the Facebook site. As Daniel Bates reported for the Daily Mail , The social networking giant says the huge privacy breach was simply a mistake — that software automatically downloaded to users’ computers when they logged in to Facebook ‘inadvertently’ sent information to the company, whether or not they were logged in at the time. Most would assume that Facebook stops monitoring them after they leave its site, but technology bloggers discovered this was not the case. Instead, the tracking information — worth billions of dollars to advertisers — was being sent back to the Facebook servers. Even after you were logged out, Facebook still tracked every page you visited. As Bates noted, “The admission is the latest in a series of privacy blunders from Facebook, which has a record of only correcting such matters when they are brought to light by other people.” As its executives struggled to explain the “inadvertent” privacy row over its “creepy” web-tracking practices, that trust was shaken once again “by criticism and speculation regarding how it uses browser cookies to get data about users,” as Josh Constine posted on Insidefacebook.com . A lack of thorough documentation explaining what each of its cookies does has led some observers to assume that the company is tracking offsite browsing behavior in order to target ads. Facebook needs to provide explanations for both the average user and privacy researchers about how exactly its cookies work in order to prevent these press flare-ups from giving users a negative impression and bringing on regulatory scrutiny from governments. The company’s growing stature and importance only magnifies such concerns. As Facebook profile pages morph more and more into overall online identities, the inherent tension between our individual desire to protect personal information and the company’s need for that information comes into ever-sharper focus. Last week, for example, Facebook sought once again to address the persistent criticism of its privacy practices by instituting a new policy providing greater transparency on the types of data it stores about you. Yet critics like Max Schrems, a German law student who filed a complaint leading to the agreement, still criticize the company’s response. “We welcome that Facebook users are now getting more access to their data, but Facebook is still not in line with the European Data Protection Law,” Schrems told Kevin J. O’Brien of the New York Times . “With the changes, Facebook will only offer access to 39 data categories, while it is holding at least 84 such data categories about every user.” In 2011, when Schrems requested his own data from Facebook, he learned that the company was keeping information he had previously deleted from the website, and was storing information on his location. None of that sounds too friendly to me, so I really can’t recommend that you trust Zuckerberg, or Facebook, or indeed any corporation that makes its money by selling you — down the river or anywhere else. And as Nielsen’s Latest Global Trust in Advertising Survey proves, we trust “word-of-mouth recommendation from friends and family” above all other forms of communication. (At least that’s what 92 percent of respondents in 56 different countries said .) At the same time, our trust in paid traditional media (including television, magazine and newspaper ads) has steadily declined since 2009. (Trust in television is down 24 percent; magazines, down 20 percent; and newspapers down 25 percent, according to the survey.) “Consumers around the world continue to see recommendations from friends… as by far the most credible,” said Randall Beard, global head, Advertiser Solutions at Nielsen. Trust is essential for the success of any brand. Mark Zuckerberg may think that Facebook’s recurrent privacy flaps haven’t much affected the sometimes anti-social social network, but they represent a huge potential threat to what he has built. The high-handed manner in which members’ personal information has been treated, the lack of consultation or even communication with them beforehand, Facebook’s growing domination of the entire social networking sphere, Zuckerberg’s constant and very public declarations of the death of privacy and his seeming imposition of new social norms all feed growing fears that he and Facebook itself simply can not be trusted. As Zuckerberg’s fellow CEOs from the legacy media should have already learned, losing the trust of your audience is the first step in losing your audience itself — and eventually the power of your brand.

Read the full article →

Soraya Chemaly: Ann Or Hilary: Either Way, Motherhood Is a Dismal Financial Decision for American Women

April 13, 2012

BREAKING NEWS GUYS: It is ” arguable ” that one of the single worst financial decisions a woman can make in this country is to become a mother. Regardless of whether she gets paid for work that she does. And one of the most disastrous economic growth policies governments can pursue is to impede women’s ability to plan their families and be paid fairly for their participation in the labor force. And yet this is exactly what the Republican party is dedicated to doing. The result of “secondary” in importance “social issues” is to ensure that stay-at-home or not, women pay and pay and pay for their reproductive choices or lack thereof. Today’s cynical Hilary Rosen/Ann Romney “Gasp!” is nothing more than this week’s politically flavored sexist-media-loves-a-”cat”-fight . What is “working woman” versus “stay-at-home” code for? For the most part it is code for “what is a woman’s relationship to a man and what is his earning potential?” It’s a paternalistic, sexist framework that subordinates women either way. That’s why this is not about a mommy war. It’s about keeping women dependent, especially by DEvaluing the work of women who are mothers and caretakers (in and out of the home) — their time, their labor, their productivity — by making balancing work and family as hard as possible. It’s the way we penalize women for taking on the bulk of our society’s reproduction responsibilities while simultaneously telling them “it’s the most important job in the world.” You want to create jobs, stimulate and grow the economy? Stop harassing and penalizing women seeking independence and financial security. Allow people to plan their families and create systematized, institutional and cultural approaches to work/life balance for both men and women. What I am not hearing anyone say loudly and clearly in this Rosen/Romney snafu is that women’s ability — not desire or choice — to take part in the economy, to be productive in the economy, to help stimulate the economy is based on her freedom to make reproductive decisions or lack thereof and on the more active, unpunished by culture, participation of men in child care. Motherhood in America , taking place as it does in a vacuum of cultural, corporate and governmental support, and idealized as part of a paternalistic, heterosexual and gender-hierarchical social structure, is why women — most of whom have to earn a living either as supplemental or primary — have to stop working, work part-time, and cycle in and out of the work force. It’s why we have a debilitating gender pay gap — really a maternal pay gap when you examine it closely — and why women make up the majority of the poor. Consider these facts: Women make up more than 50 percent of the American workforce . 40 percent of wives earn more than their husbands . Women are more and more often heads of households, now 22 percent . The highest earning window for women, practically the only time they are not subject to the wage gap, is when they are single and childless, usually in their twenties. They have to live in cities and have gone to college. More than 50 percent of children born to women under 30 are born to single mothers . 60 percent of women with children under the age of three and 77 percent of mothers with school-age children remain in the workforce . When a woman has a baby, her chances of being hired go down , compared to a single woman, by 44 percent. When a woman has a child her pay drops by 11 percent . According to the Bureau of Labor Statistics , mothers works fewer hours, have to work part time more and cannot take on overtime. Fully 55 percent of stay at home moms would like to work , for pay, out of the home. Working mothers are penalized in terms of long-term success by having to work in an interrupted fashion that perpetually erodes their career tenures or experiences. The distribution of retirement income is gendered and unbalanced. If a woman “chooses” to be a stay at home mom, because entrenched pay discrepancy, cultural habits and a gender segregated workforce make that “choice” the most logical and financially rational, she is not compensated, either through pay or benefits, for her investment of time and effort and risks her long term financial security. This is why money is not ” more important to men ” and why bickering about mommy wars is a red herring. Ignoring demographic trends because they erode your privileges (which is different from being oppressive) does not make them go away. Mitt Romney and Republican legislators would like us to focus on what really matters to women. Ann Romney, because apparently women are either a different species or speak a form of English that Mitt et al. cannot understand in their particular female-deaf form of manliness, has assured them that, based on what she is hearing, it’s “the economy.” So — let’s talk about women, work and the economy. First , women’s work is often invisible and unpaid . Let’s pretend that Ann Romney is, like the 143 million other women in the country, not the wife of a multimillionaire Mormon Bishop and talk about her unpaid work as a stay-at-home mom. According to the Wall Street Journal , an average housewife would make $138,095 if she were paid for her labor (that is what she would have to pay someone else). Ann Romney is not your average housewife, but, let’s go with it. Ann Romney’s lost wages for 30 years of providing 24 hour unpaid childcare for her husband, running a household, nursing sick children, being a chauffeur, food shopping, cooking, being executive assistant to six boys and men and other assorted duties is $4,142,850. She also did this, graciously, while struggling with major illness. Ann Romney, like all “non-working” mothers, is not financially compensated for her labor. (She is however, also like other married women who work, taxed for her efforts.) Many women in this position are thought of as parasites and a net drag by abusive husbands . In addition, Romney gave up any hope of related benefits for social security, for example, and put her trust in Mitt Romney’s long-term good graces. For women involved in the 50 percent of marriages that will end in divorce , however, this is a terrible economic scenario. For unmarried women or those depending on dual incomes to survive, this is also not an option. For women not married to a multi-millionaire Mormon bishop — that would be well over 99 percent of the 142 million of the rest of us — the real costs of being an unpaid, full-time, hard-working stay-at-home mom is too high. I don’t begrudge Ann Romney her choice. She has not only put her financial well being but also her salvation into Mitt Romney’s hands. But that is not either available or desirable to the overwhelming majority of women. Second , family planning is the key to financial survival and security. Around 50 percent of pregnancies currently in the U.S. are unplanned (it’s a side effect of not teaching people how they get pregnant). Why do women seek abortions? Studies have shown that it’s because they have families and are more often than not financially strapped, tired, responsible for children and/or other family members, trying to improve their lot in life. It is because pregnancy and motherhood affects a woman’s health and healthcare costs, child and child-care related expenses, her pursuit of higher education, her ability to work productively and for financial gain, her ability to parent other children, her chances of relying on the state help for support and her risk of long-term poverty. You know what the real entitlement program I worry about is? The fact that the reproductive control experiences of the people advocating anti-family friendly policies is primarily limited to the changing of the temperature of their tighty-whiteys . You know what the opposite of PLANNED parenthood is, UNPLANNED parenthood. And you know what that costs to women, families, the government, and “the important economy” will be when they increase as they will if the Republican Party leadership has its way with women? • More unplanned pregnancies than virtually anywhere else in the industrialized world • An increase in abortions (whether safe and legal or not) • Decreased maternal health • Decreased relationship stability • Lower educational aspirations and accomplishments for women and their children, impaired female workforce participation • Increased health care costs related to poor prenatal and neonatal care • Increases in welfare program participation • Higher maternal death rates. It is safe to assume that unplanned pregnancies and reduced maternal health have the effect of reducing women’s workforce participation and reducing the social and economic status of women and children with all kinds of impacts on market stimulation, economic growth and government spending. By the way, poor, sick, tired and dead women cannot contribute to what is “really important” — that would be “the economy.” Third , gender equality, which requires reproductive freedom, justice and autonomy for women, means INCREASED ECONOMIC ACTIVITY. Women’s ability to plan and manage their pregnancies — with or without men — spurs economic growth. This is true all over the world. Countries with high gender equity indices usually have stronger economies because they understand the value of the human capital that women represent. As noted here , “In mature economies, attitudes toward gender equality and the actual possibilities for combining parenthood with gainful employment are decisive. Countries governed by traditional male-dominant attitudes run the risk of long-term economic stagnation.” If you do not support a woman’s right to choose when to become a mother, and you actively seek to deny her reproductive health options and reduce her ability to be paid fairly for her work, then you actively work against economic growth and prosperity, for individuals, families and the country. If you insist on modeling economic policy on an outdated, sluggish, pater-familia model then you will get an outdated, sluggish mater-familia bashing economy. The “less important social issue” policies — “getting rid” of Planned Parenthood, eliminating abortion, reducing access to contraception and affordable healthcare, abstinence-only miseducation, and more — through which Mitt Romney and the Republican party are eliminating women’s options (and therefore their families options) are an ECONOMIC DISASTER. In these ways Mitt Romney and the Republican party are committed to infringing on all women’s ability to live freely and healthily and to making sure that women continue to be penalized for their maternity to the detriment of families and THE ECONOMY.

Read the full article →

Steve Clemons: New Economic Thinking vs German Ordnungspolitik

April 13, 2012

photo credit: Reuters German Minister of Finance Wolfgang Schäuble in his welcome note to an Institute of New Economic Thinking convening of some of the world’s leading economic theorists and practitioners in Berlin this week wrote: I would also like to point out that it is not just new thinking that we need.  Rather, it is often equally important to recall older ideas and approaches that may have fallen out of the limelight in the meantime.  For example, we in Germany have sharpened our focus on the necessity of pursuing economic and fiscal policies that are consistent with the principles of markets and competition — what we call Ordnungspolitik .  This approach can make crucial contributions to the concrete design of policies and especially institutions.  In my view, Germany’s “debt brake” is an institution that lays the groundwork for reliable long-term policymaking and that by itself can counteract undesriable fiscal and economic developments. Ordnungspolitik seems to roughly translate into a government debt-averse, laissez-faire approach to economic policy that runs along similar lines to what Republican House Budget Committee Paul Ryan is promoting. What is frightening many in Europe today is that Schäuble’s views are mainstream in Germany, a current account surplus national oasis in a world plagued by debt desertification. In other words, Germany is not only unwilling to extend a real lifeline to other sinking economies in Europe, it’s using this moment in history to promote an ideological austerity that it wants to compel other nations — when their economies are reeling — to do the same as the price for German support. George Soros , anchor speaker among many luminaries at this INET conference , has offered contrarian views to those of Schäuble and published this oped in yesterday’s Financial Times , ” Europe’s Future Not up to Bundesbank .”  However, in the side chatter here, most believe that the gap between Germany’s economic prescriptions and floundering European siblings won’t be bridged. There is sort of a feeling among many here that the European titanic is sinking and that Germany has control of all the life boats and won’t let them out. In a way, developing ‘new economic thinking’ is similar to researching and promoting use of renewable energy sources — vital but it takes a long time and major investment to retrofit a world organized around traditional energy.  Soros and some others at this conference have been arguing that the very foundation of equilibrium-driven economics is wrong, that markets are instead prone to bubbles and collapse and require constant regulatory involvement.  But just as the gap between Germany on one side and Spain, Italy, Greece, Portugal, and others on the other is growing — so too is the gap between market fundamentalists like German Finance Minister Schäuble and ‘new economic thinking’ market skeptics. While millions of other-than-German Europeans may sink given Germany’s tenaciousness about a debt brake for all and a conservative Ordnungspolitik, also hit hard could be President Obama’s reelection aspirations.  Stay tuned. — Steve Clemons is Washington Editor at Large at The Atlantic , where this post first appeared. Clemons can be followed on Twitter at @SCClemons

Read the full article →

Brian Tolle: Sales or Marketing?

April 12, 2012

The longer I’m in the business world, the more comical the term sales and marketing seems to me. These two disciplines couldn’t be more different. And since I’ve had to wear both hats as a business owner, what each role demands of me is mind-boggling. When I’m the marketer, I’ve got to get and keep the brand right and blast it as far and wide as possible. When I’m the salesperson, I’ve got to get in the trenches and go face-to-face with the real buyer in the flesh. It’s the difference between zone defense and man-to-man. So in the real world, it’s sales or marketing. At any one moment you’re either one or the other, not both. The same goes for when you are leading others; you’re either a marketer or a salesperson. Why is this important? The very nature of marketing requires some sort of medium… television, magazines, Internet, mail. This means the marketer is one (significant) step removed from the end user, the buyer. The two can only connect when the medium is present. If the medium isn’t available, the marketer will check their Blackberries. And the chief weapon they wield is scale. Millions of TV watchers can see one commercial, read one ad in a publication. No surprise, then, that their techniques take on a certain carpet bombing feel with the marketer as the pilot, high above the fray of the buying moment of truth. Regrettably, a leader with this mindset has a hard time connecting with the troops and spends more time in front of groups instead of individuals. Think of those leaders in your experience who epitomize the marketing mindset. How many of them can you imagine gaining commitment from a reluctant front-line employee through a face-to-face discussion? Not many. Without the bullhorn, the marketer has no voice. The very nature of sales requires personal contact… face to face, asking questions, listening for pain, being up front about each step in the process and bold enough to hold a prospect or customer to their mutual agreement, however small in the grand scheme of things. Salespeople hear “no” whereas marketers hear silence. Salespeople come to know the hard truth about the product or service but still work to make it work, it’s the only way they make a buck. Great salespeople have guts; they go back into the line of fire every day. Think of those leaders in your experience who epitomize the sales mindset. They’re never far removed from you in the trenches. They find you to make sure you’re ready to take on the fight. They look you in the eye. It’s sale or marketing. Your choice. Which one will you be? If I had my druthers, I’d take the sales guy.

Read the full article →

Jerry Chautin: Don’t Abolish SBA; Mills Says Her Agency Is Faster, Quicker, Better

April 11, 2012

Once upon a time, the U.S. Small Business Administration made direct loans to socially and economically disadvantaged small-business people. The SBA’s direct lending programs also targeted disabled veterans and others that politicians said deserved preferential treatment. What’s more, the agency required applicants to get turned down by two banks as a prerequisite to applying for its loans. The paperwork was voluminous, and it took many, gut-wrenching months to get a deal done. That was during the 1960s and ’70s, and yet the myths persist. With the exception of disaster lending , SBA has morphed into a loan grantor to mitigate some of the risk for its banks. The lenders underwrite the loans and make the credit decisions without the government imposing underwriting leniency for disadvantaged applicants. The timeline from application to closing is not much longer than for a conventional business loans. “The paperwork is actually not very much,” Karen Mills, the SBA’s administrator said, during an in the interview for a March 27 article in the New York Times . “Our turnaround time for loans is 10 days.” When delays do occur, it is often because the borrower is having difficulty assembling financial statements and other documentation requested by the lender. “Banks are working with mostly their own documents” for SBA loans, Mills added. “Our role is to provide access and opportunity.” As a hypothetical example, she cited, “The bank says the last two years have been a little tough, you don’t quite meet my standards.” But rather than turning down an existing or prospective client, “that’s when they use the SBA guarantee,” Mills explained. The SBA was there to give banks the comfort they needed to begin lending again when they were recovering from the Great Recession, according to a Feb. 3 column in Forbes Magazine . The agency was front and center as an important part of the Obama administration’s $1 trillion Recovery Act. The legislation temporarily increased the loan guarantee on SBA 7(a) loans to 90 percent from its typical 75 percent. As a result, lenders made more loans, and in some cases, accepted borrowers with lower credit scores, less cash invested and softer collateral than they would have approved otherwise. Newtek Small Business Finance , a non-bank, SBA lender, contributed the column to Forbes . “We believe that there are approximately $60 billion in outstanding balance of 7(a) loans,” the column said. “The funds are invaluable to small businesses that receive long term (7-25 year amortizing loans) with fair interest rates.” The SBA’s 7(a) program, for example, provides up to $5 million in working capital, equipment financing, acquisition funds to buy a business and real estate financing for owner-occupied buildings. That includes hotels and motels, daycare centers, manufacturing businesses, service businesses and most types of businesses. And yet, some legislative ideologues and conservative groups would rather abolish the agency than spend taxpayers’ money to boost its small business loan-guarantee programs. The programs put the full faith and credit of the federal government in loans that would otherwise not have been made. In many cases the non-chain, neighborhood restaurant, dry-cleaner, and even the McDonald Fast-food franchise that we have all come accustom to patronizing, would not exist. Furthermore, these businesses create jobs and stimulate the lackluster economy. One more myth needs to be laid to rest. The SBA does not give grants to small-business owners . An exception is for technical research and development . The SBA’s Small Business Innovation Research and Small Business Technology Transfer Research Programs offer grants directly to qualifying small businesses. SBA also gives grants and low interests loans to its licensed microlenders . In turn, the microlenders, such as Asheville, North Carolina-based Mountain BizWorks , makes small-business loans from $5,000 to $50,000. “The amount of money microlenders have to lend went from around $120 million in 2008 to $340 million now,” Mills says. “They provide an enormous amount of technical assistance,” in addition to making loans. In my opinion, some of SBA’s programs should be reformed or eventually phased out. But its lending programs are an essential part of our economy. Because without SBA, small-business ownership would founder. Jerry Chautin is a volunteer SCORE business mentor, business and real estate columnist, blogger and SBA’s 2006 national ” Journalist of the Year ” award winner. He is a former entrepreneur, commercial mortgage banker, commercial real estate dealmaker and business lender. You can follow him at www.Twitter.com/JerryChautin Copyright © 2012 Jerry Chautin — All rights reserved Huffington Post readers are permitted to distribute with attribution to the author

Read the full article →

Hulya Aksu: Women in the SoLoMo Boardrooms

April 11, 2012

Those of us who pay attention to marketing trends have all probably heard the term “SoLoMo” by now. Companies are encouraged to appeal to a hyper-connected and technologically savvy, new consumer base through the use of social, local and mobile applications. Seems like a no-brainer. What entrepreneur wouldn’t want to utilize sites like Facebook and take advantage of the ever-progressing and near-universal use of mobile technology to promote their businesses? The problem is that the SoLoMo is missing something that is in many respects also a no-brainer. The Wo(men)! There is more. Women are the savviest of savvy tech junkies, whether they know it or not. Consider the illuminating data compiled by Aileen Lee in her March 20, 2011, TechCrunch post, ” Why Women Rule the Internet .” In it she states, Comscore, Nielsen, MediaMetrix and Quantcast studies all show women are the driving force of the most important net trend of the decade: the social web. Comscore says women are the majority of users of social networking sites and spend 30 percent more time on these sites than men; mobile social network usage is 55 percent female according to Nielsen. Women are not only outnumbering men in social media usage, but they are spending more time on the social sites that they visit. The importance of women consumers to businesses is only amplified when we take into account that women also control family budgets — the purse strings. Lee also tackles this point: In e-commerce, female purchasing power is also pretty clear. Sites like Zappos, Groupon, Gilt Groupe, Etsy, Pinterest and Diapers are all driven by a majority of female customers. According to Gilt Groupe, women are 70 percent of the customer base and they drive 74 percent of revenue. And 77 percent of Groupon’s customers are female according to their site. These are profound numbers. Women are fueling the economy as we know it. So if we are such avid users and are socially connected, then why are we not among the founders and the leaders of the companies that serve us? I publish Modern DC Business Magazine and in our latest issue we covered the burgeoning technology startup scene in Washington D.C. This year, I was also invited to be a part of a private group of hand selected CEOs that represent the technology community of Washington D.C. While I did meet women who are leaders in their companies, our numbers in boardrooms sadly did not mirror our dominance on the web. I am unfortunately a minority as a publisher and technology startup founder. Recently, I was a part of a startup pitch contest at one of the most prestigious law firms in the D.C., and the room was filled with Angel investors and venture capitalists, along with 12 companies’ founders eager to score the cash they needed to catapult them into mainstream success. As I quietly sat in my chair waiting for the presentations to start, a man, who upon making eye contact with me exclaimed: “Wow, we don’t see too many women at these events!” How illuminating, I thought. But he was right. I was one of the few women present at the event. One of the women presenting entrepreneurs could not hide her excitement when she saw me in the audience. Yes, another one of us. At risk of sounding too dramatic, I couldn’t help but draw similarities to a bygone era when companies were encouraged to sell products to minorities but not hire them into leadership positions. You obviously can’t mandate companies to hire women into their executive teams or flick a switch and have women spontaneously establish technology companies. But things can be done now to ensure that future generations of women will have access to the highest levels of success in the boardrooms of America. Encouraging young girls to enter the sciences and entrepreneurship early could be a good start. But there needs to be an overall shift in the way we think about women in leadership before any reform can actually take root and be meaningful. Companies too, can make a difference, and can do so in the short term rather than waiting for a generational shift in priorities. SoLoMo companies can begin hiring smart and qualified women into leadership roles to help better communicate and connect to the women who keep these companies afloat. It is time to be an “uncool” company if your boardroom doesn’t represent your consumer’s demographic representation. That would be a good start, and who knows, it may perhaps serve as a smart strategy in other industries as well.

Read the full article →

Kristie Arslan: Mr. President, Focus on the ‘Baffle Rule,’ not the ‘Buffett Rule’

April 11, 2012

President Obama is calling on Congress to raise taxes on the wealthy in a speech today, and he’s using a clever example to describe it. Calling it the “Buffett Rule,” he’s calling for tax law changes to ensure the Warren Buffetts of the world don’t pay a lower tax rate (due to their investment income) than their secretaries. Tax fairness is a top priority for the National Association for the Self-Employed , but we’re much more interested in tax laws that impact the 22 million self-employed Americans who aren’t household names but who create a whole lot more jobs than Mr. Buffett. In honor of the millions of Americans who are struggling this week to figure out the home office deduction and other baffling tax laws, we’re calling on Congress and the president to change all tax laws that are so baffling that taxpayers don’t take advantage of them. Let’s call it the “Baffle Rule.” The tax deduction for the use of a home office is one of the biggest headaches for taxpayers. It is probably the most notoriously complex and confusing broad-based tax credit offered by the federal government. An estimated 9 million Americans work out of their homes, but there are perhaps millions of these entrepreneurs each year who don’t claim this tax credit, simply because they don’t understand it. This is especially true for self-employed taxpayers, who usually prepare their own taxes. Unlike Mr. Buffett, they don’t have a platoon of tax lawyers on speed dial, so in many cases they just give up on the deduction out of frustration or fear of an audit from an incorrectly filed return. The NASE is asking Congress to simplify this deduction, by allowing home-based businesses to take a standard $1,500 deduction for home office expenses. By making the tax rule less confusing, more self-employed taxpayers will take advantage of it, thus providing more resources for these small businesses to grow and create jobs. Tax credits don’t work to encourage behavior if Americans can’t understand them, so let’s get Congress and the president to enact the “Baffle Rule” this year, so that our taxes for next year are friendlier and less baffling to the self-employed and small businesses.

Read the full article →

Russell C. Smith: Reinventing Capitalism: Strange Currencies in the Marketplace

April 10, 2012

As a species, human beings have excelled at hedonistic adaptation. It’s one of the main reasons we’ve become the dominant species on the planet, and have survived over the past 12,000 years, when many other animals that roamed the Earth far longer didn’t accomplish anything resembling modern civilization. Dinosaurs had millions of years to evolve, but they never got around to developing a Gap Outlet, much less online shopping. Adaptation, altering behavior on a reward/punishment basis, and always staying ahead of the competition — enabled humanity to create civilization and all the institutions, organizations, and social structures that evolved along with us. When coins and paper currency overtook the barter system, societal structures adapted and those with the gold wanted to hold onto the gold. Modern capitalism and economic theories have only been around for a brief time in the history of humanity. And when it comes to economics, most of what’s been written, argued about, and speculated upon was done so before the Internet Age. As the Internet continues to expand and morph into its next iteration, helping to reinvent and demolish one industry after another, one can easily imagine the Internet soon altering huge segments of how capitalism works in the digital age. It’s safe to say there’s been no other time in the history of the world when so much information on peoples’ purchasing habits has been gathered, stored, catalogued, and most importantly… used. Impulse buying is done quickly, with a swipe of a credit or debit card, without much thought as to how a person’s overall buying timeline connects back to every other purchase ever made. Buying everything on credit or debit is now the norm in our society, and people who still use cash on a daily basis will soon become an anachronism, similar to those odd individuals who don’t always carry a mobile communication device. If the constant tracking of one’s buying habits already has a decades-long history, and everyone in society is now expected to be on-call and constantly tethered to a mobile phone, how does this consumer surveillance and over-connectedness play out in the long run? One of the easiest ways a mega-corporation can change your behavior is to offer reward points to you for every purchase you make. And with smart phone and microchips becoming more prevalent in our daily lives, don’t be surprised if you’ll soon be able to accumulate points automatically, even in your sleep. You already receive points for special deals, so why not for regular daily purchases — having your morning Starbucks Latte, drinking a Coke at lunch, or filling up at the same Shell station every afternoon. You’ll get more and more points for buying, choosing, picking anything, anytime, anywhere. You’ll become a walking preferred card for hundreds of global brand that will embed themselves into your behavior. And eventually, you may receive real rewards for your loyalty, not just rewards the corporation chooses for you. Eventually a person could accumulate far too many points to spend in a lifetime, similar to the way some frequent flyers have racked up so many miles they just don’t have enough time to use them all. Internet sites specializing in point trading could easily become the next big online business. Individuals could sign up and trade reward points with others, which would go toward buying tangible items on eBay or Swap.com. In the near future, it’s easy to imagine companies like Facebook or Google creating their own brand of currency. A far fetched idea? Not really. Just ask anybody who’s spent money on Second Life currency so they could buy virtual products or experiences. In a few years you might be buying Starbucks coffee with Star Bucks. It’s often be said by politicians that small businesses are the driving force of a healthy economy, and right now further growth of small businesses are what will create a more sustainable economy. Small businesses have struggled through these hard times, and adapted to the harsh economic realities. The complete failure of trickle-down economics has been apparent for some time, and new methods of achieving successes are tried daily, in every city in the country, online, and in every possible way. One proven method has been for small communities to invent their own currency exchange. In Traverse City, Michigan, the community developed a local currency known as Bay Bucks in 2006, and it’s billed as a the “homegrown local currency.” And Ithaca, New York has been using Ithaca Hours as a form of local small business currency since 1991. In the pioneering, can-do spirit, their website proclaims Ithaca Hours “promotes local economic strength and community self-reliance.” More than one economic seismic shift could happen over the next several decades. Finding inventive ways to get off shaky ground and move toward a more a sustainable economic climate is certainly on everyone’s mind. If capitalism has proven anything, it’s that it serves our hedonistic sensibilities well — providing citizens with everything they desire, all the time, if only they can pay for it. When a majority of the population agrees it’s finally time to reinvent capitalism so that it works for the majority and not just the ultra-wealthy, the super rich may decide to openly condemn the same system they’ve championed for so long. Witness the voices of mega-rich capitalists who realized it was time to promote a better future and change the world. Bill Gates aimed higher, began a charitable foundation, and decided to use a portion of his sizable wealth to rid the world of Malaria, and Warren Buffett has suggested to other billionaires they should set an example by giving more, or at the very least be taxed appropriately to their wealth, while also using their riches to transform the state of the world. After all, the one formidable task huge amounts of capital can be used for is to improve lives on a global scale.

Read the full article →

Mike Lux: Rick Warren’s Dependency

April 10, 2012

Rick Warren’s recent comments on the Bible and dependency show him to be profoundly out of touch with the scripture he claims to hold sacred, as well as lacking a basic understanding of government programs related to poor people. Here’s the quote I am referring to: Well certainly the Bible says we are to care about the poor… But there’s a fundamental question on the meaning of “fairness.” Does fairness mean everybody makes the same amount of money? Or does fairness mean everybody gets the opportunity to make the same amount of money? I do not believe in wealth redistribution, I believe in wealth creation. The only way to get people out of poverty is J-O-B-S. Create jobs. To create wealth, not to subsidize wealth. When you subsidize people, you create the dependency. You — you rob them of dignity. Warren here is clearly showing his own dependency on right-wing mythology. First of all, no one I know in Democratic or progressive politics (and I do know a lot of folks) advocates that everyone has to make the same amount of money — that is the ultimate mythological conservative straw man. (The only writer I know that actually advocates for that is the author of the biblical Book of Acts : “all who shared the faith owned everything in common; they sold their goods and possessions and distributed the proceeds among themselves according to what each one needed.”) In fact, the vast majority of government assistance (over 90 percent, in fact) for lower-income people consist of Social Security, Medicare, and Medicaid-related nursing home coverage for senior citizens; school lunch, Head Start, pre-natal, early childhood, public education money, and other programs for young children; student loan and job training programs for students and laid-off workers looking for jobs; and SSI checks and other programs for those too disabled to work. Then there are government jobs themselves — teachers, cops and firefighters, road construction workers, etc, which Warren ignores completely. So unless Warren is expecting 85 and 5 year olds, or maybe desperately ill people, to work for their bread, this dependency thing is a load of bunk. Finally, it is important to note that some government benefits also go to people working full or part time whose wages are so low they are still below or close to the poverty line. Maybe Pastor Warren knows these facts, maybe he doesn’t, but when you have his platform in life as a person so many people listen to, it is morally important for you to check out your facts first instead of being dependent on partisan and mean-spirited mythology. Beyond his bad facts and ugly mythology about government spending to help low-income folks survive and maybe gain a toehold into the middle class is Warren’s apparent lack of any knowledge about what the Bible he claims to revere says about helping the poor. Let me give the good pastor some examples of what I mean. I don’t think Pastor Warren has ever read the Book of Isaiah, for example. You don’t have to read far: in the very first chapter, Isaiah calls on the rulers (yes, the government, not just individuals) of Israel to hear what God tells them: You multiply your prayers, I shall not be listening. Your hands are covered in blood, wash, make yourselves clean. Take your wrong-doing out of my sight. Cease doing evil. Learn to do good, search for justice, discipline the violent, be just to the orphan, plead for the widow. A little later, in chapter 10, Isaiah is at it again, attacking the government of Israel but not for creating dependency: Woe to those who enact unjust decrees, Who compose oppressive legislation to deny justice to the weak and to cheat the poorest of my people of fair judgment, To make widows their prey and rob the orphan… To whom will you run for help, and where will you leave your riches? Isaiah goes on and on like this, for chapters and chapters. But maybe you haven’t read Isaiah, Pastor, or perhaps you just don’t like it very well since it teaches such pro-dependency lessons. Maybe we should turn to some other prophets you might like better. Oh, wait. Jeremiah says to the rulers of Israel “the very skirts of your robe are stained with the blood of the poor.” Lamentations says about Israel, “All her people are groaning, looking for something to eat.” Ezekiel speaks of the rulers of Israel this way: “You have failed to make your weak sheep strong, or to care for the sick ones, or bandage the injured ones.” Okay, maybe you never liked reading the prophets. What about Psalms; they are so comforting. Oh, wait, maybe not, or at least not to conservatives. There’s Psalms 9-10, for example, talking about the wicked ruler who “watches intently for the downtrodden, lurking unseen like a lion in his lair, lurking to pounce on the poor.” Or Psalms 22, which proclaims that God “has not despised nor disregarded the poverty of the poor, has not turned away his face, but has listened to his cries for help… The poor will eat and be fulfilled.” Even if it creates dependency, I guess. And Pastor, sorry, it doesn’t get any better for you on this dependency notion you have in your New Testament. Jesus’ mother Mary in Luke said her son would “pull princes from their thrones and raise high the lowly” and “fill the starving with good things, sending the rich empty away.” She didn’t mention whether that would cause dependency, but I tend to doubt she was too worried about it. In Jesus’ first sermon in Luke he called for a year where the rich would be forced to forgive their debts to the poor. In Matthew 14, Jesus’ disciples told him he should send the crowds away so they could buy food for themselves, and Jesus replied “there is no need for them to go, give them something eat yourselves.” In Matthew 19, he told a rich man that he should go and sell all his possessions (in spite of the fact he was a job creator!) and give all the money to the poor.” And in Matthew 25:31-46, Jesus said that God would gather all the nations (yes, the nations, not just individuals, something conveniently overlooked by conservatives) to judge who had given food to the hungry, water to the thirsty, clothes to those lacking them, who had welcomed strangers and helped prisoners and the sick. All this must sound a lot like promoting dependency to Warren. And by the way, whether poor people are helped by government or individual charity, wouldn’t it be promoting dependency all the same according to conservatives? (Right-wing hero Ayn Rand sure thought so.) Now you may think I’m being selective with these particular quotes, that these are the few times in the Bible where helping the poor are mentioned. Sorry, Pastor Warren; take a look for yourself, go ahead and read the entire thing. The poor are mentioned more than 2,000 separate times in the Bible, well over a hundred by Jesus himself — and unless I missed something somewhere, not one time is it to castigate them for their laziness or fret that they are growing too dependent on help. I am consistently stirred to anger by these false prophets of Christianity. Pastor Warren, you have every right to have whatever religious and political beliefs you want to have, but don’t proclaim you are preaching the Christian Bible and then reject most of the things the people you are supposedly following said.

Read the full article →

Richard Barrington: Retirements Survey Finds Many Tripping Over Financial Hurdles

April 10, 2012

The 2012 EBRI Retirement Confidence Survey is out, and the results reflect the importance of continuing to strive for new goals as you move through life. The EBRI is the Employee Benefit Research Institute, and their long-standing annual survey of the confidence that American workers have in their financial prospects for retirement is a good benchmark for both economic conditions and the state of U.S. retirement savings . As you might imagine, retirement confidence has taken a beating in recent years. One of the root causes suggested by the survey results is that the difficulty of meeting short-term goals might be so great that people never get around to focusing on long-term goals. A look at some of the issues covered by the EBRI survey provides some insight into the sequence of financial hurdles people face. Progressing through financial goals There are many subjects covered by the EBRI survey, but one way to think about the results is to view topics in the order people naturally face them as they move through life: Meeting day-to-day needs. The first order of business is getting a job; this may be fundamental to meeting your financial goals, but it is by no means easy. 42 percent of survey respondents cited job insecurity as the most pressing financial issue facing Americans today. Of course, until you can move beyond worrying about day-to-day needs, you have little hope of preparing for long-term ones. Getting out of debt. People often borrow money to get by, so then the challenge becomes getting out of debt. 62 percent of survey respondents cited debt as being a problem to some extent, with 20 percent calling it a major problem. Debt can be a huge barrier to retirement saving: While 67 percent of workers with no debt problem said they were either very or somewhat confident in their retirement finances, only 22 percent of those with a major debt problem expressed the same levels of confidence. Saving for retirement. With employment and debt being such hurdles, it’s no surprise that many Americans haven’t adequately addressed retirement saving. Only 52 percent of worker respondents were very or somewhat confident in having enough money to last through retirement. In 2007, this figure was 70 percent. Sustaining wealth in retirement. The challenge doesn’t end with retirement. Between stock market setbacks and falling rates on savings accounts , making money last through retirement has become tougher than people expected. The percentage of retirees who are very or somewhat confident in having enough money to live comfortably through retirement is now 63 percent, down from 79 percent in 2007. The difficulty of meeting each of these goals, as reflected by the low level of confidence people currently have in each case, reinforces the importance of working toward these goals throughout your adult life. A sequence of goals will help you keep moving forward, and what the survey suggests is that if you aren’t moving forward, you will quickly find yourself moving backward. The original article can be found at Money-Rates.com : ” Retirements survey finds many tripping over financial hurdles ”

Read the full article →

Joan Michelson: Innovation Requires Risk, but… Government Risk?

April 9, 2012

What is the government’s role in driving innovation? Listening to Senators during the recent Senate Energy and Natural Resources Committee hearings on the Energy Department loan guarantee program (specifically loans to the now-infamous Solyndra), you’d think the federal government has no role in American innovation. The lawmakers love it when they can show up at a ribbon cutting or jobs creation announcement at a successful company they supported, but are quick to criticize when the pendulum swings the other direction (especially for the other party). Clearly, there is a role for government in innovation, or there would be no DARPA , no ARPA-E , no National Institutes of Health, no NASA, no Small Business Innovation Research (SBIR) grants and no Congressional Committees on the topic, such as the Subcommittee on Competitiveness, Innovation and Export Promotion. Even the Department of Energy’s mission statement pointedly refers to “ensuring America’s security and prosperity… through transformative science and technology solutions.” “There isn’t the financial incentive for industry to take on certain risks,” Dr. Mark Rohrbaugh, Director of the NIH’s Office of Technology Transfer told me, adding that the NIH “assumes the risk until the invention is ready for industry to take it over.” He added that the NIH’s investments are “more likely than those from industry to be meeting unmet needs.” In an email follow-up Dr. Rohrbaugh added, “NIH funding is complementary to research funded by the private sector in that it generally involves research that is too high risk for the private sector to conduct on its own.” This is precisely why those who say we need to “leave it to the markets” are dead wrong. Here are a few facts about the federal government’s investments in innovation: 1. The Small Business Innovation Research/Small Business Technology Transfer program (SBIR/STTR) disbursed grants through 11 federal agencies, and is very popular across party lines. The March 2012 issue of Hawaii Business cuts to the chase : “SBIR has always been a politically popular program. After all, it’s a way to direct federal funds into almost every congressional district under the cover of helping innovation and improving the economy.” According to the SBIR website, “Through FY2009, over 112,500 (SBIR/STTR) awards have been made totaling more than $26.9 billion.” In 2010, another $2 billion-plus was invested, and the program has been funded through 2017. This includes 11 agencies, each of which is required to allocate 2.5% of their annual research and development budget to SBIR/STTR grants: the USDA, Department of Commerce, Department of Defense (and DARPA), Education Department, Department of Energy (and ARPA-E), Health and Human Services (and the NIH), Department of Homeland Security, Department of Transportation, Environmental Protection Agency, NASA and the National Science Foundation. According to the New York Times : “The consensus view is that S.B.I.R. is probably the best R&D program in the federal government,’ said Jere Glover, executive director of the Small Business Technology Council, an affiliate of the National Small Business Association. A 2008 study by researchers from the University of California found that S.B.I.R. recipients accounted for between 20 and 25 percent of top American innovations since 1997,’” By the way, an SBIR-grantee company, MicroStrain, saved the Liberty Bell when it was discovered to have a hairline crack that would be exacerbated by the Bell being moved. 2. The DOE-Environmental Protection Agency Energy Star program provides another example of successful government innovation, as it turns 20 years old this year. The Energy Star program now “include(s) nearly 20,000 organizations from every sector of the economy. More than 80 percent of Americans now recognize the Energy Star label. American families and businesses have saved nearly $230 billion on utility bills and prevented more than 1.7 billion metric tons of greenhouse gas emissions, with help from Energy Star.” “Americans, with the help of Energy Star, saved enough energy in 2010 alone to avoid greenhouse gas emissions equivalent to those from 33 million cars — all while saving nearly $18 billion on their utility bills.” 3. Revenue generator: Many of these patents and inventions have resulted in royalties from licensing agreements, for example, Dr. Rohrbaugh told me they generated $97 million in 2011 for the NIH. It’s when the experiments and investment don’t turn out as hoped that suddenly there’s a “problem” with government’s role in supporting them. “We can’t put taxpayer dollars at risk” seems to be a rallying cry for some lawmakers. Yet, they bemoan that China is overtaking the U.S. in important markets for the future, such as in solar panel manufacturing, which was originally developed in the U.S. (and subsidized substantially by the Chinese government). The lesson that seems to be lost in the discussion on Capitol Hill these days is that it’s not about “picking winners.” It’s about keeping America competitive. It’s about hedging bets by investing in a number of innovative technologies knowing that some will thrive and others will lead to new ones that thrive. All “mistakes” or “failures” are merely lessons to be applied in the next go ’round. As Benjamin Franklin once said, “I haven’t failed. I just found 10,000 ways that do not work.” Isn’t keeping America competitive the federal government’s responsibility?

Read the full article →

Jed Kolko: Home Prices Are Up. Haven’t You Heard?

April 9, 2012

Find Out Where Asking Prices and Rents Are Heading, Almost In Real-Time, With the New Trulia Price Monitor and Trulia Rent Monitor I rely on the major sales-price indexes — Case-Shiller , Federal Housing Finance Agency (FHFA) and CoreLogic — as much as the next guy (or the next housing economist, anyway). They’re essential for understanding where home prices have been going. But they come out between five and eight weeks after each month ends, and the sales prices they report are rooted in asking prices set two or three months earlier. Doing these sales-price indexes right takes time , but buyers, sellers, investors and policymakers need to know what’s happening in the housing market now . Starting today, we’re closing this gap. The Trulia Price Monitor and the Trulia Rent Monitor show every month what’s happening to asking prices and rents almost in real-time. By focusing on asking prices and releasing each month’s Monitors just days after each month ends, we can detect price movements at least three months before the major sales-price indexes do. What are the Trulia Price Monitor and Trulia Rent Monitor? To create the Trulia Price Monitor and Trulia Rent Monitor, we take all the for-sale homes and rentals ever listed on Trulia.com and calculate how asking prices and rents changed month by month. Rather than simply tracking the average or median, we adjust for the changing composition of homes that are listed each month. Therefore, these Monitors reflect the price and rent trends for similar homes in similar neighborhoods over time. For the Trulia Price Monitor, we also account for the regular seasonal fluctuations in asking prices in order to reveal the underlying trend in prices. The Trulia Price Monitor differs from the major sales-price indexes in important ways. First, we focus on asking prices. Final asking prices lead sales prices by about two or three months, reflecting the time that homes are typically on the market. In 2011, the Trulia Price Monitor’s national month-on-month changes track the seasonally-adjusted month-on-month changes in Case-Shiller and FHFA two months later.  Asking prices, however, are not a perfect predictor of sales prices: the final sales price for a home can be above or below asking, and some listed homes might not sell. Asking prices and sales prices each have their advantages for understanding the housing market: asking prices have the advantage of showing current market conditions and trends, but sales prices are the best guide to historical and long-term trends in the housing market. Second, the Trulia Price Monitor uses a different statistical approach: a “hedonic” rather than “repeat-sales” method. The explanation gets technical pretty quickly, but we’ve provided all the details in our FAQs . Here’s what to expect from us: in the first few days of each month, we will publish price and rent trends for the previous month, for the nation as a whole and for the largest metro areas (for prices, the 100 largest; for rents, most of the 100 largest). We report monthly, quarterly and yearly changes nationally, plus quarterly and yearly changes at the metro-level. Our approach lets us dig deep: in the future, we’ll look at price trends for single-family homes versus condos; homes with one, two and three or more bedrooms; downtown versus suburban trends; and more. Have some other comparison that you’d like us to make? Email us and let us know. Madness! Asking Home Prices Moved Up in March Let’s get to the facts. Nationally, asking prices on for-sale homes were 1.4 percent higher in March than one quarter ago. Prices increased month over month by 0.9 percent in March and 0.6 percent in February. What we found through the Monitor is that asking prices had been declining prior to February and reached a low in January 2012. Throughout 2011, asking prices rose slightly in several months of the year, but never more than 0.2 percent in a month. Asking prices in March were 0.7 percent below their level one year earlier. One thing to keep in mind — because the Trulia Price Monitor is seasonally adjusted, these monthly and quarterly increases are on top of typical springtime price jumps . Without adjusting for seasonality, asking prices rose 2.4 percent quarter over quarter. Asking Home Prices Are Looking Up for the Sunshine State But all housing is local. On the up side, the Trulia Price Monitor revealed that asking prices rose year over year in all large Florida metros, and fastest in Cape Coral-Fort Myers and Miami. Asking prices also rose in Phoenix, Pittsburgh and the Detroit area. Meanwhile, local housing markets in much of the West continue to struggle. Prices fell most in Tacoma and Seattle, followed by Sacramento and Las Vegas. All large California metros saw year-over-year price declines. Just check out this metro-level map and see for yourself. Florida and Michigan are looking mighty green (which means rising prices) whereas California is in the red (which means falling prices). Why do we see price increases in some places and price declines in others? As a general rule, prices are now rising faster in places where prices fell more during the bust and where vacancy rates are higher . In other words, many of the local price increases are bounce-backs: Cape Coral-Fort Myers, Miami and Phoenix all saw huge price drops after the bubble burst and big increases in asking prices this past year. But there are exceptions: Las Vegas prices continue to fall, even after years of steep price declines. Top 10 Metros With Largest Price Increases # U.S. Metro Y-O-Y % Change in Asking Price 1 Cape Coral – Fort Myers , FL 14.8% 2 Miami, FL 14.1% 3 Phoenix, AZ 13.2% 4 Pittsburgh, PA 9.2% 5 Little Rock, AR 6.7% 6 Orlando, FL 6.3% 7 North Port – Bradenton – Sarasota , FL 6.2% 8 Palm Bay – Melbourne – Titusville , FL 6.1% 9 West Palm Beach , FL 5.8% 10 Warren – Troy – Farmington Hills , MI 5.6% Top 10 Metros with Largest Price Decreases # U.S. Metro Y-O-Y % Change in Asking Price 1 Tacoma, WA -11.9% 2 Seattle, WA -9.1% 3 Sacramento, CA -8.3% 4 Las Vegas, NV -7.7% 5 Wilmington , DE-MD-NJ -7.7% 6 Columbia, SC -7.3% 7 Cleveland, OH -6.9% 8 Fresno, CA -6.8% 9 Milwaukee, WI -6.7% 10 Allentown , PA-NJ -6.7% Note: Rankings based on the year-over-year changes in asking price among the 100 largest U.S. metropolitan areas. Want to see the full list of price and rent changes for all 100 metros? You can download it here . No Wonder Your Landlord is Smiling What about rentals? Nationally, rents rose by 5.0 percent year on year: unlike prices, rents have been moving steadily upward. During the recession, some owners lost their homes and became renters instead; also, many younger adults deferred the leap from renting to owning. Strong rental demand, combined with little new rental construction, pushed rents higher. Asking rents rose over the past year in almost all large metro areas included in the Trulia Rent Monitor — regardless of whether asking home prices were going up or down. For example, rents rose strongly in Miami (12.1 percent) and Denver (9.9 percent), where for-sale prices also increased. Meanwhile, rental affordability declined in places where rents rose while prices fell, most notably in San Francisco (rents up 11.1 percent), Seattle (9.7 percent), San Jose (9.4 percent) and Boston (9.2 percent). As for the very largest metros, rents rose 6.2 percent in New York and 6.1 percent in Chicago , but only 0.6 percent in Los Angeles . So what drives rent trends? Employment growth matters most. San Francisco, Denver, Seattle, San Jose and Austin all had high year-on-year employment growth (through February 2012, according to the Bureau of Labor Statistics) and big rent increases. Is This Bounce-back Here To Stay? Will these price and rent increases continue? Continued job growth plus declining inventories equal more buyers chasing fewer homes – and therefore higher prices. The big wildcard for prices is the next wave of foreclosures. The robo-signing settlement will accelerate foreclosures, which will ultimately depress prices in neighborhoods where foreclosures are concentrated. Rents this year depend on both job growth and new construction: last year builders broke ground on many multi-family buildings, which should come to market later this year and dampen rent increases. Want to be the first to know how foreclosures , construction and jobs are affecting prices and rents in April? Come back in early May, when we’ll release the April 2012 Trulia Price Monitor and Trulia Rent Monitor.

Read the full article →

Dr Layla McCay: Wanted: Professional Soulmate

April 9, 2012

I had never heard of the term “professional soulmate.” But it turns out that while I was spending my formative years coming up with brilliant ideas to change the world, I should actually have been screening my fellow students for their potential as my future business partners. That’s what the founders of “farm-to-table” company Sweetgreen did, while they were students at Georgetown University. Recently, they told us at TEDxDupont Circle , a screening party that streamed the TEDxChange conference from Berlin (with “local voices” afterward), that as an entrepreneurial society, we put too much emphasis on the big idea. They argued that you could have all the best ideas in the world, but it takes a synergistic partnership to make it happen. As they said, Ben and Jerry didn’t become big because of Chunky Monkey. (Not that I’m suggesting that flavor is the best idea in the world, though it’s not unpleasant…) The conference wasn’t specifically about partnerships, but it really drove home the message — finding the right partners is critical to success. I liked hearing about designer Jeff Chapin’s partnership with a non-profit organization to design low-cost latrines that people really want, with huge potential impact on sanitation and health in the world’s poorest countries. It was intriguing to think of how aesthetics can play such a central role in the success of public health measures. Then Theo Sowa made a thought provoking presentation about how interventions to empower African women keep making the mistake of conceptualizing these women as “victims” who need to have things done to help them, rather than recognizing their leadership and partnering with them to deliver change. Bill and Melinda Gates are surely each others’ professional soulmates. The TEDxChange chair noted that their Foundation has become the biggest change agent in the world outside of government. This conference launched their ‘ no controversy ‘ campaign to catalyze the leadership needed to increase access to contraception in low and middle income countries. I suspect it will get results. In the meantime, there may be a gap in the market for professionalsoulmate.com …

Read the full article →

Stephen Fitzpatrick: Smart Meters – Meters Without the Smart?

April 8, 2012

Hard-pressed households may be facing yet another kind of energy bill because an upcoming launch of smart meters is going off the road. They are meant to save us money, help us control our energy use and help the country hit its environmental targets. It’s now three years since the previous government announced a national roll-out of smart meters to every UK home by 2020 but the creation and nature of the installation program has suffered repeated delays and changes in direction. The specification for smart meters, due last autumn, was finalised last month by the Department for Energy and Climate Change (DECC) and they’ve sent it to the European Union to be approved. The delays mean that right now, any existing smart meters already installed and not to the anticipated sophisticated technical standard will need to be removed from homes by 2020. As a result the meters won’t last their certified life, which is just wasteful, the cost of buying them will be significantly higher for energy suppliers and some customers will have two meters installed within a short period. For households with pre-payment meters, the government has said it won’t decide how to manage this at the same time as normal payment meters meaning that their existing ‘non-smart’ meters will be in place for longer, leading to a two-tier system. It’s been reported that at least two of the ‘Big 6′ suppliers have halted their smart meter trials due to some of these uncertainties. There’s a suggestion that smart meters could be made optional (for suppliers who may not choose to offer them and for the public who may choose not to have one installed) but we think this makes little sense. How will the UK meet its 2020 commitments to reduce carbon emissions if smart meters are optional, when our homes contribute almost 30% of the UK’s emissions? Smart meters are likely to be more expensive for everyone, as new systems and meters will have to be paid for by a smaller number of customers – with the uncertainty leading to less investment by suppliers and less choice for you and me. We have to ask whether the government is wavering in its commitment to smart meters? Switching suppliers is often a good way to get a better deal, but if you have a smart meter from one of the existing trials and want to switch supplier before 2014, you’ll rely on the old supplier making information available to the new one – but there’s no incentive to do this quickly. We’re likely to lose access to our smart data for a while following a change of supplier – or be put off from switching which could cost us more in energy bills. We’ve suggested to DECC and Ofgem, the industry regulator, that smart meter installers should be made to provide smart data to new suppliers until a central communication body is set up to manage this. The complexity of the suggested process may lead to suppliers thinking it’s too complicated and administratively intensive so the customer’s new supplier may then only offer the ability to use the meter in a non-smart mode until at least 2014. The government is saying that energy suppliers will have to provide standardised IHDs (In-Home Displays) when installing approved smart meters. From the evidence we’ve seen, we don’t think most people will use these regularly to reduce or change their energy usage, meaning they could be a huge waste of time and money. We think it would be better to let households buy an IHD of their choice – or even receive the data on a smartphone or tablet app – creating competition and ensuring a greater chance of people using the piece of tech that’s right for them. The Energy Retail Association (ERA), the industry body for the ‘Big 6′ suppliers appears to have been tasked with creating the guidelines for installing smart meters. We think the independence of the code is compromised as the ‘Big 6′ energy companies are being allowed to heavily influence it – despite someone from the DECC chairing the steering board. The danger is that the process might be skewed in favour of salesman rather than what’s best for bill-payers. And the ability to educate the public about the rollout of smart meters could be irreparably damaged if everyone realises that the installation process is being controlled by companies that already suffer from tarnished reputations. In fact, negative press about smart meters already seems to far outweigh the positive, with bad experiences reported in the US. Until all of these factors are resolved, consumers will not have all of the information in order to decide, when the time comes, whether a smart meter is a smart idea for them.

Read the full article →

James Kwak: Fiscal Affairs: Someone Is Wrong in The Times*

April 7, 2012

James Stewart has doubled down on his infatuation with Paul Ryan. Ryan’s budget, he says, is a viable centrist starting point for budget negotiations, and attacks from “left and right” are mere “partisan rhetoric.” This is several different kinds of crazy. First, Stewart repeats his belief that Ryan’s plan would increase taxes on investment income. But that belief has no basis other than Stewart’s own belief that it would be a good idea. As I pointed out before, Ryan’s own budget argues against raising taxes on capital gains and dividends. The only thing Stewart can find is Ryan’s apple-pie platitudes about the need for tax reform. But Ryan’s own vision of tax reform, as evidenced by his budget’s own words, doesn’t include higher capital gains taxes. (In addition, as a signatory to the Taxpayer Protection Pledge, Ryan is sworn to “oppose any and all efforts to increase the marginal income tax rate for individuals and business.” That sounds to me like it includes the capital gains tax rate, which is a marginal income rate.) This is further evidence of columnists’ ability to project their own fantasies onto Paul Ryan’s handsome face. More generally, Stewart pins high hopes on Ryan’s embrace of tax reform. But all Ryan’s budget actually says about tax reform can be summed up in two points: tax reform is good; and tax rates should be lower (25 percent for the top individual rate and for the top corporate rate, both down from 35 percent today). This of course allows credulous people to see themselves in Paul’s blue eyes (see above). But if you want a serious starting point for tax reform, you should look at Simpson-Bowles or Domenici-Rivlin , both of which spelled out actual tax expenditures they would close (or Feldstein, Feenberg, and MacGuineas , or White House Burning , or any one of many other policy proposals that do the same). Ryan’s “tax reform” is nothing more than a few talking points designed to score political points (why else would you specify the lower tax rates but not the closed loopholes), not a starting point for anything. Stewart also plays the “centrist” card with unprecedented aggressiveness. He cites attacks by the Club for Growth as proof of Ryan’s reasonableness. But when it comes to military spending, the Club for Growth isn’t attacking Ryan from the right; it’s attacking him from the left . Democrats want to reduce military spending as a share of GDP; so does every bipartisan deficit reduction panel; so does the Club for Growth (which thinks that the automatic spending cuts in the Budget Control Act should be respected). Ryan, by undoing the automatic spending cuts to preserve defense spending, is to the right of the budget debate, not in the center. In other words, everyone knows that if you want to reduce the deficit you have to cut defense spending–except Paul Ryan and James Stewart. Then there’s Medicare, one of the few areas where Ryan is willing to spell out his cost-cutting proposals. For Stewart, this shows that Ryan is a brave warrior against entitlement spending. But simply tackling entitlement spending doesn’t make you reasonable, centrist, or worth listening to; everyone who talks about the deficit talks about tackling entitlement spending. (Even Simon and I do, although our entitlement cuts are smaller than most other people’s.) It’s the actual proposal that matters. And Ryan’s proposal is only one step from the far-right fringe–that’s the step he walked back since last year. Last year he was going to convert Medicare into a voucher program where you could use your voucher toward insurance from a private company, but the value of the voucher was artificially capped so it would buy less and less health care over time. This year the only difference is that now you can buy insurance from a private company or from traditional Medicare. But in either case, the important points are: (a) the vouchers are designed to grow more slowly than the cost of health care, meaning a huge transfer of cost and risk from the government to individuals; and (b) reliance on the private market to reduce costs and improve outcomes (something it’s failed at dismally for the last forty years). Having a Medicare plan shouldn’t win you any points; it’s what’s in the plan that matters. At least for most of us. This inattention to actual policy is how Stewart can think that “within the Ryan budget proposal is the outline of a grand compromise not all that different from the one President Obama and the House majority leader, John Boehner, reportedly came close to reaching last summer: long-term deficit reduction through tax reform, higher tax revenue and spending cuts.” Well, yes, if you’re going to stick to the level of abstract generalities, I guess the Ryan budget is similar to the Obama-Boehner deal in that both included tax reform and spending cuts. In practice, though, the Obama-Boehner deal was nothing like the Ryan budget. We know the tax reform was completely different because Boehner was offering higher tax revenues that were not entirely due to supply-side fantasies. Ryan only achieves higher tax revenues by dictating that his plan will bring in 19 percent of GDP in tax revenue; nowhere does he say how we would actually achieve this while slashing tax rates. We also know the spending cuts were completely different, because Obama-Boehner did not convert Medicare to a voucher system (they did include spending cuts, but they kept the same benefit structure), while Ryan does. Finally, here’s one more way to think about the Ryan budget: This picture shows all government spending except for Medicare, Medicaid, CHIP, Social Security, and net interest. (The data are from Tables 1.1, 1.2, 3.1, and 8.5 of the OMB’s 2012 budget, historical tables.) It’s a close approximation for discretionary spending, and it’s what the CBO uses in its long-term projections . The Ryan Budget would reduce spending on everything except Social Security and health care to the lowest levels since before the Great Depression. Furthermore, those numbers include defense spending. Since Ryan’s budget proposes to protect military spending from the automatic cuts in the Budget Control Act, I think it’s fair to assume that he won’t want to cut defense spending to historical lows. Since World War II, defense spending has never fallen below 3.0 percent of GDP. Assuming that defense spending never falls below that level, you get this picture: This is a blatant assault on the entire federal government except for health care, Social Security, and defense. This is not a courageous, centrist starting point for a real deficit solution. * See XKCD . James Kwak is the co-author of White House Burning: The Founding Fathers, Our National Debt, and Why It Matters To You , available from April 3rd. This post is cross-posted from The Baseline Scenario . Read more from the Fiscal Affairs series here .

Read the full article →

Mike Lux: Homes, Banks, and Politics: Round 2 of Settlement Talks

April 6, 2012

Now that the big settlement talks with the banks are over, and most of the reporters have gone home, not very many people are paying attention to what is going on in the financial fraud task force, or in the continuing conversations between various players on Wall Street and the government. But not understood by most people is that there may be a Round 2 in the settlement talks, and if there is, it may well be a doozy — a much bigger deal than the first round. If there isn’t a Round 2, that will likely be a different kind of “doozy,” a problem with huge political and economic implications for the president and politicians of all stripes. Let’s start with talking about why so many activists and organizations like the Campaign for a Fair Settlement and the New Bottom Line pushed so hard for a more aggressive investigation in the first place. No matter how those first settlement talks with the banks turned out, it was always clear that whatever the number government negotiators got would be tiny compared to the scope of the $700 billion dollar underwater mortgage problem homeowners and our entire economy is faced with. And we were right: the $25 billion is a drop in the bucket, about 3 percent of the way to a solution. The far bigger question is what would happen next, because our national economy will continue to be weighed down heavily by this deeply damaged housing market unless there are much deeper mortgage write-downs. There are two big ways for more mortgage write-downs to happen, and two big goals progressives should have for the financial fraud task force. The former pair first: most mortgages are owned by either Fannie and Freddie, or by the big bank conglomerates on Wall Street. The first way for massive mortgage write-downs to happen is either for Fannie and Freddie acting administrator Ed DeMarco to change his policies on write-downs, or for him to be replaced by Obama making a recess appointment of someone who would change the policies. That’s why many groups have launched a Fire DeMarco campaign, and many others keep banging on his door to ask him to change direction. There is some dissent on this among people who know the banking issue, because some banks own second liens on these mortgages and could benefit as a result. It’s a fair point, and anything that can be done to structure Fannie and Freddie write-downs in a way to not help the big banks is important to do. But my view is that maximizing the write-downs is critical, that homeowners and the overall economy need these write-downs too badly to spend an inordinate time worrying that some banks may benefit as a result. (Wall Street bankers find many different ways to hedge their bets and diversify their holdings, meaning they sometimes find ways to profit even on things that are actually good for people. Go figure.) The other way for big write-downs to happen is if the financial fraud task force can squeeze the big banks on all the fraud they have committed, and get them to agree to writing down a much bigger pot of money — in the hundreds of billions, not the tens — in exchange for a legal release on some fraud claims (although definitely not all) by the government. Which leads to my next major point: that of goals for this fraud task force. The two goals for the task force as far as the progressives I am talking to are these: write-down money and prosecution for crimes committed. Some people think these are mutually exclusive. I don’t, and neither should task force members. Based on what we already know from news reports and other legal action, it is clear that if the task force is aggressive and tough enough in their negotiations, they can through subpoenas and depositions find thousands of separate violations of punishable financial fraud. Much of that can be used to force the bankers to the table for real negotiations about hundreds of billions of dollars in mortgage write-downs, but investigators will also find plenty of fraud so egregious that the high rollers in these firms ought to be going to jail as well. Indicting, perp walking, and sending some of these top execs to prison is important, because if wealthy and powerful people can continually violate the law with impunity, they will in fact keep doing just that, and our financial system will be permanently at risk. The question now is whether the task force will be effective in bringing bankers to justice, and in forcing bigger write-downs. But this is a real question, and I think it is important for the American people to understand what is going on in there. To all of us on the outside who have been working on these issues, things don’t seem to be moving very fast. We need to know the answers to some very important questions, including: Is there an executive director, coordinator, or clear manager of any kind in place to drive this process forward aggressively? There was discussion for a while of Rep. Brad Miller (D-N.C.), a great consumer advocate, playing such a role, but that talk seems to have died out and I am still not clear how they are managing this in the meantime. Will any more staff resources beyond the very modest numbers announced when the task force was unveiled be appointed? Of the staff resources that were appointed, are all of them actually assigned and working? If not, how many are actually doing any work? If not, why (the hell) not? Are task force leaders keeping a close eye on statute of limitation issues to make sure we can actually prosecute the most important cases of bank fraud that exist out there? After the first flurry of subpoenas, we haven’t to my knowledge seen any more come down. Why not? Seems like there is plenty to investigate, why the hold-up on more subpoenas? At least some of the members of the task force have said they want to be aggressive and fast-moving in this investigation. Are there people putting road blocks up? If so, why aren’t they being cleared away? Who has point responsibility for clearing the road blocks out of the way? Here’s the most important question in my mind: is the White House paying enough attention to this? I know from my experience in the Clinton White House that once a decision is made to move forward on a major new initiative like the settlement and fraud task force, that sometimes the sense of urgency fades and senior staff tend to move on to new issues, problems, and crises — they assume whoever they appointed to do things is taking care of it. That is natural enough given all the demands on the White House, and I sense it may have happened here. But I fear for my friends in the Obama White House that this is going to come back and bite them in the ass in a really serious way if they aren’t paying a lot of attention to it. One of the greatest weaknesses the president has going into election season, both with swing and base voters, is the lingering feeling that he and his team have been too soft on the Wall Street guys that took down this economy. The big banks making record profits and handing out record bonuses the year after taxpayers bailed them out, and while the overall economy has been terrible, has left a lasting impression with voters. The failures of the HAMP program, the flurry of bad press around the Suskind book, the unwillingness to recess appoint Elizabeth Warren as the head of Consumer Financial Protection Bureau (even though the person Obama appointed, Rich Cordray, has been terrific, he has nowhere near the profile or cachet with activists following the issue as Warren), and the lack of any prosecution of Wall Street big shots has steadily added to that image. So if nothing happens with this task force any time soon, it will be a huge disappointment and a very big deal to people and organizations working on the issue, to the reporters who know the financial beat, and to voters in general. In an election season dominated by discussion of Mitt Romney’s Wall Street background, for the president to be vulnerable on this issue would be a terrible mistake, and the way they get strong on it is to have a successful task force. Here’s the electoral component of this that almost no one is thinking about: there are 1 1,000,000 underwater homeowners right now, many of them families with multiple voters living there. There are a ton of them in key swing states like Nevada, Florida, Ohio, Pennsylvania, North Carolina, Wisconsin, and Colorado. In my mind, they are very likely to be swing voters: screwed over by Wall Street, but not feeling like either party is helping them much. They have heard about the settlement, but $25 million doesn’t go very far when there’s $700 million in negative equity, so they aren’t likely to get much help, which will make them even more irritable — it could be HAMP all over again in terms of promises of help made but not delivered. Holding the banks accountable, and delivering a big new round of write-downs, is going to look awfully good to those voters and their neighbors who don’t want more foreclosed homes on the block. My advice to my friends at the White House is to pay a lot of attention to this sooner rather than later, and to light a fire under anyone involved in the task force who may be throwing those road blocks up. The task force needs to show some visible progress, some real movement that is obvious to people, sooner rather than later on this. If they move aggressively forward, I believe based on conversations with legal experts that it is entirely possible the banks can be forced to write down $200-300 billion in mortgages before the end of the year. That would not only help those underwater homeowners but would be a dramatic boost to the entire rest of the economy because of the extra cash it would put in homeowners’ pockets and the major boost it would be to the overall housing market. The big banks can certainly afford it: according to an SEIU report , in 2010 alone just the six biggest banks gave out an estimated $143 billion in bonuses. Given that these write-downs would be cumulative over many years, $200-300 billion might mean smaller bonus checks and profit margins, but it is nothing that would break the bank. And here’s the other thing: if you write down these mortgages and stabilize the housing market, all those toxic assets the big banks hold will start to look healthier soon, so the banks would even get some of that money back. This issue has faded from the headlines, but it is a huge deal — for the homeowners who remain stuck underwater, for the housing market and economy as a whole, and for the president’s re-election chances. Let’s hope these questions get answered soon, and in a good way. And let’s hope the task force can get its act together to force another big settlement, and some perp walks as well, before it is through.

Read the full article →

Kay Koplovitz: Women & Augusta: The Long Drive From the First Tee to the Green Jacket

April 6, 2012

Virginia Rometty isn’t the first women to approach the first tee at Augusta National Golf Club. I entered a man’s domain when I became the first women to join the ranks of television CEOs to be invited to the privileged Media Day luncheon, always a Thursday event, and the first day of tournament play. The year was 1982. I am the founder and then the CEO of USA Network. We had negotiated a license to cover the Thursday and Friday tournament coverage in cooperation with CBS and Augusta National Golf Club. It was the first time the first two days were to be covered live on TV. It was also the first time I had ever attended the event. It was a magnificent spring day, sunny and warm, and the generous hospitality of the Augusta members was on display. This really is one of the world’s most prized events to experience even if you aren’t a golfer. The course is lined with flowering dogwood, cherry blossoms, azaleas and a potpourri of other plants of magnificent color. I was truly impressed with its beauty. Also impressive was the lack of commercialism — no big corporate banners, no merchandise tents. It was and still is the club of Southern hospitality. However, it was also the club with no black, women or Jewish members. In that year I also remember being astonished that all the club caddies were black and that they were the only black people allowed on the course. So I should not have been surprised by what happened as a dozen or so executives of the TV networks gathered with Chairman Hord Hardin in front of the Clubhouse to go to lunch. We entered the front door and into the main dining room where club members and guests, including women, were having lunch. We proceeded up the staircase just to the left of the hallway leading back from the main dining room. Hord was leading the way and I was right with him as we ascended the staircase. The men followed. As we approached the top of the stairs, Hord turned to me with a concerned look on his face and said in his deep southern drawl, “Ah, Kay, we’ve got a problem.” Hmm, a problem, I thought. “What’s our problem, Hord?” He hemmed and hawed a little and then said, “We don’t allow women on the second floor.” Knowing I wasn’t about to go downstairs and eat by myself, I quipped back, “Well, Hord. What are we going to do about that?” After only a moment’s hesitation on Hord’s part he offered, “Well, I guess we’ll eat downstairs in the Trophy Room.” The group turned around en masse and filed back out the front door and walked over to the Trophy Room, just 30 yards or so away. And so it was in 1982 that a new tradition was started at Augusta, as the TV luncheon was held in the Trophy Room for the next decade, until the upstairs men’s grill was finally open to all. Flash forward to eight years later, when racial equality was causing pressure for the PGA at Shoal Creek, Alabama. A colleague and I were seated on Hord’s veranda overlooking the lake in Harbor Springs Michigan. Hord was rambling on when he stopped short and his eyes lit up. Out of the blue he commented that I’d make a fine member of the club. Obvious to me then, he was thinking he’d throw the heat off the race issue by inviting a woman to join. But suddenly another thought crossed his mind, and I saw his eyes cloud over. He looked me directly in the eye and softly said, “You married a Jew, didn’t you?” I know traditions are slow to change, but change they do. Augusta does have a few black and Jewish members but no women yet. Now, thirty years after I first arrived, our time has come. It’s been a long drive since I first teed up women at Augusta. Now it’s time for Ginny and others to don the coveted Green Jacket.

Read the full article →

Annie McKee: The Evil Boss Reconsidered

April 5, 2012

“I can’t stand my boss.” “My boss is incompetent.” “I hate my boss.” “My boss is clueless.” It’s a sad situation, really, when statements like these are at the center of so many conversations at work. But it’s true: bosses are disliked, despised, disrespected and detested. More people leave jobs because of their bosses than because of pay issues, working conditions or the job itself. In fact, in a Gallup survey, fully one half of all workers would fire their boss if given the opportunity . So, if we want to improve our workplaces and work lives, we better start by looking at why so many leaders are falling short on such a grand scale. I’ve spent the last decade or so on the other side of this question — how to help leaders get better at what they do. It’s more fun to look at the problem with a solution in mind, but I keep coming back to the fundamental fact that too many leaders really do wreak havoc on people and organizations. Why does this issue persist? There are countless reasons, but a few stand out: First: We promote people for the wrong reasons. We revere the mind and we promote people who seem smart — regardless of their ability to deal well with people. We worship money and reward individuals for making it for our companies, no matter the collateral damage to people along the way. By the time a person has significant leadership responsibility, he or she has gotten loads of positive feedback — money, praise, promotions, you name it. Why should they think there is anything wrong? And if we do notice the problems with these dissonant individuals, it’s hard to convince anyone — so we see again and again that the easiest thing to quiet the storm is to promote them again. Second: Even if people want to learn how to lead, it’s difficult, if not impossible, to get this kind of development at work today. Most of our bad bosses have not learned anything at all about how to manage or lead people — that is, other than the basic plug-and-play that is the stuff of most leadership development programs in organizations. Fact: billions of dollars are wasted on leadership development programs every year , partly because they are designed and conducted in ways that ignore the vast proven practices for meaningful learning. The result: a few people learn something, most people learn very little — and even those small gains are lost over time — and we’re talking lost after only a few weeks or months, not years. And even the companies that have good programs have sidelined most of them for the last four years. Four years! That’s a generation in management terms, and accounts for the exceptionally low rate of employee satisfaction these days. Third: These bad bosses are completely, totally stressed out. If they ever had self-awareness, self-management or the capacity to create a resonant environment, these skills have become casualties of the Sacrifice Syndrome . We expect so much of our leaders, work is incredibly demanding, and our home lives aren’t easy either. Try working 24/7 for a few years, and see what happens. With that kind of stress, our brains are designed to shut down, to go myopic — and in that state you can say good-bye to clear thinking, good judgment and positive relationships at work or home. In the end, organizations create their own monsters. These bad bosses aren’t usually evil. Don’t get me wrong, I’ve met a few who are. I even worked for one. They are soul destroying. But so are the well-intended, generally good people who have turned into insecure, credit-seeking, micromanaging nightmares. What can you do? 1. The first thing you need to do is check to see if you are one of them. If you have become the person everyone loves to hate, it’s time for a change. It won’t necessarily be easy, but if you want to get back to the person you really are, you’ll need to take a hard look at what got you to this place. You’ll likely need to make some pretty major changes to your lifestyle so you can deal with the stress that is inherent in your job. You may need to put yourself in a learning mode — get a coach, find a good leadership program, develop daily routines that support you to be at your best more often, maybe even get a therapist. Yes, it might require even that. At the least, you’re sure to need to focus on personal growth. Professional development simply doesn’t happen without it. 2. If you’re not the problem — still a good leader, still creating a resonant environment for your team — you need to find ways to protect yourself from the dissonance around you. You can start by making sure your psychological defenses are strong and in place. Make sure you know that the behavior directed your way that hurts so much is not about you. It’s about your boss. It is his or her stress, not yours. It’s her insecurity, his lack of understanding about how to manage people. Defend yourself by refusing to let your bad boss hurt you. 3. You can also take some solace in looking down and around you. Make sure that you’re not “kicking the dog.” Instead of passing on the bad behavior, do just the opposite. Get yourself to the point where you can share positive emotions, not negative. Create an environment that is full of promise and excitement, not doom and gloom. Engage your natural optimism and focus on hope. Focus on empathy and compassion so you can direct your activities toward supporting others. Hope and compassion are two ways to literally shift your brain into a mode that helps you deal with stress — while you are also protecting and inspiring others. 4. Finally, you can stop the madness by promoting the right people. Don’t focus so much on results, focus on how people get results. Look under the rocks — what are they doing to people? Are they killing people to reach goals? Squeezing the life out of their team to get that last half percent of growth in the business? If so, it’s not worth it when you consider the debris they have left in their wake. No matter how unpleasant it is, you really do need to learn to give people honest feedback about their leadership skills. It’s time we look beyond smarts and focus on emotional intelligence — those are the skills that make good leaders and are the antidote to the bad bosses out there. It may be common sense, but it’s not common practice — so if we want high performing and compassionate organizations, it’s time to turn this around.

Read the full article →

Jenny Kassan: JOBS Act: Crowd Funding Could Give a Boost to Small Business

April 5, 2012

Today the President will sign the Jumpstart Our Business Startups (JOBS) Act in to law, a complex and by no means perfect bill that contains at least one ‘no-brainer’ win for both businesses and investors: crowd funding. This bipartisan legislation fulfills the President’s call to reduce regulatory burdens that prevent many small and young businesses from raising capital — specifically by allowing crowd funding and expanding mini-public offerings. The legislation is remarkable, as it (rightly) reverses more than 90 years of restrictions on raising capital at the grass-roots level. How we got here is historic as well — it illustrates what power lies in everyday individuals. An impact that will now be felt around the country as small businesses and startups look to crowd funding and other non-traditional means of raising capital. The movement began in 2009, when author and economist Michael Shuman wrote an article for Community Development Investment Review , a publication of the San Francisco Federal Reserve Bank. In it, he wrote: “Existing laws place huge restrictions on the investment choices of small, ‘unaccredited’ investors — a category in SEC vernacular that includes all but the richest 2 percent of Americans. The regulations prohibit the average American from investing in any small business, unless the firm is willing to spend $50,000 to $100,000 on lawyers to prepare a private placement memorandum or public offering — thick documents with microscopic, ALL CAPS PRINT that no human being has ever been observed actually reading.” The good news is that local businesses could get a huge investment boost with some modest securities reforms that would cost little or nothing. That simple idea gained momentum in the summer of 2010, when the Sustainable Economies Law Center (SELC), a nonprofit based in Oakland, California, wrote a letter to the Securities and Exchange Commission (SEC) requesting an exemption for crowd funding. The SEC received approximately 150 letters of support for the proposal. SELC volunteers then talked to staff at the President’s Office of Technology about the idea and the President supported the idea of an exemption for small securities offerings, which he announced in his jobs speech in September 2011. Legislation creating an exemption for small “crowd funded” investments passed the U.S. House of Representatives in November by an overwhelming majority — almost a unanimous vote of approval. With the final law being signed today, it reverses laws restricting investments that date back to the 1930s. What impact will this have on Main Street? The opportunity for growth, new startups and entrepreneurs whose ideas never make it past the dinner table due to lack of funding is vast. The impact on local business is undoubtedly also going to produce more resilient communities and cities where investors can now invest their money to build real wealth in the communities they care about. The vast majority of the American public, the 99 percent of us who are “unaccredited” investors, will soon have the opportunity to keep their money local. The half of our economy made up of small, independent businesses will now have access to capital that previously could only go to giant public companies. Americans have $30 trillion dollars invested in securities — imagine if even 10 percent of that went from Wall Street to Main Street. What could $3 trillion dollars do in our communities? Of course there is the potential, and frankly the likelihood, for abuse and failure. Investors who don’t proceed cautiously can (and some will) lose money on failed investments. There will be a rush of companies offering portals that will potentially fleece customers by charging unnecessary fees. But while some will try to make a quick buck, the broader opportunity gives me cautious optimism. There are some mechanisms in place that protect consumers from losing everything (they cannot invest more than 10 percent of their net worth for example) and there will be opportunities for savvy networks of small businesses to connect and create their own portals thereby owning an even bigger piece of the investment market. Next month I’ll be leading a conversation around how to accelerate community capital for small entrepreneurs at the Business Alliance for Local Living Economies (BALLE) Conference in Grand Rapids, Michigan. The topic of crowd funding will no doubt dominate interest and hopes for many. While crowd funding alone isn’t a silver bullet, it does play an important role in revitalizing the entrepreneurial small busines ssector of the economy. Its simplicity and ingenuity is American capitalism in its finest form.

Read the full article →

Paul Boden: I Ain’t No Broken Window

April 5, 2012

James Q. Wilson, the person credited with coining the theory of broken-windows policing , died last month and people are starting to ask what “Broken Windows” is all about. Those of us who have been identified as no more than a broken window are sick of it. The broken-windows theory holds that one poor person in a neighborhood (or, using Wilson’s words, “a single drunk or a single vagrant”) is like a first unrepaired broken window. If the window is not immediately fixed, if the vagrant is not immediately removed, it is a signal that no one cares, disorder will flourish, and the community will go to hell in a handbasket. For this theory to make sense, you first have to step far far away from thinking of people, or at least poor people, as human beings. You need to objectify them. You need to see them as dusty broken windows in a vacant building. Wilson himself admits that his reasoning here seems unjust on the individual level, but goes on to argue that not dealing with a single drunk or vagrant who hasn’t even harmed anybody may lead to “a score of drunks or a hundred vagrants” who could destroy an entire community or downtown business district. That is why we now have Business Improvement Districts (BIDs) with police enforcement to keep that neighborhood flourishing and poor unsightly people out of it. There are now over 1500 BIDs worldwide and their number is growing. And we are right back to Jim Crow Laws, Sundown Laws, Ugly Laws and Anti-Okie Laws, local laws that profess to “uphold the locally accepted obligations of civility.” Such laws have always been used by people in power against those on the outside. In other words, today’s Business Improvement Districts and broken-windows policing are, at their core, a reincarnation of various phases of American history none of us is proud of. Central to the argument is the need to adhere to “locally accepted obligations of civility.” But who is setting these “locally accepted obligations of civility?” Where is our “human civility?” We have gone from the days where people could be told “you can’t sit at this lunch counter” to “you can’t sit on this sidewalk,” from “don’t let the sun set on you here” to “this public park closes at dusk” and from “you’re on the wrong side of the tracks” to “it is illegal to hang out” on this street or corner. Of course a tired shopper can sit on the sidewalk to rest between stores and the people that lined up for two days waiting to get the new iPod can loiter and none of them will ever be ticketed, moved on, or arrested. These are the civilized people; they are consumers. They are us. The people these laws are enforced against are not us. They are them. And their mere presence makes us uncomfortable, so therefore they are not civil and need to be replaced with someone more like those of us who set the locally accepted obligations of civility. Jim Crow Laws, Sundown Laws, Ugly Laws, Anti-Okie Laws, and Broken Windows Laws, its all the same old wine — just in a new bottle. I guess history really does repeat itself and that’s sad.

Read the full article →

Richard (RJ) Eskow: Good Guys Win One: With ALEC, Things Go Better Without Coke

April 4, 2012

Score one for the good guys: After being pressured by Color of Change and other progressive groups, Coca-Cola has left ALEC — the cynical corporate coalition that has pushed a bevy of anti-democratic, anti-middle class, and anti-consumer initiatives. Now that Coke’s come around, next up is Walmart. Their response on the ALEC issue was equivocal and unacceptable. And the issue needs to be raised directly and firmly with the other companies that back the organization – a list that includes AT&T, Bayer, Coca-Cola, ExxonMobil, GlaxoSmithKline, Johnson & Johnson, Kraft Foods, Pfizer and UPS. Standing Up This weekend on The Breakdown we interviewed Rashad Robinson , Color of Change’s executive director, about the Trayvon Martin case and the role of ALEC in “stand your ground” laws like Florida’s. He indicated that ALEC’s member companies were going to be a leading target of the campaign for greater political and economic justice. A few days after that interview aired, Color of Change sent an email to its mailing list that read in part: You and more than 85,000 Color Of Change members have called on corporations to stop supporting the American Legislative Exchange Council (ALEC) because of its role in voter suppression. We contacted Coca-Cola to make sure they understand that through their membership in ALEC, they are supporting racially-discriminatory voter ID… They told us they recognize the importance of voting rights but claimed that they weren’t responsible for ALEC’s voter ID legislation. But it doesn’t matter whether the company had a direct role in the legislation — by funding ALEC, Coca-Cola is supporting an effort to disenfranchise African-Americans, Latinos, students, the elderly, the disabled and the poor. Eventually, representatives from Coca-Cola stopped responding to our emails and phone calls. Will you help us hold Coca-Cola accountable for supporting voter suppression? No Defense It’s true that ALEC is like the United States Chamber of Commerce, in that many of its member companies don’t realize what it really stands for. But the ones who have consciences (or understand the power of consumer anger) will eventually respond, just as they have for the Chamber. (Many leading corporations have left that organization as it moves to the extreme right.) So the role of activists in this situation isn’t just to exert pressure, but to educate. Companies like Coca-Cola need to understand the real nature of the organization they’re supporting. These corporations do bear moral responsibility for the actions taken with their funding and support, and they should be held accountable. (We’ll be airing an interview this weekend with Zaid Jilani, who wrote an excellent piece on The Five Most Despicable Laws Passed by ALEC , which Zaid lists as “banning living wages,” “crippling collective bargaining,” “privatizing our schools,” attacking voter rights,” and “selling prisons to the highest bidder.” We asked Zaid about laws that didn’t make the top five, and they were pretty bad too.) A Coke and a Smile Coca-Cola responded either to the information or to the persuasion. As Think Progress reports , Coke officials told the Washington Examiner today: The Coca-Cola Company has elected to discontinue its membership with the American Legislative Exchange Council (ALEC). Our involvement with ALEC was focused on efforts to oppose discriminatory food and beverage taxes, not on issues that have no direct bearing on our business. We have a long-standing policy of only taking positions on issues that impact our Company and industry. As Think Progress notes, the withdrawal came just five hours after Color of Change sent its email. In other Coca-Cola news, the company just signed a deal with Dunkin’ Brands to make its soft drinks available at Dunkin’ Donuts, Baskin-Robbins, and other Dunkin’ facilities. If you ask me, it’s a good day for a Coke (classic only, if you ask me), along with a donut or a couple scoops of ice cream. Attention Shoppers Coca-Cola’s retraction came in the Examiner ‘s ” Secrets ” blog. Blogger Paul Bedard’s interpretation of the facts comes with a strong ideological bias, but the facts are clear: The good guys won. By contrast, Wal-Mart told the Examiner : Our membership in any organization does not affirm our agreement with each policy created by the broader group. Wal-Mart has a long history of supporting voter rights, and we continue to be a strong proponent of this issue. In fact, Wal-Mart was an active supporter in 2006 of the renewal of the Voting Rights Act of… One of Wal-Mart’s basic beliefs is respect for the individual, and Wal-Mart will continue to stand with all Americans in ensuring our right to vote. Not good enough. If you support people who are attacking the right to vote, financially and with your reputation, then you are supporting injustice. Attention Sellers : This could affect your bottom line in a big way. There’s a large majority in this country that feels disenfranchised from the political process — and is. They’ve been, in the crude words of bar patrons everywhere, “screwed, blued, and tattooed.” They’ve lost their jobs, or their wages have stagnated, while organizations like ALEC strip them of organizing rights and the chance for a job at a living wage. They’ve also been disenfranchised by voter laws like the ones ALEC supports, and by a money-driven, corporate political process. But that disenfranchised majority has enormous economic power — and it’s learning how to use it. One of our most effective tools for responding to the power of corporate money is by cutting off the source of that money. Heads up, Wal-Mart. Know who does a lot of shopping in your stores? People who have been victimized by ALEC policies: Poor people, minorities and people who are working more and earning less. They’re getting wise, they’re getting angry — and they’re getting involved. Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America’s Future and the host of The Breakdown, broadcast Saturdays nights from 7-9 p.m. on WeAct Radio, AM 1480 in Washington, DC.

Read the full article →

Ernan Roman: New Value Exchange: Preference Info to Drive Personalization

April 3, 2012

THE CHALLENGE: Consumer frustration with opt-out marketing policies is growing. Marketers need to convince them to share information regarding their preferences in exchange for a valuable, personalized relationship. Unfortunately, Opt-Out Is the New Norm There are now over 200 million numbers listed on the National Do Not Call Registry. Moreover, a number of states have introduced “Do-Not-Mail” bills and the topic of “Do Not Track” legislation is red-hot. Overseas, governments are taking even more drastic actions. For example, the Italian government banned all unsolicited mail, phone, email, fax and mobile communications. As consumers find more ways to avoid unsolicited marketing communications, panicked businesses are responding by creating opt-out relationships wherever they can. This is the wrong approach. Customer Frustration is Growing Today’s empowered consumers are questioning why the burden should be on them to opt-out. In fact, prominent opt-in campaigns have resulted in enthusiastic customer response. Consider the case of comedian Louis C.K. In recent years, Louis C.K. has risen to prominence as a stand-up comic, an actor, and, with his show Louie , a writer, director and editor. And with his self-produced and distributed “Live at the Beacon Theater” video, he’s setting an important example for online marketers. Rather than forcing his consumers to opt-out, he asked them to opt-in — in a prominent, tongue-in-cheek way: “I’m going to be offering other things through this site. Would you like to hear about them? – Yes, I’d like to receive further emails about Louis C.K. things. – No, leave me alone forever, you fat idiot.” The latter was selected by default. The customer response was unequivocal: “‘Opt in’ as the default is such a minor thing, but it makes people feel good.” Create a Reciprocity of Value Rather than making “opt-out” the default, marketers should compete to engage consumers with compelling value propositions that motivate them to opt-in. The most compelling value you can offer is relevance. Consumers are eager for meaningful personalization. The challenge for marketers is to make them aware that, in order to receive or access increasingly relevant information, consumers must share increasing amounts of information regarding their preferences. Microsoft used Voice of the Customer (VoC) research to create a highly personalized experience in their Business Resource Center, which asked over 14 detailed business questions in order to deliver targeted and relevant information. As a result, they have achieved opt-in rates as high as 95 percent. Three Takeaways for Marketers > Create a Reciprocity of Value Consumers opt-in to share increasingly detailed personal preference information in exchange for marketer’s promises to deliver relevant information and offers. > Opt-In Is Not About Passively Agreeing to Receive Email It’s about actively opting-in to a relationship and self-profiling your preferences and aversions. > Consumers Are Eager to Tell You How They Want to be Treated The key is to ask. Ernan Roman is President of the marketing consultancy, Ernan Roman Direct Marketing. Recognized as the industry pioneer who created three transformational methodologies: Integrated Direct Marketing, Opt-In Marketing, and Voice of Customer Relationship Research. Ernan was recently inducted into the Marketing Hall of Fame. Clients include Microsoft, NBC Universal, Disney, Hewlett-Packard and IBM. Ernan was named to “B to B’s Who’s Who” as one of the “100 most influential people” in Business Marketing by Crain’s B to B Magazine. His fourth and latest book on marketing best practices is titled: Voice of the Customer Marketing: A Proven 5-Step Process to Create Customers Who Care, Spend, and Stay . Ernan is also the co-author of “Opt-In Marketing: Increase Sales Exponentially with Consensual Marketing” and author of “Integrated Direct Marketing: The Cutting Edge Strategy for Synchronizing Advertising, Direct Mail, Telemarketing and Field Sales.” www.erdm.com ernan@erdm.com

Read the full article →

Sen. Jeff Merkley: The Wild, Off the Mark Arguments Against the Volcker Rule

April 3, 2012

Big banks are formulating a host of arguments – wild, off the mark arguments – aimed at dismantling the Volcker Rule firewall between loan-making, customer-serving banks and high-risk hedge funds. That firewall is essential for a stable banking system. When hedge funds blow up, and they regularly do, one doesn’t want them taking out our loan-making system that is so vital to our families and businesses. MF Global, for example, blew up just a few months ago due to big bets on currency markets. But those bad bets didn’t damage our banking system, because MF Global wasn’t part of a bank. So why do big banks want to tear down the Volcker firewall ? Quite simply, hedge funds and similar trading buried in legitimate risk hedging and market-making are big business and, often, make big profits. Moreover, hedge funds inside banks have a competitive advantage by benefiting from government subsidies in the form of insured deposits and access to the Federal Reserve discount window. So what are the arguments the banks are making to attack the Volcker firewall? First they argue that the Volcker firewall will hurt retired teachers and cops by decreasing “liquidity” in markets, which is how easy or hard it is to buy or sell securities. They argue that any decrease in bank trading will make it harder for investors to buy or sell stocks and bonds, which they assert will increase the amount that investors will have to pay for transactions, thereby decreasing the profits for pension funds of retired teachers and cops. Wrong . First, the Volcker rule explicitly allows for “market-making” by bank brokers. Banks will continue to be able to serve investors by helping them make trades. Second, if additional trading is truly profitable without the support of the discount window and FDIC-insured deposits, such trading will take place outside of banks as it has for decades. Third, “liquidity” is not a holy grail. Being able to trade ever faster is not always an economic gain, either for investors or for the economy. High speed trading and computerized trading don’t add much to the economy, and they can do massive damage when things go awry. For these and other reasons, pension funds such as CalPERS, the nation’s biggest, support the Volcker Rule because they depend on a stable financial system free from boom and bust cycles. Moreover, they benefit by reducing the conflicts of interest that derives from massive hedge fund trading by multi-trillion dollar banking institutions. A second major line of attack that the banks have opened up on the Volcker firewall is it will raise gas prices even further. They even have a fancy study for their conclusion, financed by Morgan Stanley, where they argue that if a bank cannot make massive bets on the price of oil, then the price of gasoline will go up and 180,000 jobs will be lost. Wrong. The evidence points in the opposite direction. When big banks invest huge sums on the belief that oil markets are going up, it creates an artificial surge in demand that raises the price of oil. A recent Goldman Sachs report estimated that oil speculation increases the price of gasoline by about 56 cents per gallon. Even the chairman of Exxon-Mobil estimated that the true price of a barrel of oil based on supply and demand should be in the $60-70 range at the same time prices were over $100. A strong Volcker firewall, by getting the banks out of the commodities trading market, will reduce excessive speculation, creating a pathway to more stable prices. As Chairman Volcker has emphasized, U.S. markets worked well for sixty years under a much tougher Glass-Steagall separation of commercial banking from investment banking, including strong limits on bank participation in commodities. Similarly, the markets will work very well under the Volcker Rule’s modernized firewall. The big banks aren’t paying for phony studies, and shielding themselves behind teachers, cops, and drivers because they want to actually lower prices for anyone. Rather, they are doing it because the Volcker firewall will force them to give up the hedge fund-like trading that makes them billions of dollars in profits in good times, but billions of dollars in losses when things go south. When the bank’s hedge fund trading blows up the banks, it will deeply damage loan-making for families and business across America causing deep economic destruction. In short, and to paraphrase Warren Buffet’s comments, hedge funds inside banks are instruments of mass financial destruction. The sooner the Volcker firewall is implemented, the better for all of us.

Read the full article →

Aaron Hurst: Working for a Good Company vs. Doing Good Work

April 3, 2012

Introduction: Based in London, Jenny Davis-Peccoud serves as the global leader of Bain & Company’s Social Impact Practice. Having spent most of her career at Bain, Jenny has been able to watch the evolution of the firm’s investment in social impact from the incubation and subsequent launch of Bridgespan in 2000 to the significant expansion of Bain’s own Social Impact practice and corresponding activities over the past 10+ years. Jenny and I spoke recently about Bain’s partnership with Bridgespan and Bain’s social impact investment strategy. With the 2000 spin-off of Bridgespan as an independent social change consultancy, what pro bono work does Bain continue to do? We’ve continued to do a lot of pro bono work and invest in major partnerships at Bain & Company. And we have a strong, collaborative relationship with Bridgespan, including ‘externships’ and shared partners. We believe as a firm in reinventing our industry. Our investment in Bridgespan was one way we did that – and it was created as a separate organization, as a nonprofit that understands what nonprofits need. But we also continue to invest in our own pro-bono work with organizations committed to driving change in their sectors. So, how much pro bono does Bain do each year? Bain does about 80 pro bono projects a year, and 60% of those projects have people 100% allocated for at least several months. We provided over $40 million of pro bono consulting services in 2011 alone. How do you know you’ve been successful in your pro bono engagements? Even for our corporate clients we systematically go back and ask if they were satisfied with Bain’s work. We use the same process with our pro bono clients as well, and see high satisfaction rates. Secondly, Bain tracks its success by results, and so we are driven to try to understand the impact and outcomes of our work. I’ve personally been involved in many homeless projects in the UK and we’ve had 5,000 homeless people return to full time employment over 10 years. If I’m a nonprofit leader interested in engaging Bain, how do I do that? We select our pro bono clients as we select our corporate clients. We look for bold, ambitious leaders who are looking to challenge the status quo, have big aspirations for major changes, and are keen to see results. As a firm, we work with Fortune 1000 companies and mid-market firms that have potential to be those leaders over time. To give you an example, in our education practice we work with TFA (Teach For America) – which is like the Fortune 100 of corporate America. But we also work with Students First, with a bold ambitious leader like Michelle Rhee, and it’s more like a start up. We believe both of them have tremendous capability. Beyond education, we’ve partnered with Endeavor, an innovative organization focused on using entrepreurship to effect change on a global scale. And these are just a few. Do they come in through a partner at the firm? Again like our corporate clients, we’re very intentional about who we want to work with and who has the most potential to make a tremendous impact in this field. While we do have organizations introduced to us through partner relationships, we still put them through the same screen of “will they have an impact?” We are drawn to organizations that are passionate about driving change in innovative, meaningful ways. What are you seeing in terms of the demands of current employees? It is very important for our staff to use their business training to benefit the community. While Bain’s focus is on for-profit clients, we encourage social impact and work to make sure that it can be an integral part of the Bain experience. Something very appealing to our people is that they can, for example, take leadership roles in nonprofit organizations early on in their careers through our pro bono work, or they can do externships to get hands-on experience with non-profits. Our employees are very proactive about their involvement as well. We provide a lot of opportunities to get involved, but it isn’t all top-down: much of what we do is ‘grassroots’ and driven by an individual’s passion. What roles does social impact play in the decisions of recruits? We’ve done some research on importance to employees of CSR and sustainability. About 20% will proactively make a decision on these things and will be involved when they’re here – so they are deciding where they want to get the best opportunity. The rest want to know that the company does these things and is making a difference in the world. Either way, we hope that recruits see that Bain is a place in which they can have impact in the social sector. Speaking of the 20% who want to personally engage, what are they looking for specifically? When we go out to business school campuses, we talk a lot about the various ways that people can get involved at Bain. The majority of people in the room are excited about pro bono and externships, and others want to get involved in our internal “green team” environmental efforts or work directly in the community. At Bain & Company, we provide many opportunities for our people to engage in the social impact work that they are passionate about while continuing to further their professional career in consulting. How do you see pro bono evolving globally? The US is clearly ahead, and that gets back to the historical anchoring of philanthropy in the American cultural mindset. Asia is quickly catching up. Europe is developing more slowly – with the London office as our most developed office in the region. All of our offices believe in the importance of social impact, however, and I’d expect our pro bono efforts to continue growing.

Read the full article →

Beverly Macy: How Social Media Helps the 401(k) Investor

April 2, 2012

How many of you did not look at your first quarter 401(k) statement on March 31? Even though the stock market is rising, most Gen Xers and many Baby Boomers with a 401(k) are still feeling the pinch from the financial free fall that began in 2008. And most everyone with a 401(k) is scratching their heads trying to figure out the ‘undisclosed fees’ associated with their dwindling accounts. In the past, you’d sit at your desk, statement in hand, and wonder alone. No more. Social media has changed nearly everything we do and 401(k) questions are no exception. These days, when something doesn’t seem right, savvy investors take to Twitter, Facebook, and blogs to discuss and get answers. Never mind that financial advisors have their hands tied when it comes to using social media… these socially connected consumers are all over it. In late 2011 The Spectrem Group released a study entitled “Use of Social Media by 401(k) Plan Participants” that showed that more than a quarter of plan participants today rely more on social media for communication than on traditional channels such as the telephone. Beginning next quarter, 401(k) participants will receive quarterly statements showing the dollar amount of fees and expenses deducted from their account and a description of what each charge is for. These fee disclosures are required by new Department of Labor rules and could provide shocking new information to 401(k) participants. Just wait until grandma finds out! Did you know that a recent AARP survey found that 71 percent of 401(k) participants think they don’t pay any 401(k) fees at all? So while Facebook, Twitter and LinkedIn are historically a tool of younger investors, older investors are beginning to use these mediums as communication tools as well. And they are a loud bunch. Many investors who receive the new 401(k) fee disclosures will have questions about what they are paying for managed accounts (in real dollars) outside company retirement plans. Smart portfolio firms are getting ahead of the curve. Mark Cortazzo, founder of Flat Fee Portfolios , and named to Barron’s listing of “America’s Top Financial Advisors” again in 2012 says, “The middle-income investor may be surprised about what he or she is paying for asset management. Investors with accounts under $500,000 could be paying 50-100% higher advisory fees than accounts over $2M.” By the time the underlying fund expenses are factored in, investors could be paying close to 4%. That’s why his firm provides institutional-quality asset management at a low, fixed rate. Something fully transparent that the investor can easily understand. So get ready, financial advisors. That big OUCH! you’ll be feeling is the wrath of Grandma taking to her Facebook page and the GenXer posting on Twitter about how much of their nest egg has been eaten up by 401(k) fees. Once again, social media will help save the day. Beverly Macy is the CEO of Gravity Summit and the co-author of The Power of Real-Time Social Media Marketing . She also teaches Executive Global Marketing and Branding and Social Media Marketing for the UCLA Extension. Email her at beverlymacy@gmail.com.

Read the full article →

Caroline Dowd-Higgins: This Is Not the Boss I Ordered

April 2, 2012

Whispered water cooler conversations about bad bosses used to surface sporadically in work environments. These days, the complaining seems to be getting louder and less clandestine since lack of leadership is a growing frustration for professionals in a myriad of career sectors. Forbes blogger Erika Andersen summed it up nicely, stating in a recent post, “Top talent leave an organization when they’re badly managed and the organization is confusing and uninspiring.” I have been fielding numerous questions on my CBS radio show: Career Coach Caroline from people who are at their wits’ end dealing with an incompetent boss. Sadly, the good bosses are harder to find than those who wind up in leadership positions because of the Peter Principle where in a hierarchy employees tend to rise to their own level of incompetence. We aren’t teaching enough leadership skills at university and in a tough economy, professional development budgets have been slashed or eliminated. Well-meaning individuals who land roles as leaders often make your work life hellish because as nice as they are (and some are not!), they are inept at leading. So what’s a professional to do? Take Control I’ve seen many professionals leave great companies and wonderful jobs because of bad bosses. While leaving is always an option, in a tight job market you should consider a few other things first. Take control of how you operate in your work environment and how you communicate with your boss. Figure out your boss’s work and communication style and deliver your message accordingly. For example — does your boss respond better to verbal or written communication? Does he need specific details or a big picture overview? Is she a planner or more spontaneous in implementing the mission of the organization? Most conflicts in the workplace come from differences in personality, communication, and work styles. Understanding how your boss operates may alleviate some of your stress and give you and your boss better clarity of expectations. So watch and listen, and ask others who have some institutional history to share their strategies for dealing with your boss. Manage Up In many workplaces, the boss does not notice what their staff is doing unless they are on fire (literally!) or if something goes terribly wrong. If you are chugging away, producing great results, chances are your boss will focus more on his work since you don’t appear to need anything. While the autonomy may seem liberating, you must make sure that you manage up so your boss and her boss know the value you bring to the organization. If you don’t tell the powers that be what a great return on investment you are — you may stay a well-kept secret and that will stunt your professional growth within the organization and beyond. Don’t wait for an annual performance review to showcase what you do well. Schedule a periodic check-in or send written updates documenting your results and initiatives. Consider creating a portfolio that illustrates exactly how you impact your organization positively. This evidence will also help you plead your case when you are seeking a raise or promotional opportunity. Boss from Hell While some bosses just need leadership training — others are beyond repair. If your boss behaves unethically, egregiously, or harasses you — get yourself to human resources immediately. There are labor laws to protect you and you deserve a healthy and safe work environment. Don’t worry about being the bad cop; let the human resources people advocate on your behalf and document the unacceptable behavior of your boss so you have a record. What I have seen over and over again in my consulting practice is that many naïve bosses simply don’t know what their team needs — so take the boss by the horns , as it were. Have a frank conversation with your boss and tell him what you need. Tell her what your purpose is on the team, your goals, and the culture you believe will enhance productivity. If you can clarify your aspirations for the future of your organization and be a solution provider, instead of a complainer, then your boss may learn from you and appreciate your leadership insight. Of course that utopian concept doesn’t always work and sometime bad bosses are also jerks. If your boss is beyond repair and you have an unhealthy work environment that prohibits you from doing your job successfully, you may want to consider moving on. After all, you deserve to work in an environment where you are valued, appreciated, and recognized for your accomplishments. Having a boss who will mentor you, or even sponsor you would be an added perk but you may need to work elsewhere to find this. So start a stealthy job search since you are much more employable when you are currently employed. No matter how bad it gets, your bad boss is not worth being unemployed for so stick it out until you find a non toxic environment and let their shenanigans roll off your back. Don’t Diss Your Bad Boss As tempting as it may be to announce to the social media masses what an ass your boss is — take the high road and keep all communication professional. The network is small and you will need a recommendation from your current boss if you move on. Never throw your boss under the bus and develop talking points for why you are looking to move on. In many cases, a bad boss’s reputation is far reaching so you need not say a word in order to be understood by a prospective employer. When you are on the job hunt be sure to interview your prospective bosses wisely. Don’t assume that your next boss will be better. Here are some questions to ask during an interview: • What is your leadership style? • How do you mentor or sponsor your team members and encourage their professional development? • Of all the people who have worked for you, who are you the most proud of and why? • Can you describe a conflict between you and your team and how it was resolved? • Why did the person who left this position move on? • What are your future goals for the team? Know When It’s Time to Go If your new boss passes these interview questions with flying colors then you may be lucky enough to land in a healthy new work environment with a great boss who will give you an opportunity to grow and prosper. But if the new boss seems worse than your current boss, it may be a deal breaker and force you to extend your job search for a better fit. It’s worth waiting for a functional boss so never underestimate your boss’s role in your success and happiness in the organization. You should be looking for a multiplier boss who will optimize your strengths and give you an opportunity to take on new challenges, debate decisions, and invest in the organization with direct buy-in and accountability. The perfect boss may be difficult to find so in the meantime capitalize on your expanded network within and beyond your organization to find mentorship, leadership, and the professional respect you deserve. Caroline Dowd-Higgins authored the book “This Is Not the Career I Ordered” and maintains the career reinvention blog of the same name ( www.carolinedowdhiggins.com ) She is also the Director of Career & Professional Development and Adjunct Faculty at Indiana University Maurer School of Law. She hosts the national CBS Radio Show Career Coach Caroline on Tuesdays at 5pm http://sky.radio.com/shows/coach-me/

Read the full article →

David Isenberg: Some Things Are Just Unacceptable

April 2, 2012

On March 27 the Technology, Informational Policy, Intergovernmental Relations and Procurement Reform Subcommittee of the House Oversight and Government Reform Committee held a hearing, ” Labor Abuses, Human Trafficking, and Government Contracts: Is the Government Doing Enough to Protect Vulnerable Workers? ” This is a subject of more than passing interest to me because last year I wrote a report , published June 14, and commissioned by the Project on Government Oversight, on the exploitation and abuse of the workers of a KBR subcontractor. I subsequently testified at a Nov. 2, 2011 hearing about that report before this very subcommittee. That hearing, by the way, left me with a lingering sense of surrealism, even after five months, if only because it was revealed that the Pentagon official who had responsibility for this subject had never been to Iraq and Afghanistan. And sadly, as was noted back then, there has virtually never been a prosecution on this charge, even though it was a widespread practice in both Iraq and Afghanistan with contractors, or subcontractor. And there have only been a very few debarments or suspensions of contractors even though it was well known as a widespread practice. So, you can see why this might be a subject of interest. I have posted the full transcript of last week’s hearing on my blog and I encourage you to read it. But let me just highlight a few relevant points. Because this is a continuing problem new legislation has been introduced in Congress to address it. In the House it is H.R.4259 — End Trafficking in Government Contracting Act of 2012 . In the Senate it is S.2234 . That bill would prevent trafficking abuses by requiring contractors with contracts over $1 million to implement compliance plans to prevent trafficking including destroying or confiscating passports, misrepresenting wages or work locations, or using labor brokers who charge exorbitant recruiting fees. It improves accountability by requiring that a contractor notify the inspector general if he or she receives credible evidence that a subcontractor has engaged in prohibited conduct, requiring the inspector general to investigate such instances and requiring the inspector general to investigate all those instances, and with that require swift remedial action against the contractor. And, it improves enforcement of anti-trafficking requirements by expanding the criminal prohibitions that prevent fraudulent labor practices typically associated with trafficking. And if you don’t think it is a continuing problem you will need to have a little talk with Sen. Rob Portman (R-OH) who said at the hearing: Despite the existing protections, including the Trafficking Victims Protection Act of 2000, reports have made it very clear that human trafficking practices, in connection with U.S. overseas contracts, remain a very significant problem. To put this in some context, there are over 70,000 third-country nationals who now work for contractors and subcontractors of the U.S. military, again in Iraq and Afghanistan alone. Doubtlessly PMSC industry officials will say that the overwhelming majority of U.S. contractors and subcontractors are honorable and law-abiding and have made it a priority to ensure that abusive labor practices play no role in the work they do in Iraq, Afghanistan and elsewhere. This is, of course, true. It is also true that oversight is lacking. As Sen. Portman testified: And the oversight is limited. The Wartime Contracting Commission, for example, reported that, quote, “Some prime contractors, although not themselves knowingly violating the prohibitions on trafficking, have not proactively used all their capacities to supervise their labor brokers or subs.” The State Department’s Inspector General’s Report, similar, stated that, quote, “Since contracting regulations do not specify how to monitor contractors for trafficking in persons, the IG could not conclude that trafficking in persons monitoring is effective.” The bottom line here is familiar to anyone who has watched the U.S. government grapple with contracting problems in war zones; oops, I mean “stability operations.” There is a serious problem; various people, both in and outside government, point it out; the government, both legislative and executive branches begin to focus on it; more resources are devoted to fixing the problem; some improvements are genuine, others are rhetorical. Is it making a dramatic difference? No, but it is not insignificant either. But one thing should be clear. This is not some merely some picayune issue for bureaucrats to fuss over. As Sen. Portman testified, “This is about something much more fundamental, and that’s who we are as a people. It’s about respecting and protecting human dignity.” As Representative Gerry Connolly (D-VA) said: This is unacceptable. If America is about anything, it’s about a value system. And at the very essence of that value system is the enshrinement of human autonomy. We haven’t always lived that goal. We fought a civil war to make sure that that goal proceeded. But it is a value we assert. And it is certainly not a value we can ever sit back and accept to be compromised, especially somebody in our employ.

Read the full article →

Jared Bernstein: Gas Notes

April 2, 2012

Been meaning to get back to gas prices a bit, just based on a few recent articles and adventures in cable land. First, there’s this Adam Davidson piece in the NYT magazine this weekend on how high prices at the pump don’t seem to be changing people’s behavior much, because, he suspects, the average household spends only 5% of its income on gas. I’m not so sure. First, that’s an average. Low-income families spend twice that share (see figure here ). Second, while economists have always suspected a pretty inelastic response to gas prices, in this downturn, there’s certainly been a lot less driving going on–see the remarkable break in trend at the end of the series in the last figure here (this started before the recent spike and is thus more a response to the recession and income loss than higher gas prices). There’s also been a shift to higher mileage vehicles. Finally, any article about family budgets and gas prices right now should not omit the ongoing payroll tax holiday. As I’ve written before , that’s really the only thing politicians can do in this case–i.e., they can’t affect the price, but they can give a temporary boost to after-tax income to offset it. There’s only one thing a president and Congress can do to offset this price spike and they’ve already done it: raise people’s after-tax income. The payroll tax holiday that the President pushed for and Congress recently extended should put about $120 billion extra in paychecks this year. Every penny increase at the pump translates into about a $1 billion expense for consumers. Since its most recent low, the national average is up about 55 cents, or about half the aggregate of the payroll cut (annualized) so far. So, if these rules of thumb are about right, the government is actually in the process of doing about the only thing it can to help people cope with the current price spike. Everything else is just noise. Speaking of noise, the blame-the-President-for-high-gas-prices nonsense seems to have died down a bit, except for on cable TV (more on that in a moment). I saw a poll–and I’ve seen this result a number of times–that had a majority of respondents answering “no” to “do you think the president controls the price of gas?” and yet also had a majority answering “yes” to “do you blame him for high gas prices?” So, we suffer some cognitive dissonance of the issue. Re public opinion, I found this interesting: I was driving around with a bunch of kids this weekend and they noticed that gas here in northern VA just broke $4 a gallon. I mentioned that some people blame the President for the price spike. The younger kids–around 10–just couldn’t make any sense out of that. I tried to explain but they just didn’t get it. To them it was like accusing the President of not being able to fly; like good economists they essentially argued that he can no more set the price of gas than the price of the movie we just saw ( Mirror-Mirror with Julia Roberts–she’s great in it, the kids loved the movie–I thought it dragged). The older kids -12-13–agreed with the economics but recognized that, as one precocious kid put it, “that’s just a talking point.” So, somewhere between 10 and 12, kids go from simple economics to political economics. Next, I hear a lot of excitement about drilling and fracking for natural gas. And it’s true–all that extraction has been increasing the supply and lowering the price of this energy source relative to oil. But people forget this important fact: for every $10 of energy we consume, $9 goes to oil-based products (see figure). We just don’t have the infrastructure in place yet to take advantage of this price difference, so you won’t see this show up at the pump much either. Finally, there’s a meme on cable among conservative talking heads that got a test last week. I’ve asked them “exactly what do you think the President could do?” beyond the pretty aggressive extraction he’s already presiding over (described here ). One answer I’ve gotten back: he just needs to talk about his support for building out the logistics infrastructure, i.e., the pipelines that move oil around the country. That, I was told explicitly, would move the price right away. Well, on Thursday (3/22), President Obama visited Cushing, Oklahoma, a bottleneck point in our national pipeline infrastructure between North Dakota and the refineries in the Gulf. He stated that he is “directing my administration to cut through the red tape, break through the bureaucratic hurdles and make this project [building out part of the Keystone pipeline from Cushing to the Gulf] a priority, to go ahead and get it done.” So, what happen at the pump? Nothing. The figure below shows daily average prices with a line on the day of the speech. Bernanke can say stuff that moves interest rates. Prominent market types can move stock prices. World events can move oil prices. But Presidents simply can’t move gas prices. Yes, I know…evidence isn’t relevant here. In fact, any 12-year old knows that. It’s the grownups that get confused. Source: Gasbuddy.com

Read the full article →

Dave Johnson: Apple/Foxconn Promises — We’ll See

March 31, 2012

The “independent” audit of working conditions at Apple’s Chinese manufacturing supply chain is out, and it is not good. Workers are being exploited in ways that violate human rights standards and laws, and letting them get away with this is costing us our own jobs. Apple’s suppliers promise to improve conditions, make workplaces safer, stop forcing such long hours and lift wages. Foxconn even says they’ll start obeying Chinese law — but not until next year! If this really does happen can China keep its competitive advantage? “Free Trade” By opening up so-called “free trade” we made democracy a competitive disadvantage. We just let in goods made in places where people have no say, and as a result there is no environmental protection, little worker protection, terrible working conditions, very low wages and terrible exploitation of people. So of course that undercuts goods made where people have a say, and therefore demand better. We made “We, the People” having a say (democracy) into a competitive disadvantage! Because we make this mistake we lost millions of jobs, tens of thousands of factories and entire industries. We devastated out not just towns and cities, but entire regions. (See Free Trade Or Democracy, Can’t Have Both .) Free People Won’t Tolerate That A recent groundbreaking New York Times story by Charles Duhigg and Keith Bradsher, “How the U.S. Lost Out on iPhone Work” , exposed how workers are treated by Apple’s suppliers. Summary: Steve Jobs told President Obama, “Those jobs aren’t coming back,” because factories in China have people living in crowded dorm rooms where they can be rousted in the middle of the night and made to work 12-14 hour shifts, seven days a week, standing the whole time, for very little pay, using toxic chemicals and all kinds of other violations of human rights. Corporations can’t get “performance” and “efficiency” and “productivity” — profits — like that out of free people who have a say, so they move their operations over there and lay off workers and close factories over here. (Important note: it’s not just Apple, Apple is the biggest so the company name is really shorthand for the real culprits: namely, all of them .) The FLA Report This New York Times story had quite an impact. Apple was worried that people’s knowledge of their exploitation of workers in China might affect profits. So Apple responded by hiring the Fair Labor Association (FLA), a “labor monitoring group” that has no actual organized labor organization participation, to conduct an audit of working conditions at Apple’s Chinese suppliers. The report found numerous violations of labor standards and even Chinese law. For example, the report found “numerous instances where Foxconn defied industry codes of conduct by having employees work more than 60 hours a week, and sometimes more than 11 days in a row.” In addition, the report “also found that 43 percent of workers had experienced or witnessed accidents, and almost two-thirds said their compensation “does not meet their basic needs.” TPM: Apple Supplier Foxconn Violated Workers Rights, Audit Finds , The 60-plus hour work week found at the factories is above both China’s official legal maximum, 49 hours, and the maximum standard allowable by the Fair Labor Association (FLA), the organization that Apple paid to conduct what it said would be an independent audit. …The FLA inspection also revealed that “more than 43 percent of the workers report that they have experienced or witnessed an accident,” and “a considerable number of workers felt generally insecure regarding their health and safety,” especially pertaining to aluminum dust, which caused an explosion at a factory in the city of Chengdu in 2011 that killed four workers and injured 77, as the New York Times reported. Apple’s Own Published Standards Violated Chinese Law! Chinese law limits weekly work time to 49 hours but “industry code” and Apple’s standards limits weekly hours to 60 . That Apple’s (and other companies) own published standards violate even Chinese law demonstrates they were aware they were ignoring the law and using what they could get out of the workers. It demonstrates that these companies are knowingly engaged in illegal exploitation of workers, for profit. It also demonstrates that the Chinese government has been ignoring its own laws. HuffPost: Foxconn Apple Factories Violated Chinese Labor Laws, According To Fair Labor Association The Washington-based Fair Labor Association says Hon Hai Precision Industry Co., the Taiwanese company that runs the factories, is committing to reducing weekly work time to the legal Chinese maximum of 49 hours. That limit is routinely ignored in factories throughout China. Auret van Heerden, the CEO of the FLA, said Hon Hai is the first company to commit to following the legal standard. Apple’s and FLA’s own guidelines call for work weeks of 60 hours or less. Promises In a PR attempt to soften the impact of the FLA report, Apple’s suppliers made promises to improve. New York Times , “Electronic Giant Vowing Reforms in China Plants” , Responding to a critical investigation of its factories, the manufacturing giant Foxconn has pledged to sharply curtail working hours and significantly increase wages inside Chinese plants making electronic products for Apple and others. The move could improve working conditions across China. And, get this, they promise to start obeying the law — by July of next year , Foxconn’s promises include a commitment that by July of next year, no worker will labor for more than 49 hours per week — the limit set by Chinese law. The Washington Post : “Pledge by Apple’s iPhone manufacturer in China could set off new round of wage hikes” , Foxconn, owned by Taiwan’s Hon Hai Precision Industry Co., promised to limit hours while keeping total pay the same, effectively paying more per hour. Foxconn is one of China’s biggest employers, with 1.2 million workers who also assemble products for Microsoft Corp. and Hewlett-Packard Co. From the HuffPost story , The report will include new promises by Apple that stand to be just as empty as the ones made over the past five years,” said SumOfUS.org, a coalition of trade unions and consumer groups, ahead of the release of the report. And from the TPM story , “For months now, SumOfUs.org members have been calling on Apple to clean up the working conditions in its supply chain in time to produce the next iPhone be the first ethical iPhone,” the spokesperson told TPM, “That hasn’t changed at all. Our campaign is going to continue until real workers see real improvements — and so far Apple has been all talk and no action.” We’ll See This is one of those “believe it when we see it” situations. Phrases like “lip service” come to mind. We’ll see. Apple’s supplier promises to start obeying the law — by July of next year! Wow. But here is a question: Where is our government on this? American companies are breaking laws overseas, exploiting workers and violating human rights standards. They are hoarding the resulting cash offshore to avoid paying their taxes, when we have a national deficit. These actions by these companies are wiping out our jobs and communities. Where is our government on this? Click here to see the Fair Labor Association report . This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture . I am a Fellow with CAF. Sign up here for the CAF daily summary .

Read the full article →

Dr. Serena Reep: Meaning of Work: What For-Profit Corporations Can Learn From Non-Profits

March 28, 2012

According to PricewaterhouseCoopers’ 2010 data , 33 percent of the U.S. workforce is highly disengaged from the work they do as compared to 20 percent in 2008 and 10 percent pre-2008. Gallup 2010 also reports that 33 percent of employees in world-class organizations are either not engaged or actively disengaged and 67 percent of employees in average organizations are either not engaged or actively disengaged. What is the cost of this disengagement to the U.S. corporations, you ask? About $292-$355 billion annually, according to Gallup. What gives? Why is there such disconnect and dissatisfaction with the work we do? We spend the largest portion of our wakeful moments at work; if these precious moments are spent in emotional detachment, it speaks volumes about our quality of life. The way the corporations “run” their business with the “profit first” philosophy ignores the fundamentals of human nature. When people have the opportunity to develop trusting, caring and mutually supportive relationships and form a sense of community with the people they work with, they have a stake in the outcome of the individual and team performance. When this is lacking, however, it becomes “just a job that pays the bills.” They will trade their bodies and time for the paycheck but not their hearts and souls. Contrast this with Martha’s story — a clear example of what “employee engagement” looks like in everyday life. I’ve been honored to work for a short time with breast cancer awareness charities. I can’t get one particular lady, Martha, out of my mind. She was the most pleasant, vibrant, and positive woman that I’ve ever met. She was a volunteer; she didn’t make a dime from her work but somehow you knew her sentiment was worth more than a paycheck. She helped, she advised, she rolled up her sleeves, she marched, raised money and answered the phones when needed. Martha was the perfect employee who wasn’t hired. I couldn’t help but think about why more people like Martha weren’t actually working at a for-profit company. How can we bottle her incredible attitude and infectious optimism? Why is the nine-to-five worker largely unhappy and disengaged from work while this unpaid woman is eager to get to work every morning? Why? There is clearly a lack of meaning and passion, lack of relevance, in their jobs, compared to Martha’s. Everything Martha did as a volunteer had meaning and was fueled by inspiration. She had beaten the breast cancer that took her mother. Her motivation was not only personal but positively vengeful. After seven years of intense chemo, losing all her hair, her confidence and her marriage, she had one chance left. The chance came in the form of a little known alternative cancer treatment used widely in Asia. She traveled there as a last resort, and this became her saving grace. Now back in the U.S., Martha had made it an obsession to have alternative remedies approved by the FDA, so other woman can have access to treatment options. She is passionate and unrelenting. She squeezes more productivity out of one day than most people do in a month, because she found meaning for her remaining days here on earth. When your work makes a difference in the world, you will never fully grasp its true influence. The magic of passion is that it lights the passions of others in areas outside of your purpose. When was the last time you saw someone doing something with such passion and intensity that you could only think about what lies dormant in your own life? Martha not only affected those passionate about research and development of cancer treatments but also lit the fires of anyone whose dreams were covered by hesitation and disbelief. The point is this — when you find meaning in your life’s work and lean into it with all that you have, others cannot help but be inspired and lean into their own dreams. When corporations can replace process with passion, and re-engineer the workplace to sustain a culture of caring and trust, there is much better likelihood that employee engagement statistics will improve and so will their bottom-line.

Read the full article →

Don McNay: Injured People and the One Percent

March 28, 2012

Most people perceive my job as strictly helping people make money. What I really do is help injured people. I keep injured people from wasting a settlement. I help them find every government benefit and program that might make their lives better. I find ways for them to minimize taxes and maximize what they keep. I assist in mediations and help them get claims settled. Many of my clients are in the top one percent of income earners. The bracket that some people are marching against. Most of my “one-percenters” are in wheelchairs or had their families wiped out in accidents. I’ve been doing my work for nearly 30 years and would never trade places with any client who got a large settlement or judgment. No sane person would give up their health or their family for money. Thus, going to war against the top one percent is not black and white for me. I’m for making hedge fund managers pay ordinary income tax like the rest of us do. I’m for tying Wall Street bonuses to doing something productive for society, instead of taking a bonus but not creating wealth. I want to see more being done for Main Street and less being done for Wall Street. I want the average American to get a fair shake and not be ignored by Washington. But what I really want is to keep doing things to help injured people with their money. A financial guru once called me a “financial evangelist.” I think I am more like a financial pastor or minister. I want to comfort the injured and help them heal. I also want them to hang on to their money. Thus, when they start going after the top one percent, I want to make sure that my clients are not the one percent of people they are going after. I want Congress to go after Wall Street but have found that Wall Street have a lot better lobbyists than injured people do. I’ve been encouraged that injured people will benefit from health care reform. I’ve spent the past few months becoming immersed in the nuances of the new health care reform act. I’ve read all 1990 pages of the law several times. After months of study, I understand it. I see how it helps people I want to help. If you like the law, you call it health care reform, if you don’t like it, you call it Obamacare. Before I took the time to really study the legislation I called it Obamacare. I encouraged my Democratic Congressman to vote against it, which he did. Now I am calling it health care reform. It is going to turn the medical system upside down. I don’t know how we will pay for it but I see where it truly helps injured people. Some of the reforms are coming to place now, before 2014, and I am learning how to use them to help my clients. When you dig into the details of the law, you see how health care reform empowers people who have been shut out or minimized by the health care system. It promotes wellness and good health. That’s not such a bad thing. I can also see the new law, along with the bailouts and stimulus packages of recent years, putting a huge strain on the federal budget. There have been calls of “tax reform” to pay for the looming larger deficits. I’ve learned one thing from watching Washington. Whenever there is a “reform” or “call to sacrifice” it is the little people who are supposed to do the sacrificing. Wall Street gets paid back 100 cents on the dollar. I can see reforms, aimed at the “one percent,” actually hitting people like my clients who are using their resources for medical care and a better quality of life. I don’t mind taxing a Wall Street banker’s second yacht or third vacation home. I don’t want them taxing a client who wants to buy a lift for his wheelchair. It’s simple to aim focus at the top one percent of income earners and assume they are all doing something wrong. It’s more complicated when you add in people who got to the one percent by having a drunk driver smash into their car and kill their family. When we start talking about the “one percent,” we need to think about the one percent of society who are hurting and need government assistance and help. And make sure that help is provided. Don McNay, CLU, ChFC, MSFS, CSSC is the bestselling author of the book, ‘Wealth Without Wall Street’; McNay, who lives in Richmond, Ky., is an award-winning financial columnist and Huffington Post contributor. You can learn more about him at www.donmcnay.com. He is the Chairman of the Board for the McNay Settlement Group (www.mcnay.com) which provides structured settlement consulting for injury victims, lottery winners, and the families of special needs children. McNay founded Kentucky Guardianship Administrators LLC, which assists attorneys in as conservators and setting up guardianships. It is nationally recognized as an administrator of Qualified Settlement (468b) funds.

Read the full article →

Gary M. Krebs: The Mentor’s Mentor

March 27, 2012

I have what I refer to as “farsighted memory”: I can recall the red carpet from my family’s apartment in Brooklyn when I was less than 2 years old; I remember all my childhood friends’ telephone numbers; and I can even cite how much money I made shoveling snow for the first time when I was 10 ($79.50, mostly in quarters, which weighed my snow pants down to my knees). In spite of all this, I sometimes can’t remember the most obvious things, like when I drew a blank at a doctor’s office the other day when prompted for my age. Either I’m getting old or my brain needs memory glasses. When it comes to work, however, I pride myself on being detail-oriented and rarely forget a thing. Many work memories and details are as vivid to me as those previously mentioned from my childhood. The one that stands out most is my first day as an editorial assistant at Facts on File publishing company. Gerry Helferich, my boss, who was then VP and Editorial Director, said these words: “Feel free take on whatever responsibility you can handle. Anything you see you want to do, just ask. You can manage my books, edit books, acquire books — anything you want.” At the time I had no idea how rare it was for assistants in the book business — or in any business — to hear those words from a supervisor. I’ve since heard horror stories of assistants who waited years to even be able touch a manuscript (which was possible then, because it was still paper), much less be able to put red ink on an author’s copy. Yet there I was, 21 years old with very little experience, and the man in charge had trusted me with the responsibility of managing all his books. Gerry’s word was good: I handled all 50 of his projects through production, several of which became award winners and great sellers; he gave me a few manuscripts to edit; and, incredible as it may seem, helped (or, more accurately, spoon-fed) my first book acquisition, less than three months into joining the company. I had found a lifelong mentor. There isn’t a thing I know about the business that can’t be traced back to Gerry: he showed me how to choose the right trim size (format) for a book; how to run (and manipulate) a P&L (profit/loss statement); how to pitch a book to a room full of people; how to negotiate; how to write great copy; and on and on. Gerry never raised his voice, made a crack when I asked a dumb question, or dismissed my crazy ideas (in fact, he welcomed them). The only time I ever remember seeing him disappointed was when he asked me to water his office plants while he was away on vacation. In my zealousness, I overwatered and killed them all; I still feel guilty about that, two decades later. I was distraught when Gerry left Facts on File for a better opportunity: how could I possibly survive without him? To my astonishment, although he had moved on to much larger organizations, he always returned my calls and spent time with me when I needed his advice. He came to my aid on numerous occasions — helping me figure out job challenges, offering me references, and even counseling me on terms for my book deal. When I became a leader myself in the industry, Gerry continued to be a significant influence, even though our schedules rarely matched up. For years the most we could arrange was the two-minute catch-up at his company’s booth at Book Expo (the largest book convention in the U.S.). On one such occasion, I was drowning in employee issues, author problems, and overbooked meetings, and babbled to him in an over-caffeinated way that probably suggested I was about to implode. He stopped me mid-sentence, floated his hands up and down, looked me in the eyes, and said, “Calm down.” Those two words not only got me through that event, but they have guided me many times since: I just hear Gerry’s voice in my head, and I know everything will be OK. I felt more than just a tinge of grief a few years later when Gerry told me he was leaving the industry and moving to Mexico with his wife so that they could become full-time authors themselves. What a loss for the industry, I thought, but on a more selfish note, I knew there was no replacing him as my mentor. I would have to fend for myself during crises. No matter the situation, I would ask myself the question: “What would Gerry do?” Just imagining the answer got me through many complex challenges. I even made a list of the top six attributes that made his leadership style so effective: Empower others: Gerry let you run with the ball. He was never threatened by anyone else’s success. Stay calm under pressure: He didn’t overreact to anything. The worst problems were figured out in the same laid-back style as the easy ones. Don’t piss anyone off: He never yelled at anyone, burned a bridge, or insulted anyone. He knew that even the most difficult colleague has the potential to become an ally. Make time for people: He assisted everyone — direct reports, indirect reports, colleagues in other departments, and even people who threw axes at his back. He always stopped to listen and didn’t offer an opinion unless asked. Take the chance: Gerry was collegiate and agreeable, but not to the point where nothing got done. Sometimes a leader needs to push an idea or innovation through, even if there are naysayers. It’s as brave to take a positive stand on someone else’s project as it is a negative one — especially when it means disagreeing with the hierarchy, spending money, or implementing a change. Admit to mistakes: Gerry had no qualms about saying when he did something wrong. It made the team admire him all the more. Over the years, I’ve had the remarkable opportunity to give back some of the above wisdom to quite a few talented professionals. Many of these individuals are now successful editors, agents, entrepreneurs, and even leaders themselves. At my last company, I was privileged to become a corporate mentor to a star employee in the U.K. office. “Uh oh,” I thought. “This guy is so much smarter than I am — what could I possibly hope to impart to him as his mentor?” It turns out that my mentee did have some challenges, and I think on a small scale I was able to support him by listening, sharing my experiences, and steering him toward decisions when he was straddling the fence. I couldn’t have been prouder when he earned a well-deserved promotion. I found that I may have gotten as much out of that relationship as he did; not only did we exchange work advice on both sides, but we even shared our scripts (he’s a talented playwright). The book I’m now delighted to read is The Stone of Kings: In Search of the Lost Jade of the Maya , by Gerard Helferich. Not only is my mentor the author, but the book was published by Lyons Press (Globe Pequot) — my former company. As I turned the pages, it was difficult for me to avoid being reflective and another memory hit me: Gerry’s last day at Facts on File. At his farewell party, his peers made teary-eyed speeches and wished him well. I couldn’t hold back any longer and stepped forward. It didn’t occur to me how ridiculous it must have seemed; I was his assistant — a mere 23-year-old, wet-behind-the-ears kid — making a speech in front of a whole room full of people about the company’s most revered leader. But I stood up and thanked him for everything he taught me and for all of his support. I closed by proclaiming, “You’re the best manager I ever had!” Gerry burst into laughter and remarked, “Of course I am — I’m the only boss you’ve ever had!” Well, I’ve had a few bosses since — some wonderful, some pretty awful — but Gerry is still #1. Someday I hope to have another leadership opportunity where I can create those magical memories with a new staff…

Read the full article →

Patrick Sharma: Fixing the World Bank

March 26, 2012

With the economy still struggling and campaign season heating up, it is not surprising that the World Bank is far from most people’s minds. But President Obama’s surprising choice to tap Dartmouth President Jim Yong Kim as the Bank’s next president is an important one, for it has the potential to determine the fate of an institution that is running out of time. Founded in the waning days of World War II, the International Bank for Reconstruction and Development, or World Bank for short, stands at a crossroads. Although not without serious flaws , the organization has long worked to promote international development by providing loans, grants and advice to governments in the global South. The Bank and its affiliate bodies, the International Development Association and International Finance Corporation, have also served as a clearinghouse for information on development, publishing reports, convening conferences, and running programs on everything from business regulation to HIV prevention. Yet, partially as a result of its own success, the Bank teeters on the brink of irrelevance. Last year the organization lent $26 billion dollars to developing countries — a paltry sum compared to $1 trillion in loans and investment those nations received from other sources during the time. The Bank’s largest borrowers, countries like India, Brazil, and China, are increasingly important players on the world stage and will have little need for the organization’s capital in the years ahead. Moreover, in an era of globalized financial markets many poorer nations are likely to be more interested in tapping private funding and other forms of foreign aid, such as that provided by China, than relying on the Bank’s assistance, which often comes with strings attached. The fact that so many countries are graduating from Bank lending is something to celebrate. So should the organization declare victory and close up shop? The answer, unfortunately, is no. Today’s major development challenges — whether climate change, migration, or access to energy — are increasingly global in scope, and the Bank is one of the only organizations that can address them in a meaningful way. This is because the Bank has the unique ability to provide both intellectual and financial assistance on a global scale. Unlike foreign aid programs, think tanks, or private foundations, the Bank combines knowledge creation and dissemination with significant on the ground development experience. As a result, the organization continues to have considerable influence in the developing world. Additionally, because of its unique governance (the Bank’s president has significant latitude in running the organization) and funding system (the Bank gets most of its money from selling its bonds on the private market), the organization is less beset by the inertia that plagues most other multilateral institutions. Kim — or whomever is ultimately selected as the Bank’s next president — will need to take advantage of these powers to remake the organization. Although each of the World Bank’s previous eleven presidents has left their distinct mark on the institution, none has faced a development landscape quite as unsettled as today’s. With the vast majority of the world’s poor residing in a handful of fast-growing middle-income countries, low-income nations facing unprecedented environmental and resource challenges, and industrialized countries preoccupied with their own economic difficulties, the Bank’s next president must move quickly to put the organization on a sound footing. This will require many things, but the major need is to turn the Bank into a more global institution. The success that many developing countries have had in increasing their economic growth over the previous years should force the Bank to question its intellectual foundations. Staffed mainly by American-trained economists, the Bank has long advanced a development model that calls for reducing the government’s role in the economy. While this might have made sense during the Cold War, in the aftermath of the financial crisis the Bank should move faster than it already has in embracing a development philosophy that recognizes that government can be a positive force in the economy. By bringing the organization back to a more balanced vision of development, the Bank’s next president can take an important first step in preparing it for the future.

Read the full article →

Trudy Bourgeois: Getting Past Stuck With Diversity & Inclusion

March 26, 2012

I fear that leaders of the business world today are like Moses and the Israelites. Wandering the wilderness for 40 years, going around and around the same mountain. It seems that’s where we are with D&I — stuck circling the same mountain for 45 years. But, just as the Israelites, we have hope. One day God said to them, “You’ve gone around this mountain long enough. Look up and see your promised land.” We are at that moment. We’ve gone around this mountain long enough. Let’s look up and see our promised land where leaders truly embrace diversity and inclusion as a business imperative. And, let’s connect to doing what it takes to get unstuck and make some meaningful progress. Over the years, I’ve come to loath the term “journey” as it is applied to D&I — and I’ve used it myself. I’m now taking a stand. Let’s remove the connection between diversity and inclusion and “journey.” People are constantly throwing this phrase around, “On this D&I journey… ” or “D&I is not a destination, it is a journey.” Those phrases are simply code for: “We’re not making much progress.” I recently heard what I believe is an honest assessment of where the business world stands with diversity and inclusion. Tom Greco, President of Frito Lay, opened the 2012 CPG Retail Diversity Forum (a conference that I design for the Network of Executive Women ) with the following comment. He said, “We need to acknowledge that we’ve made unbelievable progress on advancing D&I, but we have undeniable challenges and unbelievable possibilities that lie ahead.” It’s time to change THE CONVERSATION. We have indeed made progress since the inception of Affirmative Action back in the early 1960s — over 45 years ago. But we are challenged to make a breakthrough. Corporate America simply is not keeping up with today’s diverse world. And, despite the business case, leaders are not tackling the challenges with a purpose. So that leaves us where we are — stuck. On a journey. Making little-to-no-progress. And with no urgency to arrive at the destination. Corporate America’s leaders today will tell you that D&I is a business imperative for their companies. Unfortunately, a very small percentage of them truly mean it and walk it out. It is irresponsible for a business leader to not address the challenges that they know might render them irrelevant in terms of their ability to meet the consumer needs and provide shareholder value. If D&I truly were a business imperative, however, then WHY do we see so little actual progress? Like the progress we see, for example, in sales quotas being met? In bonuses being given for meeting set performance standards? And so on? If D&I truly were a business imperative, we would not tolerate NO progress. No SVP of Sales or CEO, when speaking of sales targets, will accept the reasoning or excuse for having NOT met them as, “It’s a journey… we’re making directional progress.” No way. That is just not the way it works. I worked in the consumer goods industry for 18 years in Sales and Marketing. We HAD to meet our sales targets — every single quarter. Period. If we didn’t, we’d lose our jobs. For diversity & inclusion to become the TRUE business imperative that it IS, that “sales target attitude” and no-failure-accepted expectation must be applied. EVERY leader — every member of the c-suite, every SVP and above, every manager — must pursue diversity & inclusion with and through accountability, responsibility and intentionality. Until the c-suite exemplifies and requires that demonstrated AUTHENTIC leadership behavior, and it is included IN the professional expectations — we will not see any progress. And WHY do we need to see faster progress with D&I? WHY does it matter? Here’s the cold, hard truth: Companies and leaders who “get it” will survive. Those who don’t – won’t. And that’s not just my opinion. Blame the population growth and research data. According to the U.S. Census Bureau , by 2050 over half of the U.S. population will be Asian, African American and Hispanic. Those groups will hold $520 billion of the buying power in the U.S. in the consumer packaged goods industry alone. That is growth of over 74 percent from their buying power today. In addition, according to Why She Buys by Bridget Brennan, women now account for 85 percent of all consumer purchases. They make up over 50 percent of the workforce, yet hold only 16.1 percent of Fortune 500 board seats, with women of color making up only 3 percent of those seats. And, according to additional recent research by Catalyst, at the current rate of our “journey,” it will take 40 more years for women to achieve equal representation in the leadership positions of the workforce. Companies today do not have 40 more years to get this figured out. They will HAVE TO change… or they will die. Why? Because this is a business imperative that is directly related to consumer buying power. In today’s global economy, an organization’s leadership MUST mirror the face of the consumer in order to be more profitable — and in order to survive. For example, in a recent study entitled, ” Women Matter 2010 ,” McKinsey & Company established the link between the presence of women in leadership and better financial results. Women Matter 2010 proves the case that women comprise a vital consumer base, provide a source of high-quality talent in a competitive market, and have a dramatic positive impact on organizational and financial performance. So… what to do? Get UNSTUCK. How to Get Unstuck: The Quick Hitlist 1. No more “journey.” Recognize that we must stop talking out of both sides of our mouths. No more “journey.” Only a vital BUSINESS IMPERATIVE. 2. Get intentional: Make D&I your DNA. Ensure that D&I is part of your company’s authentic DNA. Make it a baseline employment expectation. Be clear about the behaviors that you are expecting from your employees. 3. Infuse a high level of discipline. Set employees up for success by creating learning opportunities that support the ability to connect across cultures. 4. Hold ALL employees accountable. Measure representation, measure retention, measure culture, measure leadership behaviors. What gets measured gets attention . And not as a bonus. Set goals for each of these areas and adopt a black and white standard. Either a leader did it or they didn’t. The board should set goals for the CEO, and the CEO should cascade these goals down throughout the entire organization. If we want to continue describing diversity & inclusion as a journey, that is our choice. But if we do, we must be clear — this is a journey that has an extreme sense of urgency. It is a direct, non-stop flight. We WILL get unstuck, move beyond this mountain and enjoy our promised land!

Read the full article →

Dean Baker: The Paul Ryan Rorschach Test

March 26, 2012

House Budget Committee Chairman Paul Ryan did a great public service when he released his budget last week. By throwing a piece of total garbage on the table and pretending it is a real budget plan, he allowed us to see who in Washington is serious about the budget and who just says things that will push their agenda. It is easy to see that Ryan himself could not possible be serious about the document he put out as “A Roadmap for America’s Future .” The Congressional Budget Office analysis of the plan, which was prepared under Representative Ryan’s direction, shows that all categories of government spending outside of health care and Social Security will shrink to 3.75 percent of GDP by 2050. This 3.75 percent of GDP includes defense spending, which is currently close to 4.0 percent of GDP, not including the cost of the war in Afghanistan. Representative Ryan said that he wants to keep defense spending close to its current level. This means that we have no money left to pay for the Justice Department, the State Department, support for education, roads and other infrastructure, the Park Service, the National Institutes of Health and all the other things that we expect the federal government to do. Essentially Paul Ryan is an anarchist who is proposing to shut down the federal government. This cannot be a misrepresentation of Representative Ryan’s agenda. He put out essentially the same budget last year at which point many people pointed out the fact that he shrank most categories of government spending to zero. If that was a mistake (albeit an incredibly foolish one) he has now had a full year to reflect on his error and redesign a budget to reflect his real priorities. Instead, he doubled down. In Representative Ryan’s 2012 Roadmap there is no room for federal funding for all the services that even conservatives expect the government to provide. Does the Republican right now want to shut down federal prisons and end border patrols as Representative Ryan’s budget implies. This is also not a case of pulling out long-term implications that have no serious meaning. It is a common and silly practice in budget debates to project out a trend for 75 or 100 years and show it leads to an untenable situation when everyone knows the trend will not continue for this long period. However Representative Ryan cannot make this complaint. He actually touts the budget surpluses that he is able to generate in 2040 and 2050 by getting rid of most of the government. His Roadmap budget document proudly compares his budget surpluses with the growing debt under the baseline path he attributes to President Obama. Even if the Roadmap lays out an absurd budget path for the years and decades ahead, Representative Ryan has nonetheless done us a valuable service with his budget. His proposal allows us to distinguish between people who are serious about budget and economic policy and people who are obviously a different agenda. Those who pretend that the Ryan budget is a real guidepost for thinking about the budget fall into the latter category. Foremost in this group is likely to be the various Peter Peterson funded groups — the Concord Coalition, Come Back America and the Committee for a Responsible Federal Budget — which last year awarded Mr. Ryan a “Fiscy” based on the commitment to fiscal responsibility in his 2011 budget plan. Of course many other prominent actors in Washington’s budget debate also applauded the 2011 Ryan budget for its serious approach to the country’s fiscal problems. These organizations and individuals may like Ryan’s plan to give more tax breaks to the rich by reducing the top tax rate for both individuals and corporations to 25 percent. They may be impressed by his plans to dismantle Medicare and Medicaid, and eventually Social Security. Or they may be attracted by his proposal to eliminate almost the entire federal government. But the advocates of the Ryan plan are obviously not thinking seriously about how to fashion a budget that provides basic social insurance and sustains a 21stcentury economy. By allowing the public to see clearly who is serious about the budget and governmental responsibilities and who is not, Representative Ryan has performed a valuable public service.

Read the full article →

Soren Petersen: ROI on Design and Risk Reduction

March 26, 2012

Co-written by Jed Simms. Creating innovative products is fraught with risk due to the inherent gap between the knowledge one has and the knowledge one needs to make good decisions. Usually one knows only 5 percent of what is needed at the stage where 70 percent of the product’s cost is determined. At this juncture, one has to make a qualified bet on the design team’s ability to close the gap faster than the money is being spent. Fortunately, there is some predictability, since return on investment (ROI) and risk go hand in hand. Small incremental investments in product improvements offer small rewards at a low risk where market and technology are known, while breakthrough innovations have the potential of offering huge rewards along with large investments and potentially scary risk. With only a vague sense of the odds, this may look like pure gambling. However, unlike roulette, product development has four winning strategies that, when combined, vastly improve the return on investment. Applying the four steps: (1) Business definition, (2) Portfolio management, (3) Hedging product concepts and (4) Managing process, ROI in design is effectively managed, execution and market risk is systematically reduced while real ROI becomes transparent, measurable and controllable. One — Stating and agreeing upfront on what the new business-as-usual end states are to be and how the results are to be made operational, in clear specific measurable terms is the most important step to optimizing ROI. This is accomplished though formulation of a dynamic and inspirational design brief for the projects considered, describing how projects fit with the corporation’s strategy. The briefs describe the desired outcomes of nine design quality criteria: strategy (philosophy, structure and innovation), context (social/human, environmental and viability) and performance (process, function and expression). Formulating the brief requires all stakeholders to convene and consider potential options in business outcome terms and then co-create a brief that is flexible enough to adjust to changes in assumptions, new learning as well as to solidify the team and inspire action. Creating a brief is actually a small design specification project in itself for management to conduct. Two — Product portfolio management, like any investment portfolio, is balancing one’s portfolio for long-term ROI, determining which projects to initiate in the first place. This can be accomplished by spreading the corporation’s investment into combinations of low and high market and execution risks. The right mix depends on the dynamics of the market and the strategy of the corporation. Three — Option management by segmenting the product development process into a number of phases, small steps where investment is made for one phase at a time, each phase reducing risk though prototyping and testing. In addition one can hedge one’s risks by investing in parallel alternative designs during a phase and then pick the most promising product concept at its end for further development. Four — Comprehensive risk/reward focused project management is the strategy for translating the brief into real-time decisions and actions — it is where the rubber hits the road. As with rally driving, mastering project management takes lots of practice in holding the original business outcomes in mind while continuously managing activities and optimizing the allotted time and cost to meet the expected quality. Besides doing all of the above well, the key to totally optimizing ROI and risk is to recognize when the team has discovered unanticipated hurdles or unforeseen game-changing opportunities. Communicating these changes to management is crucial so they can reassess their investment, take advantage of the situation and plan outcomes to optimize the resultant ROI. As in life, luck in new product development is when opportunity meets preparation. Not just once, but every month, week, day and sometimes every hour. Long-term superior ROI is achieved when direction, preparation and execution is consistent and is clearly communicated to all project participants. Special thanks to Jed Simms for researching and co-writing this article.

Read the full article →

Ron Ashkenas: Firing Someone the Right Way

March 26, 2012

Perhaps the most difficult part of any manager’s job is telling a subordinate that he can no longer stay with the company — that he’s been “fired,” “let go,” “dismissed” or otherwise taken off the payroll. It’s a gut-wrenching conversation, knowing how this simple act affects a person’s career, self-esteem and livelihood. Firing an employee also affects everyone else on your team. Not only does it change work assignments, but it also makes people wonder about your judgment as a manager and their own job security. Given these emotional undercurrents, many managers let anxiety drive the firing process instead of intellect, making a difficult moment even worse. For example, I know of a senior manager who walked unannounced into his employee’s office, junior HR person in tow, and declared: “You’ve been fired. Our HR associate will answer your questions and then escort you out of the building.” The manager then exited, leaving the shocked (former) employee and the ill-prepared HR person staring awkwardly at each other. What made this situation even worse is that the senior manager had given no previous indication of the employee’s performance difficulties and had given him nothing but positive feedback in the previous six months. Now, suddenly, the reason for the firing was “lack of teamwork.” And because it was “for cause,” no severance was offered and pay was terminated immediately. From the manager’s perspective, this approach avoided the anxiety associated with firing. He didn’t have to engage in any difficult performance discussions or justify his actions. He also avoided any kind of emotional scene and (temporary) budget impacts. Of course, he also probably generated a major lawsuit that left the company liable for far more than the cost of a severance. And once the story got out, he likely lost the respect of his team. Clearly this may be an extreme example, but there are too many stories like this one. Because firing is so emotionally charged, it’s easy to act counterproductively. To avoid that, here are some guidelines for those times when firing an employee becomes a necessity: First, make sure that letting your employee go is the last step in a careful, thoughtful, fair and transparent process that started long before the actual firing. In other words, if the dismissal is for poor performance, then it should occur after a series of performance discussions, plans and documented actions. If it’s due to reorganization or job elimination, it also should follow conversations, announcements and a reasonable “fair warning.” The key is that, if possible, firing should not come as a surprise. In most companies, the HR function has guidelines for how this process should unfold. Second, come to the “firing meeting” prepared to address the practical logistical questions that the person will have about leaving her job: When is the official end date? Are there severance arrangements? Are there opportunities elsewhere in the company? Is career counseling available? What happens with benefits? You may need help from HR to make sure that these answers are available. Third, at the meeting be ready to listen but not react. Losing a job can be traumatic, and your employee may display a range of emotions, which he might direct toward you. Try not to get caught up in responding. Listen with respect and then direct the person toward the practical realities of moving on. Offer to talk again later when the emotions are not so raw, or ask a trained HR counselor to join you. Finally, after the firing, talk to your team about the process, the reasoning and the implications for them (within the limits of confidentiality). In some cases, they will fully understand the decision. In others, they may have a very incomplete picture. In either case, you need to be sensitive to their emotions, and then help redirect their focus back on work. Firing a subordinate is one of the most difficult and painful tasks you’ll ever have to do as a manager, and for most of us it never gets easier. Unfortunately, avoiding the anxiety associated with firing only makes things worse. So if you have to do it — do it right. What’s been your experience with firing — or being fired? Cross-posted from Harvard Business Online .

Read the full article →

Ed Lawler: Sustainability: It Should Be About More Than the Bottom Line

March 26, 2012

Going green can be profitable — that is the conclusion of multiple studies that have looked at the financial outcomes of corporate efforts to improve their environmental impacts. By reducing emissions, packaging materials, and waste, Walmart, Unilever, and many other companies have been able to reduce their costs and improve their environmental impact. This has led some to conclude that the best way for corporations to serve society and to operate sustainably is to focus on reducing costs and maximizing their profits. I think that this is a flawed conclusion. The alternative to this profit-above-all approach is a sustainably effective approach that focuses on the triple bottom line of people, planet and profit. Organizations that practice and integrate sustainability thinking put it into all of their operations — they do not just work on what leads to profits. They integrate sustainability into their very DNA, and everything proceeds from that. These organizations measure themselves in all three areas and structure and design their operations to perform in ways that have a positive impact on all three. Another huge difference is that sustainably effective organizations don’t look at green or sustainable initiatives as special programs — as mere window dressing. One-off social or environmental initiatives are not enough. A sustainably effective organization makes much deeper and more comprehensive organization changes. Sustainable performance is a part of everything the company does — from how employees are managed to the overall structure of the organization and how work is designed. It must be part of the company’s identity and embedded into every aspect of the organization. My recent book, Management Reset: Organizing for Sustainable Effectiveness , explains what organizations must do to make this happen. A number of CEOs see the value of the sustainable effectiveness approach, including Kenneth Chenault of American Express and John Mackey of Whole Foods. In fact, Chenault has said that in order to pursue profits, corporations must act in ways that protect and enhance the world we live in. Many organizations still have the “profit-above-all” mentality. They focus primarily or exclusively on the obvious financial gains that exist from doing the right things environmentally and socially. If they do something that does not immediately have a positive affect the bottom line, they usually deem it a philanthropic act and strive to get public recognition for it. The problem with organizations that adopt a bottom line orientation toward sustainability is that they only do those things that are visible and have a quick financial payoff. They do not go beyond them to search for practices and policies that make sustainable performance a core issue in everything the organization does. They look for cost savings and try to avoid fines, public criticism and other negative outcomes. They spread a good veneer over the organization, but they do not change the essential nature of the organization. BP had a long history of being fined for damaging the environment and having a high employee accident rate even before the Deepwater Gulf of Mexico explosion. Does anyone remember the company’s “Beyond Petroleum” marketing efforts? BP started a highly publicized green energy business in order to improve its image, but it did not alter its commitment to profits above all else. And it did not redesign itself to achieve triple bottom line performance. The “problem” with the sustainable effectiveness approach is that it takes strong leadership at the top of a corporation to put it in place and a willingness to live with the reality that at least in the short-term it may not be the most profitable way to run a corporation. Thus, there is the issue of why a corporation should commit itself to this approach. One reason for adopting the sustainably effective approach it is that if more and more corporations adopt it there will be less and less need for government intervention into the private sector. The most important reason, however, is that it will lead to a world in which all of us will enjoy a higher quality of life. Let’s hope more and more corporations and their executives see the world this way and commit their organizations to sustainable effectiveness, not just sustainability programs. Crossposted from forbes.com .

Read the full article →

Ralph Gomory: Making Corporate Actions Visible

March 26, 2012

In a recent article we wrote: “America today is very different from the country that fought the Revolutionary War and framed the Constitution. Then, it was a nation of farmers; today, it’s a nation of corporations.” Though we are today a nation of corporations, there is remarkably little discussion about corporate actions and the impact of those actions on our lives, even though it’s clear that what our corporations, especially our major corporations, choose to do affects in major ways wages, jobs, healthcare and the overall economy. There is even less discussion on what we want from our corporations. Is it, for example, enough that their sole goals are to maximize the return to their shareholders? This article suggests something citizens can do to spur these needed discussions and to make visible what corporations are actually doing and the effects of their actions. Here we are not calling on the government to mandate this transparency, rather we are calling on ordinary citizens and citizen organizations to act to make the actions of corporations more visible, more transparent. Labeling the Corporation We are used to the idea that many of the products we buy are labeled. For example, many processed foods are obliged to disclose their ingredients, and they are labeled so that we do not have to guess at what we are eating. Consumers are often encouraged to “read the label”, so they will know what they are buying. Similarly, let us now insist on labeling and making visible what corporations are doing. Corporations affect us and our country through their decisions on outsourcing and on wages and pensions, and by what their goals are. Do they consider in their actions the effects on customers, their own employees, the communities in which they operate, and on the country that sustains them with its laws? Or do they only consider shareholder value? Do they pioneer with new and valuable products, and if they do, how do they decide where those products are made? Or, in the realm of services, do they exploit the ignorance of their customers to either give them loans they cannot repay or investment advice more tailored to corporate profits than to the welfare of the customers. Let’s label corporations with labels that tell us what they are actually doing. How to Label the Corporation We are not talking here about physical labels attached to products that corporations make, but about electronic labels attached to the corporations themselves. But where would these labels come from? How would they be made? What would they look like? What would they do? An example of corporate labeling already exists. It was created by a cooperative effort between the Zicklin Center for Business Ethics Research at The Wharton School of the University of Pennsylvania and the Center for Political Accountability (CPA). While this is a label that only describes the political spending activities of corporations, the methodology can be applied equally well to other corporate actions. Together the two organizations developed a set of twenty-nine criteria by which the corporate approach to managing, overseeing and disclosing political expenditures could be judged. The criteria covered disclosure of the range of a company’s political spending — contributions to candidates, Party committees and ballot initiatives as well as payments to trade associations and other tax exempt entities organized for political purposes — and its policies and practices for associated decision making and oversight. They then scored the top 100 U.S. corporations on all twenty-nine criteria, and for each company the weighted scores for the individual criteria were combined into a single rating, specifically, the CPA-Zicklin Index of Corporate Political Accountability and Disclosure. Before the Index was made public each company was informed of its rating and had the opportunity to dialog with CPA about them. This also gave the company the opportunity to make changes in the policies and practices they were publicly posting on their website. Only after that was the rating made public. The result is that you can see today this well thought out rating of the top 100 U.S. companies on the CPA website and also, for those who want it, a detailed d e scription of how it was determined. We believe that something very much like this can be done for other corporate activities. The essential step is to work out criteria about which you want information, then see what information can be obtained for each company. It was important to the CPA-Zicklin effort, that a corporation not providing information to the public on a specific criterion would result in a score of zero on that criterion and thus a lower rating when the result is made public. We suggest that civic organizations with a particular interest, label corporations on that interest., whether that is the environment, how they treat their employees, the quality of their goods, or the degree of outsourcing. They should then develop their criteria, and gather information; not always only from the corporations.. They should then produce a publicly available rating that is easy to link to. Modern technology makes all this possible and more. People with a particular interest in a particular company could organize a Facebook page. There could also be Smartphone apps, similar to those that already exist for comparison shopping. Pointing the camera of a Smartphone at a product would immediately reveal the company that makes it and the rating given to that company by a selected website on a selected issue. Any and all of these actions will contribute to making visible, transparent and discussible what our corporations are doing. We are a nation of corporations, but our press and our conventional politics do not in any systematic way make visible the effect of corporate actions on the country. Let us as citizens make up for that significant omission.

Read the full article →

BJ Gallagher: Ten Tips for Finding Work in a Tough Economy

March 25, 2012

The good news is that the economy is officially over and the recovery has begun — we’re on our way back up — slowly, to be sure, but it’s moving in the right direction. The bad news is that many of the jobs that disappeared in the Great Recession aren’t coming back — they’re gone for good. While the outlook for our country is getting brighter, the outlook for hundreds of thousands of individuals still seems bleak. What can you do if you’re one of those folks whose job — and/or company — is gone forever? If there’s anything I know for sure, it’s that Americans are resilient, resourceful, smart, and creative. Americans are can-do people. We are inventors and innovators. We are pioneers and adventurers. We put a man on the moon; we pull off medical miracles; we develop wonder drugs; we invent killer apps. We can certainly put ourselves back to work. Here are ten tips to get started: 1. Attitude really IS everything. Yes, you’ve heard it a thousand times… because it’s true. If you think your situation is hopeless, you’re right. If you think there must be work out there somewhere, you’re right. Your most important task right now is managing your attitude and emotions. 2. Change your paradigm — forget the word “job” and instead focus on “work” and “earning.” Give up the notion of finding a 9-to-5 job — they scarcer than hen’s teeth. But there’s still plenty of “work” to be done; it’s contract work, project work, temporary gigs, portfolio work. Think of the movie business, or construction work, harvest season on the farm — where people come together for a limited period of time to work on a project. When it’s complete, everyone moves on their next gig. 3. Do an inventory of your skills, talents, abilities and experience you have to offer. Make a list of your strongest skills and best abilities. Try to think of generic skills you can take from job to job, applying them almost anywhere — financial skills, managing projects, writing skills, verbal communication skills, the ability to manage a team, project management, organization skills, tech skills, office skills, juggling priorities, meeting deadlines, working under pressure, solving problems, resolving conflicts, dealing effectively with customers. You have to know what value you can add to a business in order to sell yourself. 4. Look for opportunity, not safety. There is no place on the map called “Safe.” Job security falls into the same category as unicorns and tooth fairies. Your only security is your ability to secure work. Give up looking for a “safe” profession (and for goodness sake, don’t tell your kids to look for a “safe” occupation, either). 5. Learn to dance with change. For thirty years now, workplace experts, authors, and career consultants have been telling us that the only certainty is change. But denial is stubborn and many folks still hope that things will “settle down” and “get back to normal.” Wake up and smell the Starbucks — change IS the new normal. 6. Don’t let what you can’t do stop you from what you can do. Stop focusing on things that are out of your control. Focus on things you can control — your mindset, your actions, how you spend your time, getting out there and meeting people, making contacts, and following up on leads. 7. Be careful what you read, watch, and listen to. News, by definition, is that which deviates from the norm. If millions of people go to work every day, that’s not news. If lots of jobs disappear and thousands of people are without work, then that’s news. But if the news is all you pay attention to, you’re not getting the big picture — or the accurate one. Sure, it’s OK to glance at the newspaper headlines or tune into the evening news for a few minutes, but don’t linger over the news or you’ll get depressed. (Refer back to #1.) 8. Polish your people skills. Business success and career success are all about relationships — relationships between bosses and the people who work for them; relationships between businesses and their customers; relationships between coworkers; relationships with vendors and other stakeholders. Eighty percent of people who fail on the job fail because of poor interpersonal skills, not poor technical skills. If you can’t get along with people, you’re in deep yogurt. 9. Go where the love is. Surround yourself with people who love you and care about you. You need all the support you can get when you’re looking for work. Just as elephants rally around one of their own who is sick or injured until he gets stronger, your friends and family can provide you with valuable help. Run to the center of the herd, honey, run to the center of the herd. 10. Tap into spiritual resources. Ninety-two percent of Americans say they believe in God. If you’re in that 92 percent, now would be a good time to cultivate your relationship with a Higher Power (whatever name you call it) and deepen your faith. Meditation, prayer, inspirational books and CDs, and spiritual groups can provide enormous strength, reassurance, and comfort in these trying times. BONUS TIP: In every recession, there are some people who make lots of money. Make a commitment to be one of those people. As Winston Churchill wisely noted: “An optimist sees an opportunity in every calamity; a pessimist sees a calamity in every opportunity.” Which one are you? ************************************************************************************* BJ Gallagher is the author of “It’s Never Too Late To Be What You Might Have Been” (Viva Editions) .

Read the full article →

Andrea Sittig-Rolf: Don’t Waste My Time, Strategy Tips For Getting the Sale

March 23, 2012

Contrary to popular belief, the secret to successful sales isn’t necessarily the “close.” While asking for the business is an important and crucial step, sales is a process that requires careful strategic planning. The “close” should be a natural next step in the sales process, not just a question you ask your prospect out of the blue such as “Are you ready to place your order?” Here are a couple of ideas to consider when walking your customers through the sales process so that closing the business is seamless, and the natural next step. A philosophy I live by in my business is “the purpose of a meeting is to get another meeting.” In other words, the purpose of a meeting is not necessarily to close the business, unless you’re in a business where “one-call closes” are common. If your business is like most, it will require more than one meeting, as well as other forms of communication such as phone conversations, e-mail exchanges, and other written correspondence before you actually close the sale. By ending the first meeting with agreeing to the next step with your prospect, you’re ensuring that the prospect is willing to move through the sales process with you. Another key factor at the end of the first meeting is to ask your prospects for a commitment that they will, in fact, respond to you when you follow up. How many times have prospects asked you to follow up, and when you do, they don’t respond to you? Maddening, isn’t it? I don’t know about you, but if the answer to doing business together is “no,” I’d rather know that sooner than later so I don’t waste my time following up with someone who isn’t really a prospect anyway. One way to insure that your prospects will respond to you when you follow up is to give them an “out” if they decide not to do business with you. To do this, after you’ve agreed to the next follow-up step, say something like, “Can I ask you a favor? When I follow up with you in two weeks, if for some reason you’ve decided not to proceed, will you please let me know? There’s a saying in sales that ‘a fast no is better than a slow no’ and if you’ve decided to go another way, that’s okay, just let me know so I won’t waste your time or mine.” Sounds a little bold, I know, but most prospects will respond positively to this because one, it gives them the out they need if they decide to go with another solution, and two, it shows your prospect that you are a busy professional and you don’t want to waste anyone’s time. This technique also works well because suddenly you’re not a desperate salesperson, but rather a confident consultant who has something of value to offer. I’ve found it necessary to practice this technique over the years when coming across prospects who are just too nice to say “no.” As much as we hate to hear “no,” I know you’ll agree that you’d rather hear it early on in the process so you don’t waste time working with someone that’s never going to become a customer anyway. The funny thing is, more often than not when using this technique, based on my personal experience, you will not hear “no” and will actually end up closing the sale. Next, you’ll need to prove your solution doesn’t just show a return-on-investment, but actually creates a profit center for your prospect. For example, if by implementing the solution you provide your customer will invest $10,000 but actually save $15,000 in other operating costs within six months, you can show not just an ROI of six months, but an actual profit (or savings) of $5,000. (Savings can also be viewed as profit since it ultimately affects the bottom line, which is probably the thing your prospect cares about most.) Finally, creating a sense of urgency will help move the sale along through the sales process. Creating a sense of urgency requires your solution to be so compelling that it doesn’t make sense for your prospect to go another day without it. A sense of urgency is created by emphasizing the pain your prospects are experiencing by not having your solution and showing that by comparison, your solution will help. Now all you have to do is show that the sooner your solution is implemented, the sooner their pain will go away, and the next logical step in the sales process will be the sale, but don’t forget to ask for it.

Read the full article →

Ali Noorani: Bipartisan Visa Reform? Hold on

March 22, 2012

Think it’s hard to get the 60 votes necessary to quash a filibuster and get something done in the U.S. Senate? Forget the supermajority: A single senator can hold up a vote for months on end — even on a bipartisan bill that serves the needs of our economy. Example A: Sen. Chuck Grassley of Iowa and the Fairness for High-Skilled Immigrants Act. Democrats and Republicans in the U.S. House of Representatives performed a modern-day political miracle in November by coming together to approve this bill, which would restore balance and fairness to the distribution of employment- and family-based immigrant visas. Introduced by Rep. Jason Chaffetz (R-UT), and Rep. Lamar Smith (R-TX), it passed 389-15. The bill would provide a small yet important fix to the distribution of employment- and family-based visas, which is arbitrary in nature and inconsistent with basic supply and demand principles. Under current law, Iceland and Belize have the same cap on visas as India and China, two countries that provide the U.S. with large numbers of science, technology and engineering professionals. This archaic approach has created huge backlogs in countries with high numbers of employer-sponsored immigrants. For example, workers from India currently face waits of up to 70 years — yes, 70 years — to receive a green card. That is not good government. Likewise, naturalized citizens and permanent residents from countries such as Mexico and the Philippines run up against years-long backlogs when trying to reunite with their loved ones. The Fairness for High-Skilled Immigrants Act eliminates one of the obstacles for the people who have been waiting the longest for employer- or family-based green cards. Sen. Grassley, an army of one when it comes to blocking smart immigration policy, placed a hold on the legislation in December. He cited concerns about “future immigration flows” and “that it does nothing to better protect Americans at home who seek high-skilled jobs during this time of record high unemployment.” The senator is turning a blind eye to the fact that Americans at home face the same amount of competition for jobs now that they would if the bill became law. The legislation does not increase the total number of visas; rather, it simply redistributes the existing pool. In fact, the minimalism that makes the bill politically palatable to 389 representatives and, for all we know, as many as 99 senators is also what limits its reach. If, one day, we get to celebrate the bipartisan support for this measure, we can do so only insofar as it lays the groundwork for broader immigration reform. Having proved they can join forces, Republicans and Democrats should do so in the name of fulfilling our economic need for skilled workers of all kinds. From the skilled engineer to the skilled farm worker, our economy depends on immigrants and immigration. For starters, legislators could add to the total number of visas by simplifying and shortening the green-card application process for international students who earn advanced degrees from American universities. Such a change for graduate students in science, technology, engineering or mathematics would encourage technological innovation on our shores and create jobs in the process, as Stuart Anderson, Executive Director of the National Foundation for American Policy, points out in a recent policy brief . We also must look beyond advanced degrees and recognize that skilled immigrants create jobs in all sectors of the American economy. For instance, the job of a skilled immigrant farm worker is directly tied to other “upstream and downstream” U.S. jobs as someone needs to transport, package and process a farm’s output. Studies by the U.S. Department of Agriculture suggest that about three U.S jobs are tied to every job on the farm. If a labor shortage forced a shift to overseas food production, all of these jobs would disappear. That’s without mentioning the economic disadvantages of importing more of our food. Recruiting skilled workers, in concert with increased investment in education and training for U.S. workers, will make the American workforce more competitive. By limiting or excluding immigrants, we only hobble ourselves. For now, even modest reform is on hold. But even if we have the opportunity to applaud members of Congress for a small visa-reform bill, we must continue to push for more meaningful policy changes that match our economic reality with our need for a skilled workforce. It is time to set our sights higher. Ali Noorani is the Executive Director of the National Immigration Forum .

Read the full article →

Mark Gongloff: JOBS Act Passes, Massive Back-Door Deregulation Rolls Back Financial Reforms, Sets Stage For Wall Street Malfeasance

March 22, 2012

Who says American politicians can’t come together to get things done any more? Demonstrating that disregard for sound financial regulation knows no party, the Senate on Thursday passed the Jumpstart Our Business Startups Act, or JOBS Act, rolling back investor-protection regulations, some of which date back to the 1930s, and some of which have been passed as recently as 2002 in the wake of Wall Street shenanigans from the 1990s tech bubble to Enron. The bill, which was supported by both parties, with the urging of small and big businesses, passed fairly easily, despite long and loud complaints from many quarters that the act would break down investor protections left and right, setting the stage for future financial scandals and crises. The bill purports to make it much easier for small firms to raise money, either through private “crowdfunding,” essentially raising money online, or by going public. At its heart is the persistent myth, relentlessly propounded by Wall Street, that there are a million Facebooks out there waiting to thrive and create jobs if only the government would just get the heck out of the way. It’s really not true , but it sounds like a good thing to be in favor of during election season. The Obama administration immediately leaped to take credit for the bill, with a statement from White House press secretary Jay Carney: The President is grateful that the Senate acted in a bipartisan way to move forward key ideas the President proposed last fall that will help our small businesses and startups access capital they need to grow and create jobs. So we get this bill, which will likely create few “jobs,” unless — as Jesse Eisinger wrote recently at ProPublica , your job is scamming investors or writing about financial crimes and crises. So financial journalists are certainly grateful for it. Senate Democrats did manage to curb some of the bill’s more outlandish aspects by providing some investor protections. Despite that, the House is expected to pass the Senate’s bill, which still includes some of the worst features originally passed by the House. Investment banks can now issue research reports on the companies they take public — meaning we’ll be back to the days when analysts can pump up “POS” stocks they then dump on unwitting customers — removing a prohibition set by Sarbanes-Oxley in 2002. Web sites can pitch new companies directly to investors, raising the specter of “boiler rooms” preying on your grandmother to pry away her retirement money. The investor protections added to the bill include greater financial disclosure and a requirement that web sites pitching crowdfunded companies register with the Securities and Exchange Commission. But another amendment with more protections was rejected. Dan Primack at Fortune has a more detailed explanation of the bill’s moving parts and the pros and cons of each. He’s far less vehement than others about the downside of the bill, but still thinks it’s a solution in search of a problem. “These changes are being proposed to cure an IPO crisis that simply does not exist,” Primack writes. Some of the other reactions from around the web have been more scorching. Senator Carl Levin (D-Mich.) wrote (emphasis added): We are about to embark upon the most sweeping deregulatory effort and assault on investor protection in decades. … If we pass this bill, it will allow vast new opportunities for fraud and abuse in capital markets. Rather than growing our economy, we are courting the next accounting scandal, the next stock bubble, the next financial crisis. If this bill passes, we will look back at our votes today with deep regret. We should not adopt this bill today. We should return it to committee, we should have hearings, we should have opportunities to amend this bill. Adopting this bill will put us in a position of the most massive and mistaken deregulation of our capital markets in decades. Senator Bernie Sanders (I-Vt.) wrote : At best, this bill could make it easier for con artists to defraud seniors out of their entire life savings by convincing them to invest in worthless companies. At worst, this bill has the potential to create the next Enron or Arthur Andersen scandal or an even worse financial crisis. The Americans for Financial Reform wrote : With the country still suffering from high unemployment and hard times in the wake of the financial crisis, it is almost unbelievable that the Senate would rush passage of measures that will undermine transparency and accountability in the capital markets, and expose our families to a new round of fraud and abuse. But that is what they have done. San Jose Mercury News columnist Chris O’Brien says Silicon Valley has let the attractive “crowdfunding” parts of the bill blind them to its face-peelingly horrible parts: Indeed, many references I see to the bill still refer to it as a “crowdfunding” bill, as if that was all there was to it. It’s important to note that the actual bill reflects several other bills that were rolled up a few weeks back. Most of this bill represents a staggering rollback of investor protections, and a major rewrite of the rules governing at least 90 percent of all IPOs. This could all be much ado about nothing. The Epicurean Dealmaker, an anonymous blogging dealmaker, wrote on Wednesday that the JOBS Act might change very little about how companies raise money, for better or for worse. He concluded, though, with a reminder: In any event, you may rest assured that one perennial truth about entrepreneurial business funding markets will never change, no matter what changes to the legislative and regulatory environment may occur: The retail investor will always get screwed.

Read the full article →

Denice Kronau: Spending Time With People I Admire Makes Me Happy at Work

March 22, 2012

If you’re someone I admire, please come sit next to me. I could use a little time breathing the same air as you. Most people I know admire people who are out of reach — Mother Theresa, Derek Jeter, Lady Gaga — to name a few and I do as well. We all have role models who inspire us. And many of us admire “the usual suspects”: our parents and siblings. Over the years, I’ve realized that I also admire a lot of people I work with. It starts with attraction and no, I don’t mean in a creepy want-to-have-sex-with-you kind of way. I meet someone new at work and there’s a spark that gets my attention: either from what they say, or their demeanor, or their personality. Something intrigues me about this person, and as we spend more time together I often find that the initial attraction turns to admiration. I turn into a groupie. Usually it’s not the people at the top of the work hierarchy whom I admire. Most of the time, it’s the folks who are in the lower ranks of the organization. Let me give you an example. I have a colleague, let’s call him Sam, who’s five years out of college, so he’s just beginning his career. Several years ago, he started a project to build a health care clinic in one of the poorest regions in the Amazon in Peru. In effect, this is his hobby. At the risk of sounding like my grandmother, when I was Sam’s age my hobby was watching TV. I’ve thought about why I admire certain people at work. Maybe I’m attracted to qualities that I know I lack, but I think it’s simpler than this. I feel good when I’m around them. It’s like I’m hoping that some of their character will rub off on me if I sit next to them at a meeting. I also like seeing their impact in the moment we’re together. Think about the people you admire. Why do you admire them? Are there people you admire at work? Do you get to spend time with them during your normal work day? I have people I admire who I see very often. But, if I am having a bad day: watch out! I stalk the people I admire when I am having a bad day — just being next to them seems to be an antidote to whatever is making me miserable in the moment. Sometimes I ask them for advice, mostly, I just enjoy the light they bring to my dark mood. Why am I writing about this? Simply because it’s one of the things that make me happy at work: I like spending time with people I admire. I walk away from these encounters feeling better, energized, motivated and just… happy.

Read the full article →

John Fullerton: Financial Statesmanship for a New Economy

March 21, 2012

Reactions to departing Goldman derivatives salesman Greg Smith’s ” Why I am Leaving Goldman Sachs ,” which appeared as an op-ed in the New York Times last week, have ranged from the hyperbolic — Robert Reich’s ” If you took the greed out of Wall Street, all you’d have left is the pavement ” — to the addicted — Mayor Michael Bloomberg’s “we need their taxes” (my paraphrase). Both views are problematic, as I will address. But first, some historical context: Wall Street has always been rife with conflicts of interest. Avoiding all conflicts of interest would destroy the lucrative integrated banking business model, so Wall Street has long proclaimed “we don’t avoid conflicts, we mange them.” Clearly, that no longer works. During the nearly twenty years I spent at JPMorgan (previously known as the Morgan Guaranty Trust Company of New York), the strong and principled leaders on Wall Street — names like JPMorgan’s Lew Preston and Dennis Weatherstone, Goldman’s John Whitehead and John Weinberg, and Lazard’s Felix Rohatyn — acknowledged these conflicts and took great pains to manage their firms’ affairs in such a way as to avoid even the appearance of conflicts of interest in their dealings with clients, regardless of the forgone revenue opportunities. These leaders were financial statesmen, role models for a generation. I stayed at what we now call “the old JPMorgan” (prior to the merger with Chase in 2001) for nearly two decades because of culture. It was far from perfect, but the firm had a special culture that demanded integrity and valued teamwork. “Only first class business, and that in a first class way” was a famous saying of J. P. Morgan, Jr. It is interesting to read the full context of this statement , still posted on Morgan’s website to this day. I wonder what happened to the belief that banking is a profession, as Morgan believed, rather than “just a business” as it is today. There was an arrogance about the culture of integrity at the firm when I had the privilege to work there, but it was real. I think it was also quite unique on Wall Street. But in fairness, we were served a lot of Kool-aid. When I started my career in the 1980′s, JPMorgan Chairman and CEO Lew Preston had a saying that was etched in the minds of all of us young bankers and was passed on for years after Lew’s departure in cult-like fashion: “When we make errors, let us be sure they are errors of judgment, not errors of principle.” There are no financial statespeople like Lew Preston or John Whitehead on Wall Street today, able to see that the colossal firms they oversee have become too big and complex to manage or govern. They systematically exploit conflicts of interest to the extent they can get away with it, as a central component of their business models. As society fully understands, these firms are incompatible with a resilient financial system that serves the long-term needs of the real economy. The servant has become master, confusing means with ends. But this does not mean that there is nothing on Wall Street above the pavement but greed, now or in the past, as Robert Reich suggests. There are many smart, hard working, honest people working in a system they did not create, nor particularly like. Some will walk away when they feel they can. Some like Greg Smith will leave with a bang. Many will carry on oblivious to the inevitable consequences of the system. There is no going back, too much has changed. And much of what’s currently wrong has always been there, yet on a smaller scale and therefore less dangerous to society as a whole. Looking forward, I can imagine three potential outcomes: Financial Statespeople emerge into leadership positions on Wall Street and lead these firms to a sustainable position serving the real needs of an economic system in profound need of transformation. In a letter exchange I had with Lloyd Blankfien back in 2009, I offered up such a proposal for Goldman in what I called the ” Goldman Sachs Historic Restructuring Speech “. While I never expected Blankfein to have the courage to follow my (unsolicited) advice, I also never could have imagined that he would subsequently embarrass himself and the entire industry trying to defend a truly sinister transaction like “Abacus” in front of the US Congress. A second outcome where governments restructure the industry by placing hard lines that eliminate the biggest conflicts of interest while downsizing the speculative casino to the safe side show it should be appears equally unlikely at this time. But it remains a possibility, even if politically unlikely given Wall Street influence in Washington. The third and unfortunately most likely outcome is that the bankers win in the short term and we continue to subsidize what are otherwise unsustainable business models and the bonuses they throw off, making it hard if not impossible for healthy alternatives to emerge at a scale that matters. In fact, the regulations imposed will have the perverse affect of making it even harder for new entrants to compete away the business of the entrenched due to the high compliance costs that only the giants can absorb. In this scenario, we inevitably drive headlong into the next financial crisis with further economic violence done to people in the real economy. Which finally brings us back to Mayor Bloomberg’s “we need the tax revenues” reaction. Bloomberg has been a good mayor in my opinion, perhaps a great mayor. He is a strong leader. Yet his response reveals how much trouble we are in, particularly looked at from a financial center like New York (or London), but also true when looked at from the unsustainable underfunded pension obligations of many states in the union. We have become addicted to speculative finance to achieve unsustainable financial returns to keep the entire system from imploding under a mountain of unserviceable liabilities right at the time when resource constraints will make it harder for the developed economies to grow out of these debts, debts made far worse by the inevitable crashes that the unsustainable system perpetuates. It’s time for financial statesmanship to emerge on Wall Street. Surprise us.

Read the full article →

← Previous Entries