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Brett Greene: How Social Media Influences Customer Service

November 15, 2010

Before you read the full story, I want to start with the fact that Vonage gave me great customer service, but getting there was an unnecessary adventure. Back in August of 2009 I signed up for a Vonage phone line when AT&T dumped their VoIP service in Colorado. I was happy with AT&T Callvantage for years and had actually left Vonage for AT&T years ago because of frustration with Vonage’s service issues and dealing with their call centers in India, which have since moved back to the United States. In February of 2010 I realized that I was using the phone on rare occasions. Using the combination of my iPhone , Skype and Bria was a good one for my personal and business needs. When I called to cancel Vonage I was reminded of their exorbitant early termination fee . (I consider this common telecom company extortion. Can you name one other service you have to pay to stop using? But we’ll save that for another post.) It was cheaper to finish out the contract at $10 (plus $6 in taxes and fees) each month for 100 hours of local service, which I knew I wouldn’t use, rather than pay the early termination fee. So I agreed to that change. On August 30, 2010 I called and finally canceled the service, or thought I had. A few days ago I noticed that I had been charged $16 in September and again in October. I called Vonage yet again to correct the mistake. For an hour I explained the situation to their representative and then to his supervisor, who said they did not have the power to issue a refund for the $32. Their notes showed that I had accepted a free month of service in exchange for continuing the service, which is not an agreement I had made, though the representative kept trying to push me into accepting it. They were robots following their scripts with a mandate to not let a customer leave easily. During conversations with both of them I did something I have never done in these situations before: I mentioned that I have over 30,000 Twitter followers with whom I would be sharing my experience. They didn’t seem to care. After they acknowledged that my account notes demonstrated I had dropped to the lowest plan in February, they claimed the only way they could help me was to cancel my service and possibly issue a refund later. According to the supervisor I spoke with, any refund issued would still require them to review the August 30th recorded phone call to confirm that I had not accepted a free month of service (which, incidentally, they had charged me for anyway). I asked the supervisor why anyone who was forced to pay for a service for 6 months that they wanted to cancel would agree to staying on for a free month. Any thinking person can understand how illogical that argument is. Ideally, a good customer service rep would acknowledge the mistake and rectify the situation in a way that the customer leaves feeling good about the company. This would result in the spreading of positive stories about their experiences with the company. Instead, the people I dealt with repeated in a mechanical way that they understood my problem, but that they couldn’t solve it. What a difference 17 hours and 30,000 Twitter followers makes! I posted a note on Twitter about this at 5pm Thursday night. By 9:30 am @Vonage responded to me by asking me how they could help and then brought @Vonage_Voice into the online conversation. A virtual Twitterstorm ensued in front of about 35,000 people following me and @Vonage. The Vonage social media customer service person was helpful and tried to get me offline as quickly as possible to talk with someone on their executive response team. Undoubtably, this was mostly done to make me happy enough to stop telling people online about my bad experience with Vonage. My refund was magically issued about 2 hours later, without anyone reviewing my August 30th phone call. So why couldn’t the representative or the supervisor I wasted an hour on the phone with offer me the same solution? I’m sharing this story in hopes that Vonage and other companies will address their ineffective customer service systems so that customers don’t need to resort to calling them out publicly in order to be treated fairly and receive a resolution for their account issues. Having an executive response team is smart. Not giving lower level employees the freedom to fix an inexpensive mistake is short-sighted. In hindsight, how much revenue will Vonage lose on the negative public relations this easily solvable situation generated? Vonage’s competitors and tens of thousands of potential customers can now discover and review customer to corporate communications on the social web that are now indexed and archived online forever in the Library of Congress. How much money was wasted by having four employees use up two hours of company time responding to my case? Definitely more than the $32 a representative could have refunded to me after a 10-minute conversation. This isn’t a Vonage issue as much as an issue with doing business the old way versus the social business way . We’ve all had similar experiences and wasted dozens of hours with companies that continue to use antiquated customer service systems. All they have to do to make the systems better is to treat customers like people instead of dollars. Companies should stop forcing customer service representatives to behave like robots, for fear of upsetting their supervisors when the best resolution is to give the customers what they want — even if that means to cancel service. If Vonage had done that I would have been posting on Twitter, Facebook and blogs about how this is one company that “gets it” instead of the dissatisfaction you’re reading now. Hopefully, as more companies realize that we live in a social ecosystem where people have voices that are heard by other customers, their customer service practices will change. Companies who embrace the social web enjoy customer loyalty from people who will promote them and give feedback on how to make their products and services more valuable. This engagement can only boost the companies’ bottom line if they pay attention and make strategic changes based on the feedback they are receiving. Operating a business with the customer in mind is more beneficial and cost effective on multiple levels. Maintaining hierarchical systems where both employees and customers are marginalized is both disempowering and costly. We live in a new era of collaboration between companies and the customers whose loyalties they seek. It’s better to build a large following of raving fans than to burn customer bridges over $32. Please share your own stories of inadequate customer service in the comment section to help corporate America understand what’s broken in their systems so they can understand how to prevent future damage.

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David Isenberg: KBR to Contractors: Yours Is Not Question Why, Yours is But to Do or Die

November 11, 2010

It is once again time to look at KBR’s legal battles. Today we take a look at the case of Reggie Lane in the Fisher, Lane v. Halliburton, KBR litigation . You can find relevant documents at the website of Fibich, Hampton & Leebron, L.L.P, which is one of the law firms representing Mr. Lane. See here . This is a case which has been cited in many other law suits, mainly because the courts have seen fit not to dismiss the suit, thus weakening the traditional contractor defense, i.e., the “political questions” doctrine. That doctrine excludes from judicial review those controversies which revolve around policy choices and value determinations constitutionally committed for resolution to the halls of Congress or the confines of the executive branch.” That has traditionally been taken to mean that issues stemming from the battlefield are supposedly outside the court’s jurisdiction. But in recent times courts have decided it is within their mandate. KBR lost several pretrial attempts to dispose of the Fisher, Lane v. Halliburton case (the most recent in March 2010). Rather than go to trial, KBR has appealed all of its rejected defenses to the Fifth Circuit. According to Joe Melugin, an attorney at Fibich, Hampton & Leebron, who has worked closely with lead counsel T. Scott Allen, Jr., of Houston, Texas, the brief was filed with the Fifth Circuit on Oct. 27, 2010. On November 9 the Court made its redacted version publicly available. What follows are some excerpts from the brief. According to Melugin, “The attached brief and record excerpts bring together (perhaps better than any previously filed publicly available documents) the facts, evidence and testimony which clearly show that KBR and its managers were fully aware that they were sending our clients to their deaths and they did it anyway.” As this is a pretrial appeal, many facts are in dispute. However, two vital facts are no longer disputed: (1) KBR had the unilateral authority to stop its drivers from participating in convoys and was not subject to the once-alleged “plenary control” of the military, 1 and (2) KBR managers unanimously expected April 9, 2004 to be the single worst day of attacks on civilian convoy drivers. KBR claimed to be subject to the Army’s plenary control. However, Judge Miller determined the evidence proves otherwise. R 2185 (“[KBR] argue[s] that they were under the plenary control of the Army, that the convoys went out according to strict protocols, and that they did not have the authority to refuse to send a convoy. However, this argument finds support in neither the terms of the LOGCAP contract itself, nor the practice of the parties at the time.”). KBR even conceded this fact in the final hearing prior to Judge Miller’s February 8, 2010 order. R 2161. This concession marked a departure from KBR’s previous claims to this Court. Lane v. Halliburton, 529 F.3d 548, 561 n.5 (5th Cir. 2008). Given the following material it is understandable why KBR tried so hard to keep this brief under seal. Reading it one can only think of the phrase “depraved indifference” when reading how KBR exposed its drivers to fatal danger. Once upon a time it appears that KBR actually took seriously keeping its contractors safe. KBR assembles a team of Security Professionals In 2003, George Seagle became KBR’s top Security person in the mideast. Seagle led KBR’s _____ All Security personnel would report to Seagle, who reported to Chief Operating Officer Tom Crum. Seagle and his Security Department warned the company of the deadly consequences of sending the truck drivers out on the road the day they died. LOGCAP Operations came under the authority of KBR’s Program General Manager (“PGM”). The 2003 PGM, John Downey, took safety seriously. He authorized every employee in the company to call a halt to any activity that the employee believed to be unsafe: The LOGCAP Safety Philosophy is simple . . . There is not one thing that we do that is worth injury to an employee. Each of you has my personal authority to stop any activity, which you believe to be unsafe. This memo became company dogma. KBR provided copies and read it to all orientation attendees. However, in February 2004, KBR replaced John Downey as Program General Manager with recently retired Army General Craig Peterson. Although Peterson paid lip service to the safety philosophy ,under his authority KBR practiced an irreconcilably different philosophy: “if the military pushes we push.” Indeed, KBR pushed very hard. Early April 2004 saw the worst fighting since the invasion. On April 1, KBR’s COO ordered Craig Peterson to heed the views of the Security Department: But Peterson and his subordinate Keith Richard had different ideas. On April 2, Security’s Rex Williams issued a “Threat Update Document.” It noted more sophisticated attacks on convoys and an expected surge of violence for the coming weekend: Good Friday (April 9) through Easter Sunday. It included a map and two KBR security calendars. One calendar highlighted (in red) that April 9, 2004 marked the first anniversary of the American liberation/occupation of Baghdad and warned of for April 9. The other calendar highlighted Easter weekend as coinciding with Arabeen, a Shia holy period. On April 4, Security’s Ray Simpson wrote to Peterson’s underling Keith Richard (and others) to propose “holding back on moving convoys,” while passing along the concerns of another security coordinator, who described coordinated attacks in Baghdad. Richard copied Peterson to the discussion and sought advice from security manager John Stewart. Stewart replied to all, “Right now our vehicles don’t need to be out there.” Meanwhile, Rex Williams reported that attacks in the Baghdad area for the week ending April 3 had climbed by 50% over the previous week. On April 5, Security tried to stop all drivers from going out. Security’s Ray Simpson ordered that there would be “no convoy movement,” based on the direction of KBR TTM Security Director Joe Brown. But Keith Richard vetoed Security’s order: “This is not a decision Joe or I can make. Only Craig Peterson or Ray Rodon can make this decision.” Brown (with added support from the LOGCAP Security Manager) re-urged his warning, “It is not safe enough for us to move.” But Richard spat back that he – not Security – was in charge: Additionally, Iraq Security Manager John Jones highlighted earlier warnings to Peterson and Richard regarding April 9 before advising, “On the 9th and 10th there will be no travel.” By Wednesday, April 7, it seemed Security was being completely ignored. Regardless, Security’s Joe Brown continued to reiterate the warnings about April 9 and 10. Meanwhile, Keith Richard exchanged emails with a friend back home. Responding to a question about his location, and showing his state of mind, Richard wrote: In the damn war zone. One of my convoy’s was hit with 14 mortars, 6 RPG’s, 5 IED’s and small arms fire. It was a basic ambush. Amazingly no one was injured or killed. Richard announced he was having a hard time “consciously sending [drivers] out in the line of fire.” But Richard followed instructions and “[he had] been given instructions to keep pushing.” Meanwhile, Peterson prepared his superiors: “The rest of this week and next week will be very difficult as there is a national holiday and a regional pilgrimage combined.” Skipping ahead to April 9, 2004, after numerous attacks against KBR convoys had occurred, we have this: By 10:05 a.m., word spread about the attack on Reedel’s convoy. Joe Daniel reported to Keith Richard that Reedel would secure at BIAP and KBR’s 10:00 a.m. Situation Report shows Hamill convoy _________ A 10:28 email reports three convoys under attack near the Tampa/Sword junction. Twelve minutes later, KBR announced that the military has designated Tampa as “red” status. Attached to this announcement is KBR’s 10:30 Situation Report. The Report shows three convoys (Teddy, Tomaszewski, and Watson) currently under attack in the BIAP area with a fourth (Reedel) having driven through the same combat only minutes earlier, while a fifth (Larvenz) was diverted from Sword to BIAP ____. This report shows the Hamill convoy at Anaconda, still staging, i.e., preparing to leave. Satellite images verify KBR’s situation reports. The Hamill convoy began the day at 7:00 a.m., staging within Anaconda. Between 7:38 and 9:51 a.m., Hamill moved no more than 200 meters, all within Anaconda. By the time Hamill reported his departure at 10:45 a.m., KBR knew at least this: (1) Henderson convoy was attacked between Anaconda and BIAP. (2) Reedel convoy was attacked in the BIAP area. (3) Reedel lost his truck, along with at least six others, in the attack. (4) At least eight drivers were missing from the Reedel convoy. (5) Drivers were injured in the Reedel attack. (6) Teddy, Watson, and Tomaszewski convoys are currently under attack in the BIAP area. (7) Larvenz convoy was attacked on Sword and diverted into BIAP for safety. (8) Daryl Watson convoy was attacked leaving BIAP. (9) Reed convoy reported heavy fire between Abu Ghraib prison and BIAP. (10) The military has designated Tampa as “red.” Despite this knowledge KBR directed Hamill to lead a convoy of unarmed American civilians–men not allowed to wear camouflage–driving Army green camouflaged fuel tankers into combat. Moreover, as Hamill testified, for all he knew: It was just a normal day like any other day … No one from KBR or Halliburton had told me anything that would make me think it wasn’t a normal day like any other.

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Bernie Madoff’s Personal Items Go Up For Auction — Including A Tiny Bull (PHOTOS)

November 10, 2010

Bernie Madoff’s tiny bull is up for sale. (Scroll down for pictures of Madoff’s personal belongings that are up for auction) A miniature bronze statue and symbol of Wall Street optimism that once belonged the former financial adviser is among the 400 items U.S. Marshals are auctioning on Saturday to help compensate the convicted swindler’s victims. Made in Italy in 1927, the piece is 5.5 inches long and 2.75 inches tall — seemingly modest for a man who promised investors consistently high returns at extraordinary levels above the market but instead pocketed from them billions of dollars. He pleaded guilty last year and was sentenced to 150 years in prison. A previous auction of his personal property raised $1 million. U.S. Marshals displayed an array of jewelry, furniture, antiques, clothing and other personal effects on Wednesday ahead of Saturday’s auction in Brooklyn and simultaneous online bidding. A 10.54-karat diamond engagement ring that once belonged to wife Ruth Madoff and a pair of black velveteen slippers embroidered with Bernie’s initials will also go on sale, along with a 1917 Steinway grand piano and 15 luxury watches. The bronze bull was one of several sculptures including miniature busts of Plato and Aristotle and twin marble lions. Among the collectibles are a set of 120 rare postage stamps and 247 rare coins and banknotes from around the globe. Proceeds from the auction will go to the Department of Justice’s Asset Forfeiture Fund, which is used to compensate the victims of Madoff’s multibillion-dollar Ponzi scheme. Copyright 2010 Thomson Reuters. Click for Restrictions .

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Don Tapscott: Macrowikinomics: Time to Stop Tinkering, Time for Collaborative Health Care

November 8, 2010

This article is the second in a series of 12 over the next 3 weeks written by Don Tapscott and Anthony D. Williams authors of the newly released book Macrowikinomics: Rebooting Business and the World. The book is receiving a lot of buzz. Mark Parker, the CEO of Nike calls it “A Masterpiece. An iconic and defining book for our times.” The Economist says it’s a Schumpeterian story of creative Destruction.” The book argues that many of the institutions of the industrial age have finally come to the end of their lifecycle, and now being reinvented around a new set of principles and a networked model. Today’s blog is about rethinking health care. ***** Now that Republicans control the House, they will try to roll back ObamaCare. The president has said, understandably, that he will resist vigorously. But for all its sound and fury, the debate over ObamaCare is distracting us from a more important discussion: the basic model of health care is no longer viable. Indeed, both parties have different views about funding models, when evidence suggests that only much deeper changes in how we manage our own health and well-being can prevent spending from spiraling out of control. Despite the advancements of modern medicine, health care’s business model has remained unchanged for centuries. It assumes that, medically speaking, physicians are smart and patients aren’t. Doctors wait in their office or hospital for sick people to come to them, and doctors treat their patients and tell them what to do, one-on-one, face-to-face. If patients didn’t like what their doctor told them, they could shop around for other opinions if they could afford it. Patients play little or no role in deciding their own treatments plans. As one physician puts it: “Today’s healthcare institutions are like the old media: centralized, one way, immutable and controlled by the people who created and delivered it. Patients are passive recipients.” So it is no surprise that a growing number of physicians and patients want a better model of health care. They envision a system in which everyone involved, including patients, use the Web as a platform to share information, deliver care and build communities around medical interests and health goals. A main benefit, as studies show, is that when patients are more engaged in managing their own health, they are more committed to being healthy. Users of MedHelp, a popular online health community, are able to track over 1500 symptoms and treatments on a daily basis using iPhone apps covering both general health conditions, such as weight loss and allergies, and very specific disorders, such as infertility and diabetes. If patients so choose, this information can be shared on an ongoing basis via the Internet with their doctors or caregivers. This information continuum is much more useful than the readings taken during a visit to the doctor every one or two years. Studies show that constant attention to key indices can help motivate people to change their behavior. People who weigh themselves daily are more successful at weight loss and maintenance than those who weigh in weekly. People on the Weight Watchers diet who attend meetings and use digital tools, such as an iPhone app, to follow their points are 50 percent more successful in reaching their weight loss goals than those who don’t. Several pilot studies aimed at reducing the cost of chronic care confirm that such self-monitoring technology reduces errors, improves communication with doctors and helps patients better manage their illnesses. These advances, in turn, decrease emergency department trips, unnecessary doctor’s office appointments and costly home nurse visits. Since patients with chronic conditions absorb nearly 70% of Medicare spending according to the Center for Medicare and Medicaid Studies, equipping patients with tools for self-management would not only improve health outcomes, but also reduce costs. We also know that loneliness and isolation can be a medical risk factor, another area where the Internet can potentially help. Lonely people get sicker than the population as a whole. They suffer from a wide variety of ailments, ranging from colds to heart attacks. Lonely people with HIV respond less well to antiretroviral drugs. People who are lonely in their old age are twice as likely to develop Alzheimer’s than other seniors who are socially active. Socially isolated women have a greater risk of dying once they have been diagnosed with breast cancer. In the most exhaustive study on social ties and health to date, researchers at Brigham Young University and the University of North Carolina at Chapel Hill pooled data from 148 studies on health outcomes and social relationships — every research paper on the topic they could find, involving more than 300,000 men and women across the developed world — and found that those with poor social connections had on average 50 percent higher odds of death in the study’s follow-up period (an average of 7.5 years) than people with more robust social ties. The overall boost in longevity is about as large as the mortality difference observed between smokers and nonsmokers, according to the authors. And it’s larger than differences in the risk of death associated with many other well-known lifestyle factors, including lack of exercise and obesity. Of course, you can’t legislate social relationships. But according to Dr. Michael Evans at St. Michaels Hospital in Toronto, doctors could do more to encourage patients to seek social support in online health care communities. What’s more, he suggests that patients with chronic conditions represent an untapped workforce that is not currently engaged in improving health care. An estimated 30 percent of the American population has a chronic disease and a further 29 percent of the population knows or cares for someone who has one. Bringing these communities together over the Internet to share health care experiences and outcomes, says Evans, can help speed up research and allow superior medical techniques and treatments to spread faster. Take PatientsLikeMe, a vibrant health care community whose members — 60,000 and growing – suffer from debilitating chronic conditions such as ALS, Parkinson’s and bipolar disorder. Members can share details of their medical history, which many do. They don’t mind the loss of privacy when the alternative is to struggle in isolation with the helplessness, lack of control and fear associated with illness. Exchanging information gives them an invaluable source of support and helps them make smarter decisions. Members participate for free, but the data they contribute is rendered anonymous and then aggregated to inform research conducted by doctors, pharmaceutical and medical device companies. This openness ultimately benefits everyone. New treatments can be evaluated and brought to market more quickly. Patients can learn about what’s working and, in consultation with their doctors, make adjustments to their own treatment plans. “People think we are a social networking site,” says co-founder Ben Heywood. “But we’re an open medical framework. This is a large scale research project.” As the benefits of online engagement become clear, we think the time has come for every American to have their own Personal Health Pages on the Internet, including children and infants. Think of it as the patient’s personal window into his or her own health and the basis for participation in a broader health social network. Adults would own and control their own data, but health care professionals (and perhaps family members) could access it as required with appropriate levels of privacy and security. It would serve as each person’s portal to health care information, link them to organizations such as Weight Watchers or a local health club, and track relevant medical advancements. Much like Facebook, a patient could create a community or join medical “causes”. And just like the App store, low-cost or free applications could help individuals measure their own health, do pre-diagnosis of a sick child or test for possible drug interactions. In the Internet-centric business model, patients become more like partners — they self-organize, contribute to the total sum of knowledge, share information, support each other, and become active in managing their own health. This goes beyond the current catchphrase of health care being “patient centric.” Not only is collaborative health care focused on the patient; the patient co-creates health care and wellness, producing an outcome that is a more evidence-based and cost-effective, i.e., safer, better and cheaper. Of course, without the buy-in of the biggest players — namely government and insurers — we won’t be able to maximize this opportunity and more people will get needlessly sick. Harness these new capabilities, on the other hand, and the medical establishment can join with patients and other stakeholders in making the health care system work for everyone. Follow Anthony Williams on Twitter: www.twitter.com/adw_tweets

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Peggy McColl: Are You Marketing From a Place of Integrity?

October 27, 2010

Let me set the scene for you. It’s the beginning of spring and you have decided it’s time to seek out the support of a professional to help you with your weight loss goals and get ready for shorts season. You go to the gym for your first appointment with your personal trainer and there he is. One hundred pounds overweight and laboring for breath as he reaches the top of the stairs to greet you. Your heart sinks. You were putting your faith in someone to show you the way and it looks like he has not been able to find it on his own. Sounds a little far-fetched? Perhaps in person it is, but this type of disconnect happens behind the safe curtain of the internet all of the time. I have had a few of these experiences myself over the years and you probably have also. I have known authors to write books about how to get rich, yet they had no money. They planned to get rich by teaching others how to do it. Odd, isn’t it? There are also a lot of social media “experts” teaching people how to use social media for profits, but where are their actual profits, how are they making money from it, besides teaching it to others? Hmm? Ever meet someone who appeared completely disorganized, always full of drama and living in reactive mode? Were you ever shocked to find out he/she was a life coach? Then there are the folks who write about how to have a happy marriage and they have been divorced several times. In this case maybe they are telling you what not to do? Perhaps they should put it into practice before they deem themselves the teacher. I even had a client who signed up for one of my wealth programs and agreed to pay the investment over three payments. After being reminded that her second and third payments were overdue she came up with a proposition for me. If I helped to promote her own product about getting rich, the money I made by being her affiliate would pay me for my services. Did I lose you there for a minute? I am not surprised. I was confused and shocked when she suggested it to me. Now I am not suggesting that everyone online is a phony. What I am strongly recommending is that if you are going to offer anything, and I mean anything online, you need to do so from a place of total integrity . Your brand, your reputation, and your success depend upon being authentic. That is the only way to create raving fans. You don’t want clients that are happy you want clients that are raving about you. By being authentic it causes other people to talk about you. They are so impressed that they can’t wait to tell their friends and colleagues about you or your business. When your curtain is pulled back, what will your clients see? If you are not being authentic you are not building a business on a solid foundation. People will find out about you, one way or another. The online you should be a mirror image of the real you . Have you found that success follows authenticity? Do you have a raving fan story? Please share them in the comments section below.

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Dan Solin: Time for a Reality Check

October 27, 2010

As year-end approaches, this seems like a good time for a reality check. On October 9, 2007, the Dow Jones Industrial Average closed at its all time high of 14,164. At that level, it had gained 94% over the preceding five years. The euphoria of the bulls was palpable. On March 9, 2009, the index reached a new twelve-year low, closing at 6,547. The bears became the talk of Wall Street. Doom was in the air. How you dealt with your investments during this period is indicative of everything that is wrong with the securities industry and why you need to fundamentally change the way you invest. Few brokers predicted the greatest financial crisis since the Great Depression. Almost no one predicted both the meltdown and rapid recovery of the markets. Yet more than 90% of individual investors maintain brokerage accounts and rely on the flawed advice of their “investment professionals.” What if you didn’t panic and did nothing from October 9, 2007 to date? I call it the Seinfeld approach to investing. You were in a globally diversified portfolio of low cost index or passively managed funds in an asset allocation (the division of your portfolio between stocks and bonds) appropriate for your tolerance for risk and investment objectives. As of September 30, 2010, if your allocation to stocks was 50%, your portfolio has fully recovered. Investors with with an allocation of less than 50% to stocks have positive returns. If you were among the small percent of investors for whom an allocation of 100% stocks was appropriate, your total return is down almost 20%. Check your portfolio returns. How do those results compare? Most likely, not well if you were listening to the financial pundits and “fled to safety” when the market crashed. Almost all clients of brokers invest in actively managed funds, where the fund manager attempts to “beat the market.” The use of these funds is another reason why investors typically underperform the market. If there is one compelling reason for terminating your relationship with your broker, it’s the fact that recommendations of actively managed mutual funds are the way brokers make a living. In a recent blog , Eugene Fama and Kenneth French, two of the most distinguished Professors of Finance in the country, explained the folly of investing in actively managed funds. They concluded that, when you factor luck into the equation, they expect 97% of actively managed funds to underperform a passive alternative. Their conclusion is consistent with other studies that have shown over 99% of active fund managers have no genuine stock picking ability. If your personal reality check persuades you to enter the New Year with a new investing approach, don’t necessarily assume you can do it yourself. Studies over a 30 year period show that even those who pursue an indexing strategy on their own fail to capture 100% of market returns. They still do far better than investors in actively managed funds, but their failure to rebalance their portfolios and the lack of discipline to stay the course when times get rough, take a heavy toll. A competent passive advisor, who focuses on your asset allocation and recommends investments only in index funds, passively managed funds or Exchange Traded Funds, can be a wise investment. 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. Here is the trailer for my new book, Timeless Investment Advice .

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MIT Entrepreneurship Review: JetPens: How To Be An Entrepreneur On Your Own Terms

October 26, 2010

“I didn’t have a very specific vision for a company. I wanted to do something that would increase the probability of success, and I also didn’t particularly want to answer to investors,” says JetPens co-founder Adrian Mak, who started his company in 2004 with an initial investment of $9,000. The company managed to achieve profitability after two years, without any additional financing, by selling Japanese pens, pencils and stationery to pen fanatics. Since characters in Asian alphabets are much more complex than the English alphabet, the writing instruments available in Asia are much more precise than those in the US. Because they never had to sell any equity to outside investors, the three founding partners have retained autonomy over the business and its profits and have shaped the organization to fit their personal goals. Of all the possibilities, why pens? AM: We saw from online forums that people were looking for them and realized that online retail fit our skill set well. We also saw that we could try it out in a way that wouldn’t be very capital-intensive. To start out, we spent about $5000 on merchandise, launched a cheap pilot to prove the business model, and got good results. So in at the beginning, you focused instead on proving the business model and bringing up the business? AM: Although some people perceive entrepreneurship as risky, we tried to create a scenario to minimize risk. We did things in a non-capital-intensive way. We avoided outside investors so we could keep control. We did a lot of things to save money in the beginning; for example, we didn’t spend any money on advertising early on because we had more time than money. We spent a lot of time doing online social marketing and search optimization. How else did your limited budget affect your strategy in the beginning? AM: A lot of our decision-making was driven by our lack of financial resources. It didn’t make sense to outsource warehousing either at our initial scale, so we kept all our merchandise in my living room, which was also our first office. Actually, I’d say all these decisions were made because we had no money, but we had a lot of desire. As for our marketing strategy in 2004, Facebook was just getting started and Twitter didn’t exist. Blogs and forums were really useful in our early days. This helped us with search engine rankings and driving traffic to the website. What advice would you give aspiring entrepreneurs, especially those who are still in school? AM: If you are young and don’t have a lot of obligations, just go for it. When you come up with your business plan, it doesn’t have to be really elaborate. Just work out the core economics of your business and work from there. I made a one-page spreadsheet to figure out how much money I needed to live on, and how many units we would have to sell to reach that number. It turned out that the number was within reason, and this spreadsheet was half our business plan. What would you say to aspiring entrepreneurs who are trying to figure out their motivations and values? AM: With the benefit of hindsight, I’d highly recommend understanding psychologically why you want to be an entrepreneur, because there are several good reasons. Do you primarily want to gain financial freedom, to make a big impact, to become a billionaire, or to create your ideal work environment? You want to gear your business decisions to reflect this, and good decisions should flow out of your core psychological desire — especially the type and size of market you decide to pursue, decisions about raising money and setting your company’ s level of aggressiveness. Check out the MIT Entrepreneurship Review for more information on Adrian and JetPens. You can also follow the MIT Entrepreneurship Review on Twitter at @ MITEReview .

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Wendy N. Powell: The Career Hangover: What Do You Do?

October 21, 2010

You find yourself at the end of a chapter in life — you chose a career and all of a sudden there is no longer room for you in the company. My friend, you are not alone. It feels remarkably like a hangover, hurting and hoping that it will end soon. No longer part of the company “family,” you are one of the newly “orphaned” children and you wondering where to go and what to do. Shake yourself off and get rid of the hopelessness. You can mourn for a few days, but get to work on your new goals as soon as you can. Most people sit in front of their computers for countless hours or even months, searching for the same jobs that multitudes of people are applying for. You must concentrate not only on job opportunities, but take more active steps in improving the applicant — you. You have the unique opportunity to reinvent yourself. Critically review your strengths, make a decision about your personal brand, and follow through. Identify what sets you apart and make it your best asset. Conduct a SWOT analysis to help market yourself. To refresh your memory, SWOT stands for your personal strengths and weaknesses , and the outside opportunities and threats . • Make a critical list of your strengths. Think it through; go back to it on occasion to revise. What activities do you enjoy? What do you do well? What makes you most effective? Brainstorm ways to turn these strengths into possibilities for your personal and professional growth. • It is equally important to assess your weaknesses. Be realistic about what careers may not be for you, and honest about what skills you do not have. • Finding and weighing the opportunities can be the most difficult. The current job market may have limited career choices, but you need to brainstorm potential creative opportunities from the pool of your chosen strengths. Of course, keep apprised of the industries that are hiring in your area, but also be aware of the possibility of relocating. If you want to start your own business, invest with your eyes open wide. • Threats to your success are unfortunately abundant and occasionally out of your control. Don’t get in your own way, think positively, and push through the obstacles and threats that may appear. It is likely that you will have more time on your hands, so spend it wisely by re-acquainting yourself with your chosen field of work. Many industries are changing with technology and media, so stay aware of what’s new in your world, and be able to hold informed conversations with prospective employers or lenders so you can prove that you would add to the bottom line. If possible, get fresh work experience by volunteering your time or applying for temporary work. You don’t know what opportunities will surface. You also need to get out of the house. The natural tendency is to avoid people who ask about your job search. These may be the very individuals to lead you to your new job. I know one unemployed person who refused to be around friends and family for fear of hearing the dreaded question, “New job yet?” After getting out and about, he realized that his new career opportunity was there for the taking from a former colleague. He was hired into his new career after networking. Years later, he returned the favor for the very person who helped him. There are countless stories of reinvention where people have picked themselves up by the proverbial bootstraps and soared in their careers with fresh choices. These people are critically thinking risk-takers, and they are just what we need to make our economy soar. Among them, the computer technician who invested his severance pay in workout centers, the human resource director who realized her strength in teaching and writing, the financial manager who became a cupcake mogul, and the retiree who created the best recipe for pâté and is marketing it. There is life outside of the comfort zone. You actually might like it there.

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Michael Hudson: 16 Cents on the Dollar: Doing the Math on Angelo Mozilo’s Big Settlement

October 19, 2010

In the end, Angelo Mozilo settled for pennies on the dollar. The former Countrywide Financial Corp. chief agreed Friday to a settlement that requires him to pay 16 cents out of his own pocket for every dollar federal authorities claimed he had taken out of the company in ill-gotten personal gains. Let’s do the math: ■ The government alleged that he added $141.7 million (before taxes) to his personal fortune through corporate misconduct. ■ Mozillo agreed to personally pay a $22.5 million fine — 16 percent of the alleged ill-gotten gains. ■ In addition, Mozillo agreed to turn over another $45 million to former Countrywide shareholders, who lost billions when the company’s stock price plummeted as loan defaults soared. But the $45 million won’t come out of Mozilo’s pocket. Under the terms of his employment contract, it will be paid instead by Countrywide’s insurers and by Bank of America, which bought Countrywide in 2008. The government settled the civil fraud and insider trading allegations against Mozilo for less than it wanted because, one legal analyst said, it would have been a challenge to prove its case. “This is not a slam dunk,” Duke University law professor James D. Cox told The New York Times . “It’s a risky case and it’s got a lot of complexities to it.” Mozilo admitted no wrongdoing, and his lawyers were sure to have mounted a ferocious defense. The Securities and Exchange Commission said the $22.5 million fine will be the largest penalty ever paid by a senior executive of a public company in an SEC settlement. Too Easy? But some observers wonder whether Mozilo got off easy. David Callahan, author of the book, The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead , writes : It is hard to see how the Mozilo settlement — coming on the heels of another weak SEC settlement with financier Steve Rattner — will deter future wrongdoing. . . . Indeed, it could have the contrary effect. If you can make a great fortune behaving badly, get busted, and still end up with most of that [fortune], then you’ve come out way ahead. At least in financial terms. Countywide reaped huge profits — and, eventually, produced huge losses for its shareholders — through a high-wire strategy that focused on selling huge volumes of subprime loans and other risky products. One of the ironies of Countrywide’s fall was that Mozilo had been hesitant, at first, to jump into the subprime market. As I write in my new book about the subprime debacle, The Monster , Mozilo and Countrywide eventually succumbed to the temptation to follow the example of Ameriquest Mortgage Co. and its billionaire owner, Roland Arnall, an entrepreneur who was in many ways the founding father of subprime. The inventive mortgage products emerging in the home-loan market were watched closely by the heaviest of the industry’s heavyweights: Countrywide Financial’s Angelo R. Mozilo. Mozilo’s company had established itself as the largest mortgage lender in America by providing loans to home owners with good credit. Mozilo called his company “my baby.” For much of his career, he had been cautious about the kinds of loans his company made. Countrywide had mostly steered clear of subprime as other lenders dived into the market throughout the 1990s. Mozilo worried that subprime loans were too risky, in some cases even “toxic.” … While Ameriquest’s methods may have made Mozilo uneasy, he wasn’t so troubled that he kept Countrywide from joining the subprime gold rush. His company had survived decades of real-estate booms and busts, and he thought it had the brains and brawn to handle the risks of subprime better than the upstarts. Mozilo’s competitive instincts beat out his caution. He couldn’t accept being second or third. “It’s a question of dominance,” he told investors. He didn’t like that Countrywide trailed Ameriquest in the subprime lending rankings. By 2003 Arnall’s companies had captured nearly 12 percent of the subprime market; Countrywide did barely half as much subprime volume, with a market share of just 6 percent. Besides, the real money in the mortgage business was now in subprime, not in prime loans. When Countrywide sold prime loans to investors, its average profit margin was 0.93 percent; when it sold subprime loans to investors, the company’s profit margin nearly quadrupled, to 3.64 percent. The fees, interest rates, and prepayment penalties embedded in subprime loans made them much more seductive to investors. Countrywide’s Size, Clout Though Mozilo’s company came late to the party, once it was there, its size and clout deepened the pain that subprime visited upon home owners and the financial system. Countrywide did little to pull back on its subprime push, even in 2006, when there were signs of an impending crash. “You have to make a choice: to get out or not. And they stayed,” a longtime mortgage industry watcher told the Los Angeles Times . “It’s hard when you’re following someone off a cliff to know when to stop.” In early 2008, Bank of America purchased Countrywide, once worth as much as $26 billion, for a fire-sale price of $4 billion. Countrywide might have survived if its founder hadn’t become fixated on competing with Ameriquest, Muolo, the National Mortgage News editor, said. “If he hadn’t followed Roland Arnall down the subprime path this would never have happened,” Muolo said. “It’s ego and ambition that sunk him.” Michael Hudson is a staff writer with the Center for Public Integrity and author of The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America — and Spawned a Global Crisis (Times Books, October 2010).

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‘Foreclosure Mill’ Employees Got Gifts For Altering Documents, Witness Says

October 18, 2010

At a large Florida “foreclosure mill,” a manager signed up to 1,000 documents a day without reading them and employees were given gifts to speed up foreclosure paperwork, according to depositions released today by the Florida Attorney General’s Office. The news, also reported by Tampa Online , comes as Bank of America, the nation’s largest bank by assets, announcement that it would resume more than 100,000 foreclosures in 23 states after an internal investigation of its practices. Florida authorities are investigating the law offices of David J. Stern over how it handled foreclosure paperwork. As the AP notes, Cheryl Salmons , an office manager at the law offices of David Stern, “would sign 500 files in the morning and another 500 files in the afternoon without reviewing them and with no witnesses,” according to Kelly Scott, a former assistant at the firm. The perks for good performance were considerable, according to Scott’s statement. Tampa Online notes office employees were lavished with gifts: “As a perk of Samons’ [ sic .] job, Stern’s office would routinely pay her personal mortgage, a car payment, her electric bills and her cell phone bill, according to Scott, who told investigators Stern also bought Samons [ sic .] a new BMW sport utility vehicle every year and gave her and other employees jewelry. Additionally, Stern purchased employee David Vargas a house, a car and a cell phone, Scott claims in her statement.” According to Kelly Scott’s statement, Cheryl Ramos’s marathon document signing sessions took place in an office conference room and would leave her wearied. From Scott’s deposition: They would [be] stacked amongst each other, side by side, and Cheryl would come twice a day, in the morning and mid-afternoon, around two or three o’clock and she would sign all of them, every single one of them… Cheryl would give certain paralegals rights to sign her name, because most of the time she was very tired exhausted from signing her name numerous times per day. You had to understand it was more than five hundred files that she’s signing morning and afternoon. David Stern had an especially close relationship with the mortgage giants Fannie Mae and Freddie Mac, Scott said in her statement. The lenders were “considered his babies,” Scott said and employees would change codes to hide files when their representatives visited the office. View PDF’s of the new statements here .

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David Isenberg: PMSC and the Quest for Perfect Information

October 9, 2010

People often try to fit private military and security contractors into a binary construct. Either they are thinly veiled corporate mercenaries or they are unsung patriots doing their part for the country, albeit at a pretty good salary. As I have tried to make clear in the past it is not that simple. I personally do not subscribe to either stereotype. The most important quality of PMSC is that they are civilians, often working either directly for, or indirectly supporting the U.S. military and other government departments or agencies. Of course much of the time they are not working for the military at all, or even the U.S. government, but that is another story. To me the most interesting part of the PMSC phenomenon, which in its most recent phase is at least thirty years old, is how they fit into states’ geopolitical and foreign policy ambitions. To borrow from Harry Potter novels, that is the issue that must not be named. It is true that I often mention problems with using PMSC. But that is mostly because some supporters insist on making claims for them that have not been clearly backed up by data. While some of the claims, as in the perennial one that they are more cost-effective than using regular military forces sound reasonable, and might even be true, at least in certain carefully limited circumstances, that is far from the often sweeping claims made for them. Let’s consider that PMSC businesses operate in a market economy. But free market economics only concerns itself with private sector exchanges, which in turn assume perfect information. However, anyone who has ever studied PMSC in detail understands that perfect information is exactly what we do not have in regard to PMSC. They very fact that contracts are frequently, if not usually, classified and that both clients and PMSC themselves are often not revealed are just two examples of the lack of perfect information. As a comical example consider the recently published book Operation Dark Heart: Spycraft and Special Ops on the Frontlines of Afghanistan — and the Path to Victory by Lt. Col Anthony Shaffer, U.S. Army Reserve. As most people are aware the U.S. government purchased the entire print run of the book from St. Martin’s Press for $47,000 a few weeks before its scheduled release last month. But it did not suppress the book entirely: Operation Dark Heart has since been reissued after an estimated 250 sections were blacked out and deleted. Now if the government is going to resort to blatant censorship one would hope it would at least do so to protect truly vital information. Did it? You can guess the answer. Consider that in the unredacted version the index cites Blackwater as an entry on page 242. In the censored version of the book that page reads, “I went through the CIA pipeline to get back to the States, flying on a __________-chartered flight from Kabul to Tashkent.” Now really, is there anyone, anywhere who is unaware that Blackwater operated, through its former subsidiary Presidential Airways, in Afghanistan? Anyone, anyone? Yes, I did not think so. Okay, that was just for comic relief. Now, in the interest of providing “perfect information” let’s take a look at some expert testimony which takes on some of the generalizations made by PMSC supporters. Back on June 22 there was a hearing of the House Oversight and Government Reform Subcommittee on National Security and Foreign Affairs Hearing; ” Investigation of Protection Payments for Safe Passage along the Afghan Supply Chain? ” Let’s look at the written testimony of Colonel Hammes , Senior Research Fellow, Institute for National Strategic Studies, National Defense University. Col Hammes is not an opponent of PMSC. His statement opens by detailing the benefits of their use. But he goes on to detail their costs: The Bad When serving within the combat zone, particularly during a counterinsurgency, contractors create a number of significant problems from the tactical to the strategic level. Three primary characteristics of contractors, particularly armed contractors, create problems for the government. First, the government does not control the quality of the personnel the contractor hires. Second, unless it provides a government officer or NCO for each convoy, personal security detail or facilities protection unit, it does not control their daily interactions with the local population. Finally, the population holds the government responsible for everything the contractors do or fail to do. Since insurgency is essentially a competition for legitimacy between the government and insurgents, this factor elevates the issue of quality and tactical control to the strategic level. Quality control is a well publicized issue. The repeated reports of substandard construction, fraud and theft highlight the problems associated with unarmed contractors. As noted above, these incidents are being investigated. In addition, the USG is working hard to refine contracting and oversight procedures to reduce these types of problems. Unfortunately, the problem is just as prevalent with armed contractors. While high-end personal security details generally are well trained, less visible armed contractors display less quality. When suicide bombers began striking Iraqi Armed Forces recruiting stations, the contractor responsible for recruiting the Iraqi forces subcontracted for a security force. The contractor was promised former Gurkhas. What showed up in Iraq a couple of weeks later were untrained, under-equipped Nepalese villagers. n10 Not only did these contractors provide inadequate security, the U.S. government passed the authority to use deadly force in the name of the United States to these untrained foreign nationals. Since the government neither recruits nor trains individual armed contractors, it essentially has to trust the contractor to provide quality personnel. In this case, the subcontractor took shortcuts despite the obvious risk to the personnel manning the recruiting stations. Even if we hire enough contracting officers to effectively supervise the contracts, how exactly does a contracting officer determine the military qualifications of an individual much less a group such as a Personal or Site Security Detail? The U.S. military dedicates large facilities, major exercises, expensive simulations and combat experienced staffs to determine if U.S. units are properly trained. Contractors don’t. We need to acknowledge that contracting officers have no truly effective control over the quality of the personnel the contractors hire. In fact, we have to accept that we will be unable to determine their actual effectiveness until they begin to operate in theater. And then, only if a member of the U.S. government is in position to observe the contractors as they operate. Compounding the problems created by lack of quality control, the government does not control the contractor’s daily contact with the population. Despite continued efforts to increase government oversight of contractor operations, nothing short of having qualified U.S. government personnel accompanying and in command of the contractors will provide control. With support contractors this means we may get poorly wired buildings or malfunctioning computer systems. However, with armed contractors we have the bullying, intimidation and even killing of local civilians such as the September 2007 Blackwater shootings in Nisour Square. The lack of quality and tactical control greatly increase the impact of the third major problem – the United States is held responsible for everything the contractors do or fail to do. Despite the fact the United States has no effective quality or operational control over the contractors, the local population rightly holds it responsible for all contractor failures. Numerous personal conversations with Iraqis revealed a deep disgust with the actions of armed contractors. They noted we gave them authority to use deadly weapons in our name. While Iraqis were not confident American forces would be punished for killing Iraqis, they believed it was at least a possibility. However, the Iraqis were convinced that contractors were simply above any law. These perceptions serious undercut the legitimacy of the government. A key measure of the legitimacy of a government is a monopoly on the use of force within its boundaries. The very act of hiring armed contractors dilutes that monopoly. Legitimate governments are also responsible for the actions of their agents – particularly those actions taken against their own populations. Yet, despite efforts to increase the accountability of contractors, the widespread perception is that armed contractors who commit crimes against host nation people are outside the law of both the host country and the United States. While we have laws criminalizing certain activities, the cost and difficulty of trying a contractor for crimes that occurred overseas in a conflict zone has so far deterred U.S. prosecutors. In over seven years of activity in Iraq, no contractor has been convicted of a crime against Iraqi citizens. Either contractors are a remarkably law abiding group or the system does not work. The fact that an insurgency is essentially a competition for legitimacy in the eyes of the people elevates the presence of armed contractors to a strategic issue. Exacerbating the legitimacy issue, contractors of all kinds are a serious irritant to the host nation population. Armed contractors irritate because they are an unaccountable group that can and does impose its will upon the population in many daily encounters – driving too fast, forcing locals off the road, using the wrong side of the road. Even unarmed contractors irritate the population when they take relatively well paying jobs that local people desperately need. In addition to undercutting its legitimacy, the use of contractors may actually undercut local government power. In Afghanistan, security and reconstruction contracts have resulted in significant shifts in relative power between competing Afghan qawms as well as allegations of corruption. Dexter Filkins, writing in the NY Times notes the power structure in Orugzan Province, Afghanistan has changed completely due to the U.S. government selecting Mr. Matiullah Khan to provide security for convoys from Kandahar to Tirin Kot. “With his NATO millions, and the American backing, Mr. Matiullah has grown into the strongest political and economic force in the region. He estimates that his salaries support 15,000 people in this impoverished province. … This has irritated some local leaders, who say that the line between Mr. Matiullah’s business interest and the government has disappeared. …. Both General Carter and Hanif Atmar, the Afghan interior minister, said they hoped to disband Mr. Matiullah’s militia soon — or at least to bring it under formal government control. … General Carter said that while he had no direct proof in Mr. Matiullah’s case, he harbored more general worries that the legions of unregulated Afghan security companies had a financial interest in prolonging chaos.” n11 Thus, an unacknowledged but very serious strategic impact of using contractors is to directly undercut both the legitimacy and the authority of the host nation government. Contracting also has a direct and measureable impact on the local economy. When the U.S. government passes its authority to a prime contractor, that contractor then controls a major source of new wealth and power in the community. However, the contractor is motivated by two factors – maximizing profit and making his operation run smoothly. This means that even if he devotes resources to understanding the impact of his operations on society, his decisions on how to allocate those resources will be different than those of someone trying to govern the area. For instance, various contractors’ policies of hiring South Asians rather than Iraqis caused anger among Iraqis during the critical early phases of the insurgency. Desperate for jobs, the Iraqis saw Third Country Nationals getting jobs Iraqis were both qualified for and eager to do. n12 While there were clear business reasons and some security reasons for doing so, the decision was a slap in the face of Iraqis at a time of record unemployment within the country. There is more but rather than post it all here I suggest you read his statement. So just remember that we are far from knowing the whole story when it comes to PMSC. Neither one note critics like Jeremy Scahill of The Nation magazine, the Captain Ahab of the PMSC industry, or trade associations like IPOA give or even know the whole truth. As my friend Bill Kittredge notes, “People simply do not want to construct rational arguments that are internally consistent if that consistency conflicts with their normative or personal preferences.”

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Peter Shankman: Five Ways to Not Screw up Your Networking Attempts

October 4, 2010

I was at a conference this weekend in Las Vegas — It’s bad enough to fight with the recycled air, the perfumed-at-50-degrees conference rooms, and the endless fried foods that pass for “healthy,” but you add in 200 people who have absolutely no clue how to network, and it’s enough to make you pull an Ocean’s Eleven and sneak out of the hotel in an ambulance. Here are the top five ways to not screw up your next networking opportunity. 1) Networking doesn’t begin when you get to the conference, it begins the second you leave your house. Anyone is a potential hiring manager, client, or customer. True story: I was behind a real jackass at a ticket counter for an international flight last year. At one point, he actually had the nerve to say “Well, I work for company XYZ (A big global company), and I can make sure that we never give you any business again if you don’t fix my problem,” or something just as arrogant. At that point, the person behind me walked up to him, and said quietly “What’s your name?” The arrogant slob said “Why do you care, pal?” To which the first gentleman said “Because I’m senior executive vice president at [said big global company,] and I won’t have anyone sullying our good name with their petty bullshit.” I’m pretty sure the arrogant guy doesn’t work for the company anymore. In today’s world, you’ve simply got to be on your best behavior. I can promise you, if you’re a screaming jerk at check-in, or on the rental car bus, or virtually anywhere, and I happen to be there, I’ll be the guy with the FlipCam, posting your idiot rant onto YouTube. Why? Because I can. You don’t want to be the guy in the video. Besides — I know a lot of people — What if I know your boss? Or what if you find me one day as the guy doing the hiring? 2) Turns out, “It doesn’t always have to be about you!” is actually a good comment. As we sit down at the conference lunch, I don’t need to know what you do, how well you do it, how many awards you’ve received for doing it, and how you’re pretty sure you can do it for me if I’d simply pay you to, all before I’ve had sip one of my watered down iced tea. Here’s a thought — Try making it about someone else for a change — Instead of sitting down and launching into your pre-rehearsed litany of how great you are, what about shutting up and listening once in a while? Put the business-card-Uzi away, and don’t rapid fire them to anyone within range. You know how it seems how some people are only listening to find a break in the conversation so they can talk? Don’t be that person. Ask questions! It’s the ultimate way to learn, and allows you the opportunity to actually contribute something of value to the conversation, as opposed to the spiel of your latest victory. Remember: Value gets remembered, verbal diarrhea simply gets recalled — and not in a good way. 3) Going up to the speaker at the end of her speech ensures only one thing: You’ll be one of a hundred people going up to the speaker at the end of her speech. So rather than giving yourself the opportunity to not get noticed in the slightest, why not buck the crowd? Find the speaker twenty minutes before they go on stage, and introduce yourself. On your business card, write “I’m the one who met you before your speech. You’ll be remembered. 4) Do something different : My business card is a poker chip. You can’t scan it in, you don’t want to throw it out. You keep it on your desk and play with it. I’ve seen other business cards that were actual credit cards, bottle openers — Anything but a boring piece of cardboard. Try and be original. If you’re creative enough to give me something I’ll remember, chances are I’ll want to do some business with you. 5) Finally — Be wary of making the leap from “Met you at the conference” to “Friending you on Facebook so you can see photos of me in my speedo.” Until Facebook becomes the norm and networking is ubiquitous with it, (probably 24 months) there are still people wary of it. And until you learn what to post online and what not to post, remember that not everyone is going to assume that a FB connection request is either a) acceptable or b) worth their time. We’ll get there, but we’re not there yet. We’ll eventually learn what’s acceptable and what’s not — because in the end, we’ll only have one network — It’ll have everyone in our lives, both business and professional, and we’ll have to be smart enough to know that what we post can be seen by everyone, forever. Until we are, asking a potential business contact who doesn’t know you that well to till your crops on Farmville is just asking for trouble. (And massive ridicule.) 6) Bonus rule : It’s no one’s fault but your own if your personal or professional brand isn’t seen as you want it. It’s not Facebook’s fault, it’s not Twitter’s fault, it’s not LinkedIn’s fault — It’s your fault. Make sure to keep up appearances as you want them to be. Otherwise, you’ve got no one to blame but yourself. Peter Shankman sold his social media company HARO (http://helpareporter.com) to Vocus, Inc. in June of this year. He spends the majority of his time tweeting as @petershankman, and doesn’t take his Blackberry with him if he’s going to be drinking. He blogs at http://shankman.com

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Caroline Dowd-Higgins: How a Coach Can Distinguish You in the Workplace

October 4, 2010

Having a personal career coach for C-level executives is expected as part of their continuing professional development and it also makes great business sense. Coaches can also be helpful for non executives in various stages of your career. A coach can help polish your communication skills, develop and implement effective leadership strategies in your workplace, and plan a road map for you to move forward on the promotional ladder. The coaching menu varies greatly and the research is showing that professionals who work with a coach are making great strides in the workplace that positively impact performance and results. Some organizations provide coaching in-house, especially in the upper ranks of the organizational chart. But for those of you who don’t have this as part of your workplace benefits package, seeking out career coaching on your own is a worthwhile investment to consider. A Lesson from Athletes For decades, professional athletes have utilized coaches to help them change behaviors, stretch their physical limits, and achieve performance goals. Career coaches utilize a developmental approach to help an individual reach their objective just as a major league baseball coach leads individual players to work as part of a team and win games. But the professional sports teams take it a step farther and employ specialized coaches to tap into specific skill sets from the physical trainer and the sports psychologist to the pitching coach on a baseball team, each of whom serve a niche function. In the work world, coaches can help you develop new skills, communicate more effectively, and bring individuals on teams together to achieve greater performance potential, for example. Find a coach that specializes in exactly what you need since one size does not fit all. Another added benefit is the opportunity to have someone provide regular feedback and champion your personal cause to optimize your success. But you must choose your coach wisely since this personal relationship is built on trust and will only work with open lines of communication. Check references, ask for referrals, and always test drive since a reputable coach should offer a complimentary consultation. Personal Guru While having a personal career guru may not seem financially feasible for those at beginning or mid level careers, consider utilizing a coach only for very specific workplace challenges. To avoid Laurence J. Peter’s famed principle that in a hierarchy, every employee tends to rise to his or her level of incompetence, you might seek out a coach if you find yourself in a new leadership role without the skills or experience to effectively lead your team. Instead of floundering as a new leader with added responsibilities and no clue how to manage and inspire your flock, seek out a leadership coach who can show you how. Even a seasoned leader can seek the help of a coach to get her team unstuck with behaviors or mind sets that are holding them back and preventing maximum results and performance. Coaches can also help prepare you for a new job opportunity, polishing your professional toolkit from resume and cover letters to your interview skills. While coaches can be very useful in the preparation and execution of a job search plan, most are not recruiters who will help you find actual job opportunities so be clear about what you need and want before entering into this professional relationship. Your Coach is Not Your Shrink A coach should be an effective sounding board for your issues at work and often plays the role of the cheerleader to motivate you to implement your newly honed skills. But, a coach is not a dumping ground for your emotional baggage and should be viewed as a professional resource that can provide an objective perspective about complicated work issues as well as solutions. Although not a substitute for therapy, working with a coach can give you clarity to work through difficult scenarios on the job that may give you peace of mind. Also called executive coaches, these professionals can help you put your goals into practice and effect change that has a powerful impact on your organization and your career. But don’t fret if a coach seems out of your financial grasp since there are many ways to seek out free counsel from experienced professionals in the form of mentorship. Mentors as Coaches Everyone should develop a personal board of directors they can look to for professional advice. The best case scenario is to include professionals from outside of your current organization so they can provide objective wisdom and suggestions. Or, consider going outside of your immediate department at work to utilize the in-house expertise and institutional history within your workplace. Whether you are a rookie employee, a mid level professional, or a seasoned executive, consider how you can pay-it-forward to others who need coaching in your network and serve as a mentor. If you have the wherewithal to hire an executive or career coach to help you achieve your maximum potential you are investing in your future success. Coaching in the workplace is here to stay so take advantage of this any way you can get it! Caroline Dowd-Higgins pens a career transition blog called “This Is Not the Career I Ordered” ( www.notthecareeriordered.com ). She is also the Director of Career & Professional Development at Indiana University Maurer School of Law.

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Jay-Z & Warren Buffett Talk Shop On Giving Back

September 23, 2010

For the upcoming issue of Forbes magazine , Jay-Z and Warren Buffett sat down to lunch with Steve Forbes to talk money – and philanthropy. The two financial moguls discussed their personal successes over strawberry malts, and cited the obstacles that come with charitable giving. Buffett explained to Forbes , It’s tougher than business, Steve. You’re looking for easy things to do in business. If people have liked drinking Coca-Cola for 100 years, they’ll probably like it for another 100. It doesn’t require great brainpower to figure that out. In philanthropy you’re tackling the tougher problems of society, things where people have applied money and intelligence before and haven’t really solved the problem. The interview, published Thursday on Forbes.com , will hit newsstands on Oct. 11, 2010.

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Olbermann: GOP Uses ‘Small’ Business’ Tag To Help Save Huge Companies Billions (VIDEO)

September 23, 2010

The “small” businesses that Republican lawmakers say will suffer if the Bush-era tax cuts for the wealthy expire are not so small after all, MSNBC’s “Countdown” reported Tuesday. Some of these businesses, which include big names in engineering and finance, are “large” in terms of revenue, payroll and distribution, but “small” in terms of ownership, the report, by David Cay Johnston and Chris Hayes, has found. According to the Republican tax logic, a small number of owners is the sole criterion for a “small business.” Such businesses, which according to the Joint Committee on Taxation accounted for 94 percent of all U.S. businesses in 2007, include partnerships, sole proprietorships and S corporations , a designation that allows owners to report profits and losses on their personal tax return, rather than on the company’s. “‘Small business’ is a brand name,” MSNBC’s Keith Olbermann said. The report found that businesses with billions of dollars in annual revenue fall under the small business category. Bechtel, a global engineering and construction company that is considered a “small business” under this logic, took in $31 billion last year. Ferrellgas, a propane company, earned $2 billion in revenue last year. McIlhenny, another “small business,” which makes Tabasco sauce, made $250 million in revenue in 2007. Other names include auditing firm PricewaterhouseCoopers and private equity firm Kohlberg Kravis Roberts. Also on the list are the collection of “small businesses” owned by the billionaire Koch Brothers, who this year tied for fifth on the Forbes list of wealthiest Americans , and who were profiled last month by Jane Mayer in The New Yorker . Bloomberg first reported this unusual tax logic on Monday. The Republican “small business” designation, the report said, would apply even to individuals with no employees at all. It could include actors, athletes and authors — even President Obama . WATCH MSNBC’s segment: Visit msnbc.com for breaking news , world news , and news about the economy

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Richard (RJ) Eskow: After Summers, Which Path Will the President Take?

September 21, 2010

Now that Larry Summers is leaving, the President has a decision to make. His choice of a replacement will send a signal about the next two years of economic policy. That signal can restore consumer confidence and reinvigorate the electorate, or it can lead to even more discouragement and despair. Today unnamed Administration officials floated the idea of naming a corporate executive to the position. That’s a trial balloon that should be punctured immediately. The thirty-year-old law school graduate who asked the President yesterday, ” Is the American dream over for me? ” might interpret a choice like that as a ‘yes’ — unless he also happens to be a Fortune 500 CEO. There’s some confusion around today’s news about Summers’ end-of-year departure. Was it a rushed announcement? Did Summers choose to leave, or did he get the axe? Bloomberg News observed that Summers’ departure leaves Tim Geithner as the sole remaining member of Obama’s original economic team, which adds up to something that looks very much like a shakeup. Or maybe not. The Bloomberg article also quotes Robert Gibbs as saying “it is not a surprise,” and it’s true that it’s common for Administration officials to leave after the midterm elections. For his part, the President lavished Summers with praise : “I will always be grateful that at a time of great peril for our country, a man of Larry’s brilliance, experience and judgment was willing to answer the call and lead our economic team. Over the past two years, he has helped guide us from the depths of the worst recession since the 1930s to renewed growth.” Despite the kind words, the Wall Street Journal reports that “Administration officials say Mr. Summers’ departure could reinvigorate the White House economic team.” And there’s this quote from the President’s town hall meeting yesterday (via David Dayen ): “Well, look, I have not made any determinations about personnel. I think Larry Summers and Tim Geithner have done an outstanding job… This is tough, the work that they do… they’re going to have a whole range of decisions about family… the bottom line is that we’re constantly thinking, is what we’re doing working as well as it could?” But for those who are hoping that this move signals a change in policy, we can zigzag back to the “no policy change” camp if we take this quote seriously (from the WSJ article:) “Those who know Mr. Summers say his departure has more to do with the need to recover from two tough years in which he worked brutal hours and often did not sleep.” In other words, we don’t know nothin’. That means the Administration doesn’t have to pay the political price for looking like it’s in disarray. But it also means the President doesn’t get the benefit of looking as if he’s taking decisive action after seeing unsatisfactory results. Here’s what we do know: For middle-class Americans in search of economic relief, Summers’ departure is hardly what you’d call a setback. According to all reports it was Summers who insisted on introducing a smaller stimulus package, back when Obama had the political clout to get whatever he needed to fix the economy. We’re seeing the results in today’s “jobless recovery.” Ezra Klein quotes Stephanie Taylor of the Progressive Change Campaign Committee, who said his departure is “a big victory for anyone who voted for change in 2008 only to see Summers work from the inside to water down Wall Street reform, block President Obama’s promise to protect Net Neutrality, and urge other pro-corporate positions.” The Bloomberg report tried to pin down the Administration’s thinking about possible replacements. But by citing a variety of unnamed sources (“one person familiar with White House discussion,” two people,” “one person”) we’re left with a cloud of unknowing: Administration officials are weighing whether to put a prominent corporate executive in the NEC director’s job to counter criticism that the administration is anti-business …White House aides are also eager to name a woman to serve in a high-level position … They also are concerned about finding someone with Summers’ experience and stature… That’s enough trial balloons to float an army of economists somewhere high above the clouds. (Whoever said “good idea” — hey, that’s not nice!) The President’s choice will be watched closely by discouraged Americans like those he met yesterday. His appointment of Elizabeth Warren last week sent an encouraging message, not only to progressives but to middle class Americans who seem to have resonated with Warren whenever they’ve seen her. But whatever glow the Warren appointment cast will soon be outshone, for better or for worse, by this appointment. Felix Salmon said that the idea of replacing Summers with a corporate executive is “

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Unions for the Jobless: Unemployed People Find Solidarity Online

September 14, 2010

When Charlene Troyer of Chicago, Illinois, was laid off from her job as an environmental manager for a garbage collection company in November 2009, she felt like there weren’t many people she could turn to for moral support. Her parents had never been unemployed and all four of her grandparents had kept their jobs through the Great Depression. “This was a whole new territory for them,” she told HuffPost. “One set of grandparents were self-employed farmers, and the other side worked for the postal service, so they never saw any job loss. They thought people who were unemployed had issues because of something they had done. They had no concept of a bad economy.” After several months of missing mortgage payments, trying to support three children on a $450-a-week unemployment check and watching her credit become ruined beyond repair, she says she decided to look for support groups online. “The depression just gets so bad,” she told HuffPost. “You look at the stack of bills and decide what the heck you’re gonna pay and how the heck you’re gonna afford food. My self confidence and dignity have been compromised.  I have failed my obligations to support my family and provide for them. It helps to talk to people who are going through the same thing.” Troyer says she found a Facebook organization called “Extend Unemployment Benefits” , where jobless people from across the country gather to offer support and advice to each other, discuss the latest in unemployment news, and rally together to petition Congress to extend unemployment benefits. One active group member, Brian Yeagle, uses the site regularly to motivate other unemployed people to vote and call their senators. “I have been on the phone for the last 3 hours straight calling Senator’s offices, pushing the message Tier 5 to Survive!!” Yeagle wrote on the page Monday. “Please continue to call, email, and fax today and everyday, this is the only way we are gonna make this work…. Please don’t give up now!!” Other members use the site as a venue to creatively express their frustrations. “How am I to stand up and enjoy the pride of being a father who cannot provide?” Lance Sievert wrote on the group discussion board. “My head has fallen, my eyes are cast downward. Where is the man that not so long ago could hold his head high, whose blue eyes were framed in an uplifted brow and who walked with a spring and urgency? He was not real? He was only so as is given by the contentness (sic) and security of being employed.” A number of support groups for the unemployed have sprung up online since 2008, reflecting a strong need for solidarity and commiseration among the jobless during this excruciatingly drawn-out period of high U.S. unemployment. On Unemployed-Friends.com , administrators post information about pending legislation for benefits and job creation, employment networking, job opportunities and schooling grants. On JoblessJoe.com , a more discussion based online community, people can share their personal unemployment stories, ask for feedback on their resumés and find money-saving tips from others in a tight financial situation. For some users, like Troyer, the sense of community in these online support groups is so strong that they are staying active on the sites long after they become re-employed. Troyer, who finally found a job in July making about $17,000 less than she was making in her previous job, said she continues to offer support and advice to people on the “Extend Unemployment Benefits” Facebook page because it gives her a sense of purpose, even though her own financial situation has improved. “When people have interviews, I cheer them on and give them advice as far as how to answer questions. It helps me to respond to other people because I can see they’re in worse shape than I am,” she said. “Helping them helps me.”

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Jonathan Bernstein: The C-Factor: How Credibility Plays a Role in Crisis Management

September 13, 2010

Imagine your organization: becoming the target of a class action lawsuit alleging fraudulent marketing practices; or, being accused of creating a hostile workplace environment; or, learning, without advance notice, that it is the target of an investigation by a state attorney general. Not a great worry yet, you say, because there are two sides to every story, right? No. Issues don’t have only two sides, and no matter how well crafted the message, the credibility of the messenger — what I call the “C-Factor” — is as or more important in terms of impacting your stakeholders. Let’s look at some of the potential stakeholders for any of these situations: Organization’s executive team (and their families) Other employees (and their families) Shareholders Board of directors Customers/clients Vendors Municipalities that depend on revenue from and/or interact with your organization in some significant way Residents of municipalities that depend on revenue from and/or interact with your organization in some significant way Competitors (yes, they definitely have a stake in what happens to you, albeit a “reverse stake”) All of them have their own points of view on your crisis situation, and all of them are going to be expressing their points of view to everyone they know . In the absence of issues-specific information from you, each of your stakeholder groups is likely to come up with its own conclusions and opinions about what is actually happening. And each of them, as groups or as individuals, have their own “C(redibility) Factor.” Like the famous “Q-Factor” associated with recognizable celebrities, I’m suggesting that everyone has a C-Factor — the degree to which they are credible to others. When any stakeholder speaks about an issue, his/her/their C-Factor impacts the extent to which their messages are believed. I will leave it to the research and statistic experts to quantify C-Factor, but I can offer some experiential and subjective observations about the importance of considering the C-Factor: Matching the C-Factor to the audience . Who’s going to be most believable speaking to employees? Is it the CEO? In some organizations it might be, in others it might be a lower-level manager. Who should speak to shareholders? The chairman of the board? The CFO? There must be a situation-specific analysis of their C-Factors. In a consumer versus business complaint/issue, the consumer always starts with a higher C-Factor in the court of public opinion. In the wake of everything from Enron to Worldcomm, Toyota to Tiger Woods, even once-lauded Johnson & Johnson, and many others, suspicion of business motives and practices are high. If a consumer sounds credible, and is already starting with a higher default C-Factor, the business has to do a lot of work to balance perception. If the consumer sounds like he or she is ranting, they lower their own C-Factor. If the consumer hires a reputable law firm, his/her C-Factor goes up. If a law firm known to take “just about anything” on a contingency basis takes the case, the consumer’s C-Factor may go down. C-Factors can combine or be enhanced through association. . If an organization or individual with a high C-Factor endorses a business’ honesty or products, the business’ C-Factor is raised. On the other hand, if those opposed to the organization or individual have their complaint supported by a high C-Factor organization (e.g., Sierra Club, ACLU), then the opponents’ C-Factor gets a bump up. C-Factors are not necessarily based in reality. Some individuals, because of their personal charisma, have a high C-Factor, sometimes even after they have committed publicly known “sins.” Witness Bill Clinton or Marion Barry. Ditto for some organizations, such as the Better Business Bureau, whose fact-checking is, in my extensive experience, woeful, and whose record-keeping is often inaccurate and dated. Yet if there are “BBB complaints” against your business, consumer reporters automatically think that you’re in the wrong. We, as crisis managers, must consider C-Factors when deciding “who should talk to whom” and whether certain strategies should be employed. Real or not, they play an important role.

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James M. Russell: The Progressive Role of Billionaires

September 10, 2010

Last month, 40 billionaires from around the United States announced that they had signed ” The Giving Pledge ,” an initiative started by Warren Buffett and Bill and Melinda Gates, stating their plans to donate the majority of their personal fortunes in their lifetime or after their death. Among the other signers are Star Wars director George Lucas, New York City Mayor Michael Bloomberg, and Texans T. Boone Pickens and Laura and John Arnold, who made their money through natural gas trading with John’s Houston-based hedge fund Centaurus Energy. Buffett says the pledge “is about asking wealthy families to have important conversations about their wealth and how it will be used.” If presented correctly, however, the pledge could also be a conversation that changes the debate on taxation in the United States. Their timing was fitting, considering the day’s other news: U.S. Treasury Secretary Timothy Geithner said at the Center for American Progress that “America is a less equal country than it was 10 years ago,” in part because of former President Bush’s tax cuts for the super wealthy. Geithner’s statement is undoubtedly true. A recent Institute for Policy Studies report concludes that, over the past 50 years, the brunt of this country’s tax burden has been shifted onto the middle class. Through tax cuts and write-offs, the super-wealthy have benefited from a “two-tier” tax structure: one for them and another for everybody else. Another report issued last year reveals income inequality in this country is the worst it’s ever been. The report’s author, Benjamin Saez of the University of California at Berkeley , found that in 2007 alone the top 10th of one percent of American earners took home nearly 6 percent of all income. And according to Lawrence Mishel at the Economic Policy Institute, a left-leaning research organization in Washington, D.C., the 400 American households with the highest incomes enjoyed a much faster pace of income growth than the vast majority between 1992 and 2007. The pledge signers have made it clear that they want to make the world a better place in a big way. Their commitment leaves little doubt that this is more than a huge tax write-off. But maybe they could help us even more by talking more about what rich people shouldn’t be able to write off. Or maybe they could just follow the lead of a group of wealthy Germans who recently volunteered to give more of their income to their country’s federal government. After all, as Mike Lapham of the Responsible Wealth Project at United for Fair Economy, points out, “A philanthropist might build a road … but philanthropy could never build and maintain the interstate highway system and state and city roads we all … depend on.” By voluntarily offering more, our American philanthropists could use this platform to advocate for humane federal tax policies across the board. Buffett and Gates — staunch advocates of progressive taxation — could also help by reminding other billionaires of the responsibility that comes with wealth. Buffett’s outspoken support for higher taxes on the wealthy has, in the past, earned him the ire of some of his fellow billionaires. In 2007, for example, he blasted the U.S. tax system for being dramatically uneven. According to The Times of London , Buffett said that without avoiding higher taxes, he was taxed at 17.7 percent on $46 million in annual income, while his secretary was taxed 30 percent on $60,000. He has also testified before Congress on behalf of the recently expired estate tax. Meanwhile, Gates’ father, Bill Gates Sr., is leading an initiative to pass a personal income tax in Washington state for those making more than $200,000 a year. In a time of political standstill, these billionaires could multiply their influence by adding to the debate on other progressive policy topics, like campaign finance reform in the wake of the Citizens United case and the restoration of a robust estate tax. Already, without Buffett or Gates, some of these billionaires have called on Congress to reinstate the estate tax, while another small group of millionaires wants the Bush tax cuts to expire. In a recent poll, nearly 70 percent of Americans said they support campaign finance reform and nearly 88 percent oppose the Citizens United decision, which negated important limits on corporations’ campaign contributions. With many of these philanthropists also being major political donors and one (Bloomberg) a public officeholder, it’s time for them to raise their voices on behalf of the American public. They earned their money — and this responsibility too. This originally appeared in the Fort Worth Weekly.

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MMRGlobal Launches New Travel and Benefits Sales Group

September 10, 2010

Company Sees Untapped Markets for Personal Health Records

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Marshall Goldsmith: What Is the Truth About Leadership? (Part 1 of 2)

September 7, 2010

My good friends Jim Kouzes and Barry Posner, best known for the classic, award-winning book, The Leadership Challenge , have written a new book called The Truth About Leadership . Recently I had the opportunity to catch up with Jim about his and Barry’s new book. Following is part one of the fascinating discussion I had with Jim recently during a conference he was giving in San Diego. MG: What will fans of T he Leadership Challenge find in The Truth about Leadership that may surprise them? JK: We’ve been traveling the world for three decades now, constantly researching the practices of exemplary leadership and the qualities people look for and admire in the leaders they would willingly follow. During and after our seminars and presentations, people ask us a lot of different questions, but there’s always one thing that they all want to know: “What’s new?” They want to know how things are different now compared to how they were five, ten, twenty, or thirty years ago. So we tell them. We tell them how the context of leadership has changed dramatically since we first asked people in the early 1980s to tell us about their personal best leadership experiences and about their most admired leaders. For example, we talk about how global terrorism has heightened uncertainty as political landscapes have changed. How global warming and scarcity of natural resources have made regions of the world unstable and created the need for more sustainable products and lifestyles. How the global economy has increased marketplace competition in the neighborhood and around the world and how financial institutions have exploded, imploded, and risen like Phoenixes from the ashes. How the always-on, 24/7, click-away new technologies have both connected and isolated people, as their capacity for speed cranks up the world’s pace. But we also tell our audiences something else, which usually surprises at least a few people. We tell them that as much as the context of leadership has changed, the content of leadership has not changed much at all. The fundamental behaviors, actions, and practices of leaders have remained essentially the same since we first began researching and writing about leadership over three decades ago. Much has changed, but there’s a whole lot more that’s stayed the same. We thought it was as important in these changing times to remind people of what endures as it was to talk about what has been disrupted. This is not idle theorizing on our part. We wanted to make certain that the lessons we included in The Truth about Leadership not only withstood the test of time but also withstood the scrutiny of statistics. So we sifted through the reams of data that had piled up over three decades and isolated those nuggets that were soundly supported by the numbers. This is a collection of the real thing–no fads, no myths, and no trendy responses–just truths that endure. MG: Do you still believe that effective leadership can be taught? JK: Let’s get something straight. Leadership is not preordained. It is not a gene, and it is not a trait. There is no hard evidence to support any assertion that leadership is imprinted in the DNA of only some individuals and that the rest of us missed out and are doomed to be clueless. The truth is that the best leaders are the best learners. Leadership can be learned. It is an observable pattern of practices and behaviors, and a definable set of skills and abilities. Skills can be learned, and when we track the progress of people who participate in leadership development programs, we observe that they improve over time. They learn to be better leaders as long as they engage in activities that help them learn how. Learning is the master skill of leadership, and our studies demonstrate that the more leaders engage in learning the better they become at leading. But here’s the rub. While leadership can be learned, not everyone learns it, and not all those who learn leadership master it. Why? Because to master leadership you have to have a strong desire to excel, you have to believe strongly that you can learn new skills and abilities, and you have to be willing to devote yourself to continuous learning and deliberate practice. No matter how good you are you can always get better. You have to have a passion for learning in order to become the best leader you can be. You have to be willing to put in the hours of daily practice over a period of years–the rest of your life, really. You have to be open to new experiences and open to honestly examining how you and others perform, especially under conditions of uncertainty. You have to be willing to quickly learn from your failures as well as your successes and to find ways to try out new behaviors without hesitation. You won’t always do things perfectly, but you will get the chance to grow. MG: Which of the ten time-tested truths do you personally think is the hardest to follow? JK: The hardest leadership practice to master is also the one that differentiates leaders from individual contributors. The truth is that focusing on the future sets leaders apart. The capacity to imagine and articulate exciting future possibilities is the defining competence of leaders. And, our data tells us that this is the most difficult set of skills to learn. Developing the capacity to envision the future requires you to spend more time in the future–meaning more time reflecting on the future, more time reading about the future, and more time talking to others about the future. It’s not an easy assignment, but it is an absolutely necessary one. It also requires you to reflect back on your past to discover the themes that really engage you and excite you. And it means thinking about the kind of legacy you want to leave and the contributions you want to make. None of this can be done by a pessimist. You must remain optimistic and hopeful about what is yet to come. You must truly believe that the future will be brighter and be confident that we’ll all get there together. A positive difference can only be made by a positive leader. MG: Explain the role of character in leadership? JK: The truth is that credibility is the foundation of leadership. This is the inescapable conclusion we’ve come to after thirty years of asking people around the world what they look for and admire in a leader, someone whose direction they would willingly follow. The key word here is “willingly.” It’s one thing to follow someone because you think you have to “or else,” and it’s another when you follow a leader because you want to. What does it take to be the kind of person, the kind of leader, whom others want to follow, doing so enthusiastically and voluntarily? It turns out that the believability of the leader determines whether people will willingly give more of their time, talent, energy, experience, intelligence, creativity, and support. Only credible leaders earn commitment, and only commitment builds and regenerates great organizations and communities. A leader’s credibility makes the difference between being an effective leader and being an ineffective one. Credibility determines whether others want to follow you or not. It determines how loyal they will be, how committed they will be, how much energy they will put into the cause, and how productive they will be. And the effect of personal integrity of leaders goes far beyond employee attitudes. It also influences customer and investor loyalty. People are just more likely to stick with you when they know they are dealing with a credible person and a credible institution. In business, and in life, if people don’t believe in you, they won’t stand by you.

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Unemployed Yale Graduate Juggles Startup With Fatherhood

September 7, 2010

The following is a guest article from from Dean Blackburn , a Yale graduate who was laid off from his IT job 17 months ago. Between the parenting duties of his two-year-old and taking care of his family without steady pay, Blackburn is preparing to launch his own company, NaviDate , a data-driven twist on online dating. The financial worries that floated through the executive team at my last job led to a lot of great people being laid off. For myself, it meant being laid off on a particular day at the end of February of 2009, because waiting even one more day would mean paying for my March health benefits. Looking back on it, I think that hurt more than the layoff itself – knowing that the president of the company was that calculating and that unfeeling about my own, and my family’s wellbeing. It put those “family days” and company picnics in a weird new light. My wife is Japanese and was working before our baby arrived – she got a job three days after getting her spouse visa. Like many mothers, she took a year off to really focus on our daughter. When my layoff hit, daycare was an easily removable cost center, but “only temporary,” a few months at most, right? Now, after a couple years off work, she’s anxious about going back and missing more of the wonderful things she’s seen already in our daughter’s rapid growth. There too remains the chicken and egg problem of finding an affordable five-day-a-week preschool while at the same time finding a job to pay for it… We still go out occasionally, and try to participate in life as much as possible to stay sane. But we look at the numbers constantly now, and worry about what will happen when it runs out. Not if, but when. At this point, even if I were to get a job, and start seeing income again, I’m certain this will happen again down the road. Because ultimately, it’s not about a dip in corporate profits, but a change in corporate attitude – a change that means no one’s job is safe, and never will be, ever again. Probably been true for a while, but the recession made it crystal clear. That’s one of the reasons I’m starting my own company – it’s no longer a trade off between doing what you love, and having stability. Stability is long gone, so you better do something you love, period! My company, NaviDate, is a little bit like Pandora meets the NSA for online dating – we use your personal data stream online and off to create a personality and behavioral profile that matches you to compatible partners. The idea started back in November of last year at Silicon Valley Startup Weekend. I then joined the Founder Institute Silicon Valley winter session in December. Out of 270 or so applicants, I was one of 57 who made the cut. After long classes, great mentoring, and hard work, I emerged as one of 18 graduates, with my own company (NaviDate Inc.), a clear vision, and a true excitement for my life and career again, with only occasional confusion as to why I didn’t go this route sooner. It’s a race – can I find those few remaining people, and can we together build and market the hell out of our product, before the money runs out? No idea! But I don’t care, because it’s so much better than a desk job with no job security, few chances to push my talents, and no control over my own fate. Somehow, I am optimistic! To found a tech company without being an engineer, or having one on board yet? Perhaps delusional? You need to be, ridiculously so, to start your own company. Still, the great thing about the world kicking your teeth in is you don’t have a lot to lose in asking – and getting answers to – the fundamental questions. And it’s a great way to find out who your real friends are. Learn more about Dean’s company, NaviDate, by clicking here. For more, visit our new Third World America section.

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Liz Ryan: How to Show Volunteer Experience on a Resume

September 2, 2010

Dear Liz, If you’re using a “Human Voice” Resume style in a chronological format, what is the best way to include volunteer work experience? Should it be in a separate section of the resume or integrated by date, and if integrated, what would it look like? Diana Hi Diana! It depends whether the volunteer activities happened alongside a regular job, or filled in their own time slot. If you volunteered when you were between jobs, you could show the volunteer experience this way (and by the way, we’re not going to use the word ‘volunteer’ in our description — you did the work, so who cares how and whether you got paid?): American Red Cross, Clifton, New Jersey Webmaster 2004 I was brought on board to overhaul the organization’s website, specifically to attract volunteers, make it easy for them to sign up to help with programs, and accept donations online. – In the three months following the site relaunch, donations increased threefold (from $40K to $120K) – I wrote a soup-to-nuts webmaster’s guide for use once my assignment was completed, detailing everything from changing pages to best SEO practices – The New Jersey state Red Cross Executive Director remarked “Clifton’s is by far the best Red Cross chapter site I’ve seen, anywhere.” Cheers — Liz p.s. Our new Career Altitude Online courses for September are launching next week! Here’s the lineup of courses: Stop! Don’t Send That Resume (Avoiding the Black Hole) Put a Human Voice in Your Resume Build Your Personal Brand Crafting Compelling Pain Letters Getting Started on LinkedIn Enrolling Your Network in Your Job Search The cost to participate is $129 for one course, $199 for two, $269 for three, $319 for four, etc. Join us! … or write to Jackie@asklizryan.com with questions.

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Fred Whelan and Gladys Stone: Rejected Outright for the Job Because of Their Online Image

August 31, 2010

Business strategist and Webby Award winner David Allen Ibsen (runs business consultancy 5 Meetings Before Lunch ) was helping one of his start-up clients with their organizational needs. Specifically, they were looking to make a couple of key hires. Ibsen tapped into his business/social network on LinkedIn to search and identify potential candidates. “LinkedIn is great because you have the person’s resume right in front of you.” He then gave the short list of candidates to his client who “Googled” each person’s name to do a background check. The client put the names into two buckets: “People with a positive web presence” and “Not”. The positives were called in for interviews, the rest were rejected outright. While these people had professional LinkedIn profiles, they were dinged because of what they had on other social networking sites. A professional profile is great but it doesn’t mean you’ll get a pass on them checking Facebook, Twitter or blogs you may have written. According to Ibsen, these people should consider taking a look at their personal brand. “Just like my corporate clients who covet their brand reputation, individuals need to look at what type of story is being told about them online and make sure it matches who they are and how they want to be perceived.” So, where should you start if you have a less than favorable web presence? Facebook – Look at your profile photo. Is this how you would want to be judged by a potential employer? We know it’s supposed to be just for friends, but the reality is that your photo along with your profile’s “likes” and “dislikes” are open to public review. Give your likes and dislikes the same scrutiny. If you happened to be “tagged” in a photo, that picture could also make its way to a hiring manager or recruiter. Let your friends know that you would rather not be tagged. Twitter – Whatever you tweet can get retweeted, on and on. It’s like the old Faberge shampoo commercials , “I told two friends, who told two friends” and before you know it, it’s out there in a big way. Tweets do fall off Google searches rather quickly, which is the good news. If you need to do some damage control on something you’ve tweeted, then tweet a number of positive things. LinkedIn – A way to rebrand yourself here would be to raise your profile by answering questions in your area of expertise. Also, review your profile for keywords and positioning. That can make a difference in how people find you and perceive you. We coached a woman who was a professor, author and speaker. Her profile emphasized her academic background, when she really wanted to focus on her writing and speaking engagements. This was an easy fix and got her more attention in the areas she wanted. David Allen Ibsen: “The Internet and the rise of social media have changed the rules in terms of how prospective employers do background checks. Even though the rules have changed, one thing still holds true – building a good reputation is invaluable.” People make the mistake of viewing LinkedIn as their professional image and consider Facebook and Twitter as their personal ones. While you might make this distinction, hiring managers don’t. Ibsen: “Never post anything on the Internet you wouldn’t want your mother – or boss – to see.” Fred & Gladys Whelan Stone Executive Search and Coaching Authors of GOAL! Your 30 Day Career Plan for Business & Career Success

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Fred Whelan and Gladys Stone: Rejected Outright for the Job Because of Their Online Image

August 31, 2010

Business strategist and Webby Award winner David Allen Ibsen (runs business consultancy 5 Meetings Before Lunch ) was helping one of his start-up clients with their organizational needs. Specifically, they were looking to make a couple of key hires. Ibsen tapped into his business/social network on LinkedIn to search and identify potential candidates. “LinkedIn is great because you have the person’s resume right in front of you.” He then gave the short list of candidates to his client who “Googled” each person’s name to do a background check. The client put the names into two buckets: “People with a positive web presence” and “Not”. The positives were called in for interviews, the rest were rejected outright. While these people had professional LinkedIn profiles, they were dinged because of what they had on other social networking sites. A professional profile is great but it doesn’t mean you’ll get a pass on them checking Facebook, Twitter or blogs you may have written. According to Ibsen, these people should consider taking a look at their personal brand. “Just like my corporate clients who covet their brand reputation, individuals need to look at what type of story is being told about them online and make sure it matches who they are and how they want to be perceived.” So, where should you start if you have a less than favorable web presence? Facebook – Look at your profile photo. Is this how you would want to be judged by a potential employer? We know it’s supposed to be just for friends, but the reality is that your photo along with your profile’s “likes” and “dislikes” are open to public review. Give your likes and dislikes the same scrutiny. If you happened to be “tagged” in a photo, that picture could also make its way to a hiring manager or recruiter. Let your friends know that you would rather not be tagged. Twitter – Whatever you tweet can get retweeted, on and on. It’s like the old Faberge shampoo commercials , “I told two friends, who told two friends” and before you know it, it’s out there in a big way. Tweets do fall off Google searches rather quickly, which is the good news. If you need to do some damage control on something you’ve tweeted, then tweet a number of positive things. LinkedIn – A way to rebrand yourself here would be to raise your profile by answering questions in your area of expertise. Also, review your profile for keywords and positioning. That can make a difference in how people find you and perceive you. We coached a woman who was a professor, author and speaker. Her profile emphasized her academic background, when she really wanted to focus on her writing and speaking engagements. This was an easy fix and got her more attention in the areas she wanted. David Allen Ibsen: “The Internet and the rise of social media have changed the rules in terms of how prospective employers do background checks. Even though the rules have changed, one thing still holds true – building a good reputation is invaluable.” People make the mistake of viewing LinkedIn as their professional image and consider Facebook and Twitter as their personal ones. While you might make this distinction, hiring managers don’t. Ibsen: “Never post anything on the Internet you wouldn’t want your mother – or boss – to see.” Fred & Gladys Whelan Stone Executive Search and Coaching Authors of GOAL! Your 30 Day Career Plan for Business & Career Success

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Mary Bottari: Will Perpetrators of Financial Crimes Ever Face Justice?

August 25, 2010

Some will rob you with a six gun and some with a fountain pen – Woodie Guthrie Like mushrooms popping up in a damp basement, a slew of court settlements have been registered recently involving the big banks and their role in the financial crisis. An informal review of settlements over the last two years reveals about 16 multi-million dollar payouts from the big banks amounting to some $1.6 billion in fines and restitution and $13 billion in buybacks of auction-rate securities that were represented to be as safe as cash. Sounds impressive, doesn’t it? But when fines are stacked up against an elite white-collar crime spree worth trillions, it is a little less impressive. Broad Array of Crimes Revealed A review of the settlements shows an array of fraudulent and illegal actions. * Predatory, deceptive and abusive lending related to mortgages * Securities fraud, including creating investment vehicles designed to fail * Accounting fraud * Brokerage fraud * Bribery of government officials * Undisclosed conflict of interest in financial analysis and advice * Lying to shareholders and investors * Robbing consumers with abusive overdraft fees * Robbing homeowners by overcharging them by hundreds or thousands of dollars, when they were already in bankruptcy and foreclosure A pattern is emerging: no admission of wrongdoing, earnest promises to do a better job and a fine representing a fraction of the infraction. Because the fine is paid by shareholders, no one is held accountable and the whole incident is swept under the rug. Last week, a federal judge reviewing a proposed settlement between the Securities and Exchange Commission (SEC) and Citigroup sounded off. “Why isn’t the government getting tough with the banks?” Judge Ellen Segal Huvelle demanded of government lawyers. The SEC wanted to fine Citigroup $75 million for failing to disclose to shareholders some $50 billion in subprime mortgage investments that were deteriorating during the financial crisis and ultimately crippled the bank. This is the third time that a federal judge has weighed in with regulators to demand stiffer penalties against the banks. Incompetence and Indifference Allows Elites to Avoid Accountability In these cases there is no jury. The judge acts as a stand-in for the public interest. While we can hope that judges are getting tougher on these settlements, the whole process lets the people who committed the crimes avoid the public rage and personal accountability that helps to deter future crimes. Recently, Judge Emmet G. Sullivan sharply questioned one settlement with Barclays Bank telling government lawyers that the public might see the settlement as a “free ride” and noted that “requiring banking officials to stand before federal judges and enter pleas of guilty might be a powerful deterrent to this type of conduct.” But now, two years after Wall Street’s fraudulent and reckless behavior collapsed the economy, costing average Americans trillions in lost wages, savings and housing wealth and throwing eight million people out of work and some six million families out of their homes, not one Wall Street banker or predatory lender is behind bars. “The failure of the Bush and Obama administrations to imprison a single CEO of the nonprime mortgage lending specialists that led what the FBI aptly named an ‘epidemic’ of mortgage fraud in 2006 — four years ago — demonstrates a level of incompetence and indifference to the crimes of the elites that is staggering,” says University of Missouri law Professor Bill Black, a former federal regulator during the Savings and Loan crisis of the 1980s. Even Drug Money Laundering Tolerated America’s largest banks apparently can engage in the most flagrantly criminal activity and emerge unscathed. While average Americans would be given a stiff jail term for laundering even small amounts of drug money, this summer Bloomberg News broke the story that Wells Fargo/Wachovia had been caught laundering billions in Mexican drug cartel money, but got away with a slap on the wrist. The Justice Department charge sheet against the bank indicates that between 2003 and 2008, Wachovia handled $378.4 billion for Mexican currency exchanges, “the largest violation of the Bank Secrecy Act, an anti-money-laundering law, in U.S. history.” According to Bloomberg , the sum is equal to one-third of Mexico’s current gross domestic product. Yet the bank’s penalty for laundering over $380 billion in drug money is going to be a promise not to ever do it again and a $160 million fine. Given that the firm’s top officers were alerted to this activity, which fuels Mexico’s murderous drug war, shouldn’t someone have to stand trial? Unequal Justice The perception of unequal justice — one set of rules for the average Joe, and another for the elites on Wall Street — erodes the public’s faith in the criminal justice system and our political system as a whole. “Our prisons have tens of thousands of blue collar thieves. If one added up the cumulative financial damage they caused it would not represent one-hundredth of one percent of the losses caused by a single fraudulent large nonprime specialty lender,” says Black, who hopes that someday a leader will emerge with the courage (and common sense) to prosecute the elite criminals that cause our recurrent, intensifying financial crises. Bank of America ex-CEO Kenneth Lewis and ex-CFO Joe Price, are facing fraud charges connected to their personal involvement in the of a $3.6 billion dollar bonus package to[Merrill Lynch executives shortly before the bank took over the investment firm in 2008. This time, it’s not federal agencies pressing charges but the New York Attorney General’s office. Baring a dismissal, these two bankers may yet find themselves before a judge this fall. But it is highly unlikely that this one prosecution will satisfy the nation’s hunger for justice. TAKE ACTION: Click here to send a note to the FBI and the Department of Justice and tell them to pick up the pace. These firm may be too big to fail, but their executives are not too big for jail. LEARN MORE : See our informal tally of recent settlements below. *************************************************************** BIG BANKS SETTLEMENTS The Firm: Goldman Sachs 1. The Company/Subsidiary: Goldman Sachs/Litton Loan Servicing LP The Settlement Amount: $60 million The Settlement date: May 10, 2009 The Court or Federal Agency: The Massachusetts attorney general’s office The Complaint: Goldman paid the fine to end the Massachusetts AG’s investigation into allegations that it engaged in predatory lending practices in the state. The settlement will be used to reduce the mortgage payments of 714 Massachusetts residents who had secured subprime mortgages funded by Goldman Sachs. Source: Wayne Leslie, ” Goldman Pays to End State Inquiry Into Loans,” The New York Times , May 11, 2009. 2. The Company/Subsidiary: Goldman Sachs The Settlement Amount: $550 million ($300 million to the U.S. government and $250 million to investors The Settlement date: July 15, 2010 The Court or Federal Agency: The Securities and Exchange Commission The Complaint: In April 2010, the bank was accused of securities fraud in a civil suit by the SEC that claimed the bank had created and sold mortgage investments that were secretly devised to fail. Though Goldman did not formally admit to the SEC’s allegations, it agreed to a judicial order barring it from committing intentional fraud in the future under federal securities laws. Source: Gretchen Morgensen, “SEC Accuses Goldman of Mortgage Fraud,” The New York Times , April 16, 2010. The Firm: Wells Fargo 1. The Company/Subsidiary: Wells Fargo The Settlement Amount: $1.4 billion The Settlement date: November 18, 2009 The Court or Federal Agency: California’s attorney general The Complaint: “The brokerage arm of the bank marketed the securities, which resemble corporate debt and whose interest rates were regularly reset by auctions, as an alternative to cash for years, even after analysts warned that the market could freeze up. In February 2008, banks stopped participating in the auctions and effectively locked up investors’ cash. Under the terms of the settlement, Wells Fargo agreed to buy back at par value by April 2010 all auction-rate securities bought through its brokerage unit by investors before the market froze up.” Source: Cyrus Sanati, “Wells Fargo to Repurchase $1.4 Billion of Securities ,” The New York Times , November 18, 2009. 2. The Company/Subsidiary: Wells Fargo/Wachovia Bank The Settlement Amount: $160 million The Settlement date: March 17, 2010 The Court or Federal Agency: The United States District Court for Southern District of Florida The Complaint: Under the agreement, Wachovia will forfeit $110 million, representing the proceeds of illegal narcotics sales that were laundered through the bank, the United States attorney’s office in the Southern District of Florida said. The bank will pay an additional $50 million fine to the Treasury. A deferred prosecution agreement with the Justice Department resolved charges that the bank had willfully failed to establish a program to guard against money laundering. It also resolved Wachovia’s admitted failure to identify, detect and report suspicious transactions in third-party payment processor accounts. Source: REUTERS, ” Wachovia and U.S. Settle a Money Laundering Case, ” The New York Times , March, 17, 2010. 3. The Company: Wells Fargo The Settlement Amount: $1.5 million The Settlement Date: July 21, 2010 The Court or Federal Agency: The United States District Court, AZ The Complaint: Surprise alleged that the financial institution invested the city’s money in a risky, off-shore company backed by subprime mortgages and home-equity loans. Surprise officials last week said Wells Fargo Bank would pay $1.5 million in a settlement agreement to the city. Source: “Surprise City Council accepts Wells Fargo’s Offer on Settlement,” The Arizona Republic , July 28, 2010. 4. The Company/Subsidiary: Wells Fargo The Settlement Amount: $203 million The Settlement date: August 10, 2010 The Court or Federal Agency: The United States District Court for the Northern District of California The Complaint: “A federal judge on Tuesday ordered Wells Fargo to pay California customers in restitution for claims that it had manipulated transactions to maximize the overdraft fees it charged. Instead of processing transactions in the order in which they were received, Wells Fargo put through the largest to smallest. In a stinging 90-page opinion, United States District Judge William Alsup wrote that the practice was unfair and deceptive.” Source: Andrew Martin and Ron Lieber, “Wells Fargo Loses Ruling on Overdraft Fees,” August 10, 2010. The Firm: JP Morgan Chase 1. The Company Subsidiary: JP Morgan Chase/Bear Stearns Companies The Settlement Amount: $28 million The Settlement date: September 9, 2008 The Court or Federal Agency: Federal Trade Commission The Complaint: The Bear Stearns Companies and its mortgage servicing unit agreed to pay $28 million to settle federal charges it had deceived subprime borrowers and had engaged in abusive loan practices before the investment bank’s collapse. Source: ” Bear to Pay $28 Million to Settle Loan Complaint ,” The New York Times , September 9, 2008. 2. The Company/Subsidiary: JP Morgan Securities Inc. The Settlement Amount: will pay a penalty of $25 million, make a payment of $50 million to Jefferson County, and forfeit more than $647 million in claimed termination fees. The Settlement date: November 4, 2009 The Court or Federal Agency: The Securities and Exchange Commission The Complaint: “JP Morgan Securities Inc. settled charges with the Securities and Exchange Commission for two former managing directors’ alleged roles in an unlawful payment scheme that enabled them to win business involving municipal-bond offerings and swap-agreement transactions with Jefferson County, Ala.” Source: Fawn Johnson and Michael Aneiro, “J.P. Morgan Unit Settles Alabama Case,” November 5, 2009. The Firm: Morgan Stanley 1. The Company/Subsidiary: Morgan Stanley The Settlement Amount: $7.2 million The Settlement date: March 25, 2009 The Court or Agency: FINRA The Complaint: Morgan Stanley & Co. will pay more than $7 million to resolve allegations of misconduct by two former brokers accused of misleading Rochester, N.Y., area employees of Eastman Kodak Co. and Xerox Corp. to take early retirement and invest retirement assets with them. Source: “Settlement for Morgan Stanley,” Crain’s New York Business , March 25, 2009. 2. The Company/Subsidiary: Morgan Stanley The Settlement Amount: $102 million The Settlement date: June 23, 2010 The Court or Federal Agency: Attorney General of the Commonwealth of Massachusetts The Complaint: Morgan Stanley will pay $58 million to affected Massachusetts borrowers and $23 million to the state’s pension fund to make up for the investment losses it suffered, and will return $19.5 million to the state’s taxpayers. Source: REUTERS, “Morgan Stanley to Settle Case Over Subprime Loans,” The New York Times , June 24, 2010. The Firm: Bank of America 1. The Company/Subsidiary: Bank of America The Settlement Amount: $4.7 billion The Settlement date: October 9, 2008 The Court or Federal Agency: Securities and Exchange Commission and the New York attorney general The Complaint: “The Bank of America Corporation has agreed to buy back as much as $4.7 billion in auction-rate securities to settle charges that it misled thousands of customers about the risky investments, federal and New York state regulators said Wednesday.” Source: THE ASSOCIATED PRESS, “Bank of America Agrees to Buy Back Auction-Rate Securities,” The New York Times , October 9, 2008. 2. The Company/Subsidiary: Bank of America/Merrill Lynch The Settlement Amount: $26.5 Million The Settlement date: September 9, 2009 The Court or Federal Agency: Texas State Securities Commissioner The Complaint: “Merrill Lynch & Co. agreed to pay $26.5 million in a national settlement stemming from Texas’s claims that the brokerage firm allowed sales assistants to sell securities without being properly registered.” Source: Kevin Kingsbury, “Merrill to Pay $26.5 Million to Settle Sales-Practice Probe,” Wall Street Journal, September 9, 2009. 3. The Company/Subsidiary: Bank of America/Countrywide Financial Corp. The Settlement Amount: $108 million The Settlement date: June 6, 2010 The Court or Federal Agency: Federal Trade Commission The Complaint: “Bank of America Corp. agreed Monday to pay $108 million to settle U.S. claims that Countrywide, the mortgage lender it acquired two years ago, cheated hundreds of thousands of customers facing foreclosure on their homes.” Source: Thomas Catan, “BofA to Pay $108 Million in FTC Case,” Wall Street Journal, June 8, 2010. 4. The Company/Subsidiary: Bank of America/Merrill Lynch The Settlement Amount: $150 million The Settlement date: February 22, 2010 The Court or Federal Agency: Securities and Exchange Commission and the New York attorney general The Complaint: Southern District of New York Judge Jed S. Rakoff “reluctantly” gave his conditional approval Monday morning to a $150 million agreement between the Securities and Exchange Commission and Bank of America Corp. to settle allegations that the bank failed to make required disclosures relating the $3.8 billion dollar bonus package paid to Merrill Lynch executives when BofA took over the investment firm in 2008. The Judge succeeded in getting the settlement raised from $33 million to $150 million. Source: “Judge approves SEC Deal with Bank of America,” New York Times , February 22, 2010. The Firm: Citigroup 1. The Company/Subsidiary: Citigroup Inc. The Settlement Amount: $7 billion The Settlement date: Dec. 11, 2008 The Court or Federal Agency: the Securities and Exchange Commission, New York Attorney General Andrew Cuomo and state securities regulators The Complaint: Under final settlements announced Thursday with regulators that include the Securities and Exchange Commission, New York Attorney General Andrew Cuomo and state securities regulators, the two banks agreed to buy back billions of dollars of illiquid auction-rate securities from hundreds of customers. Those customers have been unable to sell the securities, which they thought were as good as cash. Source: Liz Rappaport, “CitiGroup, UBS Settle Deal on Payback,” Wall Street Journal , Dec 12, 2008. 2.The Company/Subsidiary : Citigroup The Settlement Amount: $75 million The Settlement date: July 29, 2010 The Court or Federal Agency: Securities and Exchange Commission The Complaint: “Citigroup agreed on Thursday to pay $75 million to settle federal claims that it failed to disclose vast holdings of subprime mortgage investments that were deteriorating during the financial crisis and ultimately crippled the bank. The commission singled out two Citigroup executives– Mr. Crittenden agreed to pay a $100,000 fine; Mr. Tildesley will pay $80,000.” Source: Eric Dash and Louise Story, “Citigroup Pays $75 Million to Settle Subprime Claims,” The New York Times , July 29, 2010.

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Danny Wong: Lessons Learned from Managing a Dozen Interns

August 20, 2010

It was easy to hire them. It was summer time, and there were plenty of kids looking for unpaid, part-time internships. They could work a few hours a day, a few times a week, and even get school credit. The rest of the time, they could hang out with friends, go to the beach, stay at home and relax, or get another job just for some spending money. During the summer of 2009, and into the fall, I saw at least two hundred resumes , and Blank Label ended up hiring upwards to a dozen interns to help us build our men’s dress shirt venture. It was a genius idea. We wouldn’t have to pay them (exploitative? yes, but we gave school credit), only manage them, and the theory was, they would work 10-12 hours a week, with 3-4 hours of management, so on the low end, they would be contributing to 6 extra hours of work, 9 extra hours on the high end, and we could scale this by hiring more interns to fulfill more tasks each week so we wouldn’t have to cough up equity or cash for more support. But the cruel reality was, 10-12 hours really meant 8-10. Also, my time managing them meant I wasn’t being productive, so if I managed them for 4 hours a week, on the low end, they would only have 4 hours of work to contribute, but those 4 hours are negligible because those are the 4 hours I lost on my end managing them, so the numbers clearly didn’t work out to our benefit. In most cases, more time and energy was spent managing the interns than we had output from them. We were young and foolish. We thought that this was the smarter thing to do. Our interns didn’t work out for several reasons: 1) They were unmotivated . Without equity or pay, they couldn’t really be sold on the business and they weren’t engaged enough to help us make big things happen. 2) They were selfish . Perhaps this is a strong word, but they just wanted to pick our brains about running a business and learn from us when all we wanted was for them to fulfill a role. 3) We were selfish . We didn’t really want to train them. Of course, we wanted a fair exchange and what we thought was fair was us providing resources and means to execute great ideas and big projects for a real-world business, without us having to micro-manage them, but they needed more guidance, more support, which we weren’t available to offer because we had a lot on our plates already. 4) They were busy . Part-time interns should have all the time in the world, right? Wrong. When they know they are only committed for a few hours each week, they tend to watch the clock and save work-related matters for when they are working. There was no extra time to manage big projects, no extra time to really learn a lot and be able to contribute a lot. They were preoccupied with their personal and social lives. In the fall, the interns were too busy with school and hanging out with friends to be bothered with more work from us. 5) They couldn’t execute . While they had great ideas which they generously shared, we brought on interns with the intention that they would be responsible for themselves, so when they had a great idea, we allocated the proper resources to them to make something happen, but they weren’t able to properly execute. The ability to execute is one of the most important skills in anyone you hire, especially in startups. Ideas mean nothing if you can’t execute them, so we ended up with this really nice list of ideas, which was just added to our even longer list of things-to-do. I’ve done internships before. I’ve known people who have done internships too. To be honest, I don’t know how most companies can justify hosting interns when hosting interns is taxing on the mental energy and the time of the intern managers. Paid internships are an anomaly to me because, from my experiences, interns cost companies a good amount of money and those companies rarely see a positive return. After managing about a dozen interns, we’ve realized that we were not too successful in recruiting great candidates for part-time roles. Instead, we have decided to really only recruit A+ players who can make a decent time commitment to our business, and would be paid salary, stock options or a combination of both. This way, we only get people who are invested in us, rather than us just being invested in them because we crossed our fingers hoping our interns would work out, when we really needed them and they didn’t quite need us. When it comes to hiring, it’s important for both parties to have vested interest in each other, because an imbalance of interest can put the relationship in an awkward position. While it was fun to manage a dozen interns and it was a great learning experience to do so, we won’t be hiring interns for a while, although we occasionally entertain the thought. Danny Wong is the co-founder of Blank Label, a co-creation startup specializing in dress shirts for men . Blank Label makes DIY dress shirts, slim fit dress shirts and fitted dress shirts .

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Inder Sidhu: What Did You Do on Your Summer Vacation?

August 19, 2010

In a few short weeks, tens of millions of schoolchildren will be asked a familiar question: What did you do on your summer vacation? Considering that most kids spend the summer riding bikes, going to camp or manning lemonade stands, it might be more revealing to ask parents instead: Did you take some time off this summer? If not, then I have five words of advice for you: Go jump in a lake. Seriously. Chances are you need a break. That’s especially true now as the recession eases and business starts to heart up. Worried about job security, many workers powered through the recession without any down time. In fact, surveys indicate that just 42 percent of Americans planned a leisure trip in 2009 , down from 49 percent in 2005. Not surprisingly, the number of working professionals who say they suffer from burnout is staggering, and not just in the U.S., but in Germany , New Zealand and elsewhere, too. Burnout, of course, leads to job dissatisfaction, loss of productivity and even morale problems. This isn’t just a problem for individuals, but employers, too Can it be fixed–or prevented? It can, but it requires both an understanding of the core problem, and a commitment to fixing it. Let’s start with the former: Like many working professionals, you may have prioritized your professional life at the expense of your personal one. Have you marginalized personal relationships, allowed your health or fitness to suffer, and/or reduced the amount of time you spend relaxing? Many workers persuade themselves these sacrifices are worth it. They convince themselves that they will be rewarded for their dedication. So they work longer hours, hoping for a promotion, holding out for a large bonus or just some job security. Even when their sacrifices are rewarded, few workers stop to evaluate whether their efforts were worth it. More should. That’s because many of us are slow to realize the toll that these sacrifices take. We don’t see the signs that our attitudes may be slipping, or that ours stress level may be rising. But employers do. Left unchecked, these conditions can fester and turn a once capable and productive worker into a malcontent and office misfit. That’s why the question of “what did you do on your summer vacation” is so important. If you did not take time off because “you were too busy,” then your priorities may be out of alignment. Remember: you have two lives to live: one at home, and one at the office. Though they may blend from time to time, they still have separate and distinct needs. Living both fully is the only way to reach long-term happiness and contentment. If you discover that your professional life is holding your personal life hostage, you need to commit to addressing the problem. Start by scheduling that overdue summer vacation. Taking time off allows us to regroup and think about our priorities. It also allows us to assess the state of our personal affairs. Vacation is often a time when people ask themselves the following: Am I in the shape I want to be in? Are my finances in order? When was the last time I called my best friend? I’m not talking about trying to de-emphasize your professional responsibilities in favor of personal fun, but instead pursuing both, for the benefit of each other. Think about that in the final remaining weeks before Labor Day, while the weather is still warm enough to splash around at the end of a dock. Inder Sidhu is the Senior Vice President of Strategy & Planning for Worldwide Operations at Cisco, and the author of Doing Both: How Cisco Captures Today’s Profits and Drives Tomorrow’s Growth . Follow Inder on Twitter at @indersidhu .

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Inder Sidhu: What Did You Do on Your Summer Vacation?

August 19, 2010

In a few short weeks, tens of millions of schoolchildren will be asked a familiar question: What did you do on your summer vacation? Considering that most kids spend the summer riding bikes, going to camp or manning lemonade stands, it might be more revealing to ask parents instead: Did you take some time off this summer? If not, then I have five words of advice for you: Go jump in a lake. Seriously. Chances are you need a break. That’s especially true now as the recession eases and business starts to heart up. Worried about job security, many workers powered through the recession without any down time. In fact, surveys indicate that just 42 percent of Americans planned a leisure trip in 2009 , down from 49 percent in 2005. Not surprisingly, the number of working professionals who say they suffer from burnout is staggering, and not just in the U.S., but in Germany , New Zealand and elsewhere, too. Burnout, of course, leads to job dissatisfaction, loss of productivity and even morale problems. This isn’t just a problem for individuals, but employers, too Can it be fixed–or prevented? It can, but it requires both an understanding of the core problem, and a commitment to fixing it. Let’s start with the former: Like many working professionals, you may have prioritized your professional life at the expense of your personal one. Have you marginalized personal relationships, allowed your health or fitness to suffer, and/or reduced the amount of time you spend relaxing? Many workers persuade themselves these sacrifices are worth it. They convince themselves that they will be rewarded for their dedication. So they work longer hours, hoping for a promotion, holding out for a large bonus or just some job security. Even when their sacrifices are rewarded, few workers stop to evaluate whether their efforts were worth it. More should. That’s because many of us are slow to realize the toll that these sacrifices take. We don’t see the signs that our attitudes may be slipping, or that ours stress level may be rising. But employers do. Left unchecked, these conditions can fester and turn a once capable and productive worker into a malcontent and office misfit. That’s why the question of “what did you do on your summer vacation” is so important. If you did not take time off because “you were too busy,” then your priorities may be out of alignment. Remember: you have two lives to live: one at home, and one at the office. Though they may blend from time to time, they still have separate and distinct needs. Living both fully is the only way to reach long-term happiness and contentment. If you discover that your professional life is holding your personal life hostage, you need to commit to addressing the problem. Start by scheduling that overdue summer vacation. Taking time off allows us to regroup and think about our priorities. It also allows us to assess the state of our personal affairs. Vacation is often a time when people ask themselves the following: Am I in the shape I want to be in? Are my finances in order? When was the last time I called my best friend? I’m not talking about trying to de-emphasize your professional responsibilities in favor of personal fun, but instead pursuing both, for the benefit of each other. Think about that in the final remaining weeks before Labor Day, while the weather is still warm enough to splash around at the end of a dock. Inder Sidhu is the Senior Vice President of Strategy & Planning for Worldwide Operations at Cisco, and the author of Doing Both: How Cisco Captures Today’s Profits and Drives Tomorrow’s Growth . Follow Inder on Twitter at @indersidhu .

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Richard (RJ) Eskow: Techno-Thriller: Why Was Goldman Sachs So Worried About One Nerdy Sentence?

August 13, 2010

It sounds like the plot to a dozen movies: Picture a corporation so powerful that its tentacles circle the globe and reach into the highest corridors of power. Yet a single sentence on an ex-employee’s obscure website forces it to move into action. That sentence is so important that it leaves the corporation with no choice but to make that employee … No, not disappear. They just made him delete it. (This is where the movie comparisons end.) But the question is, why? The sentence described the Goldman Sachs risk system, SecDB (which stands for securities database). It read: “Unbeknownst to most of the non-strategists, you could see basically every position and holding across the company, whether you were supposed to or not.” Without some digging we can’t know that the sentence is true – but why did it cause such a reaction? It was pretty well buried in a blog post by Antonio Garcia-Martinez, a former Goldman “quant” (financial analyst). The post is a long, kiss-and-tell piece about his reasons for joining Goldman, his experiences there, why he left, and why he’s happier at his new start-up company. He says a number of unflattering things about Goldman Sachs in his post. So do a great many people, for that matter – every day. So why did Goldman Sachs bother making Garcia-Martinez delete this particular sentence, out of the reams of scandalous things said about them, and then contact Business Insider’s Clusterstock blog (which had reprinted it) to deny that it was true ? Because it could have a serious impact on Goldman’s future. First, consider the effect a revelation like this would have on Goldman’s already-battered client relationships. The firm is struggling to overcome the now-public knowledge that it bet against some of those clients, causing them financial harm while claiming at the same time to “serve their needs.” Personal relationships can influence a business deal even more than the corporation’s reputation, which is probably one reason Goldman’s still around. A corporate exec may continue to place his business with them even after he’s heard the bad stuff, as long as he likes and trusts hiscontact there. But what if our exec knew that his trusted “friend” at Goldman was aware of every position Goldman or its clients were taking against him (or had taken in the past), and that the guys betting against him knew instantly what he was doing? He might not want too much to do with his “friend” after that. Then there’s the question of market manipulation. Goldman has approximately 15% of the entire derivatives market. If its traders can immediately cross-check any deal they negotiate against what’s happening across 15% of the market, in real-time, that could raise serious legal issues. And it could seriously undercut statements like these, in which Goldman’s senior management tried to defend itself from accusations of fraud: “We certainly did not know the future of the residential housing market in the first half of 2007 any more than we can predict the future of markets today. We also did not know whether the value of the instruments we sold would increase or decrease. ” (emphasis mine) If they and their employees were tracking every deal in real-time they had a better picture of the those instruments’ value than they let on. A database like the one Garcia-Martinez described, if it exists, would be an invaluable tool in getting a jump on the market – or manipulating it. But wait: it gets worse. David Viniar, Goldman’s CFO, testified under oath to the Federal Crisis Inquiry Commission and claimed that Goldman didn’t track its derivatives deals separately from its other transactions. FCIC panel chair Angelides pressed him: “Are you telling me you have no system at your company that tracks revenues or assets of contracts, and liabilities and payments under contracts? You have no management reports, no financial reports that track these contracts?” “I’ve never seen one,” Viniar answered. The Commissioners seemed to verge on accusing him of lying. “Nobody here really believes (that),” said one. Flash back to February of this year, when David Viniar said this in a presentation to investors : “Technology is fundamental to everything we do, from revenue-producing activities to enabling much of the control infrastructure of the firm.” And here’s another quote, from Goldman’s Business Principles: “We take great pride in the professional quality of our work.” As the Wall Street Journal reported, Goldman has said that “credit trading desks … are separated by industry group … (and) traders are indifferent to whether they are selling clients a bond or a credit derivative.” The Journal added: “The firm also said its technology systems firm-wide don’t single out derivatives transactions.” Now comes the part of the movie where we place our sentence, that jigsaw puzzle piece, into context so that we get its full meaning: ” The Goldman Sachs risk system is called SecDB (securities database), and everything at Goldman that matters is run out of it. … Database replication was near-instant , and pushing to production was two keystrokes. You pushed, and London and Tokyo saw the change as fast as your neighbor on the desk did (and yes, if you fucked things up, you got 4AM phone calls from some British dude telling you to fix it). Regtests ran nightly, and no one could trade a model without thorough testing … Unbeknownst to most of the non-strategists, you could see basically every position and holding across the company, whether you were supposed to or not. The whole thing was so good …” He’s saying that Goldman Sachs has a first-rate, centralized data system that captures each deal in detail, and that everyone can see it as soon as it’s posted. What’s more, if I understand him correctly, he’s saying that employees are required to run a detailed model of their deals before they can post them on the system. And all this information is stored on a database. How can a system can do all this and yet be unable to distinguish between a bond and a derivative? Nevertheless, David Viniar testified under oath that Goldman’s systems were so unsophisticated that he couldn’t even tell the FCIC how much profit the company made from derivatives. Eventually, under continued pressure, Goldman provided the FCIC with an estimate which amounted to 25%-35% of its 2009 revenue. Yet Goldman is telling investors it won’t lose any revenue as a result of the financial reform bill , and analysts believe them. “They’ve clearly seen the writing on the wall and are planning their moves ahead of time,” said one. That brings us to Goldman’s plans to shut down its proprietary trading unit and spin it off into an independent hedge fund — or move it into Goldman’s asset management arm. Here’s a question that probably hasn’t been asked yet: Do they plan to use Goldman’s SecDB, or any other Goldman systems, in that asset management firm? If this trading unit is moved into a hedge fund, will that fund ‘rent’ its computer systems from Goldman? Will all the traders and ‘quants’ at these various organizations be able to ‘see’ deals happening in real time? That could trigger calls for an SEC investigation or other actions to prevent Goldman from improperly using computer data. And it could raise questions about the other big banks’ systems, too. It’s understandable why, given the implications of this nerdy sentence, Goldman would dispatch its publicists to tell Clusterstock it isn’t true. As for Garcia-Martinez, he was asked why he deleted the sentence. ” Prudence is the better part of valor ,” he answered — followed, no doubt, by a click as a gloved hand placed the telephone back in its cradle. Or course, this is no thriller. But the story raises serious questions, ones we should be asking anyway. If a bank is “too big to fail,” its data is “big enough to misuse.” It also shows why we need strong regulations behind the financial reform bill, to make sure that information doesn’t become another “financial weapon of mass destruction.” And it shows why we need to end “too big to fail.” The story also illustrates how much we don’t know about what the big financial players are doing. It reminds us that we wont be able to protect the economy from future Wall Street crimes unless we keep investigating the ones that have already taken place. _______________________________________________________________ Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America’s Future. This post was produced as part of the Curbing Wall Street project. Richard also blogs at A Night Light . He can be reached at “rjeskow@ourfuture.org.” Website: Eskow and Associates

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Karen Luniw: Success in the City: Leveraging Your Brilliance

August 13, 2010

Did you know that right now, right this moment you have the ability with what you already have to leverage your own personal brilliance in order to build your business? Well, you do. One of my favorite things to share with groups I speak to is about how their brain works. Often people claim that their processing capability is less than what I’m about to share with you but no matter how you slice it — it is incomprehensible. The shame is that we don’t always use it to leverage ourselves in our business. The fact is, we work way too hard. Do you go through your day expecting to come across the million-dollar idea? (It’s all relative – for some a million isn’t going to cut it — for others, it’s over and beyond) Next question: Would you be able to recognize the million dollar idea if you saw it? Most people say ‘yes’ at this point. I say it’s not likely they would. This is where we need to start to leverage what you already have — your focus. The fact is, day in and day out, we tend to focus on what’s in front of us and if we’re in business or trying to make a quota — what we’re usually focused on is the problem. C’mon, be honest and think about yesterday — what did you spend most of your day thinking about? It’s a rare bird that can say they were focused solely on the good that’s happening around them. The way our brain works means that whatever we’re focused on, whatever messages we constantly feed it (which turn into beliefs) in turn sets off a mechanism that I compare to a huge radar dish that is constantly scanning the environment to prove us right. I’ll repeat that – whatever we consciously choose to focus on – our brain looks for in order to prove us right….whether it’s right or wrong. Ever lose your keys temporarily? When you did, you were likely muttering to yourself, ‘I can’t find my keys,’ ‘They’re not here.’ Notice what you’re prompting your brain to do. You’re prompting it to prove you right even though your subconscious mind can process over 400 billion bytes of information per second and it knows EXACTLY where your keys are — it can’t send your conscious mind that sensory information because it would be contradicting your focus that ‘the keys are not here.’ It’s the same with us at work. If we’re constantly focused on the problem or the challenges that are facing us — we will find them — it cannot be any other way. The great news is that you can leverage this knowledge and create an almost unfair advantage in your work and business. If you truly start to shift your focus to be expecting the million dollar idea to show up — your subconscious will start to scan the environment for it. This is the first thing you can do to start leveraging your brilliance for your business. If the million dollar idea is there (and it is) if you keep your focus – you will have no choice but to see it. This is just the start in leveraging your brilliance — next, I’ll share how the power of your story can attract all the business you want and how an amazing natural law proves that you can have what you desire for your self and your business. Remember, if you want this to be easier, contact me and we can work together to make this process easier, faster and with great results!! Karen Luniw is the author of Attraction in Action: Your How to Guide to Relationships, Money, Work and Health and is a coach who helps people break through blocks in their personal and business lives. For inspiration, check out her Top 10 Law of Attraction Tips for 2010 movie. There are huge clues in the movie to help you move further towards your goals.

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Janis Bowdler: Should Getting Sick Mean I Lose My Home?

August 13, 2010

Below is the fourth installment in a five-part series, Too Little to Save , in which the National Council of La Raza (NCLR) highlights a family and describes their struggles with foreclosure. Ms. Suarez is a single mom who has a toddler and two ten-year-old twins, one boy and one girl. They live in southeastern Texas and have lost their home because of a medical emergency. Bureaucracy at the bank was a major point of frustration for Ms. Suarez: [The bank] didn’t check the paperwork I submitted when I requested people to help me keep the home, because they were supposed to send me some papers―papers I have never received. I didn’t even receive a letter in the mail on their behalf telling me that the house would be foreclosed. Two weeks before they took away my home, I talked to them and they told me to wait because the paperwork wasn’t ready yet, I mean, they still needed a final decision. And all of a sudden, they leave a letter at my door [telling me to leave the house]. The Suarez family moved several times after they went through foreclosure. The poor conditions added to their challenges: [M]y children were asking what’s going to happen…whether we’re going to have a stable place to live…An apartment may be unclean; sometimes there’s a lot of garbage. Sometimes people drink outside the apartments. I mean, many things like that…they don’t have anywhere to play. The space is more limited. Ms. Suarez expressed concern over changes in her son’s allergies after the foreclosure in the new apartment: [M]y ten-year-old boy suffers from allergies. He’s allergic to mold, many things, also things like trees. He’s allergic to many types of trees. My son has been suffering more from allergies. I have to take him every other week for an allergy shot. The instability of not knowing where they would be going to school was particularly difficult on Ms. Suarez’s children. Ms. Suarez described her daughter as more distracted in school. She also noted that her children could no longer participate in extracurricular activities because she would not be able to pick them up from school. Looking forward, Ms. Suarez had mixed feelings on the American Dream and whether homeownership was in her future: Well, the American Dream was, like they say, crumbled when I lost my home. But I would like to have the chance again to buy a house. As of December 2009, approximately 4.5 million homeowners were at least 90 days delinquent on their mortgage or in foreclosure. The Suarez family had a medical emergency that triggered the dominos leading to their foreclosure. The loss our nation has sustained as a whole from this crisis will only be compounded by a second wave of foreclosures that is predicted to surface in the next two years. While the American Dream flounders, we should keep in mind that we have hardly exhausted our foreclosure prevention options. Decision-makers must revisit solutions, such as mandatory loss mitigation, which have proven to help families hold onto their homes when possible. Has your life been affected by the risk of foreclosure? If so, please share your experience. Contributing to this project will help decision-makers better understand the depth of this continued foreclosure crisis and take better steps to address it. Your personal story could impact their decisions! Click here for the previous installment of Too Little to Save.

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Donna Flagg: Lessons in Love and Work the HP Way

August 12, 2010

Inevitably, it’s a topic that continues to rear its ugly head at what seems to be regular intervals. Over and over we hear about how romantic relationships in the workplace go south and create all kinds of drama for the individuals involved, the public and the companies themselves. Most recently, we had Mark Hurd, the ousted HP CEO suspected of having an affair with a contractor and lying about it. There is some debate over how accurate an accusation this is, but nonetheless his personal involvement with Jodie Fisher has caused a media firestorm and serious PR implications for the company. This case however, is bifurcated. There are two problems here. One is the alleged romance between Mark and Jodie and the other is how he allocated expenses to either fund the relationship or conceal its existence – at least that’s what the report said. On the policy side, the romance issue is simple. There are several things that a company needs to have in place in order to manage these situations effectively. I assume that HP did have something resembling the outline below, although one never knows. Sometimes it’s the most obvious, expected, protective measures that are surprisingly left out of corporate policy. Design and publish a policy about personal, office romance in your workplace. It’s important to craft one that makes sense for the specific organization, its business and employees. Communicate clearly, abundantly and regularly about how the policy will be managed and enforced. Policies are only as important as businesses make them. So to bury them in a handbook somewhere and cross your fingers that you’ll never need them, doesn’t help much after the fact, when you learn that you actually did. Support the policy by building infrastructure around it. However you choose to define dating and relationships in your organization, systems and structures will need to be in place that either ensure these situations are out in the open and easy to talk about, or to ensure that they do not occur. That may require sanctions, rewards or systems to handle different scenarios if they should arise. Enforce the policy and if not, pay the consequences if it backfires. There’s not much more you can do. It’s unclear where HP comes down on romantic relationships policy. And, since a complaint of sexual harassment was levied against the CEO, and sexual harassment laws are regulated federally, it’s hard to know whether he violated company policy or an employment agreement by becoming involved with a contractor in the first place. If he did, and the company had a policy prohibiting it, he could have been fired on the spot and this whole mess could have been avoided. So, it’s become muddled as to whether he was originally in hot water because of a company policy breach or because it escalated into a formal complaint of sexual harassment, which therefore prompted new charges of expense improprieties. So what’s what here? Admittedly, it is a bit of a mess for HP to untangle and the board is not known for its grace in handling executive matters. So we shall see. Meanwhile, the best romantic relationship policy I ever came across was one that allowed employees to date (or do whatever) as long as their personal involvement was disclosed to the organization in some way, shape or form. This meant that there was an explicit expectation on both the people in the relationship and anyone who knew about it to make the involvement known to the company. To support transparency the company created contact channels internally and externally so that employees had someone to go to if they felt unsafe using traditional reporting lines. With that, it was also made crystal clear that non-disclosure on the part of the lovebirds or anyone else “in the know” was grounds for termination. After all, the point was that there was no reason to hide it or lie because in the company’s mind, there was nothing wrong with finding love at work and pursuing a relationship as a result. In fact, it was considered natural due to the amount of time that people spend at work. But this company wasn’t stupid either. It was well aware of the emotional component that comes with romance as well as the dark side of human nature. So in order to protect the business, the company simply reassigned one of the individuals to a different department so as to mitigate any potential negative impact in the event that the romance soured. Oh well, all is fair in love and work.

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Edward D. Kleinbard: Sacred Tax Cows: It’s Them or Us

August 10, 2010

The National Commission on Fiscal Responsibility and Reform is in a pickle. We can expect Republican members of the Commission to push for cuts in government spending but no new taxes, and Democratic members to argue that tax increases are necessary. With a supermajority required to approve any recommendation, what hope is there of success? The best hope for bipartisan consensus lies in targeting the $1.2 trillion a year in hidden government spending embedded in the Tax Code in the form of “tax expenditures.” These programs are styled as tax savings, but really function as replacements for explicit government spending. Some make sense, but a great many are poorly targeted and would never pass Congress if presented as an outright spending proposal. Unfortunately, some of the most popular of these tax breaks – in particular, political “sacred cows” like the home mortgage interest deduction, the charitable contribution deduction and the deduction for state and local taxes – are incredibly expensive and give the country very poor returns relative to their cost. Everyone likes these tax breaks, but in light of the long-term fiscal crisis facing the country, we must choose: we can maintain our herd of hideously expensive tax sacred cows, or we can sacrifice them and set the country on the path to fiscal health. Today the government spends more through tax expenditures than it collects from the personal income tax, and spends twice as much through the Tax Code as it does through explicit discretionary spending programs. Unlike explicit spending, tax expenditures show up in the budget process simply as reduced tax revenues. In reality the tax revenues are there, borne by taxpayers not eligible for the subsidy, and spent on those who do qualify. It’s as if the government actually collected roughly twice as much in personal income taxes as it actually does, but then spent all those extra revenues on programs that today are invisible as a matter of budget presentation or debate. The reason to focus on tax expenditures is that we have little choice. Cutting traditional spending programs cannot by itself address the fiscal gap in the second half of this decade. For 2007, total non-defense discretionary spending (for example, spending on highways, housing, education and national parks) amounted to only 18 percent of federal government outlays. Cutting Social Security benefits or government spending on healthcare could make a much larger impact, especially the further out you take the projections. But in light of citizens’ reliance on existing programs in planning their futures, the aging of America’s population (and with it the increase in demands for these programs), and the long time lag before incremental changes materially affect budget numbers, it is improbable that even remotely feasible changes in Social Security or healthcare policies could by themselves address our deficit problem over the next decade. From the other direction, the fiscal gap also cannot be addressed solely by taxing the rich. To do so would require that the top income tax rate jump from 35 percent to 75 percent or more – levels that haven’t been seen in over 40 years. In light of the increasing income inequality in the United States, there’s a good case to be made for somewhat higher marginal rates on high-income Americans, but there just aren’t enough rich individuals to fill the fiscal gap by themselves. By necessity, then, any plausible plan to set this country on a sustainable budget path will require higher tax revenues, borne by the majority of Americans. This need not be dismissed as irresponsible. The United States currently is a low-tax country. The OECD calculates that the aggregate tax burden in the United States (federal, state and local) in 2007 was the fourth-lowest as a share of gross domestic product among the organization’s 33 members, comprising most of the world’s large economies. By making some judicious adjustments to tax rates and targeting tax expenditures, we can meet President Obama’s goal of reducing budget deficits to 3 percent or less of GDP in the second half of this decade, and we can shrink the overall handprint of government on the economy. (Longer-term balance requires revisiting the major entitlements programs.) Moreover, we can do so without recourse to new taxes, like a Value Added Tax. The process would include two elements: first, revert to the tax rate schedule in effect during the Clinton Administration. That will raise the tax rates imposed on affluent Americans in particular, but only to levels that we know from past experience are consistent with a robust economy. Second, eliminate itemized deductions, except possibly those for extraordinary medical expenses (because they do relate to an individual’s ability to pay tax). The largest itemized deductions, those for home mortgage interest, charitable contributions and state and local taxes, are among the most expensive tax subsidies. These three sacred cows alone are projected to cost at least $240 billion for just the coming fiscal year, and that cost will climb as the economy recovers. Only about one-third of tax filers are eligible to claim itemized deductions. And most economists agree that itemized deductions are poorly designed as incentives, for two reasons. One, the subsidies go up as an individual’s income increases (because tax deductions are more valuable the higher your maximum tax bracket), and two, they frequently reward acts – much charitable giving, for example – that would have occurred even without the subsidy. Economists Rosanne Altshuler and colleagues at the Tax Policy Center recently calculated that the changes proposed here would raise more than enough revenue to address the fiscal gap in the second half of this decade. The proposal also would add to the progressivity of the tax system, because itemizers in most cases are higher-income taxpayers. Moreover, the changes would also cause fewer tax-related adverse effects on the economy than would other income tax revenue-raisers of comparable magnitude, such as significant hikes in marginal tax rates at every level. Of course, it would be inadvisable to go cold turkey on a change as dramatic as the one I propose, because current housing prices and household budgets incorporate the existence of these subsidies. Instead, their elimination should be implemented over a period of several years. That delays the full benefit, but the sooner we begin phasing out much of the synthetic government spending that permeates the Tax Code, the sooner we will reach the goal of sound fiscal policy. Itemized tax deductions and other tax expenditures routinely are labeled “sacred cows,” made politically untouchable by virtue of their great popularity and entrenched political constituencies. But the reality is that, in light of our current unsustainable long-term fiscal path, we really have no choice: it’s them or us. Tax expenditures are a $1.2 trillion per year herd of sacred cows that we can no longer afford to keep. Their culling must begin. Professor of Law, University of Southern California Gould School of Law, and former Chief of Staff of the U.S. Congress’s Joint Committee on Taxation. ekleinbard@law.usc.edu

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Ryan Mack: "Shape-Up" Your Finances

August 10, 2010

On August 7, 2010, the Optimum Institute of Economic Empowerment took to the streets to conduct the most fun program that we have ever done. We conducted the “Shape Up Your Finances” Economic Empowerment tour which consisted of visiting barbershops and beauty salons throughout Brooklyn, NY with the intent of igniting conversations about one of the most infrequently talked about topics that you hear in the barbershop: fiscal responsibility. Sure you might hear about how much money other people are making, such as that famous athlete who signed that multimillion dollar contract. You might hear about how much money that famous celebrity spent on his/her wedding. However, why is there hardly ever a conversation about the importance of building personal wealth and how to go about doing it? This is what this tour addressed but this also leads to a larger issue…why are we so timid to talk about money? The economy crashed in 2007 because of many factors, but one of the largest factors that lead to the demise of U.S. markets and global markets was fiscal irresponsibility on multiple levels. The government was spending money frivolously, corporations were taking excessive uncovered risk (well…not covered by them but certainly covered by the taxpayer), and too many people were spending tomorrow’s money while racking up debt today. Our control over the government and corporations is limited. We can have our voices heard in the voting booth and lobby for change which may or may not work immediately, or ever. However, we certainly have control over our own personal finances and how we manage them. The problem is too few know how, or choose not to listen to conventional wisdom, when it comes to managing money. One of the best ways to fix this problem is to incorporate this into a regular topic of conversation for the sake of providing more exposure to this problem. What would have happened if that person who planned to purchase a home who had a 550 FICO score, no money in the bank, and an income that is inconsistent at best had overheard a conversation about the most responsible way to purchase a home? What would have happened if that 35-year-old man who was living at home with his mother, between jobs, and still wanted to figure out a way to lease a new Range Rover because it was cool, overheard a conversation about the dangers of consumption and how to start a new business? What would have happened if that mother who lived in public housing with a room full of furniture from Rent-A-Center overheard a conversation about financial predators and how much money we waste on interest that we could have saved? What would have happened to these people…better yet, what would have happened to our country? We yell and scream at the television screen for change but turn right around and throw our change in the garbage. More than in the barbershop, we need to talk about our personal finances around the dinner table. We need to talk about our personal finances with our friends and family members. If you are going to a great personal finance workshop, have a financial planner who really takes the time to teach you about money, or finish reading a great book by an author like Suze Orman, tell somebody about it! Blast the information on Facebook, send it to your group on Linkedin, call a friend and let them know what you have learned. It is no longer acceptable for any of us to have this mindset that we are going to grow by ourselves. Sharing information is paramount if we are going to start a movement of social change as it relates to our finances. On the other side, if you hear someone talking about money, pay attention. What are they saying? Are they correct? Take the information and go home and read a few books to see if what they are saying is correct. It is great to take information from people, but your knowledge base should be the best defense against being led astray. You don’t have to be a financial expert, but you should know at least the basics about money before you see a financial advisory, mortgage broker, accountant, or any other advisor who can have an impact on your finances. If I know that by stealing a car I will go to prison if I get caught, that doesn’t make me as smart as an attorney…that only means that I have enough knowledge of law to keep myself out of trouble. The same principle applies to your personal finances. The Optimum Institute of Economic Empowerment is a nonprofit that is trying its best to participate in a grass roots effort to change the way we think, feel, and act with our money! To see a video clip of the “Shape Up Your Finances” Empowerment Tour click here… http://www.youtube.com/watch?v=u7ceJh3fRCI

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Elisabeth Rhyne: Microfinance: Keeping the Mission When Non-Profits Become For-Profits

August 9, 2010

Most people with a lively interest in microfinance know that the majority of microloans dispensed throughout the world today come from for-profit microfinance institutions, rather than donation-dependent non-governmental organizations (NGOs). What may be less recognized is how these for-profit MFIs were born. Many of the world’s largest and most successful microfinance organizations — including India’s SKS Microfinance, which just raised some $358 million in a closely-watched IPO — started life as nonprofit NGOs. Riding on early success in attracting clients, they decided to undergo dramatic transformations: they found investors, obtained regulatory approval, and spun off licensed, for-profit financial institutions, leaving the original NGO behind. This process has now happened dozens of times around the world. The pioneer transformer, BancoSol of Bolivia in 1992, demonstrated that the path from non-profit to for-profit is fraught with difficulties. It often takes years to complete, especially when it involves getting regulators to grant a financial institution license. A leader like Vikram Akula, SKS’s founder, needs a compelling reason to take his organization through that ordeal. For Akula, as for many others, that compelling reason was capital for growth. As Akula told Forbes India in September 2009, the transformation was all about SKS’s mission to reach millions of families who lack access to financial services: Grameen Bank reaches 7 million clients and that’s amazing. On the other hand, it took Professor Yunus [Grameen Bank's founder] 35 years to do that… Can you imagine how many generations it will take to reach 150 million poor households in India if we took that approach? We have to scale more rapidly, and only commercial capital will meet our huge funding requirements. And indeed, funded by three rounds of venture capital prior to its IPO, SKS grew from a modest nonprofit with 2000 borrowers in 2001 to a “Starbucks of microfinance” with 4.7 million borrowers in 2009. With the IPO, it is poised to continue growing. The mission-critical reasons for transformation have to be very compelling because when money is at stake, personal interests tend to complicate the process. The hard challenge is to align the personal interests of the founders, investors and other stakeholders with the long run mission to assist low income clients. The SKS IPO, for example, has generated controversy in part because trustees of two charitable microfinance organizations that financed SKS at the outset disagree over how to spend the tens of millions of dollars those groups earned in the IPO. Another nonprofit supporter, Seattle-based Unitus, last month abruptly laid off its staff and announced it would refocus its efforts in fields other than microfinance — a move that has raised a lot of eyebrows . And Mr. Akula, with a significant personal stake in SKS, is also a target, as observers examine whether his decisions place the mission in front of his own interests. For-profit with a purpose: ingredients of successful transformations The challenge is to transform while keeping the organization committed to its social mission. In practice, this entails balancing the interests, egos, abilities, goals, and responsibilities of the various stakeholders to create an organization that delivers high quality services and remains focused on its target clientele. At the Center for Financial Inclusion at ACCION, our ” Aligning Interests ” study examines several successful and not-so-successful MFI transformations in detail and sketches out practices that improve the chances for continuity of mission. One good practice is to keep the original team of sponsoring organizations in place. Often, the founding NGO retains a large ownership stake and seats on the board. So do multilateral organizations or development banks that have invested capital and expertise in the past. It is also critical to create a strong and mission-focused management team, blending original NGO management with new managers who supplement the existing skill set. It helps to talk openly about stakeholders’ diverse personal interests, including those of NGO managers, board directors, and staff. Managers may be motivated by many factors, from financial security, to prestige, to commitment to poverty alleviation. As perhaps different from purely private mergers and acquisitions, the participants in a microfinance transformation generally recognize that financial rewards are not the only relevant factor. In fact, the non-profit origins of these organizations make financial rewards for managers a particularly ticklish subject. In a number of cases, employees’ personal interests are addressed through opportunities for equity participation based on future performance (with care taken not to draw upon the original non-profit corpus). The case for an NGO “Prenup” Today, almost 20 years since BancoSol made the industry’s first successful transformation, any start-up NGO should consider whether transformation might be a part of its future. If so, its founding agreements should anticipate the possibility as much as possible — the NGO equivalent of a prenuptial agreement. Provisions such as the granting of sweat equity, which may be ethically questionable if granted in retrospect, become more acceptable precisely because all parties to the institution explicitly agreed to them from the start. These issues may be easier to agree on at the beginning, when the NGO’s business has not yet developed a large commercial value. Re-imagining the for-profit company Many people committed to social justice may have a built-in assumption that nonprofits are inherently more virtuous than for-profit companies. Most people also recognize, however, that for-profit businesses have been the primary engines of wealth creation in the modern world. It is for that reason that many social entrepreneurs are now seeking to create double bottom-line entities that maintain a dual focus on profits and a social mission. The microfinance industry has been at the forefront of such experimentation. While some missteps are inevitable, we are learning as we go. Each new case, SKS Microfinance included, provides valuable lessons and helps complete an increasingly useful transformation toolkit.

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Target’s Promised ‘Review Process’ For Political Donations Has A Lot Of Anti-Gay Ground To Cover [UPDATE]

August 5, 2010

As you may have heard, mega-retailer Target has come under fire recently for contributing to a political action committee called MN Forward, which supports the gubernatorial ambitions of Tom Emmer, a candidate whose hostility toward the LGBT community begins with opposition to same-sex marriage and runs through to wholesale denial of equal rights and alliances with organizations whose takes on the gay community neatly align with those Ugandan madmen . It took a long while for the Human Rights Campaign — which had previously bequeathed to Target a pristine 100-percent rating on its Corporate Equality Index — to get off the mat and take up this matter with the retailer. They’ve since applied pressure to both Target and Best Buy . For their trouble, they’ve earned an apology from Target CEO Greg Steinhafel , along with a nebulous promise that Target will institute a “review process for future political donations.” Abe Sauer, who has put a bullseye of his own on this story, returns to The Awl today with as rich an exploration of both new and old angles to this story as you’re likely to find anywhere. From Sauer’s report, it seems like any “review process” Target institutes for the benefit of maintaining a good relationship with the LGBT community has got a long period of reflecting on past actions to look forward to: The truth is not that Target and its leadership have suddenly turned on their commitment to gay rights. It’s more that it never really existed to begin with. Further research shows that Target has funneled significant funding to the most socially conservative of Republicans and that it boasts a frightening culture of anti-gay candidate support from Target’s own stable of top executives. We have already noted that CEO Gregg Steinhafel and his wife both maxed out their personal contributions this year to Michele Bachmann and Tom Emmer. But Steinhafel is just the captain of the crew. Target’s current group of top corporate officers have supported a murderers row of anti-gay politicians. Even more confusing, some of those anti-gay candidates supported by Target’s PAC and its executives don’t even represent Minnesota. That’s just a taste, please make with the click to get the full story. Here’s an addition worth noting, however: Al Franken, who is a very staunch supporter of complete gay equality, received zero dollars from Target executives or the Target PAC. Coleman, meanwhile, supported a constitutional amendment against gay equality. How on earth did they maintain a perfect rating from the HRC? UPDATE: While Target is reviewing their process for political donations, maybe they’d like to explain this? From Open Secrets : Looks like Target was playing both sides of the fence in California’s Proposition 8 battle, except they favored the anti-marriage equality side by a wide margin. And to dovetail back to the HRC Corporate Equality Index, here’s what HRC spokesman Michael Cole told Abe Sauer on July 29 : Cole told us, “It’s important to understand that the CEI is a measure of the workplace practices of a company toward its own LGBT employees. We don’t believe that rating companies based upon their political contributions is an accurate reflection of their commitment to LGBT equality in the workplace.” Further, Cole says, “Unless the contribution is to a ballot initiative that is anti-LGBT (such as California’s Prop. 8 in 2008), political contributions are not factored into a company’s score….” So it looks like the HRC needs to embark on an internal review of their own, as well. RELATED: Real America: Target Doesn’t Support Gay Equality Because It Never Did [The Awl] [Would you like to follow me on Twitter ? Because why not? Also, please send tips to tv@huffingtonpost.com -- learn more about our media monitoring project here .]

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Tiger Oil Company Memos: Letters From Possibly The Worst Boss Ever

August 5, 2010

Sick of your boss? The next time you’re ready to quit, compare yourself to Edward Mike Davis, the CEO of the failed Houston oil firm Tiger Oil. (Hat tip to Boing Boing .) Gathered by Letters of Note , the memos, all of which were apparently written in the 1970s are masterstrokes in the art of tyrannical leadership. The highlights include: commands to avoid speaking to Edward Mike Davis, to avoid idle conversation and personal calls — and, case you’re wondering, Edward Mike Davis does “not appreciate people coming into my office and helping themselves to my candy, cigars, medicine, and other personal items.” The Houston Press dug up the letters a few years ago, and E&P ran a series of posts in which it heard from a handful of readers who had encountered “Tiger Mike .” Real or not, check out some of the most disturbing of the memos — and check out the full collection at Letters of Note. MEMORANDUM DATE: December 9, 1977 TO: Payroll FROM: Edward Mike Davis SUBJECT: Sick Pay Effective now, employees will be docked for the time they are off sick, unless I authorize you to pay them. This is for Tiger Oil – Houston Office – employees. (Signed) EDWARD MIKE DAVIS And here’s another gem in which Edward Mike Davis instructs his employees to avoid talking to him: MEMORANDUM DATE: January 13, 1978 TO: Landmen, Geologists, Geophysicists, Engineers, or To Whom It May Concern FROM: Edward Mike Davis This memorandum is an addendum and in addition to the “Memorandum To All Monthly Salaried Personnel” dated January 12, 1978. This is for Steve Chamberlain, Bill Durr, Wayne Rogers, on down. When you are on the road or out doing my business, that is exactly what I expect you to do 100%. I do not want any fabricated expense accounts, drinking or carousing around on my money. Telephone calls for business purposes only will be accepted — not personal. This will apply to all geologists, geophysicists, and whoever the hell it may concern who works for me. If you don’t like it, you can do the same thing the ones in the first memo got told — pick up your check! If it doesn’t apply to you, and you have not violated this, you don’t have to worry. If you have violated this, correct it by not doing it any more. All I want to do is run a good orderly ship — or rather than that, run it like the Army. If I don’t pay you enough money to do these things you want to do personally, then I suggest you ask for a raise or quit and get another job. Don’t take advantage of me, because I am going to be looking down your throat. You need the job — I don’t! Do not speak to me when you see me. If I want to to speak to you, I will do so. I want to save my throat. I don’t want to ruin it by saying hello to all of you sons-of-bitches., (Signed) EDWARD MIKE DAVIS

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Donna Flagg: The Ins and Outs of Writing Employee Handbooks

August 4, 2010

It can be a daunting task to know what should be included in an employee handbook or company manual. There are so many things that need to be said that often aren’t and also, many things that don’t need to be said that often are. So how do you know what information, and how much of it, should make the cut? Well there are a couple of things to consider. The first of which is that there is a legal component that dictates certain policies must be in place. But these can vary by state and apply (or not). Other laws are federal and apply to everyone, but vary based on the size of the company. The Family Medical Leave Act (FMLA) is a good example of this. And still others apply by industry, such as certain safety standard laws. So before putting anything down “in stone,” check the requirements that apply to your business type and company size, in your state. Then after you get the legal technicalities out of the way, there should be elements included that apply specifically to your company. These are the organizational components that help define, and then shape the behaviors within your business. Third, there are informational components — like benefits — that don’t fall (necessarily) into either of the above categories, but that employees need to be aware of nonetheless. And finally, on a less tangible note, it is important to try to write policies in a tone that reflects your brand. I can’t tell you how many times I’ve seen wonderfully forward, friendly, flexible companies hand over a manual that not only didn’t represent the heart of the company — at all — but also, that was outright offensive and off-putting to their employees. When that happens, it’s usually because lawyers have written it, and writers haven’t. The end result is often a combative and adversarial document that reads like a contract and starts the entire employment relationship off with an “us against them,” attitude before it even has a chance to get started. My advice is to get the laws down correctly and then have someone who both understands the company and who does not write in legalese prepare the manual in the “right” voice. So below, I’ve outlined a basic template of headings that can help you start thinking about the best policies, practices and procedures for your organization. It is by no means an exhaustive list, but rather a high-level guide to serve as a compass. Keep in mind that the order in which you place them is up to you and should be arranged to flow in a way that makes sense for your company. Set up: This is just some basic introductory information to set the mood and welcome employees into your company. * Introduction to the Handbook * Introduction to the Company * Corporate Values, Mission, Vision… Legal: These are some of the things that are predetermined for you by law and that typically require companies to communicate the corresponding policies to employees in writing: * Employment “At Will” * Equal Employment Opportunity * Anti-Discrimination * Harassment * Sexual Harassment * FMLA * Safety * Privacy * Drug and Alcohol Testing * COBRA Organizational: These define some of the things that the company expects from employees and what the employees can expect from the company. * Introductory Period (Many call this a “Probation Period”) * Attendance and Punctuality * Professional Conduct * Dress Code * Email, Internet and Voicemail Usage Policy * Smoking Policy * Expenses * Travel * Computer Software * Personal Property * Workplace Monitoring * Confidentiality of Corporate Information * Conflict of Interest * Employee Development and Evaluation * Termination of Employment Informational: I call this the “boring but important” category. * Employee Benefits * Salary Administration * Paydays * Holidays * Deductions * Meals and Breaks * Overtime * Vacation * Personal/Sick Days * Bereavement * Leave Time * Jury Duty * Voting Wrap up: This section just closes it out with an opportunity to make a statement about the enforcement of the policies set forth within the manual and a place for signatures. * Maintaining the Integrity of the Policies * Acknowledgment of Receipt Again, the key to a successful handbook/manual is to create one that fits who you are as a company. We have written versions as small as 25 pages and gone up to over 1000, and have also seen cases that involve volumes that span thousands of pages. It really depends on your needs as a company. The point being that all needs are not the same.

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Alexa von Tobel: Avoiding Financial Potholes

August 4, 2010

A lot of the financial advice out there focuses on the little things, like the money you’ll save by cutting out your daily caffeine fix. Of course, there are times when the little things do matter–those coffees add up when you are trying to stick to a tight budget . But when it comes down to it, making smart financial decisions is not really about the coffee. It’s about making sure that you get the BIG financial decisions in your life right. By the “big things,” I mean the financial milestones that we all encounter, from getting a mortgage to having a baby . I also mean anything that has the potential to really wreck your personal finances–life is full of financial pot holes and there are steps you can take to avoid them. At LearnVest , we often have users come to us who have made wrong turns along the way and are looking to get back on track financially. The best advice that I can offer is that being proactive and a careful planner is key. Think about the major things that could shake up your financial life, and I’ll bet there are some great ways to protect yourself. I’ve defined four of life’s big financial milestones and what you can do to get those right: 1. If you’re renting a home , get renter’s insurance . What if your place is robbed and your most valuable possessions disappear? What if you accidentally start a fire? What if your apartment is infested with bugs? Could you afford another place to stay while an exterminator comes in? What about while they rebuild your home? Investing in renter’s insurance is hugely worthwhile. It protects you from a whole load of financial pitfalls around your home. Your home should be the center of your sense of security–not the cause of you losing financial security. 2. If you’re getting married , there are some crucial conversations you need to have with your significant other. What if you open up a joint credit card with your spouse, and he or she proceeds to rack up thousands of dollars of debt on it? That ultimately affects your credit history. You need to be open about your numbers (credit score, income, etc.) and make sure you’re on the same page for your shared future. We’re all starting to talk more openly about money and that starts at home. 3. What if you suddenly lose your job ? You should save a good chunk of your income ( LearnVest recommends at least 10 percent yearly) and part of that should go towards an emergency fund. A great emergency fund has six to nine months of your living expenses, so you can hang in there until you find a new job. Losing your job is terrifying, but being prepared makes it so much easier. 4. If you’re thinking about having a baby , make sure you have a sound savings plan in place. At LearnVest, we recently wrote a piece about how to plan ahead financially for having a baby. Personal finance is of course extremely personal. Everyone is different (and numbers vary!), so the best way to use financial resources is to consult them for inspiration to help you think critically about your money. It’s always important to remember that these sources provide general guidelines, rather than steadfast rules. Everyone’s lifestyle and goals are different, so it’s best to use general recommendations as a baseline but to evaluate them within the context of your own personal situation. The most important thing is that you consider the financial impact of a particular milestone and carefully plan how you will cover those expenses, by saving, reallocating your budget, or cutting costs in other aspects of your life. For example, while LearnVest ideally wants everyone to max out their IRA contributions each year, if that is truly out of reach for you right now, then figure out how much you can afford to contribute to your IRA each month and commit to that amount. If you take the time to plan for your financial future, then you’ll find it easy to make smart, educated decisions about the big things in your financial life. So go ahead, enjoy that latte.

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Jim Randel: Necessity is the Mother of Invention

August 4, 2010

As I do research for my new book, The Skinny on Creativity , I reach certain conclusions. One conclusion is that people will be as creative as they need to be. In other words, when pressed, people can be very creative. By way of testing my various hypotheses, I make a list of famous creative people – in this case the 10 most creative women I can think of: Mary Kay Ash – started Mary Kay Cosmetics (direct sales business) Jane Fonda – kicked off the personal workout craze Madonna – no explanation needed Ayn Rand – author of Atlas Shrugged Anita Roddick – creator of The Body Shop (natural cosmetics) J.K. Rowling – invented Harry Potter Martha Stewart – no explanation necessary Lillian Vernon – started the mail-order catalogue business Dr. Ruth Westheimer – sex education and entertainment Oprah Winfrey – no explanation needed And then I do research on each woman, trying to figure out what might have triggered her amazing creativity. Here is what I learned about each: Mary Kay Ash – single mother raising 3 children Jane Fonda – mother committed suicide when Jane was 12 Madonna – mother died when Madonna was 5 Ayn Rand – fled Russian oppression Anita Roddick – born in a born in a bomb shelter during WWII J.K. Rowling – single mom living on welfare Martha Stewart – raised in Nutley, New Jersey Lillian Vernon – fled Germany just before WWII Dr. Ruth Westheimer – parents killed in the Holocaust Oprah Winfrey – raped as a teenager, gave birth to stillborn In other words, each of these famous women had to deal with some serious adversity. And each rose to the occasion – finding an inner strength to elevate her life with creative thinking and expression. The lesson for all of us? Creativity is not handed out to some and not others. We all have the ability to think creatively. But, you may need to challenge yourself to find out just how creative you can be. Jim Randel is the Founder of The Skinny On™ book series. See www.theskinnyon.com .

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Richard (RJ) Eskow: Come on Down — It’s Time to Play "Social Security Survivor"!

August 3, 2010

A broad coalition of groups has been formed to defend Social Security, and the videos announcing it are all worth watching. Of all the ideas proposed, my personal favorite comes from AFSCME President Gerald W. McEntee: A new reality show starring the people who want to cut Social Security. He suggests having John Boehner, billionaire benefit-cut advocate Peter G. Peterson, and Deficit Commission chairs Alan Simpson and Erskine Bowles live for a year on the average Social Security benefit of $14,000. “They won’t get a COLA (cost of living increase,” says McEntee, “but they’ll still have to deduct $100 a month for Medicare Part B and still have to pay $200 a month for Medigap insurance.” (The video of his comments is below.) Great idea, Mr. McEntee! Mr. Peterson should be more than happy to take you up on your offer. He likes games, having funded one called “Deficitball.”(1) Alan Simpson seems like a playful sort of fellow, too. It sounds a lot like I’m a Celebrity, Get Me Out of Here! , where the famous and well-to-do are dropped in a jungle and forced to do icky things like eat bugs and snakes. But in this case the jungles will be our own cities and towns and contestants are more likely to eat Purina than piranha. But why limit ourselves to only four contestants? Why not invite those Senators who have pushed for these sorts of cuts, too, like the senior Senator from California ? Dianne Feinstein, come on down! And let’s not exclude economists like Alice Rivlin, a member of the Simpson/Bowles Commission who wants to cut benefits for all the wrong reasons. Let’s meet our newest contestant! Dr. Rivlin thinks it’s “absurdly unlikely” that “widows living on the edge of subsistence” will have their benefits cut – but then, she doesn’t tell us where she thinks that edge lies. That’s a shame because, as women, our last two contestants will be asked to survive on less than the men. The average Social Security benefit for older women is $11,900, so that’s what our female contestants will receive. Unfair? you say. Outrageous? Sure it is, but this is a “reality show” and that’s the reality. “When do you think they’ll stop calling for benefit cuts?” asks McAfee. “Probably in the first episode.” He’s probably right. Chances are that our contestants live in pleasant communities, surrounded by the nearness of family and friends. That’ll be the first thing to change. There may be tearful farewells to children and grandchildren and lifelong friends, as our contestants move to urban slums or the distant and fading outposts of the American dream. Our next dose of reality: Our male contestants will be living on $1,166 each month, and the women will have $991. After those premiums are subtracted they’ll have $866 or $691 for all their monthly needs. (And let’s hope they don’t have out-of-pocket medical expenses.) Rent? Food? Transportation? These amounts will have to cover everything. Our contestants may not know what it’s like to live like this, but here’s their first lesson: Monthly budgets are too long-term when you’re subsisting at this level. If they’re lucky enough to pay no more than $500 per month for rent and utilities, our male contestants will now have $85 per week for all other expenses and the women will have $44.27. Is our reality show “real” enough for you yet, contestants? Are we “living on the edge of subsistence” yet? Eating bugs and snakes for a few weeks is probably starting to look pretty good by comparison. What would we call this reality show? Survivor ? The name’s been taken. The Real World ? Taken. Extreme Makeover ? That one’s taken too. American Chopper ? Not quite right, although would be a good name for what the Deficit Commission is trying to do right now with our benefits. Here’s the reality: Generations of Americans benefited from a three-legged system that ensured their financial security in old age. The first was the pension system, which has been gutted by employers. The second was savings and personal assets, which for most households have been decimated in the last several years. And now the only remaining leg, Social Security, is under attack. “It’s not a benefit cut,” proponents claim. “We just want to raise the retirement age.” But many people who live in the reality show we call “life” can’t work until we’re seventy. Their jobs are physically demanding, or there aren’t any jobs to be had. Raising the retirement age means less money for them. (Of course, it also means less money over a lifetime for those who retire at seventy, too.) Social Security’s the most conservatively managed, financially stable public program we have. It has survived multiple economic downturns. Its greatest threat right now comes from our would-be contestants. Some deficit cutters will promise that lower-income people will not see benefit cuts. But any cuts will break the covenant under which workers have paid payroll taxes for a lifetime. And the question remains: Where will you cut? If you say you won’t do it for people living on $44 per week, what about those whose total income adds up to $65 a week? $75? $100? What will satisfy you? And what assurances will we have that you won’t break your promise again someday? When it comes to tampering with Social Security, millions of Americans are already living the reality we just described. The next one to “play” it may be the teacher who taught you to read, or the nurse that brought you back to health … or your mother and father … or you. Hey, look! The show’s about to begin. Some of the faces look awfully familiar .. . Hey, America! It’s time to meet our newest contestants! ____________________________________ (1) I thought “Budgetball” sounded like a cross between The Fountainhead and Death Race 2000 , but if Peterson plays this game I promise to reconsider. (click here to send a message to every Washington politician on the campaign trail: Hands off Social Security!) (The reality show remarks occur at 2:30.) ____________________________________ Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America’s Future. This post was produced as part of the Strengthen Social Security campaign. Richard also blogs at A Night Light . He can be reached at “rjeskow@ourfuture.org.” Website: Eskow and Associates

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Bill Singer: The $600 Million Teddy Bear Case

August 2, 2010

Way back in February 2009, BrokeAndBroker.com detailed the story about the The $600 Million Teddy Bear: WG Trading. On February 25, 2009, the Securities and Exchange Commission issued a 22-page Complaint : Securities and Exchange Commission v. WG Trading Investors, L.P., WG Trading Company, Limited Partnership, Westridge Capital Management, Inc., Paul Greenwood And Stephen Walsh, (Defendants) And Robin Greenwood And Janet Walsh (Relief Defendants) (SDNY, 09-CV-1750). The SEC characterized the matter as an “emergency enforcement action to halt ongoing securities fraud involving the misappropriation of hundreds of millions of dollars of investor assets.” In reality, the WG Trading case represents yet another long-term fraud (described in the Complaint as dating back to 1996) that went undetected by our nation’s many regulators and prosecutors for far too long with disastrous consequences. Exposure and Enhanced Management The Defendants are charged with soliciting institutional investors, including educational institutions and public pension/retirement plans, by promising to invest in a so-called “enhanced equity index strategy.” Starting at Paragraph 21, the Complaint details the supposed intricacies of this scam. First off, you got “exposure.” Oh, how I love that term of art! Invest with us and we will give you “exposure” to the market. The minute you start hearing such gobbledygook, head for the hills! Nonetheless, like most porn movies, the strategy here involved a lot of exposure to a stock index. The Defendants explained that they would be making purchases of ” long positions in equity index futures that provided exposure to the entire index.” Now that’s a very difficult market strategy. Hmmm . . . if I buy an S&P 500 index future I get exposure to the entire index. My, what a complicated concept. Sort of like, if I buy one share of Apple stock I get some kind of exposure to… what…no…wait a minute…don’t tell me….I’m getting it…it’s exposure to an entire one-share of interest in the Apple company. Right? If you feel that you understand the arcane exposure strategy, then read on. We are now going to discuss the second prong of Defendants’ sophisticated investment plan: the “enhanced cash management.” This is a very complex spin on the prior exposure thingy. Here, instead of buying the futures index, the Defendants would sell the index short and buy the underlying index equities. You got that? You sell short the index but also buy the underlying stocks. You do that to lock in a rate of interest. Of course, as part of this super sophisticated exposure and enhanced management technique, the Defendants often took the extreme measure of doing the exact opposite of the complicated sell/buy program. Yes…indeed….they engineered the buy of the index and a sell of the underlying stocks. That’s the famed double reverse flip with a half gainer into the index pool. Getting Stiffed by a Steiff According to the SEC’s Complaint, those Defendants “used client money invested in WGTI as their personal piggy-bank to furnish lavish and luxurious lifestyle which include the purchase of multi-million dollar homes, a horse farm, cars, horses, and rare collectibles such as Steiff teddy bears.” See Paragraph 2 of the Complaint. And we’re not talking chicken feed here. No, this is $667 million in investor funds, of which Greenwood and Walsh are accused of misappropriating $554 million–okay, well, sure, the SEC does allow that some of that money went to Greenwood’s spouse (R. Greenwood) and to Walsh’s ex-spouse (J. Walsh). You also have to give these guys some credit for bravado. As recently as February 5, 2009 — in the midst of the Madoff case and the growing rumors about Stanford, and, well, add all those other lurid names as you see fit — the Defendants raised another $21 million from the University of Pittsburgh, an existing client. On February 5, 2009, the National Futures Association (NFA) started an audit of Defendants and those good auditors were likely astonished to discover that the balance sheet showed only $95 million had been invested in the stock arbitrage strategy. Some $573 million was largely in notes payable to WGTI from Greenwood and Walsh–notes dating back to 1996! Apparently not getting the answers and assurance the NFA regulators sought, the organization suspended Greenwood’s and Walsh’s NFA membership. What had NFA uncovered? Nothing more complicated than an apparent effort by Greenwood and Walsh to take investors money from the business, use it for their own personal desires, and to cover the withdrawals through the issuance of personal promissory notes. That was the third prong of their strategy. First prong was the exposure. Second prong was the enhanced cash management. Third prong was take the suckers for all their worth and we’ll issue promissory notes back to the firm. If the allegations are proven true, it’s no small wonder that the SEC beat a hasty retreat to the courthouse and sought an immediate temporary restraining order and asset freezes. Then there is also the sensible demand for disgorgement of the ill-gotten gains and for civil money penalties. Now it’s not like WG Trading Company (WGTC) was some fly-by-night pennystock promoter. Certainly not — if that were the case, I’m sure our regulatory community would have been all over such a little fraudster. No, in this case, WGTC is a New York Stock Exchange (NYSE) member firm. That always meant that you were just a cut above the riff raff. How times have changed. Time for Some Answers? Here are some tough questions that I think the public needs to demand are answered: How many times did the NFA, NYSE, NASD, FINRA, CFTC, and SEC examine the Defendants since 1996, and what were the findings? Why are we only now learning about this (and other) multi-year frauds (many of a decade or more duration)–why did the regulators fail to detect the misconduct earlier? Why did the promissory note scenario escape regulatory scrutiny for over a decade? Who was personally in charge of NFA, NYSE, NASD, FINRA, CFTC, and SEC’s regulatory program as it related to the Defendants and what explanations do those individuals offer for the apparent failures to detect the serious fraud? The 2010 Recap As things presently stand, in August 2010, from at least 1996 through February 2009, Greenwood and others ran a fraudulent commodities trading and investment advisory scheme using an entity they controlled called WG Trading Investors. Through a marketer, Greenwood and others solicited $7.6 billion in investor funds on the understanding that they would invest the funds in a program called “equity index arbitrage,” which they represented was a conservative trading strategy that had outperformed the results of the S&P 500 Index for more than 10 years. Contrary to their representations to their investors, Greenwood and others misappropriated at least $331 million in investor funds, and, among other things, used the funds to construct Greenwood’s home, purchase expensive collectible items, and operate a horse farm. Greenwood and others also diverted investor funds to satisfy obligations on investments that were unrelated to the “equity index arbitrage” trading business. Greenwood and others executed promissory notes in favor of WG Investors to, among other things, conceal trading losses and their misappropriation of investor funds. These promissory notes totaled approximately $554 million, of which approximately $293 million was Greenwood’s. Greenwood and others also created and caused others to create false account statements that were sent to clients to reflect fictitious returns consistent with the returns that had been promised to those clients. Guilty Pleas Duffy On July 21, 2009, Deborah Duffy, the former Chief Compliance Officer of WG Trading Company, pled guilty to conspiracy, securities fraud, and money laundering, for her role in the fraud scheme. See the SEC Complaint and the SEC Order Instituting Administrative Proceedings/Settlement . Greenwood On July 28, 2010, sixty-three-year-old Paul Greenwood pled guilty before United States District Judge Miriam Goldman Cedarbaum to a six-count Indictment charging him with conspiracy, securities fraud, commodities fraud, wire fraud, and money laundering for running a fraudulent commodities trading and investment advisory scheme while a principal of WG Trading Company and WG Trading Investors. See the Department of Justice Press Release . Greenwood pled guilty to six charges, which carry the following maximum penalties: Conspiracy. 5 years in prison; fine of $250,000, or twice the gross gain or loss from the crime Securities Fraud. 20 years in prison; fine of 5 million, or twice the gross gain or loss from the crime Commodities Fraud. 10 years in prison; fine of 1 million, or twice the gross gain or loss from the crime Two Counts of Wire Fraud. 20 years in prison; fine of 250,000, or twice the gross gain or loss from the crime Money Laundering. 10 years in prison; fine of 250,000, or twice the gross gain or loss from the crime, or twice the amount of criminally derived property involved in the transaction Pursuant to a plea agreement, Greenwood agreed to forfeit at least $331 million, which represents the amount of funds that were misappropriated and diverted to make an investment in Signal Apparel Company, Inc., which was not disclosed to investors. Last Man Standing Stephen Walsh, another principal of WG Trading Company and WG Trading Investors, is charged with conspiracy, securities fraud, commodities fraud, wire fraud, and money laundering for his role in orchestrating and perpetrating the fraud scheme. Walsh allegedly used investor funds for himself and to make large cash payments to his ex-wife and, like Greenwood, executed $261 million worth of promissory notes in favor of WG Investors to conceal trading losses and the misappropriation of investor funds. The charges against Walsh remain pending, and he is presumed innocent unless and until proven guilty.

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Anti-Government Sentiment Stifling Push For New Regulations

August 2, 2010

WASHINGTON — Public distrust of government is limiting the push for tighter federal regulations even in the wake of regulatory lapses that contributed to the financial meltdown, the oil spill in the Gulf of Mexico and April’s deadly coal mine explosion. These disasters would seem likely candidates for nudging the public’s appetite for regulation, which typically ebbs and flows, toward the pro-oversight side. But notwithstanding a financial overhaul bill that squeaked through Congress, Republicans still rail against government regulation as if the home-loan catastrophe and BP oil spill never happened. Democrats, meanwhile, often tiptoe around the subject, fearful of being labeled anti-free enterprise. The reason, Democrats and government analysts say, is that the public’s desire for better regulations to protect consumers is trumped by a stronger dislike of the only power that can reasonably conduct such efforts: the government. “People’s trust in government is appallingly low,” said Matt Bennett of Third Way, a Democratic-leaning group that researches numerous issues. At best, Americans seem conflicted about government regulation. In a new Bloomberg poll, a plurality of respondents said they have become more supportive of tougher regulations in recent months. Still, barely more than a third said there should be more government oversight in general, while the rest wanted less regulation or about the current amount. Moreover, most major regulations must come from Congress, which gets an unfavorable rating from nearly three out of every four Americans, according to a recent Associated Press-GfK poll. Consumer advocates say these attitudes help explain why there wasn’t louder support for new regulations to prevent a repeat of, say, the subprime mortgage collapse. It helped trigger a near-depression in 2008 and 2009 that trimmed $17 trillion from Americans’ net worth. Tougher government oversight at numerous points might have averted much of the damage: Preventing home loans from going to people with virtually no chance of repaying them; barring lenders from immediately selling loans so they would profit even if the borrower quickly defaulted; and vetting the packaging of subprime loans into complex products sold to thousands of investors who lost billions of dollars. Despite such gaps in consumer safeguards, the Obama administration plays down the regulatory aspects of the new financial oversight law. “The basic strategy in this reform bill does not rest on the wisdom of regulators,” says Treasury Secretary Tim Geithner. “It’ll help consumers make better choices with better disclosure,” he said, and enable the government “to put in place strong constraints on risk-taking on all the nation’s largest institutions.” The new law also creates a Consumer Financial Protection Bureau and a Financial Stability Oversight Council. In his 1,500-word speech when he signed the measure into law, President Barack Obama made only one direct reference to government regulation. “For these new rules to be effective,” he said, “regulators will have to be vigilant.” Meanwhile, Republican candidates, lawmakers and their allies continue to bash government regulations in general, as they have for years. Anti-regulation feelings run especially high among tea party activists. In Nevada, GOP Senate nominee Sharron Angle says businesses are clinging to their cash because “they can’t see through the fog of taxation and regulation at the government level.” Kentucky’s Republican Senate nominee, Rand Paul, stumbled early when he suggested the 1964 Civil Rights Act – which forced restaurants and other businesses to admit black customers – was an overreach of regulatory powers. The U.S. Chamber of Commerce said the White House has “vilified industries while embarking on an ill-advised course of government expansion, major tax increases, massive deficits and job-destroying regulations.” Robert Weissman, president of Public Citizen, said he found it “quite remarkable that the Chamber feels it’s time to start a new anti-regulation campaign,” because the Wall Street meltdown, Gulf oil spill, Toyota car recall and April 5 coal mine explosion, which killed 29 men in West Virginia, were “all directly tied to inadequate regulation.” With Democrats soft-pedaling their embrace of tougher regulations, the public remains divided and pessimistic. Nearly four in five of those polled by Bloomberg said they have just a little or no confidence that the new finance law will prevent or significantly soften a future crisis, or make their personal assets more secure.

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Charles Kolb: The Building Blocks of Corporate Statesmanship

July 23, 2010

Jørgen Vig Knudstorp is not a household name in America. And those few who may know him probably can’t pronounce his name. Or remember how to spell it. But there are millions of American children and parents who know the company he runs and use his products every day. Mr. Vig Knudstorp is the CEO of the Danish-based children’s company we know as LEGO. As an educational “toy,” the value of the LEGO building blocks has been phenomenal. What the company, now more than 80-years-old, calls the LEGO system of play — “learning through LEGO” — considers young children as role models for our future and as creative problem-solvers. Their CEO is quite sincere when he says that what the company really cares about is inspiring the young people who will build our tomorrow. Is this just more corporate happy talk? Hardly. The founding CEO of Google, Larry Page, has called LEGO the most important technology he has encountered: those little blocks taught him literally how to think digitally and algorithmically. LEGO is a company that is all about play – about exploring the connections between creative play and learning, about approaching play as a catalyst for learning. The company is focused on the future — not short-term, but long-term. Over the last two years, I have had the pleasure of spending time with Mr. Vig Knudstorp on three continents: Europe, North America, and, last month, South America – at an early education forum in Sao Paulo, Brazil . With support from the Bernard Van Leer Foundation in The Hague , the Committee for Economic Development, along with LEGO Education, United Way Brasil, Conselho Empresarial da America Latina, Todos Pela Educação, and Instituto para o Desenvolvimento do Investimento Social, co-sponsored a day-long forum for Brazilian business leaders about the important economic returns associated with public and private investments in early education. Our goal was to increase the number of Brazilian business leaders who support expanded investments in early childhood education. After the conference ended, I spent part of the next day with Vig Knudstorp and a LEGO team visiting a school supported by the company in one of the more than 1,500 slums (” favelas “) found throughout Sao Paulo, a city with more than 19 million residents. LEGO Education has an approach called ” Brick by Brick: The Brazil We Want ” that is working with dozens of schools throughout the country to improve education. The school we visited is in “Heliopolis,” Sao Paulo’s second largest favela and home to some 120,000 people. This trip was Vig Knudstorp’s first visit to Brazil — but certainly not his last. LEGO’s commitment is tangible – not just because of the LEGO blocks we saw the children playing with but also in the impact LEGO is having among these very poor children and their families. One could see hope, excitement, pride – and, yes, creativity. In one classroom, the students showed us an award they had won last year for a creative LEGO design. The award itself was a trophy made from LEGOs, and it rested on a LEGO stand. Two of the young children proudly presented it to the LEGO CEO. Vig Knudstorp reached into his pocket and took out his business card — something unique among global CEOs, I suspect: his business card is a little LEGO figure of himself. (You can change his hair, if you like, and move his arms and legs. His name is on the front; his personal e-mail address is on the back. If you write to him, he’ll write you back.) He adjusted the arms on his “card” so that they were raised up, to the sky, and then he gently placed the little figure on the stand so that it was facing the award — arms raised in celebration and joy at the children’s success. It was a moment with these children that was unforgettable. In his remarks the previous day at the forum, Vig Knudstorp reflected on what his company’s efforts might mean to a broader, international business community. He made three points. First, in older, industrial societies, people went to work and mostly did what they were told. Those days are over: the workforce of today and of the future will not emphasize obedience but, instead creativity, and a passion for what workers do. This workforce will be much more logical, systematic, and analytical. Second, an IBM survey of some 1,500 global CEOs noted that the biggest challenges they faced had to do with the ability of their organizations to relate to diverse corporate stakeholders; the ability to foster “dexterous” organizations that could act quickly, change as needed, and be self-correcting in a bottoms-up rather than top-down approach; and the ability to generate creativity throughout all aspects of a company’s business. Third, Vig Knudstorp sees fundamentally two types of companies that will exist in our future: companies that essentially work for themselves and companies that focus not on what they make but on “why” they make it. The former, he says, often put the cart before the horse, whereas the latter consider, as part of their operations, the impact they have on the environment, their communities, and their countries. Focusing on an issue such as early childhood education offers companies and their leaders a great “why” instead of just focusing on what companies and business leaders do for themselves. Moreover, in his view, the most talented employees in the future will prefer to work for companies that have a strong “why.” Are there lessons from this Dane and his extraordinary company for American business and its CEOs? There are many: about long-term investments in education and the workforce, about the values that animate a corporate environment, about encouraging creativity instead of “groupthink,” about building self-correcting mechanisms inside companies that don’t wait for the regulator to step in once the bubble has burst, and about creating a sense of purpose that goes beyond quarterly earnings reports and compensation. Corporate America right now has a terrible perception among the American public at large. The building blocks for turning around this situation are right there, before our eyes. ______________________________________________________________ Charles Kolb served in the first Bush White House from 1990-1992 and as General Counsel of United Way of America from 1992-1997. He is now President of the Committee for Economic Development in Washington, D.C. The views in this article are solely the author’s.

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Microsoft’s 4Q 2010 Revenue Breaks A Record

July 22, 2010

SEATTLE — Microsoft Corp. said Thursday that its net income surged 48 percent in the most recent quarter, the latest sign that businesses are again spending money on technology. Strong sales of Windows, particularly to Microsoft’s corporate customers, helped boost results in the fiscal fourth quarter. Microsoft said it has sold more than 175 million licenses of the newest version, Windows 7, since it went on sale last year. Big businesses stopped replacing aging computers, servers and software during the worst of the recession. Last quarter, the software maker said it saw signs that its corporate customers were starting to spend again. This quarter’s results, which follow a strong report from chipmaker Intel Corp., show the trend has continued. Microsoft Chief Financial Officer Peter Klein said billings for its multiyear agreements with big companies increased in the quarter. Microsoft’s results are closely tied to the personal computer market. Worldwide PC shipments rose about 22 percent in the quarter, according to the research group IDC. For the April-June period, Microsoft’s net income jumped to $4.52 billion, or 51 cents per share, from $3.05 billion, or 34 cents per share, last year. Revenue rose 22 percent to $16.04 billion, from $13.1 billion in the same period a year ago. The results were stronger than Wall Street had expected. Analysts surveyed by Thomson Reuters had forecast net income of 45 cents per share on $15.3 billion in revenue. Revenue for the group that makes Windows increased 44 percent to $4.5 billion, more than a quarter of Microsoft’s total. The division that makes Office 2010 and other business software saw revenue rise 15 percent to $5.3 billion. Microsoft’s server software group reported a 14 percent increase in revenue to $4 billion. Klein said Microsoft’s currency-hedging program protected it from the effects of a stronger U.S. dollar. Otherwise, sales made in foreign currencies would have translated into fewer U.S. dollars. For the full year, Microsoft said net income rose 29 percent to $18.8 billion, or $2.10 per share, from $14.6 billion, or $1.62 per share, a year earlier. Revenue increased 7 percent to $62.5 billion, from $58.4 billion in the prior year. Shares of the company fell 16 cents to $25.68 in extended trading after the release of results. Earlier, shares increased 72 cents, or 2.9 percent, to close at $25.84.

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Comstock Homebuilding Companies Announces Departure of Jeffrey R. Dauer, Chief Financial Officer

July 22, 2010

RESTON, VA–(Marketwire – July 22, 2010) –  Comstock Homebuilding Companies, Inc. ( NASDAQ : CHCI ) (“Comstock” or the “Company”) today announced that Jeffrey R. Dauer, the Company’s Chief Financial Officer, has notified the Company of his intention to resign, effective as of August 31, 2010. Mr. Dauer’s resignation is not the result of any disagreement with management or the Board. Mr. Dauer is assisting the Company in its evaluation of potential candidates to serve as his successor and with the transition of his duties to a new Chief Financial Officer. Mr. Dauer is leaving to pursue other personal and professional interests.

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Comstock Homebuilding Companies Announces Departure of Jeffrey R. Dauer, Chief Financial Officer

July 22, 2010

RESTON, VA–(Marketwire – July 22, 2010) –  Comstock Homebuilding Companies, Inc. ( NASDAQ : CHCI ) (“Comstock” or the “Company”) today announced that Jeffrey R. Dauer, the Company’s Chief Financial Officer, has notified the Company of his intention to resign, effective as of August 31, 2010. Mr. Dauer’s resignation is not the result of any disagreement with management or the Board. Mr. Dauer is assisting the Company in its evaluation of potential candidates to serve as his successor and with the transition of his duties to a new Chief Financial Officer. Mr. Dauer is leaving to pursue other personal and professional interests.

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