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| Volume 8, Issue 13 |
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In This Issue:
 Greenspan concedes error on regulation
 Five myths about the election and the stock market
The coming pink slip epidemic
Financial crisis: Communicating with employees
 Managing the star performer no one wants to work with
 20 'silver bullet' interview questions that ID great job applicants
Time to pay attention: the next work/Life benefit?
 Lojack for laptops
 Crisis demands new CFO skills
[Your balance sheet and your bank] now what?
How bailout loosens accounting, tax rules
 Signaling firm performance through financial statement presentation
 How capitalism will save us
Is your office making you sick?
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Greenspan concedes error on regulation
For years, a Congressional hearing with Alan Greenspan was a marquee event.
Lawmakers doted on him as an economic sage. Markets jumped up or down depending on what he said. Politicians in both parties wanted the maestro on their side. But on Thursday, almost three years after stepping down as chairman of the Federal Reserve, a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting
power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending. “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of
shocked disbelief,” he told the House Committee on Oversight and Government Reform. Now 82, Mr. Greenspan came in for one of the harshest grillings of his life...
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Five myths about the election and the stock market
With the Obama-McCain contest nearing the finish line, BusinessWeek debunks some Wall Street notions about bulls, bears, elephants, and donkeys.
For the first time in 76 years, a financial crisis is occurring at the same time as a Presidential election. Based on recent polls, the coincidence seems to have boosted the chances that Illinois Senator Barack Obama, the Democratic nominee, will defeat Republican Arizona Senator John McCain on Nov. 4. The financial crisis has affected
the Presidential race, but how is the election affecting the financial markets? Pundits offer endless theories on that question, and their answers are often suspiciously similar to their political views. Thus, right-leaning market experts insist Obama's tax proposals would be disastrous for investors. More liberal Obama supporters insist
the market will celebrate if he is given the job of leading the world out of the financial crisis. Some of these claims are impossible to prove or disprove. But there are some myths about the election and the stock market that need clearing up...
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The coming pink slip epidemic
Economic woe usually leads to layoffs in certain industries, but this time the pink slips will be widespread.
When the dot-com and housing bubbles burst, it was easy to see what types of jobs would disappear. But these days as nervous lenders cower and credit contracts, virtually every industry is likely to be scathed in the widely predicted downturn starting this autumn. Nearly every business relies on credit to operate—just as they
need customers to have spending power. With lending trimmed, and companies and consumers tightening their belts (BusinessWeek, 10/9/08), jobs will be cut across broad swaths of the economy, from the tech sector to investment banking, and from
manufacturing to soft drinks...
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Financial crisis: Communicating with employees
Send e-mails, have meetings, walk the halls: Keeping your workforce informed is essential to morale and productivity.
When New York's Twin Towers came down on September 11, I was hosting a show for a now-defunct national television network based in San Francisco. What happened over the following days and weeks convinced me to devote my career to the study of leadership communications. Actually, it's what didn't happen that struck me. Senior leaders at
the network didn't communicate internally regarding the crisis and what it would mean for the company and our jobs: no e-mails, no announcements, no staff meetings, nothing. Rumors ran rampant, and to this day I know of some former colleagues who lost so much respect for their supervisors that they would never think of working for them
again. So while I was disappointed, I wasn't surprised to see a new national survey of 514 workers showing that most are not receiving information from senior leadership regarding the impact of the financial crisis...
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Managing the star performer no one wants to work with
Behold the star performers! Able to surpass goals without breaking a sweat, quick to grasp new organizational missions, brighter than 90 percent of their colleagues, these special employees are technically superior to, well, even their superiors.
But like most superheroes, star performers may have a dark side. What if the best, fastest employee has a few quirks that set the rest of the team on edge? Is it worth poisoning a culture to retain an employee whose behavior isn't consistent with the organization's values? And if a star performer is truly outperforming his or her
peers, how can the talent manager justify redirecting his or her behavior? Tiziana Casciaro and Miguel Sousa Lobo - authors of the Harvard Business School study "Competent Jerks, Lovable Fools, and the Formation of Social Networks" - said people who like each other typically share similar values and ways of thinking, making it
difficult to generate fresh ideas. Further, most individuals avoid skilled but unpleasant colleagues, leaving competent jerks' expertise untapped. The authors contend most employees would rather work with someone less competent because that person may be more pleasant, more open to other's ideas and more willing to share
their own. They may even be perceived as more trustworthy. Talent leaders might consider the following tips to help solve star-performer issues:...
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20 'silver bullet' interview questions that ID great job applicants
Interview questions come in all flavors. Sometimes they’re straightforward, sometimes they're tricky and sometimes they’re just plain weird-"If you were an animal, what kind would you be?" But the best interview questions focus on what
applicants know how to do. Here are 20 questions you can use to elicit the information you need to pick the right person for the job...
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Time to pay attention: the next work/Life benefit?
The average worker spends about two hours every day dealing with unnecessary interruptions, ranging from e-mails to instant messages to phone calls to visits from co-workers. Those interruptions cost businesses $590 billion a year in lost
productivity. HR professionals can help solve this problem at any organization. In fact, it could be the latest work/life benefit: time to pay attention...
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Lojack for laptops
Companies lose billions of dollars a year in hardware and data. Here's how the good guys try to get the stuff back.
Allow me, for a moment, to predict the future: Your company is going to lose a lot of money on laptops. It's inevitable. A laptop is stolen every 53 seconds. More than 12,000 laptops disappear weekly from U.S. airports alone. Only 3% of stolen laptops are ever returned. According to the Computer Security Institute, the average large
company lost almost $3.9 million last year to laptop and mobile-device thefts, and another $4.5 million on the proprietary and confidential data stored in those machines. Throw in the expense of offering free credit reporting to customers whose data was accidentally exposed, and corporations spend an estimated $5.4 billion
annually. Grant Thornton, the 6,000-person accounting firm, knew those numbers all too well. "We have one laptop per employee, and we'd had some break-ins and thefts," says director of IT David Johnson. Like most companies, many more laptops disappeared internally: The same laptop is transferred to four employees over three years, and
suddenly (whoops!) no one knows where it is. "You can't really consider security if you don't know what you have and where it is," he says. "We lease our computers from Lenovo. When it asks where every item is -- and we pay a fee if we don't know -- you begin to care a lot." The tonic comes from a 15-year-old Canadian company called
Absolute Software. It has developed software that lives in a notebook computer's motherboard and pings Absolute's headquarters with its online IP address. The daily pings let companies...
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Crisis demands new CFO skills
Rather suddenly, companies aren't any longer looking to make accountants into finance chiefs. In their fight for survival, they need a different breed.
The preferred skill set for CFOs is shifting quickly in the heat of the economic turmoil and the credit crisis. For many companies seeking finance leaders, the accounting and financial reporting acumen deemed so crucial in the early years of the Sarbanes-Oxley era has slid down the wish list over the past 12 months — and
especially recently, executive recruiters told CFO.com. That realignment was gradually taking hold anyway, with many companies having gotten their hands around Sarbox compliance. Now, with events dictating a faster pace of change, what they're looking
for instead in CFO candidates depends on how the crisis is affecting them...
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[Your balance sheet and your bank] now what?
Now What? As banks tend to their balance sheets and seek higher returns on capital, corporate lines of credit are becoming more expensive — and tougher to keep.
Is it an insignificant crack, or a sign that the foundation is about to crumble? That's what Pepco Holdings found itself wondering when one of the 16 participants in its revolving-loan syndicate recently exercised an option to reduce its exposure by 20 percent. Any threat to its credit line triggers alarm at Pepco. The $1.5 billion
revolver provides liquidity for the electric utility's unregulated businesses, which have commodity price exposures and mark-to-market collateral activity, says CFO Paul Barry. "We had heard of several banks dropping out of credit facilities altogether, so we are fortunate. But the surprise is that only one bank has come to us asking to
[offset] some of its exposure," says Barry. "A number of banks are under pressure to do it." While investment-grade Pepco has largely evaded fallout from the subprime crunch, CFOs at other companies may see lines of credit...
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How bailout loosens accounting, tax rules
While the new law works to ease the credit crisis, it lets banks sidestep tax and accounting rules.
Banking regulators may not have suspended fair-value accounting to benefit the balance sheets of ailing financial institutions. But they did bend generally accepted accounting principles in the name of increased liquidity and the public good. What's more, Congress gave banks permission to ignore a tax code provision for the same
reason. The rule-bending stands to benefit a wide swath of corporations by pushing banks to build up cash cushions and start lending again, at least one tax and accounting expert says. Tucked into the Emergency Economic Stabilization Act of 2008, the rule relaxation could increase their banks' regulatory capital, also called Tier 1
capital. "I suppose I'm in the camp that believes some relaxation of the rules was necessary in order to help cure the liquidity crisis," says tax expert Robert Willens. "That said, it strikes me as a dangerous precedent to set. If the rules can be ignored, or reshaped, based on a Treasury or IRS or Fed official's perception of
'exigent circumstances,' then it will be difficult to reinstate the rules — that were reshaped or ignored — once the crisis passes." adds Willens. One provision of EESA is designed to bolster...
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Signaling firm performance through financial statement presentation:
Executive Summary:
Do managers' presentation decisions within their financial statements reflect informational motivations (that is, revealing the underlying economics of the firm) or opportunistic motivations (that is, attempts to bias perceptions of firm performance)? The authors examine managers' choices to present special items (such as write-offs and
restructuring charges) separately on the income statement rather than aggregated in other line items with disclosure only in the footnotes. Prior research suggests that managers engage in opportunistic reporting in other presentation decisions, and that managers' presentation decisions on the financial statement affects users' judgments.
The distinction also matters because current changes in reporting standards are likely to increase the occurrence of "nonrecurring" type charges similar to special items, such as fair value changes. Key concepts include:
- Managers, in most instances, appear to use the flexibility afforded in the presentation of special items to inform users of the underlying economics of these items.
- Special items receiving income statement presentation are more transitory than those receiving footnote presentation.
- These results are consistent with managers using discretion in the financial statement presentation of special items for informational reasons. There is limited evidence that opportunistic motivations underlie this presentation decision...
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How capitalism will save us
We are experiencing the devastating consequences of a chain of major economic policy errors, which, to use a current cliché, created the perfect storm.
These government blunders temporarily paralyzed the global credit system and are now sending the U.S. and Europe into recession, while sharply cutting back Asia's growth rates. Left to its own devices, the credit crisis, which began in August 2007, would have crushed economies as severely as did the Great Depression. Belatedly, but
thankfully, governments recognized that the only way to get credit flowing again was for them to make quick and direct massive infusions of new equity into beleaguered banks, as well as commit to other emergency measures hitherto unimaginable. [So, will this global boom resume next year, slowly at first and then with increasing momentum?
It should. Whether that happens, however, depends on the next, highly dangerous phase: the political aftermath. Will we and other countries pursue policies that hinder growth and retard or abort a full-blown recovery, e.g., regulations that stifle
innovation and taxes that harm the creation and deployment of capital? Washington politicians are asking: If the federal government can bail out banks, why not other battered businesses? Congress recently voted]...
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Is your office making you sick?
If you're a member of the workforce, chances are you're doing everything possible to hold on to your job. That includes coming in early, working late, logging in on weekends and neglecting the gym.
While this may make your boss happy, your body is most likely crying foul. Despite a noticeable shift toward promoting healthy workplaces--many offices provide employees with a gourmet cafeteria and an array of wellness services including health risk assessments, telephone and Web-based consultations--your job can still make you sick,
now moreso than ever. From uncomfortable workspaces to poor air quality to depression-inducing stress, there are plenty of opportunities to come home feeling worse than when you left in the morning...
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