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Daily Archives: April 8th, 2009

Lucy Battersby
April 6, 2009

THE serendipity of the economic disaster unfolding around the world is that it is an opportunity for capitalism to purge itself of practices that look great on the next annual report, but are disastrous in the long-term.

Capitalism already has a mechanism that should have prevented the financial crisis: long-term investors.

But the concerns of individual or long-term investors were often ignored in the euphoria of economic growth that preceded this crisis, to the dismay of anyone planning to retire in the next five years.

This is where people like Colin Melvin come into the picture.

Mr Melvin is a quiet Brit who represents £50 billion ($A100 billion) belonging to pension funds around the world through his role as chief executive of Hermes Equity Ownership Services, which is owned by the British Telecom Pension Scheme and partly owns Australia’s Regnan Governance and Engagement.

Unlike short-term investors, superannuation funds keep their money in companies for 10 to 15 years and know that is sufficient time for poor management decisions to destroy a productive company.

Mr Melvin and his London-based staff examine company management, structure and practices and look for unsustainable or unethical practices. They then engage with the company on behalf of the funds, fixing any potential problems.

“Companies that do the right thing make more money in the long run,” Mr Melvin said in Melbourne a few weeks ago. “The task is to work with the company and encourage them to accept change.”

If capitalism is to survive without excessive government regulation, long-term institutional investors need to harness their power through representatives like Hermes and Regnan.

The point of this column is not to give Hermes and Regnan a free advertisement, but to demonstrate they can succeeded where regulators, unions, the media, pressure groups and individual shareholders cannot. Last year they confronted 450 companies around the world on issues ranging from corporate governance to child labour and corruption.

There are 30 million superannuation accounts in Australia with more than $200 billion invested in domestic and international shares.

Regnan represents $39 billion worth of superannuation investments in S&P/ASX 200 companies, but as with individual retail shareholders, it is far too onerous for super funds to keep an eye on all their foreign investments.

VicSuper is the only Australia company that uses Hermes to monitor foreign investments.

Even though these funds may own less than 2 per cent of company shares, they carry enough gravitas for company directors to agree to a meeting. “The contrast between us and an NGO or pressure group, who just look at the issue, (is) we support (the change) with a financial case,” Mr Melvin said.

Most boards know when there is a bad apple among directors, but it is difficult for one board member to oust another, Mr Melvin explained.

“Companies are often relieved to find someone in their shareholder base who is taking an interest.”

The financial crisis has increased awareness of the damage a bad corporate culture can do, and Hermes’ clients doubled last year to 11 funds.

Recently they started acting for a Canadian pension fund with investments in large American banks. “There were problems with risk management and pay structures, and we’d been raising these problems for several years. But the rest of the financial services industry was pushing banks in the opposite direction,” Mr Melvin said.

The question of whether shareholders, as the owners, or directors, as custodians, are responsible for a company’s behaviour often causes tension between the two parties.

So consider an argument put forward by two representatives from the British-based Relationships Foundation to a group of business and company leaders a few weeks ago.

Michael Schluter and Jonathan Rushworth have devised a “relational business charter”, which encourages company directors to consider the relationships in and around a company in making all decisions — such as keeping executive pay at a ratio to the lowest wage and treating suppliers fairly.

Many shareholders neglect their duty as company owners, Dr Schluter and Mr Rushworth argue, and should not profit from shares if they cannot participate in meetings and make time to analyse board decisions.

“What is the moral basis of expecting a return on capital without doing anything for it?” Dr Schluter asked.

Even bankers agree that sensible corporate governance and active shareholders are what keep companies profitable.

Stephen Roach, chairman of Morgan Stanley Asia, wrote in an opinion piece this year: “There has been a major systemic failure of the model that has held the world together since the 1930s.

“Governance, or the lack thereof … proved to be the weak link in the chain. Fix that, and capitalism will be just fine.”

Journal of Business and Psychology, 24 (1), 2009
Desmond J. Leach, Steven G. Rogelberg, Peter B. Warr and Jennifer L. Burnfield

Published online: 22 February 2009
 Springer Science+Business Media, LLC 2009

Purpose The aim of this investigation was to test hypotheses about meeting design characteristics (punctuality,
chairperson, etc.) in relation to attendees’ perceptions of meeting effectiveness.

Design/Methodology/Approach Two studies were conducted:
Study 1 investigated meetings attended in a typical week (N = 958), whereas Study 2 examined the last
meeting attended on a particular day (N = 292).

Findings A number of design characteristics (in particular agenda use and quality of facilities) were found to be important in predicting perceived effectiveness. Attendee involvement served as a key mediator variable in the observed relationships. Neither meeting type nor size was found to affect the relationships of the design characteristics and involvement with effectiveness. Meeting size, however, was negatively related to attendee involvement.

Implications The findings help us to better understand relationships between design characteristics and attendees’ perceptions of meeting effectiveness. Meeting organizers can use the findings to guide administration of meetings, with potential to enhance the quality of meetings.

Originality/Value Meetings are a common organizational activity but are rarely the focus of empirical research. The use of two complementary studies, to our knowledge, provides a unique account of the contribution of design characteristics to perceptions of meeting effectiveness.

Keywords Meeting effectiveness, Design characteristics, Attendee involvement

Recruiters’ Inferences of Applicant Personality Based on Resume Screening: Do Paper People have a Personality?

Journal of Business and Psychology, 24 (1), 2009 Volume 24, Number 1, March 2009

Michael S. Cole, Hubert S. Feild, William F. Giles and Stanley G. Harris
Published online: 28 November 2008

Abstract: Research shows recruiters infer dispositional characteristics from job applicants’ resumes and use these inferences in evaluating applicants’ employability. However, the reliability and validity of these inferences have not been empirically tested. Using data collected from 244 recruiters, we found low levels of estimated interrater reliability when they reviewed entry-level applicants’ resumes and made inferences regarding applicants’ personality traits. Moreover, when recruiters’ nferences of applicant personality were correlated with applicants’ actual Big Five personality scores, results indicated that recruiters’ inferences lacked validity, with the possible exceptions of extraversion and openness to experience. Finally, despite being largely unreliable and invalid, recruiters’ inferences of applicants’ extraversion, openness to experience, and conscientiousness predicted the recruiters’ subsequent employability assessments of the applicants.

Keywords Personnel selection, Resumes, Recruitment, Personality

Have a look at this:

Lauren Wilson | April 08, 2009
Article from: The Australian

THE Productivity Commission inquiry into executive pay will not be a “witch-hunt” to name and shame high-earning chief executives, but an investigation of whether current arrangements drive corporate performance or encourage too much risk-taking.

Speaking at the release of an issues paper in Melbourne yesterday, former Australian Competition and Consumer Commission chairman Allan Fels, who has been appointed an associate commissioner for the inquiry, said: “I don’t see this as a witch-hunt on individuals, but as an attempt to look at the issues more generally.”

The Australian Council of Superannuation Investors recently found executive pay had increased by 96per cent from 2001 to 2007, while average adult weekly earnings increased by only 32per cent, and the consumer price index by just 18per cent.

“There is a very high degree of community concern about executive pay,” Professor Fels said. “The issue will be very much on the public agenda for the duration of the inquiry.”

The Productivity Commission inquiry, headed by its chairman Gary Banks, was requested last month by Assistant Treasurer Chris Bowen as part of a government crackdown on corporate exorbitance that also targeted massive golden handshakes for departing executives.

Mr Banks said it had become important to determine a model of executive pay that could withstand a downturn in the economy, given businesses were less diligent at assessing the merits of large remuneration packages when the share market was roaring.

Commissioner Robert Fitzgerald said the inquiry offered “extraordinary opportunity to lift the lid on the way remuneration packages operate”.

He said it would explore whether executive pay arrangements drove corporate performance, whether they best served the interests of shareholders and the community, and whether high pay packages encouraged inappropriate risk-taking.

Mr Fitzgerald said he hoped some of the myths surrounding executive pay could be debunked, including whether it was necessary to pay Australian executives obscenely high wages to keep them from working overseas.

The issues paper says the inquiry will investigate whether shareholders should have a greater influence to determine remuneration practices, and how best this could be done.

It will also canvass how transparency might be increased so corporations cannot camouflage their remuneration practices.

In line with discussions at the Group of 20 meeting in London last week, the inquiry will explore whether banks and financial organisations should come under a different set of conditions from other corporations.

Initial submissions are due by May 29, public hearings will begin on June 16 and a draft report is scheduled to be released in September. The final report will be handed down on December 19.

Imre Salusinszky, NSW political reporter | April 08, 2009
Article from: The Australian

JUNIOR nurses in NSW will pay for their own training under changes to be announced by Health Minister John Della Bosca, with unions and the Opposition warning that the move could worsen the state’s nurse shortage.

Enrolled nurses will pay up to $1000 a year for TAFE training, but much more in private college fees if they do not secure one of 600 places available.

There will 200 free TAFE places.

At present, about 1300 junior nurses graduate each year. They work in hospitals while they train and are paid more than $34,000 by NSW Health.

Aspiring trainee nurses have been in limbo since the Government announced last year the scheme would be scrapped.

Mr Della Bosca told The Australian the changes would bring NSW into line with the other states and guarantee nurses were ready to look after patients.

Opposition health spokeswoman Jillian Skinner said the new scheme would not align NSW with other states, as there were no student loans on offer.

Annie Butler from the NSW Nurses Association said the new scheme would not maintain a skilled workforce.,25197,25306209-5013404,00.html