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Copyright: © 2013 The Wharton School of the University of Pennsylvania
After a year of solid gains the economic recovery is beginning to slow. Demand is trailing off as inventory levels have been restored and emergency stimulus measures withdrawn. Continued high unemployment and a downtick in housing are weighing on consumer confidence and spending. Add unexpected shocks from Europe and a slowdown in China and forecasters are now ratcheting down their expectations for growth over the next year. While many still expect economic expansion to continue in the longer term ”we have definitely hit a soft patch ” one Wharton faculty member notes.
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While most experts agree that a single-minded focus on the short term can cause negative consequences for companies they also suggest that blaming quarterly earnings reports and the pressure to meet analysts’ targets or company guidance is like shooting the messenger. Although the system of quarterly earnings might be broken fixing it is no easy matter and might create even more pressure to produce immediate results.
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Whether they are artists or executives every worker has the potential to be excellent. The challenge for any leader according to Boston Philharmonic conductor Benjamin Zander is to tap into employees’ strengths and give them the tools they need to shine. In a speech at the 14th Annual Wharton Leadership Conference Zander described how the same techniques he uses in the concert hall can be employed in creating a happier more successful business environment.
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China’s announcement in June that it will abandon the peg tying the renminbi (RMB) to the U.S. dollar and gradually let its currency appreciate was widely applauded in international business and economic circles. The decision is important experts say not only in debates about the future clout of the dollar and the RMB in global trade and politics but also for correcting global economic imbalances. Yet now many observers are wondering what impact the revaluation will have on jobs and prices for the average person -- whether in Boston Beijing or anywhere in between.
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The recent financial crisis triggered primarily by bad bets in the financial sector has added momentum to the idea that executive compensation should be tied more closely to corporate debt rather than equity. Last month for example American International Group (AIG) announced that it will link incentive pay to the value of the troubled insurer’s bonds. In a new paper Wharton finance professor Alex Edmans and doctoral student Qi Liu argue that these types of incentives protect bondholders’ interests and the value of the firm particularly when a company’s solvency is in question.
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American companies will continue to fall behind their counterparts in emerging markets such as China or India unless they move toward what Deloitte’s John Hagel III calls ”the edge ” which is where passionate change-driven employees collaborate with others on the kind of innovations that prevent a company from seeing its core business model slowly erode. During a talk at the recent Wharton Leadership Conference Hagel discussed how CEOs can look to sources such as the online game World of Warcraft for inspiration in finding a successful path forward.
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Embellishing stories about one’s accomplishments or qualifications whether by exaggeration or misstatement is part of human nature experts say and almost everyone is guilty of it at one time or another. Left unchecked however exaggerations that seemed innocuous at first can result in serious potentially career-ending consequences. Thanks to the Internet it’s easier than ever to get caught in an exaggeration Wharton experts and others note. But the temptation to embellish has also never been greater as recession-weary workers feel pressured to justify their worth and a 24-hour news cycle demands that leaders have an immediate sound-bite-ready answer for everything.
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With the financial crisis in the United States seemingly under control Europe went into a panic of its own this spring substituting the specter of defaults on sovereign debt for the American penchant for defaults on home-mortgage debt. A stabilization package valued at nearly $1 trillion was put into place in Europe calming markets at least for the moment. But where does the euro wind up amid all this tumult? One view is that the euro is safe bolstered by a sense that it is too important to fail. But others say it is heading for a fall.
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”Cap and trade” systems in which corporations that exceed their allotment of carbon dioxide emissions are allowed to purchase certificates from those with low emissions were designed to combat global climate change by giving polluters a financial incentive to reduce or offset their impact on the environment. But carbon markets in Europe and elsewhere are increasingly falling victim to fraud in the form of phishing bribery and other schemes. Wharton experts and others say combating these crimes is a complicated problem which thus far has no clear solution.
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The call for a boycott of BP in the wake of its ongoing disastrous oil spill in the Gulf of Mexico is hardly surprising. The boycott which in BP’s case was proposed by consumer group Public Citizen is a tactic that has been used for centuries by consumers as a way to express outrage. While research shows many boycotts come up short in forcing their targets to give in to the demands of protest organizers they can have real impact in terms of lost sales and a damaged reputation. In the case of BP however experts say a boycott is likely to be only a nuisance when compared to the outsized legal liability the company is facing from the Gulf spill.
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