Global branding has become increasingly popular in the past few decades. Companies are more often seeking to expand overseas into tempting and lucrative developing markets. Furthermore, the Internet has given global branding a heightened importance as websites can be accessed from anywhere. This is why international trademarks have become a necessity for companies operating in the global marketplace to ensure as much protection for their brands as possible.
Smart Business spoke with Namit Bhatt, an associate at Fay Sharpe LLP, about protecting brands when advertising abroad.
What should a company consider before expanding internationally?
One of the first steps is making sure the brand is protected at home. In the U.S., this means registering a trademark with the U.S. Patent and Trademark Office (PTO). Securing a federal trademark registration with the PTO offers the strongest protection by helping to fight dilution and infringement of the brand marks used on the company’s products and in any advertisements.
Before a company expands into a foreign marketplace, it should conduct a trademark search to look for any marks in that country that could be confused with its brand. Fighting against a conflicting trademark is costly and time consuming to a growing company; a search helps avoid that cost.
How can a company achieve international protection?
When dealing internationally, take advantage of international agreements between countries because multi-national treaties and agreements can determine branding protections. The World Trade Organization is a useful source for treaties dealing with intellectual property (IP) standards. The World Intellectual Property Organization (WIPO) is also a useful resource for determining the IP rights available. WIPO manages the Madrid Protocol, which assists the international registration of trademarks. More than ninety countries have acceded to the Madrid Protocol with India, Rwanda and Tunisia becoming members in 2013.
The Madrid Protocol allows companies that own trademark applications or registrations in a member country to expand the trademark application to other member countries with a single application. For example, a company with a registered trademark in the U.S., a member country, that desires to expand to India, can electronically file an international application with WIPO under the Madrid Protocol. The designated member countries are then notified of the international application and can examine the application for any conflicts within the local trademark system. Using this method is a convenient way to expand into a global marketplace quickly, efficiently and with one set of fees instead the expense of applying to each country individually.
Another international treaty that is helpful for global branding is the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). The TRIPS agreement establishes a minimum level of IP protections including trademarks. This means that any member country of the treaty must adopt at least the amount of protection set forth in the treaty and can choose to give more protection than the minimum.
How can a company maintain international protection?
After a company achieves trademark registration in the new marketplace, it is important to maintain and enforce the rights granted under the trademark registration. Generally, the company should maintain continuous use of their trademark to not relinquish any rights for the brand. Also, the company should watch out for any marks that could dilute the protection of a registered mark. These methods will ensure that the global branding can be used for many years after registration.
Ensuring global protection of a company’s brand has become easier as the need for international protection has increased. Companies looking to enter new markets should be mindful of the options available and consider using them. Before advertising a product in a new marketplace, a company should look to gain protection of its brand in the marketplace. •
If your organization is using social networking sites to search for potential job candidates, it is not alone. Social networking sites have become an increasingly popular recruitment and screening tool because of the ease and efficiency they allow for finding new talent. However, in the absence of an existing evidence-based model for using social networking sites, organizations must find a way to balance the risks and rewards as research catches up to practice.
Recent surveys tell us that LinkedIn is the most frequently used social networking site for recruiting and screening potential candidates. Perhaps this is because LinkedIn was developed for professional networking purposes and offers the most structure and consistency in what and how potential candidate information is presented. The challenge, however, is that depending on the job, both relevant and non-relevant information can be found on LinkedIn.
Smart Business spoke with Rosanna F. Miguel, Ph.D., SPHR, an assistant professor of Human Resource Management in the Department of Management, Marketing and Logistics in the Boler School of Business at John Carroll University, about the effective use of social media for hiring.
How are organizations using social networking sites to reap the most rewards?
Many organizations are using social networking sites to search for passive candidates who possess a specific skill set, which may be difficult to find. For example, an organization may be interested in finding bilingual candidates with leadership skills, or candidates with a background in health care and management. Other uses include looking for active job seekers, posting job information, or participating in discussions to spur interest in the organization and increase employer brand. Most often, organizations seek out individuals to fill salaried mid- to upper-level management or director positions.
What guidelines should organizations follow to minimize legal risks?
The structure and consistency offered by LinkedIn is a substantial advantage over sites such as Facebook and Twitter that do not allow for a highly disciplined approach to the use of available information. Structure and consistency lead to higher validity and help ensure organizations are meeting the professional and legal guidelines that have been in place since the 1964 Civil Rights Act.
While the use of social networking sites for screening purposes is relatively new, the potential pitfalls associated with this approach are not. The guidelines that apply to the use of the standard resume and application blank, for example, apply to the use of social networking sites. In fact, LinkedIn has been described as a new version of the traditional application blank. Problems arise when organizations use LinkedIn or other social networking sites haphazardly, without a formal policy or concern for professional and legal guidelines. Most importantly, organizations must ensure the use of job relevant information about potential candidates by focusing their search on the requirements of the job based on a recent job analysis. Information that may discriminate against protected groups or that is not job relevant must be avoided (e.g., photographs, age, personal information, etc.).
How can the use of social networking sites positively and negatively affect an organization’s pool of potential candidates?
Organizations are looking to social networking sites to expand the population of high potential candidates, particularly when organizations demand a specific skill set that may be in high demand by employers. Some of the most talented individuals can be found on social networking sites, and their identities are just a few clicks away. However, research tells us that social networking sites do not adequately represent the true population of potential candidates. That is, fewer Hispanics and African-Americans use social networking sites. This means that relying exclusively on social networking sites to search for potential candidates is not effective for increasing employee diversity and ensuring that minorities have a fair chance of being selected. This puts organizations at risk for discrimination lawsuits. Organizations can avoid this potential pitfall by including other methods to source candidates, such as job boards, job fairs and magazines. More specifically, methods that have a higher chance of targeting minority groups can be selected to widen the demographic representation of potential candidates.
Why should organizations create social networking policies to screen job candidates?
Surveys suggest that more than half of all organizations using social networking sites to screen job candidates do not have a formal policy for doing so and do not intend to create one in the near future. If one of the goals is to ensure social networking sites are used according to professional and legal guidelines in a consistent and fair manner that leads to the identification of job relevant information, a policy to describe those guidelines to the users of social networking sites is a must. An EEOC or OFCCP audit should not come as a surprise to organizations; organizations must be prepared to support their recruitment and selection procedures in advance of a potential discrimination lawsuit, regardless of whether that procedure involves social networking sites or not. •
Rosanna F. Miguel, Ph.D., SPHR, is an assistant professor of Human Resource Management in the Department of Management, Marketing, and Logistics in the Boler School of Business at John Carroll University. Reach her at email@example.com.
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GOJO Industries Inc. was one of five 2013 Summit of Sustainability Award (SOSA) winners, an award that recognizes companies for their sustainability efforts. The awards acknowledge organizations that are helping to fulfill the SOSA mission of introducing green best practices to Summit County’s business community, showing the value of the triple bottom line: People-Planet-Prosperity through Recognition-Education-Engagement-Networking.
Smart Business spoke with Nicole Koharik, Global Sustainability Marketing Director at GOJO, about what the company has done in the category of sustainability.
What is key to moving an organization toward sustainability?
Imbedding sustainability into the culture for long-term results is critical.
At GOJO we used an approach we call SWOW (Sustainable Ways of Working). And because of that approach, sustainability is not only inherent in our business strategy, but it’s also integrated into our key processes.
For example, during annual business planning every unit thinks about sustainability and how it fits into their plan and priorities. It’s also included in our new product development process, and in our employee education and communications programming.
How can companies begin establishing a sustainability-minded culture?
Benchmarking is a great first step because it serves as the input for setting goals, which is ultimately how you measure your success and communicate your results. It also helps educate employees about your impacts and understand where you’re starting from so that they can also engage in identifying solutions to drive that improvement. The result has been employees who embrace sustainability and see how they can contribute to the organization’s goals.
How did GOJO develop a deeper culture of sustainable operations?
One important step was establishing a shared vocabulary. For example, when we started talking about sustainability internally, we noticed that our team members were using the terms green and sustainability interchangeably, and were thinking primarily about the environment. Properly defining those terms helped employees understand that sustainability really means that we’re committed to social, environmental and economic considerations.
We also adopted an overarching guiding principal that we call sustainable value. This helped make sure employees understood that the work that we were taking on was ultimately about creating social, environmental and economic value both for our business and for our stakeholders.
What metrics best reflect your progress towards your stated sustainability goals?
In our sustainability report we have a scorecard, which we established in 2010, that includes 2015 goals to reduce our water use, solid waste generation and greenhouse gas emissions.
On the social metrics, we generated a 25 percent improvement in hand hygiene delivered in equivalent uses relative to the 2010 per-use rate.
In environmental metrics, we reported a 40 percent reduction in greenhouse gas emission since 2010, a 29 percent reduction in water use over the same time period and a 13 percent reduction in the generation of solid waste.
On the economic side, we achieved a 52 percent increase in our sales from sustainability certified products.
What is the greatest benefit the sustainability plan has brought to GOJO?
Through our efforts we’ve experienced a strengthening of our competitive advantage in the marketplace — winning new business and enhancing our brands by driving innovation. And we’re also making significant progress on the long-term goal of becoming a sustainable organization.
How did winning the SOSA help your business?
Winning the SOSA led to an increased engagement opportunity with many new stakeholders. We formed new relationships with organizations that have won previously and it helped validate our leadership position, which is really helpful and a great sign to our customers in the marketplace. ●
Nicole Koharik is Global Sustainability Marketing Director at GOJO Industries Inc. Reach her at (330) 255-6000 or firstname.lastname@example.org.
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Although it appears the Affordable Care Act (ACA) was not intended to affect the workers’ compensation system, it may influence it. Ohio may be less likely to experience some of the hypothetical outcomes discussed for other states, but there is a correlation and potential impact.
Smart Business spoke with David D. Kessler, medical director at CompManagement Health Systems, about how the ACA might affect workers’ compensation.
What aspects of the ACA could be used in the workers’ compensation system?
An important concept with the ACA is the reference to Accountable Care Organizations, which are groups of health care providers who coordinate the care given to their patients. This requires sharing information for informed decision-making among stakeholders.
Workers’ compensation has many moving parts that involve multiple interested parties, creating variable goals. These have the potential to introduce inefficient processes, escalating costs and compromising care for injured workers. Sharing clinical information between parties helps with enhanced decision-making and permits the use of evidence-based best practices. Coordination on this level should reduce duplication of services, potentially reduce medical errors and enhance recovery from an injury, permitting a timely and safe return to work.
It is generally accepted that fee-for-service payment methodology has a tendency to increase utilization for optimizing provider revenues. Although a higher frequency of care in the acute phase may increase initial costs, it can mean achieving long-term goals and better outcomes, lowering costs to employers.
How could the ACA’s expanded benefits affect workers’ compensation?
The ACA may result in healthier employee groups because it covers those who previously had no health care benefits, allowing them to address primary health care needs. A healthier employee population should have lower risks for claim frequency or severity, reducing associated costs from disability and medical care post-injury. Although employers may fear increased exposure for filing claims or prolonged use of services initially, this may lessen when other health care options are offered. However, high deductibles or co-pays may create financial stress to the beneficiary, discouraging greater use of health insurance.
Another common situation in workers’ compensation is when an employee’s current health status or pre-existing condition prolongs recovery and requires additional care, successively producing greater costs. Accurate diagnosis and complete records help the Managed Care Organization (MCO) determine if the requested services are necessary for treatment in a claim. Engagement and personal responsibility from the individual through accessing available health care that may be external to workers’ compensation can help decrease barriers affecting response to treatment.
How might the ACA affect the kind of care provided through workers’ compensation?
Another component of the ACA that affects the workers’ compensation arena is the Patient-Centered Outcomes Research Institute (PCORI), which is designed to improve health care delivery and outcomes. In a comparable process, MCOs in Ohio are required to use Official Disability Guidelines (ODG), which are a meta-analysis of evidence-based protocols that serve as the basis for evidence-based care collaboration. When providers are reluctant to cooperate and discuss evidence-based practices, it impedes achieving ideal outcomes. Utilization management of requested services from the MCO industry is enriched through use of tools such as ODG, and should serve as an educational opportunity for informed decision-making for injured workers, employers and providers. PCORI’s success could facilitate applicable use in the workers’ compensation system.
Although the ACA may not directly impact Ohio workers’ compensation, its focus on the interactive communication of evidence-based medicine for informed decision-making, regardless of the payer or administrative organization, should be the guiding message driving quality, cost-effective, patient-centered care. ●
David D. Kessler, DC, MHA, CHCQM is Medical Director at CompManagement Health Systems. Reach him at (614) 760-1788 or email@example.com.
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Cloud technologies have transformed the playing field for small and midsize businesses, largely because of their flexibility. Organizations have the ability to quickly and painlessly ramp up their services when they need something more.
“Using their Internet connection, they can harness the power — and reap the rewards — of applications traditionally available only to large enterprises with big IT budgets,” says Kevin Conmy, regional vice president, Freedom Region at Comcast Business. “Cloud-based services, from servers to storage, provide access to high-performance infrastructure without high-priced investments. Streaming video can be used to bring conferences and training to any employee, anywhere. Mobile devices increase productivity beyond company walls, with businesses seeing increased efficiency and a growing bottom line.
“But what may not be immediately visible is the impact these tools are having on company networks,” he says.
Smart Business spoke with Conmy about sufficiently planning for your company’s bandwidth needs for today and tomorrow.
How are Internet connections and networks affecting business operations?
As organizations move to the cloud and embrace applications like high-definition video and Web-based tools, their Internet connection becomes more important. Suddenly, more data needs to move — and move quickly — over your connection. If your network doesn’t have sufficient bandwidth or speed, you could experience slower response times, or risk losing connectivity completely.
As a result, many tools intended to allow businesses to analyze data, make decisions, and interact with employees and customers with lightning speed are at risk of not operating at peak efficiency. There may be a delay between a query to a cloud-based data center and a response, or video streams may freeze as they struggle over a lagging connection. Remote workers also might have difficulty accessing applications or email because too many people are accessing the company network simultaneously.
Which businesses face bandwidth problems?
This need for speed is more the rule than the exception. In a 2012 Comcast Business poll, 84 percent of small and midsized business respondents experienced increasing bandwidth needs because of their use of the cloud, Wi-Fi and mobile devices.
This trend is expected to increase, too, as companies continue to aggregate and unlock value from customer data, such as order histories, buying preferences and online shopping patterns. More than half of respondents in a different Comcast Business survey expect the quantity of collected data to grow at least 50 percent within two years.
How can organizations deal with the challenge of increasing bandwidth?
Clearly, a bandwidth upgrade is, or soon will be, in order for many. In the old days, companies often relied on T1 lines from traditional phone providers. So, boosting speeds involved buying and tying together more lines, a pricey and complex endeavor.
Today, things are easier, but only if you ask the right questions before an upgrade:
- Does the network have the reach we need? If you rely on transferring data between offices, make sure your provider has a wide network, and double-check to ensure all locations are within that footprint. Just because one office may appear to be in the middle of a coverage map doesn’t guarantee your satellite location 20 miles away will have that same good fortune.
- How quickly, and in what increments, can we change our bandwidth? Having the ability to scale up or down can help companies buy only what they need and cut long run costs. Select a provider that can do this via a simple phone call to save you hours of aggravation and help enhance business productivity.
- What happens if the network goes down? The majority of telecom providers operate over another provider’s fiber lines. So, although you may be under contract with a smaller company boasting a less expensive monthly bill, you’re likely using the same line as one of the larger companies. What does this mean? In an outage, your main contact may not be able to immediately resolve the issue.
By asking now, you can help ensure your company knows what it needs for the future so you can begin planning accordingly. ●
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The employee benefit procurement process, sometimes called marketing, has changed little over the past 25 years. This continues to frustrate many organizations looking for transparency, and potential cost savings, when procuring life, disability stop loss, dental, vision or pharmacy benefit management coverage.
Formal Requests for Proposals (RFP) may travel by email, but the underlying process is the same; insurance carriers simply send an image of the paper proposal that they would have dropped off years prior. The interpretation, presentation and, most importantly, negotiations haven’t changed, says Matthew R. Huttlin, vice president in the Employee Benefits Division at ECBM.
Almost a decade ago, a major insurance scandal in New York uncovered bid-rigging and anti-competitive activity within the opaque procurement process.
“The industry agreed to reform and become more transparent, which they did to some extent, but procurement activity remains a bit of a ‘black box’ process that continues today,” Huttlin says.
Smart Business spoke with Huttlin about the future of employee benefits procurement — a reverse auction.
What problems still exist today?
The process is clearly still antiquated and fraught with opportunities for mistakes. Business owners often negotiate without solid documentation. Broker/consultants, as well as their clients, continue to see proposal mistakes, missed deadlines, inaccurate proposals and presentation revisions.
Also, insurance carriers market to their strengths, as opposed to conforming to client requirements, which may lead to misinformation, more work, mistakes and increased costs.
How can business owners better obtain employee benefit coverage lines?
An online version of a reverse auction, or Dutch auction, cuts to the heart of the problem by introducing technology to the process while maintaining the business owner’s control of the outcome. This type of auction works opposite of a normal auction — instead of bidding up the price of an item, the auction bids the price down.
What are the benefits of this method?
This process is:
- Prescriptive — RFPs are standardized, specifying the client requirements. Carriers respond using pre-determined plan specifications.
- Efficient — Carriers get complete, consistent data on which to act with agreed upon timelines.
- Transparent — Clients receive documentation on every step from the initial offers to the final pricing.
- Effective — The online system delivers the RFP to more markets, garnering more accurate quotes that are immediately posted for analysis.
How exactly does this reverse auction work?
There are four phases to the procurement. In the RFP development/submission phase, the RFP is placed on a secure website under a standardized format and peer reviewed to ensure accuracy. Once released, carriers are notified to go to the website to obtain all of the relevant information to prepare their proposal.
During the technical evaluation/initialpricing phase, carriers post proposals into the system for evaluation. The broker/consultant reviews the vendor confirmations and deviations to the requested scope of services, confirming plan design features, alternatives and administrative capabilities. The carrier also posts its initial pricing.
Then, all carriers receive feedback as to their ranking by their initial pricing in the financial evaluation/secondary-pricing phase. Actual rates aren’t shared. Over the course of a set period, usually two days, carriers can revise their pricing offers. Every time a new offer is submitted, all carriers are notified of the new ranking order.
Once the financial evaluation is complete, clients review the detailed results in the evaluation/selection phase. This review can include finalist presentations, site visits, etc. The client maintains full control over the selection process. Business owners aren’t required to select the lowest bid, but rather the carrier that best fits their requirements.
This high-tech approach is an efficient and effective way to handle procurement that provides accurate, transparent and documented results while driving prices down in a timely fashion. ●
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To provide or not to provide? That is the most pressing health insurance question facing companies across the country this year. As implementation of the Affordable Care Act moves forward, many businesses are making strategic decisions regarding health care benefits. Those that have sponsored health insurance for years are now considering dropping coverage and reallocating resources.
But what are the true costs of dropping coverage? While the questions may be simple, the analysis can get fairly complex and extend beyond easily identifiable costs.
Smart Business spoke with Sholly Nicholson, human resources manager at Sensiba San Filippo LLP, to examine some of the most important health care questions businesses face this year.
How should businesses approach their health care coverage decisions?
It is critical for any company to evaluate health care coverage based on the anticipated impact it will have on the entire organization. That means considering both easily recognizable and potentially hidden costs associated with sponsoring or dropping coverage. Will dropping coverage negatively affect your ability to attract and retain talent? Will it result in a loss of valuable personnel, and if so, to what degree?
What are the benefits to providing health care coverage?
Depending on the nature of your business, employer-sponsored health care plans might already be expected. It’s possible to drop coverage and increase employee pay to allow them to choose their own plans on the health care exchange networks. However, continuing coverage can be a critical part of strategic planning.
Employer-sponsored plans provide control over the plan’s design and benefits available to employees. If you operate in an industry with heated competition for a limited talent pool, selecting and managing your plan could provide a competitive advantage. With current uncertainty regarding exchange health plans, employees may feel more comfortable knowing that your organization is selecting a plan that allows them access to the doctors and hospitals they want.
What can companies do to control rates?
If you decide to offer health care benefits, managing costs will be critical moving forward. Get as many quotes as possible. Insurance providers are always offering new plan designs and premium pricing.
Incentives can be offered to employees who participate in annual health risk assessments, biometric screenings or other wellness initiatives. Promoting health and well-being through education, exercise facilities and nutrition initiatives can have a long-term effect on the number of claims incurred, which will have a significant effect on your group rates.
What should a company consider when designing its plan?
Not all plans are created equal, and the organizational benefits of a well-designed and well-managed plan can be substantial. It’s important to look closely at the provider network.
Will your employees be covered by the primary care physicians they want? Will they have access to the best hospital facilities? Smart companies review residential locations and current providers of their employees before making any changes.
The structure of the plan can also be important. To balance costs and benefits, many companies are moving toward high deductible plans combined with health savings accounts (HSAs). The high deductible plans keep premiums under control, while HSAs allow employees to set aside money pretax to offset deductibles.
What’s the best advice you can provide regarding health care coverage decisions?
The health care decisions you make today will have a profound effect on the future of your organization. A happy and healthy workplace will be productive and profitable.
The right answer is unique to every company, but the best approach to finding that answer is consistent: Expand the scope of your analysis and conduct a broad investigation in order to discover how your health care decisions will affect your company moving forward. If you consider all of the ramifications of your decisions and align your strategy with your desired outcome, you will find the best solution for your employees and organization. ●
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The performance of the average mutual fund, exchange-traded fund (ETF) and hedge fund investor lags the performance of their funds.
“The average fund investor loses money by engaging in active investment timing,” says Marco Pagani, Ph.D., Associate Professor of Finance and Interim MBA Director of the Lucas College and Graduate School of Business at San José State University.
Smart Business spoke with Pagani to learn more about the ability of fund investors to time the market.
How is the timing ability of fund investors measured?
Fund performance is computed using time-weighted returns — the geometric mean — which measure the return of a buy-and-hold strategy. This is a strategy that holds a fixed quantity of fund shares without any contribution, known as shares purchase, or withdrawal, called shares sale, during the investment horizon. Such measure is ideal to compare the performance of similar funds over a common time period. The return realized by an investor depends on the performance of the investment selected and the ability to purchase or redeem shares at the most advantageous time during an investment period.
An investor’s performance is measured by dollar-weighted returns, referred to as an internal rate of return, which account for both the investment performance and the investor’s timing ability. By calculating the difference between the time-weighted return and the dollar-weighted return, one can isolate the portion of the overall return solely due to the ability to time investments.
To what extent are returns reduced by poor investment timing skills?
Financial research has shown that the penalty associated with poor timing decisions is significant and present among many categories of investors. Professors Geoffrey Friesen and Travis Sapp in their 2007 article published in the Journal of Banking and Finance show that the average equity mutual fund investment underperforms by 1.6 percent on an annual basis. Similarly, studies performed by Morningstar estimate the timing penalty at around 1.5 percent per year.
Consistent evidence has been found by studying the ETF universe. In a 2013 working paper I co-authored with Dr. Stoyu Ivanov, we estimate that ETF investors lag the performance of their investment by 2.4 percent per year.
In a 2011 article in the Journal of Financial Economics, Professors Ilia Dichev and Gwen Yu found that the average hedge fund investor displays a timing penalty in the order of 3.5 percent per year. The significant penalty associated with the timing decisions of hedge fund investors imply that, even though hedge funds have produced returns higher than the equity market, the returns of hedge fund investors have lagged the performance of the S&P 500 and have only fared marginally better than short-term Treasury securities.
What are the investor or fund characteristics associated with poor timing ability?
It does not appear that the performance of more sophisticated investors displays lower timing penalties. Hedge fund investors, comprising sophisticated individual investors or institutional investors, somehow display the worse timing ability.
With both mutual and hedge funds it seems that negative timing skills are especially concentrated in large funds where more dollars are at stake. Active fund investors show worse timing performance than index mutual funds. In a 2013 working paper I co-authored with Dr. Marco Navone, we found that load mutual funds are associated with larger timing penalties than no-load funds. This is particularly interesting since load funds are often bought or sold through investment professional and brokerage channels.
What should fund investors know?
Investors should not attempt to time the market because it is hazardous to their financial health. To avoid engaging in pernicious investment behavior, investors should follow a predetermined schedule of share purchases or sales motivated by cash flow availability and target portfolio allocation. Trades motivated by market forecasts or emotional reactions should be avoided at all costs. ●
Marco Pagani, Ph.D., is an Associate Professor of Finance and Interim MBA Director of the Lucas College and Graduate School of Business at San José State University. Reach him at (408) 924-3477 or firstname.lastname@example.org.
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Q: The U.S. economic expansion appears to be continuing at a moderate pace into 2014. Are you surprised?
A: Not at all. We switched from negative to positive on the economy back in the Spring of 2009 and have not wavered since then. The key to our confidence has been the message from our proprietary Recession Signals Checklist (the RSC).
Q: That doesn’t sound like the name of a “quantitative econometric model”!
A: That’s correct – however, each factor on the RSC does have a quantifiable level that causes it to toggle on/off. We tested dozens of economic data series and chose 10 that represent major economic sectors and interest rates. Our “back-test” period for the RSC covered 1980-2006, which included recessions in 1980, 1982, 1991 and 2001. In each of those instances, 9 or 10 of the RSC data series reached the quantified levels that signaled a high risk of recession. Equally importantly, we did not want “false positives” every time the economy slowed significantly, so we focused on the 1985 and 1995 mid-cycle slowdowns when many economists feared a recession was imminent. No more than 3 signals toggled on in those instances.
Q: How has it worked in real time since then?
A: To paraphrase the golf adage, “Back-tests are for show, but real-time is for dough!” Thus far, the RSC has been very helpful to us as it strongly signaled recession as the Great Recession developed in 2008. Per the title of this interview, many economists were surprised when the economy avoided falling into a double-dip recession in 2010, 2011 and again in 2012. The RSC held at 2 or 3 signals most of that stretch, but hit a rather nerve-wracking 4 of 10 in 2011. Overall, these low RSC readings gave us confidence in the economic expansion. While it’s nice to make accurate forecasts, the payoff was the support the forecast gave to our bullish investment strategies.
Q: What is the RSC telling you now?
A: Currently, NO signals are toggled on which supports our sanguine economic outlook for 2014.
Q: Are there additional factors that encourage optimism on the economy?
A: Absolutely. We see several factors that could lead to better growth, including: 1) reduced drag from Government spending cuts (state & local spending is already growing and the year/year impact of Federal sequester spending cuts has dropped), 2) an improving global economy helps export demand (Europe and Japan are coming out of recessions and emerging economies continue to outgrow developed), 3) low U.S. energy costs (fracking means North American natural gas costs are fractions of global levels), 4) consumers and businesses alike will benefit from improved balance sheets and renewed credit growth, 5) steady jobs growth (finally, a new high in jobs in 2014) will help consumer confidence and incomes, and 6) the U.S. “manufacturing renaissance” .
Q: That last factor sounds meaningful for our region –can you elaborate on it?
A: The era of “offshoring” of production seems to be reversing into re-shoring as the U.S. holds its position as the #1 or #2 country in the world in terms of manufacturing output. Shifting dynamics of global labor markets are playing a role in this, as is the advantage of lower domestic energy costs, but technology is a huge factor. Digitization and robotics have played a significant role in the massive productivity edge U.S. manufacturers hold over emerging market competitors. That advantage is a two-edged sword in terms of jobs in our region, as the automation-related jobs pay better. However, they require more education and technical training and are less numerous than the repetitive tasks of days gone by.
So to conclude, we have not been surprised by the growth of the U.S. economy and we remain optimistic that the pace of GDP growth is finally escaping the “terrible twos” and headed toward the more “pleasant threes!”
Disclosure: This message does not constitute individual investment, legal or tax advice. All opinions are reflective of judgments made on the original date of publication and do not constitute a guarantee of present or future financial market conditions.
In recent years there has been an increase in the number of claims filed against employers arising out of employment practice disputes. Many claims have no legal basis, but employers are still forced to defend themselves — spending time and money.
“Businesses are more likely to have an employment practices claim than a property claim,” says Shelley White, assistant vice president at SeibertKeck. “There are over 100,000 charges filed annually against employers under statutes imposed by the Equal Employment Opportunity Commission (EEOC). The majority of these claims target smaller businesses. However, no business is exempt.”
Smart Business spoke with White about understanding employment practices liability coverage.
What’s important to know about employment practice claims?
Employment law has grown at an incredible pace since passage of the Civil Rights Act of 1991 and the Age Discrimination in Employment Act, among others. Ambiguities in these laws allow the widest possible interpretation, which in turn opens the door for litigation.
The most frequent types of claims made against an employer are discrimination, sexual harassment, wrongful termination and retaliation. There’s also been an uptick in wage and hour lawsuits. Claims can come from potential hires, former and current employees, clients, suppliers or vendors.
Discrimination can be defined as the termination of an employee, demotion, refusal to hire or promote due to race, color, religion, age, sex, physical or mental disabilities or handicaps, pregnancy or national origin. Think about the times you or someone in the office told an off-color or racy joke to a new employee or client. It’s only a matter of time until this comes back as a claim.
The average claim costs an employer $50,000, and defense costs represent about two-thirds of the total settlement. Without a mechanism to transfer risk, these costs could cripple smaller businesses, or at least damage their reputation. For larger businesses, one uninsured claim can lead to potential shareholder lawsuits.
How does employment practices liability coverage mitigate this risk?
Businesses can purchase a policy that provides coverage for a wide spectrum of employment-related claims and offers risk management services to help minimize the risk of getting sued. This policy protects the corporation, directors and officers, employees (including leased and temporary), volunteers, and in some cases can be endorsed to include independent contractors (when working for the employer).
The definition of a claim includes arbitration, regulatory and administrative proceedings, and EEOC and Department of Labor investigations.
Limits can range from $500,000 up to $10 million or higher. As your business assets grow, so should your limits. Settlement costs and legal fees are typically included in the policy limits. However, some carriers will provide separate limits for these costs.
It’s important, however, to be aware of the varying contracts and differences in coverage and exclusions from one policy to another. There is no standard form. Sitting down with your trusted insurance adviser will help with this process.
Beyond buying insurance, what preventive measures lower claim risk?
Minimize the possibility of costly claims by:
- Creating an employee handbook detailing company policies and procedures.
- Educating employees on sexual harassment and discrimination, and offering sensitivity training.
- Establishing a procedure for handling employee complaints.
- Developing job descriptions with clear expectations of skills and performance.
- Conducting periodic performance reviews.
- Creating an effective record-keeping system to document employee issues, and what was done to resolve them.
- Instituting at-will employment.
- Implementing procedures for hiring, firing and disciplining employees.
Many carriers offer free risk management services. Online resources provide best practices training modules for addressing sexual harassment, discrimination, investigations and termination, while providing links to HR websites. ●
Shelley White is assistant vice president at SeibertKeck. Reach her at (330) 865-6582 or email@example.com.
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