Lisa Murton Beets

Tuesday, 25 November 2008 19:00

Triple bottom line

Traditionally, business ethics have focused on fair and honest practices. While moral integrity is still the fundamental core of ethics, the definition has become much broader.

“For many years the emphasis was on the shareholder approach,” says Cordell P. Schulten, MA, JD, lecturer, business ethics, Fontbonne University. “The primary responsibility in policy declarations was to owners/shareholders and essentially was fulfilled by profitability and economic measures. Now, we’ve moved to the stakeholder approach where decision makers in business take into account not just the owners, but employees, suppliers, the community, and broader relationships with government agencies and within a global context.”

This concept, says Schulten, has gained prominence in business ethics within the past 15 years and is known as the triple bottom line, where a company looks at economic results, social responsibility and environmental stewardship and impact.

Smart Business spoke to Schulten about the triple bottom line and how to utilize it.

What are the business benefits of corporate social responsibility?

Companies that are adopting the triple bottom line approach are presenting demonstrative evidence that considering all stakeholders translates into good business that bodes well for overall profitability. Starbucks, with its commitment to fair trade for coffee growers, is a good example. Starbucks demonstrates how being deliberate about social responsibility and environmental steward-ship pays off. In today’s world, authenticity is key, especially with our 20-something emerging leaders and consumers. In many cases, people and organizations won’t even do business with companies that do not have a reputation for being socially responsible.

How can companies deal more responsibly with customers and suppliers?

The key to putting the triple bottom line into practice is listening. Be aware of the concerns and interests of employees and customers. Provide ways to obtain feedback. Open and maintain lines of communication.

A good example of a company that deals responsibly is Stonyfield Farms. It stands behind its suppliers and is willing to pay a higher price for organic milk. The commitment of the company to the value of organic products is essential to its identity. Some of this goes back to your ethical theory. Is it duty-based, where decisions are made based on the best thing to do? Or do you have a consequentialist view, where you take the action that will bring the best results to the greatest number of people? Or are your ethics virtue-based? Stonyfield provides proof that there is a return on virtues-based ethics. Treating employees and suppliers fairly, with practical demonstrations of that fairness (e.g., paying them well and on time), creates loyalty.

How can companies foster strong relationships with the local community?

A good starting point is to be aware of how your business impacts the community and how you can use the best parts of your business to help. What do you do well? How can you connect that to the needs of organizations, charitable groups and others focused on helping your community? Some companies focus on one, two, or three local organizations by doing things such as encouraging their employees to help out with specific projects for these groups. Helping in the community is a great way to create and build relationships in the social context, raise awareness of your company, and enhance the community’s appreciation of your business.

How can companies demonstrate their commitment to the environment?

Again, it involves awareness and a willingness to listen to and be aware of the issues. You can start with the basics, for example the paper products you’re consuming. How much paper do you use? What type of paper is it? Pedro’s Planet Inc., which sells recycled office supplies, is a good example of an environmentally responsible company that helps other businesses be environmentally responsible as well. Other examples include the many companies across the country that are ‘greening’ their headquarters by implementing solar power, daylighting, water conservation measures, and other sustainable design strategies. Actions such as these demonstrate a commitment to reducing adverse environmental impact.

How can companies measure the effectiveness of corporate social responsibility?

Many companies are now releasing social responsibility reports, which follow the financial audit model, in order to audit ethics policies. These reports show what the company intended to do, how it approached this, and what it achieved. It involves doing surveys and interviews with employees, customers and suppliers, asking whether the company is honest and fair and if it has a reputation for integrity. Some companies have compliance officers who monitor whether they are following the law. However, a true, broad-based approach to ethics goes beyond doing what you have to do to monitoring how well you are doing it. On a final note, a solid ethical approach to doing business must come from the top down. You can have a written policy, but if your employees don’t see the company’s leaders embody it in concrete ways, it won’t be effective.

CORDELL P. SCHULTEN, MA, JD, is a lecturer of business ethics at Fontbonne University. Reach him at or (314) 223-8182.

Tuesday, 25 November 2008 19:00

Warranties expiring?

Your company’s data center is a critical corporate asset. The right serviceprogram will extend the life of equipment, minimize indirect costs of down-time, reduce costs of equipment ownership, increase uptime and maximize operations to increase business profitability.

With all that is at stake, you should closely evaluate your options when equipmentwarranties are about to expire. Instead ofautomatically signing an extended serviceagreement with the OEM, it may be to youradvantage to select an Independent Service Organization (ISO).

“In all cases, prices are substantiallylower with an ISO,” says Ed Kenty, president and CEO of Park Place International.“However, price is not the primary differentiator. When looking for an ISO, the number one factor is quality. Yes, you’ll savemoney, but keeping your data centerhealthy and your mission-critical operations up and running will be the primaryconcerns.”

Smart Business asked Kenty to explainthe choices companies have when theirwarranties are about to expire.

What issues are of most concern to IT professionals when facing warranty expiration?

When considering whether they shouldengage an ISO, the biggest concern formany IT managers is risk mitigation. Manyelect to continue on with the OEMs of theirdata center equipment because they perceive these companies as the safe choice.However, the right ISO definitely deliversthe same quality as the OEM, perhaps evenbetter, at a much lower price. In order toavoid having to make hasty decisions, it’simportant to know exactly when the warranties (which usually last one to threeyears) are going to expire on each piece ofequipment.

Warranty dates throughout a data centerare staggered. In most instances, you won’tget a notice from an OEM that a warrantyis about to expire, but rather a bill at thelast minute for a service agreement. Toavoid that, have the OEM come to yourfacility and do a system audit. Maintain alist that shows each piece of equipmentalong with its warranty expiration date.

How much could a company save by contracting with an ISO versus staying with theOEM?

In today’s economy, many companiesdon’t have the capital to refresh equipmentand are increasingly looking to extend thelife cycle of the equipment they alreadyhave. If you can extend the life three orfour years beyond the warranty expiration,for a total life cycle of seven to eight years,and you’re saving 40 to 55 percent per year(say you choose a $450,000 to $600,000service contract with an ISO versus a$1 million contract with the OEM), thetotal savings are substantial.

How is working with an ISO different thanworking with an OEM?

There is a perception in the marketplacethat OEMs offer better service. That mayhave been true 10 years ago, but it’s nolonger the case. Today, ISOs have all thetools they need to offer the same servicesas OEMs. In fact, many OEMs use ISOs assubcontractors to deliver their services.Because OEMs use multiple partners,clients will often see many different engineers working in their data centers. An ISO, on the other hand, will often assignone or two engineers to the account. Thisway, the engineers become extremelyfamiliar with your equipment and are ableto provide consistent, quality service.

In addition, they often have better andfaster access to a wide range of parts. AnISO becomes a single point of contact,which is attractive to an IT manager whodoesn’t want to deal with multiple vendors.This also eliminates finger pointing. Insome ways, ISOs are not much differentthan OEMs: They have 24-7 call centers,they offer the same level of training, thesame knowledge base and the same service protocols as large OEMs. However,service is the ISO’s core competency,whereas the OEM’s primary focus is onmanufacturing and selling new equipment.

What are the main points to consider whenpurchasing hardware maintenance services?

Again, price is not the primary differentiator. You have to ensure the company you’reevaluating has a quality reputation. Reviewits financial status and size, volume of contracts and customer base. Most important,however, is the relationship. You have to becomfortable with the provider and be ableto trust it. Carefully review its referencecustomers in your geographic area. If youhave multiple locations, make sure it hasfacilities across the country and/or aroundthe globe to ensure a quick response evenin remote locations.

Evaluate the quality of its engineers andtechnicians. Will the same people respondto your service calls each time? Does theprovider have access to the array of partsneeded for compatibility with your multi-platform environments? Is it willing to signa nondisclosure agreement to ensure theconfidentiality of your information?

Finally, the ISO should tailor its operations to the way you operate your ITdepartment. Flexibility is the key. Everything from establishing parts inventories todeveloping work schedules to determiningbilling frequencies should be implementedto complement your operation and business practices.

ED KENTY is president and CEO of Park Place International. Reach him at (800) 931-3366 or

Thursday, 25 September 2008 20:00

Issues in money laundering

Do the names Second Life, Club Penguin and Zwinktopia mean anything to you? These “virtual worlds” may seem like harmless places on the Internet that provide simple entertainment, but in reality, they are increasingly serving as money laundering hubs for criminals all around the globe.

“These are legitimate sites and legitimate business is conducted over these sites. However, if you do business with a launderer — who you thought was a legitimate customer — you’re involved even if you didn’t know it,” cautions Theresa Mack, CPA, CAMS (Certified Anti Money Laundering Specialist ) senior manager, investigations, for Cendrowski Corporate Advisors LLC. “Virtual banks are another high-risk area. Anonymity may be convenient, but you incur greater risk when you don’t do business face-to-face.”

Smart Business asked Mack about other emerging issues in money laundering.

What’s a simple definition of money laundering?

The conversion or transfer of property, knowing it is derived from a criminal offense, for the purpose of concealing or disguising its illicit origin, or of assisting any person who is involved in the commission of the crime to evade the legal consequences of his or her actions. Willful blindness is considered having knowledge in the U.S. courts.

Has it become more prevalent today?

The International Monetary Fund estimates the aggregate size of money laundering in the world could be between 2 and 5 percent of the world’s gross domestic product. Money launderers are always looking for new ways to launder their ill-gotten funds. Economies and countries with growing and developing economies but inadequate controls are especially vulnerable.

Why do companies need to be educated about this topic?

If you do business with a customer/client who is involved with money laundering, you are at risk of being involved in a money laundering investigation. If you are buying a company, money laundering could overstate sales or have a direct impact on the expenses. Crimes like this can infiltrate financial institutions, entwine businesses and acquire control of large sectors of the economy through investment, or bribes to businesses, public officials and governments. Money laundering can weaken the social fabric and ultimately decay the institutions of our society. In countries moving to democratic systems, this criminal influence can undermine the transition. Fundamentally, money laundering is linked to the underlying criminal activity. Willful blindness of entities/people who allow money laundering or turn a blind eye to it are often found to have knowledge in the eyes of the U.S. courts, hence criminal prosecution, jail time and hefty fines are the consequence of not being educated on this subject matter.

What are some of the newer things criminals are doing to launder money?

1) Prepaid cards are currently the most significant money laundering threat. There is an estimated $30 billion in payments going to Latin America from the U.S. each year alone. These are branded by AMEX, MasterCard, or Visa and operate like traditional credit or debit cards. These cards facilitate the cross-border movement of funds without a declaration requirement. The funds can be loaded anywhere in the world, there often is no maximum load limit, they can be used at ATMs, no bank account is needed and they can be activated online. 2) As mentioned above, virtual worlds on the Internet are high-threat areas. At sites like Second Life, users can buy and sell with money that can be ‘purchased.’ Activity is constant and unmonitored for the most part. Law enforcement has taken note as are these sites who are increasing their monitoring of the transactions. 3) ATM businesses that are also issuing agents of money orders are using their independent ATMs in these stores with illicitly derived cash and allowing launders to use the ATM instead of using a bank ATM. 4) Money services businesses. The USA PATRIOT Act of 2001 enhanced law enforcement organizations’ ability to combat money laundering through these businesses by amending federal statutes making it a crime to operate an unlicensed money service business under 18 USC Sect. 1960. Individual states have their own laws regarding licensure. Enforcement is trying to keep up.

How can a company protect itself?

Do proper due diligence on everyone you do business with. If you have any suspicions about a transaction involving a company or individual, protect yourself by anonymously filing a Suspicious Activity Report (SAR), and keep a copy for your own records should you ever be approached about the activity. You can download a SAR at the Financial Crimes Enforcement Network Web site at SARs can only be used by law enforcement for intelligence gathering and cannot be entered into a court of law.

THERESA MACK, CPA, CAMS, former Special Agent of the FBI, is senior manager, investigations, with Cendrowski Corporate Advisors LLC. Reach her at (866) 717-1607 or

If you’re preparing to buy, develop or alter property, take heed. It may not appear that wetlands exist on the land. But don’t be fooled; if wetlands are present it can take up to one year or longer to obtain a permit to fill them in and/or build upon them.

The first step is to engage a wetland delineation specialist who will determine if you do indeed have a wetland on your property. If so, the specialist will assess to what degree it will impact your project.

“Too often, owners and developers presume that permitting will take a few months, only to run into scheduling problems when all other phases are ready to go but the wet-land permit has yet to be issued,” says Ted Esborn, member of the business department and chair of the Environmental Law Section at McDonald Hopkins LLC. “Giving in to the temptation to proceed without the wetland permit (or in violation of its terms) can have dire consequences in terms of penalties, legal costs and extended project delays.”

Smart Business spoke with Esborn, who deals with numerous complex wetland compliance matters and other environmental law issues, about wetland development.

How did water become such a hot topic?

Until the Clean Water Act was passed in 1972, the Rivers and Harbors Act of 1899 was the primary federal legislation for the protection of our natural waters. Its aim was to protect waters for navigation and commerce. The Rivers and Harbors Act actually authorized the discharge of sewage into waters. Water quality was an afterthought because we assumed our freshwater resources were replenishable and sustainable.

What changed our thinking?

The realization that our freshwater resources did not have the capacity to accept unlimited wastes and remain sustainable. Commercial fishing declined. Industrial rivers caught fire. Lakes and streams were turning into open sewers.

How did wetlands become controversial?

Wetlands were once viewed as unproductive lands that served as habitats for disease-carrying mosquitoes and detriments to surrounding property values. However, in the 1970s, scientists began to realize that flooding increased and surface water quality declined in areas where wetlands had been.

Why are wetlands regulated?

The U.S. Army Corps of Engineers (USACE) and EPA share jurisdiction over the waters of the U.S. The USACE maintains ‘navigation’ jurisdiction, issuing permits for any proposed structures or filling affecting jurisdictional waters. The EPA maintains jurisdiction over water quality impacts caused by structures installed or filling activities.

Given the impacts that wetlands have on surface waters, the USACE and EPA consider wetlands to be part of the jurisdictional waters of the U.S. under the federal Clean Water Act and require a federal permit for any filling or building activities.

What constitutes a wetland?

Wetlands are determined by three factors: they must have hydric soils, wetland vegetation and soil saturation for at least five percent of the region’s growing period.

How does one determine whether the three factors for a wetland are met?

Owners should engage a wetland delineation specialist with specialized training in botany and geology to assess the three factors. Botany is critical because plant species typically determine the boundaries of a wet-land. Choosing an experienced specialist is important because he or she can resolve disputes quickly and save time.

Do all wetlands that meet the criteria require a federal permit from the USACE to either fill them in or place a structure in their confines?

Not necessarily. A wetland meeting the three criteria falls under federal jurisdiction if it has a hydrological connection to a surface water. But even if a wetland doesn’t have a hydrological connection to a surface water it may still fall under state jurisdiction as an ‘isolated’ wetland. Ohio and many other states require their own authorizing permits for impacts on isolated wetlands.

Why does it take so long to get a permit?

First, there is a dual-review process by both the USACE and the federal or state EPA.

Second, if a wetland under federal jurisdiction is not eligible for a USACE standard nationwide permit, then an individual permit will be required. Individual permits take longer to prepare.

Third, the USACE and EPA district offices have limited field personnel available to conduct ground-truthing site investigations of submitted permit applications and delineations.

Fourth, if the area might contain endangered species, a special survey may have to be conducted.

Fifth, mitigation arrangements must be established. If you eliminate a wetland, you have to replace it by creating a new one or by contributing to the enhancement of an existing one elsewhere.

The process can be very complicated, and even contested, so it’s best to start about a year in advance.

TED ESBORN is a member of the business department and chair of the Environmental Law Section at McDonald Hopkins LLC. Reach him at (216) 348-5735 or

Wednesday, 25 June 2008 20:00

Holistic assessment

An operational review is a powerful tool that offers insights into the way your organization really works on a current basis. More importantly, it shows you how well it is prepared to meet future challenges.

“The holistic approach — looking at the function of the system as a whole as a way of determining its impact on the efficiency of the parts — provides the basis for a blueprint to raise your organization’s performance to the next level,” says Harry Cendrowski, CPA/ABV, CFE, CVA, CFD, CFFA, the managing member of Cendrowski Corporate Advisors LLC.

“Operational reviews give you a comprehensive assessment of governance — defining expectations, granting power within the organization and giving feedback as to whether the job is being done the right or wrong way,” he adds.

Smart Business spoke with Cendrowski about what companies should expect from an operational review.

Of what benefit is an operational review?

The objective of an operational review is to help organizations learn to act, instead of just reacting to the challenges of growth and change.

Because the information provided is practical from both a financial and operational perspective, it leads to very practical recommendations to help a company achieve its goals. The review identifies the extent to which your internal controls actually work and enables you to identify and understand your strengths, weaknesses, opportunities and threats.

How does the process work?

Experienced teams interview and observe. Actually watching how employees carry out their responsibilities is a key part of the process. It also is important that the team gain the employees’ trust and confidence. In this regard, they must be assured that whatever they say will be kept confidential. Therefore, management must guarantee anonymity to anyone who offers critical information. Otherwise, employees will filter their responses and the data will be much less useful.

What are some of the areas of assessment?

Governance and ethical guidelines — Responsibilities, authority and the scope in which an employee has the freedom to act must be clearly defined and documented. Employees must actually have the authority to carry out the general responsibilities and specific tasks they have been assigned.

Strategic planning and tactics — Without clear strategic direction, there likely will be different expectations between ownership and management. The corporate structure must be designed to best leverage business and tax opportunities. Customer service standards must be clearly defined and understood by the employees, who must actually agree with them. You might be surprised to discover how often this is a problem.

Communication and reporting standards — If there is confusion in these areas, there could be lapses in internal controls, putting the company and/or its assets at risk. Reports must be useful, and the flow of information and how it is processed must keep pace with the company’s growth.

Contingency planning, testing and recovery — Contingency plans must not become outmoded. An organization must be really prepared to react to disruptions. This includes establishing a formal process to review transactions processing during both disruption and recovery.

Information technology (IT) and security controls — Every organization must have safeguards to ensure system transactions and information are restricted only to authorized users. Proper IT security policies must be in place and state-of-the-art protection techniques employed, with everything documented, periodically updated and continually monitored. Management’s objectives for protection and integrity of the data must be met.

What sort of report is presented?

It defines objectives, describes the current conditions in which those objectives must be met and recommends whatever changes are necessary. The plan has three levels of recommendations: one for executives, another for management and a third for staff.

The executive summary concentrates on strengths, weaknesses, opportunities and threats to the organization as a whole. It contains recommendations for any needed changes in policy or governance.

The management plan is based on employee feedback coupled with our expertise and includes areas of immediate improvement as well as suggestions of potential problem areas.

The staff report deals with nuts and bolts, like charting the hierarchy of the organization, and spelling out specific control objectives that are critical to the mission and to which personnel must pay close attention if they wish to engender both organizational and personal success.

HARRY CENDROWSKI, CPA/ABV, CFE, CVA, CFD, CFFA, is managing member of Cendrowski Corporate Advisors LLC, Bloomfield Hills. Reach him at (866) 717-1607 or or go to the company’s Web site at

Monday, 26 May 2008 20:00

Estate planning revisited

If you think estate planning is only for individuals with significant wealth or is just a strategy for tax savings, think again. “For the most part, everyone needs to have their estate planning in order,” says Deviani M. Kuhar, member of the estate planning and probate department of McDonald Hopkins LLC. “An estate plan doesn’t need to be highly sophisticated, and it may or may not involve trusts. At a minimum, almost everyone needs to make sure their beneficiaries are listed properly, that they’ve properly titled their assets, and that they’ve specified who the guardians will be for their children if they die and how their spouse’s and children’s needs will be provided for.”

Smart Business spoke to Kuhar about estate plans and how to put one in place.

Why is there a need for estate planning?

Estate planning encompasses many different circumstances, such as:


  • Couples who have minor children. Whether or not these couples have accumulated a lot of wealth, they still need to document who the guardian would be if they both die and how the children’s needs and education would be provided for. In most cases, parents will want to specify at what age the children can receive assets without any restrictions on how those assets can be used.



  • Children with special needs. Different types of trusts can be set up to meet the child’s needs if a parent(s) were to die. An important consideration is to ensure that access to any available government assistance would remain intact.



  • The desire to avoid probate. For those who want their families to avoid having personal information become public record, revocable trusts can be a good option. You can also avoid probate by making sure your beneficiary designations are up-to-date. How you title your assets determines who they will pass to. Most people still have the misconception that their wills determine what happens to their assets. Only if an asset is titled in your name alone, with no surviving owner or beneficiary designation, would it pass under the terms of your will and go through probate to reach your children or other beneficiaries.



  • Divorced individuals with children. If the children are minors, it should be determined who will be the guardian if the noncustodial parent cannot. Further, if either parent dies, are there enough funds available to make sure the children have basic needs and education paid for? Often, this involves more life insurance than is currently in place.



  • Second marriages involving children. Often, those in second marriages make sure their spouses are taken care of should they die, but also want assurance that their children will benefit, as opposed to the spouse’s children or other potential beneficiaries.



  • Business owners often don’t plan for what will happen to their business should they die. Consideration needs to be given as to whether their spouse or children should be involved in the business. Steps need to be taken to make sure the owner’s family will receive fair value for the business.


How can people plan for common situations?

Decisions involving minor children and naming guardians are often the most difficult ones for parents to make, but once they get beyond that, subsequent decisions tend to become easier. One of the best ways to make sure the children are taken care of financially is to establish a revocable trust. The trust can specify when children can receive assets so they do not receive them at too early of an age and you are assured your assets will be used to pay for their education and other needs. Another way to assure your children’s needs are met is to have plenty of life insurance. All too often, people don’t realistically assess how expensive it is to provide for children. There are also instances where there is no life insurance for a stay-at-home parent. If that parent were to die, the working spouse would need to factor in child care and other costs involved with running a household.

If a case involves a second marriage and children are involved, planning often begins before the marriage, starting with a prenuptial agreement, which ensures that if a person dies, his or her children will be entitled to the assets. A trust can be established to provide for a person’s spouse, but also to make sure that when the spouse dies, children from his or her previous marriage receive assets. Business owners often address their issues through the use of buy/sell arrangements and by making provisions in their estate planning documents addressing the distribution of their business assets.

At what point should you have an estate plan that considers federal estate taxes?

Individuals and married couples will want to consider federal estate tax planning when their assets or combined assets exceed $2 million. This is because individuals have $2 million that is exempt from federal estate taxes (this amount is scheduled to rise to $3.5 million next year and many believe that Congress will keep the exemption at this amount rather than allow the estate tax to be repealed just for the year 2010 and return to a $1 million per person exemption, as it is scheduled to do in 2011). With proper planning, married couples should be able to pass $4 million ($7 million next year) to their children or other intended recipients without incurring federal estate taxes. Without proper planning, that amount is often limited to $2 million ($3.5 million next year). Unmarried individuals also have options available to reduce their potential estate tax liability.

DEVIANI M. KUHAR is a member of the estate planning and probate department of McDonald Hopkins LLC. Reach her at (216) 430-2038 or

Wednesday, 26 March 2008 20:00

Eat right, work tight

Corporate wellness programs emphasize all the things we know we should be doing — eating right, exercising and not smoking. But why, specifically, is it in the employer’s best interest to promote smart eating habits among its employees?

“Productivity, absenteeism, morale, retention, recruiting — all of these things can be linked back to corporate wellness,” says Cheryl A. Houston, Ph.D., RD, LD, associate professor and director of the dietetics program as well as the chairperson of the department of human environmental sciences at Fontbonne University.

“There have been many general studies on the benefits of wellness programs over the last five to 10 years,” Houston says. “One of the key findings is the improvement on absenteeism rates. Companies with organized wellness programs — i.e. weekly supervised exercise — have reported a reduction of 4.8 days of sick time per employee per year. Additionally, one company realized a 68 percent improvement in days lost to disability following the implementation of a rehabilitation program for post-coronary patients.”

Smart Business asked Houston how food fits into the overall wellness picture.

What factors tend to set off poor eating habits among employees?

Stress is probably the No. 1 factor. Today’s workers have a great deal of stress, not only on the job but at home, as well. Many employees are caring for both children and aging parents. The insanity of our schedules makes it difficult to be 100 percent ‘present’ while we are at work. Technology has also created stress. Everyone expects access to you 24-7. Work never really ‘ends’ — or at least our minds are on work well into the night. This is emotionally and physically draining. As a result, people are irritable, getting headaches, suffering from mental confusion and impaired decision-making ability. All of these factors will have many long-term consequences on a person’s health. Good nutrition helps buffer these negative effects.

What can a company do to reduce stress?

Examine your own corporate culture. Do you tell everyone to take a lunch break, but then your managers don’t? Do you give the impression that your top people ‘are at it’ 24-7-365? If so, then you’re not modeling healthy behavior. Another thing you can do is ask your employees how you can help them. For example, maybe you’ve been thinking of offering a smoking cessation program — but only 10 percent of your workers smoke. On the other hand, 80 percent are overweight and would really like resources to help them lose weight. Identify the interest and the risk to tailor your programs appropriately.

How can companies create a healthier environment overall?

Studies show that there are a number of things you can do. Some suggestions are:

  • Offer some type of health education to increase employees’ awareness of health and wellness.

  • Provide a supportive social and physical environment. In his book ‘Mindless Eating: Why We Eat More Than We Think,’ Brian Wansink, Ph.D., explains how dramatically our environment influences what we eat, how much we eat and how quickly we eat.

  • Provide healthy options. Make sure you have wholesome food on hand at meetings and in the cafeteria, where it should taste good and be priced reasonably.

  • Integrate health into the corporate culture as an element to be valued. Link wellness to employee assistance programs. For example, if someone is dealing with divorce-related stress, help him or her maintain healthy eating habits during the process.

  • Conduct health risk appraisals, which give you tangible information to work with so you can provide the right types of targeted information focused to your employees.

What can an employer do for a person with special nutrition-related needs?

Let’s consider a person living with diabetes. A fluctuating schedule totally disrupts someone who is trying to manage a chronic condition. These employees need some degree of autonomy — the ability to start and stop work on their own — so they can check their blood sugar level when they need to, etc. And they should have a clean, private place to attend to their health needs — not be expected to do so in the company bathroom. The same goes for nursing mothers. Why would they want to risk contaminating their baby’s milk in a public restroom?

How should these efforts be driven through the organization?

Human resources is often thought of first, and that’s a good place to start. But it’s important to know that a wellness program does not have to be expensive; there are many free or low-cost programs available in the community. Universities are always looking for partnership opportunities where students can be brought in to speak, conduct brown-bag luncheons, do screenings, etc., all under supervision while they learn. Students in programs, such as dietetics, occupational and physical therapy, nursing and other related areas, all need these types of real-life experiences. You can also go to Web sites for organizations such as the American Dietetics Association and the American Heart Association, which will help you identify free programs and speakers.

CHERYL A. HOUSTON, Ph.D., RD, LD, is associate professor and director of the dietetics program as well as the chairperson of the

Wednesday, 26 March 2008 20:00

ESOPs and exit strategies

You’ve worked hard to build your business, and now it’s time to think about the future. Don’t let yourself get backed into a corner and have to sell your business in a pinch. Why not consider selling it to your employees by setting up an Employee Stock Ownership Plan (ESOP)?

“Recent surveys indicate that some 60 percent of business owners lack a succession plan,” says Carl J. Grassi, president of McDonald Hopkins LLC. “That’s worrisome because it’s important to devote time and attention to building your graceful exit.”

An ESOP is a qualified retirement plan that allows you to sell your business to your employees. It is designed to invest primarily in the employer’s stock. ESOPs are often used as vehicles to obtain financing for the buyout of shares from existing shareholders on a tax-advantaged basis.

Smart Business asked Grassi why business owners should consider an ESOP.

How do you determine if an ESOP is the right fit for your business?

Ideally, an ESOP candidate is a corporation that has sufficient debt capacity; a history of dependable, positive cash flow, usually in a business that is not overly cyclical; a strong management team; and culture that promotes employee ownership. Also, it is important that the company have relatively low employee turnover and sufficient annual payroll to take advantage of the tax benefits associated with an ESOP.

How does the process begin?

The business should consider an ESOP feasibility study. The results of that study will help the company decide whether to proceed.

What are the tax incentives of an ESOP?

If, after the transaction, an ESOP owns at least 30 percent of the outstanding stock of the corporation, and proceeds received by selling shareholders are rolled over into ‘qualified replacement property,’ the federal income tax realized from the sale by a selling shareholder can generally be deferred — this tax benefit does not apply to an S corporation. The corporation will get a tax deduction for the interest paid to the lender and for an amount equal to the principal repayments, generally not in excess of 25 percent of the eligible compensation of ESOP participants. In an S corporation, whatever percentage an ESOP owns, that is generally the percentage of the company’s taxable income not subject to federal income tax.

How can a selling shareholder properly take advantage of the income tax deferral?

To take advantage of the income tax deferral, the proceeds received from the ESOP must be reinvested, generally within 12 months of the sale, in qualified replacement property, which I briefly mentioned. Qualified replacement property includes stock or securities generally issued by a domestic operating corporation. Reinvestment in shares of a mutual fund or government securities does not qualify as replacement property. Interest or dividend income on replacement securities will still be taxed when received. The gain previously deferred generally will be recognized when the replacement property is sold. Some shareholders may not be eligible for this income tax deferral treatment.

What are the benefits to other shareholders?

An ESOP may alleviate or limit the need for insurance on the selling shareholder’s life, establish the vehicle for future sales of additional stock of the corporation, and relieve remaining shareholders and the corporation from the requirement of buying out selling shareholders’ shares upon their death. Depending on the percentage of the ESOP’s ownership of the corporation, the remaining shareholders may still control the business.

What are the benefits to the corporation and employees?

The ESOP provides a tax-advantaged financing vehicle to buy out the stock of a selling shareholder. The effect of an ESOP transaction is that the interest and principal payments by the corporation on the bank loan to fund its loan to the ESOP are usually fully tax deductible. Accordingly, the corporation is able to fund the buyout of a selling shareholder with pretax dollars as opposed to after-tax dollars. For employees, an ESOP can provide a significant stock-based, incentive-oriented retirement plan benefit. Employees will share in the equity growth of the business.

What about potential drawbacks?

The shares sold to the ESOP must generally be held by the ESOP for three years to avoid an excise tax. ESOPs of S corporations that have relatively few participants are restricted in allocating stock or synthetic equity to certain persons. ESOPs may be too expensive for small companies. Setting up an ESOP is complex, and you have to take a close look at debt financing and all the various requirements related to the tax treatment.

CARL J. GRASSI is the president of McDonald Hopkins LLC. Reach him at (216) 348-5400 or

Friday, 26 October 2007 20:00

Disease management programs

Disease management programs can help employers improve the health of their employees, reduce absenteeism due to illness and hospitalizations and save on premiums costs. While disease management has been a health care industry concept for approximately 10 years, programs continue to gain momentum with each passing year as health care costs continue to rise.

“One of the barriers with disease management in the past has been that employees have not become engaged until they actually have a problem,” says Marlen Rodriguez, RN, BSHSA, CCM, director, Care Management, AvMed Health Plans. “Today, the trend is to be more proactive in order to prevent problems from occurring in the first place.”

Smart Business asked Rodriguez to explain how disease management programs work.

What areas do a disease management program encompass?

Disease management is a collaborative process integrating health care resources, management, finance, and high-quality service and care delivery. AvMed Health Plans recently changed its structure to a ‘care management’ approach, providing four components: disease management programs, complex case management, catastrophic case management, and specialized care management focused on high-risk conditions.

How does the health plan provider work with the employer?

The provider may work with a group to identify its specific needs depending on its size and demographics. The population is analyzed to identify its areas of risk. Take the example of an automotive repair company. The population is generally comprised of males, age 25 to 40, with risk factors such as coronary artery disease and high blood pressure. Because we know that, we can help the employer educate its work force about wellness programs specifically focused on those areas.

How does the health plan provider assist employees who need services?

There are dedicated medical directors/advisers who provide support to the programs. Employees get assigned to care coordinators who work with and educate them by phone. These care coordinators work with the employees’ health care providers to develop care plans. The frequency of contact depends on the employees’ needs. It may be weekly for a period of time, then monthly, then quarterly. During this period, they are receiving information about their condition, oftentimes in ‘pieces,’ so as not to overwhelm or confuse them. If the employee has asthma, for example, he will receive information about medication, triggers, what he can do to prevent attacks by altering his home environment, etc. In the future, we will also see more communication via the Web in addition to telephone contact.

What are some of the barriers involved with reaching out to employees?

Some employees may feel a bit threatened. For example, they may not want their employer to know they have a certain condition. Others may not be ready to engage in their health care. We reassure them by providing information. Others face time constraints, such as obtaining time off work to get necessary lab work, etc. We coordinate care to make it easier for them. Interventions to assist members are all different, but the main component is ensuring that they have all the tools they need to manage their disease. For example, we make sure diabetics have all the insulin strips and supplies they need. If the member has asthma, perhaps we arrange for a respiratory therapist to check his or her home for environmental triggers. In all cases, education is the key.

On what areas are the programs focused?

They may include areas such as asthma, coronary artery disease, diabetes, heart failure, end-stage renal disease, wounds, oncology, high-risk maternity, complex cases of multiple trauma, two or more hospitalizations within 90 days for related diagnosis (readmissions), AIDS (needing treatment beyond oral medications), home health care (i.e., members with complicated, extensive and/or high-cost services), neonates with complicated medical conditions, ventilator-dependent members at home, hospice, members leaving facilities against medical advice (AMA), ER services (three or more encounters within 12 months) and catastrophic cases.

What does the future hold?

The industry is increasingly using technology to identify members early in their condition in order to empower members to make lifestyle changes. We need to start early and work with employer groups to create wellness programs focusing on smoking cessation, weight loss and increased activity in order to improve the health of our work force, thus preventing future chronic conditions. Basic lifestyle changes will make a major impact going forward.

MARLEN RODRIGUEZ, RN, BSHSA, CCM, is director, Care Management, AvMed Health Plans. Reach her at (305) 671-4702 or

Sunday, 26 August 2007 20:00

Employee wellness programs

Organizations that value and promote a healthy lifestyle may have an edge when it comes to attracting and retaining key people. In addition, their employees may be more alert and more productive.

“In these organizations, we also tend to see better employee morale, says Nancy Zimmerman, Well Workplace coordinator, AvMed Health Plans. “A healthy lifestyle impacts every part of the day-to-day work environment. Workplace wellness programs translate into fewer injuries, less human error and a more harmonious work environment.

“A good workplace wellness program will also help reduce stress, which has been called ‘the 21st century disease,’” she adds. “A large majority of workers complain that their job is stressful — a problem that affects all levels within an organization.”

Smart Business asked Zimmerman how wellness programs can contribute to a healthier work force and lower costs.

How does having a wellness program keep costs down?

For well over a decade, research has showed the effectiveness of workplace wellness programs. For every dollar spent on a corporate wellness program, the returns have been cost savings of between $2.30 and $10.10 in the areas of decreased absenteeism, fewer sick days, reduced workers’ comp claims, lowered health and insurance costs, and improvements to employee performance and productivity.

What types of wellness programs can be implemented?

A comprehensive wellness program involves all employees, deals with all major health risks, offers choices, targets both the employees and the worksite environment and provides periodic evaluation of its results. A comprehensive program emphasizes follow up and offers support for the employees.

Though many types of screenings can be done at the worksite, the most common is heart health. The screening should include blood pressure measurement, cholesterol/HDL-cholesterol, glucose (blood sugar) and body weight. Also, educational materials specific to diet, nutrition, exercise, cholesterol, smoking and weight management should be available. The health professionals conducting the screenings should provide consultation and help set individual goals with the participants.

A Health Risk Appraisal (HRA) should be used in conjunction with the health screening, which will ensure accuracy of the clinical answers. An HRA is a computerized or paper assessment tool, which looks at an individual's family history, health status and lifestyle. An HRA can identify precursors associated with serious illness and quantify the probable impact for each individual. It also provides recommendations and indicates what risks are modifiable. One of the big benefits of this tool is that it can provide aggregate group data of a company that can be used as an evaluation tool.

Once the aggregate data is assessed, implementation of programs can begin. For example, if the report reflected that 60 percent of employees are in a prehypertensive state, then follow up with blood-pressure-specific information and repeat screening is recommended, along with nutrition counseling.

Also, the HRA report will tell the employer about the fitness levels of their employees. If the levels are low, then that can contribute to risks for a number of illnesses. In that case, a walking program, adding a fitness center or membership or bringing a personal trainer to administer a fitness program would be recommended.

In general, how do employees react to wellness programs?

Most employees react well to the concept and take the screening and HRA feedback very seriously. The employees feel good that their organization is concerned about their general health and well-being.

Unfortunately, that’s where a majority of employees end their participation in wellness programs. That’s the challenge: to maintain their interest. Wellness is interesting because it is about a serious subject — a person’s health — yet, it is supposed to be fun. Most people react well to incentives, such as raffles. While many would rather have you raffle items such as a TV or cruise, offering prizes such as healthy items or gift certificates to healthy eating establishments will keep the focus on wellness.

There is a trend, though — call it a second wave of the wellness revolution: employers rewarding healthy employees who participate in wellness programs with lower premiums. The ‘if you don’t play, you pay’ theory is catching on around the country, mostly in larger employer groups.

How can top-level management encourage employees to take advantage of wellness programs?

It is imperative that all of this come from the top. The buy-in must be complete to be successful. This includes giving employees time off of work to participate in these programs. If upper management starts working on ways to make a healthier lifestyle easier to achieve for employees — and consider tying premiums to that healthier lifestyle — then there is a chance to have a happier, healthier work force.

NANCY ZIMMERMAN is Well Workplace coordinator, AvMedHealth Plans. Reach her at (904) 858-1302 or