As the economy begins to improve, with increasing sales and corporate profits gaining some momentum, now is a good time for companies to consider directors and officers liability insurance to help secure their growth.
Smart Business spoke with Philip K. Glick, senior vice president at ECBM and a registered professional liability underwriter, about some issues companies should be addressing in this area.
Are you seeing a growth in claims?
Mergers and acquisitions and other business combinations have begun to increase. This activity has resulted in more directors and officers liability claims brought by disgruntled shareholder groups that question their buyout’s valuation. Also, if a merger or acquisition falls through, one or both parties may file a claim against the other for breakup fees or other damages.
In addition, the number of wage and hour claims filed by current and former employees continues to increase. These claims involve a range of allegations, including failure to pay overtime; failure to pay for break periods; failure to pay for the time involved in getting in and out of uniforms; and failure to reimburse employees for the cost of uniforms and other job-related expenses.
With more litigation, are there changes in the directors and officers liability market?
As a result of litigation trends and the overall tightening of the property and liability insurance marketplace, renewal premiums are increasing by 8 to 10 percent for directors and officers liability, including employment practices liability. Companies with recent claims face larger increases.
Insurance companies also are restricting coverage terms and conditions offered. With respect to employment practices liability, often written as a part of directors and officers liability coverage, many insurers are eliminating coverage for wage and hour claims — even for legal defense costs routinely covered in prior years. Some insurers may be willing to provide a sub-limit for these costs.
Carriers are eliminating coverage for claims brought by former directors or officers against the company, even if they haven’t been with the company for years. Examples include failure to pay post-termination benefits or cheating a former shareholder out of the real value of prior stock holdings upon the company’s sale to a third-party buyer today. These restrictions might be changed with a carve back only excluding claims if a former officer/director has been gone less than two or three years.
Are coverage extensions or improvements available to broaden your coverage?
Even with market tightening, the directors and officers liability marketplace remains competitive with many coverage enhancements available, if specifically requested. For example, the cost of legal defense is often included in the policy limits, but many insurers are willing to provide an extra limit of coverage for defense of claims, if the overall policy limit has been used up by the payment of awards.
Some insurance companies also provide an ‘excess side A’ limit of protection, giving additional coverage to individual directors and officers in the event claims against the company have used up policy limits. It’s an extra level of protection to insulate personal assets from third-party claims.
Another expanded coverage involves the selection of defense counsel. Traditionally, smaller private companies’ coverage was written on a ‘duty to defend’ basis where the insurance company appointed defense counsel for claims. Today, carriers may allow the insured to get approval for their own counsel choice, or to select counsel from a preapproved list.
Many insurers are offering directors and officers liability in combination with other specialty coverages, such as employment related practices, fiduciary liability and crime insurance, under an overall blanket professional liability menu of coverages. This can be subject to an overall shared aggregate limit for all claims or separate limits of protection for each part. Blanket coverage costs less and has broader terms and conditions than separate policies.
Insurance companies also are willing to provide coverage for potential whistle-blower claims in which current or former employees allege the company violated laws involving government-funded contracts.
Philip K. Glick is a senior vice president and registered professional liability underwriter at ECBM. Reach him at (610) 668-7100, ext. 1310, or email@example.com.
For more information about risk management, visit ECBM's blog.
Insights Risk Management is brought to you by ECBM
Wouldn’t it be great if every day we woke up and all was good in the world — no poor or mediocre operating results, no people issues, no customer or supplier issues, no worries.
Unfortunately, that is not the world we live in today. The most successful companies and their leaders have one thing in common — they are effective in dealing with difficult decisions that can have profound results.
“Many people can identify what should be done, but not everyone is courageous enough to act,” says Stephen W. Christian, managing director at Kreischer Miller.
Smart Business spoke with Christian about the obstacles to dealing with troubling issues and a path toward more effectively resolving them.
What are some of the toughest decisions facing executives?
Without a doubt, people issues are most prevalent. Examples include investing in strategic hires, counseling poor performers and retooling the organization chart. Other areas that often result in decision paralysis include investing in equipment or a physical plant, exiting or entering geographic regions, and walking away from a customer or service line.
Why is it important to quickly and effectively deal with tough decisions?
Decisions are required every day, some routine and some critical. Managers make routine decisions, but leaders make the critical ones. Effectively tackling performance and strategic issues guides our future and puts us on a path toward success. As leaders, we have people watching us and counting on us to do the right thing for the organization. We may be the owners or top executives, but our team members’ livelihoods depend on us effectively dealing with tough decisions.
What gets in the way of addressing difficult business issues?
Unfortunately, there is no shortage of reasons to ignore or postpone important actions. A day becomes a week, a week becomes a month, a month becomes a year, and before we know it, a decision we knew was necessary never takes place. Some reasons for this are lack of accountability, uncertainty about what we are trying to accomplish, fear of failure, worries about short-term consequences, failure to embrace the opportunity and concerns over what others might think.
What puts executives in the best position to make timely and effective decisions regarding complex and difficult matters?
Successful leaders utilize a variety of techniques to ensure they resolve difficult decisions. These techniques include defining the discrete decision at hand — focusing on the issue, not all the noise surrounding the matter; outlining the opportunities arising from the action; and defining the costs, both monetary and process change related.
From there, a plan of action is determined and commitment to a time frame is established. Along the way, seek the counsel of those whose judgments you trust to validate the plan and remind yourself that the goal is to advance the cause of the organization. There are no risk free, perfect answers.
Can you read a book to become a better decision-maker?
What you can read in a book are techniques to overcome obstacles and reinforcement of the importance of making effective decisions. The ability to actually effectuate what you know should be done comes from your inner being. Remind yourself that successful companies are led by people who identify critical issues, take risks, are decisive and accept responsibility. Action is what it is all about.
The world is full of people who understand what the issues are. Not all of them have the skill to determine the solution to a problem, and even fewer have the ability to effect and sustain change.
Stephen W. Christian is a managing director at Kreischer Miller. Reach him at (215) 441-4600 or firstname.lastname@example.org.
For more governance and leadership topics, check out the Center for Private Company Excellence blog.
Insights Accounting & Consulting is brought to you by Kreischer Miller
The restaurant and bar industry is highly competitive, and many owners struggle every day to stay in business. The right technology can help restaurants and bars gain an edge, while improving back-office operations and guest experience.
Recently, Comcast Business conducted a poll of LinkedIn members in the hospitality industry. Of the more than 700 respondents, 31 percent said technology was setting them up for success, the second-highest response.
Smart Business spoke with Kevin Conmy, regional vice president of business services at Comcast Business, about how technology and the Internet can be the keys to evolving a restaurant or bar from struggling to thriving.
What technology is driving new efficiencies for back-end operations?
Multiple generations often operate family-owned restaurants and bars. Older-generation owners may prefer traditional, paper-based methods to take customer orders, track time and inventory, and pay employees. However, these businesses often lose money without understanding why.
Fortunately, many software packages and systems are specifically designed to bring the business a level of automation and help operations run more smoothly. Owners can automatically re-order items when supplies get low with real-time inventory management systems, preventing shortages of key ingredients and minimizing over-ordering. They can order food and make supplier payments directly online, making accounts payable faster and easier. Online time cards and schedule management software can improve employee management and allow servers to log in to a secure site to see their schedules with updated changes. The system can deliver announcements to quickly communicate important information, such as menu changes, to the entire staff.
Technology also allows tablets and other mobile devices to send orders immediately to the kitchen. Orders move faster with fewer errors.
How can owners improve guest experiences?
Consumers today are constantly using their smartphones, tablets or laptops. They want a fast connection to watch videos, update social media accounts or do a live video chat right at the table. Restaurants and bars can differentiate themselves with fast wireless Internet service. Having a sign that says ‘We have Wi-Fi’ brings people in and keeps them coming back. To support this, you must have a high-capacity connection out to the Internet that supports the Wi-Fi network.
Technology is also transforming how guests order and pay with tableside touch-screens. One-click ordering leads to more food and drink orders. The bill payment delivers tips directly into a server’s account.
How does cloud technology help restaurant and bar owners?
Many of these technology solutions are stored and operated ‘in the cloud’ so owners simply pay for the service and log onto a website to access the software. Then, there is no need to upgrade software or keep a server on site. Plus, the system can be accessed from any Internet connection, allowing owners to keep eyes on their businesses whenever or wherever. They also don’t have to be technology experts to use these tools, freeing up more time to manage the restaurant or bar.
And with data stored elsewhere, owners don’t have to worry about losing information because of a technical issue, theft or fire/flood damage.
However, the key to cloud-based systems is access. Businesses need fast, reliable Internet access to get online, so cloud-based systems work quickly and reliably.
What are the first steps to getting started?
Restaurants and bars need to start planning now to shift to technology-based systems and amenities. First, stay ahead of the bandwidth curve by ensuring you have a fast enough Internet connection to meet your needs today and tomorrow. Once you have a high-speed network connection out to the Internet, you can purchase cloud-based software systems or Wi-Fi access points.
Business owners also might consider bundling Internet, phone and television with one provider, so there’s only one place to call for assistance, and one bill to pay.
To enjoy the benefits of these technology tools, restaurants and bars need to embrace them now, or risk being left behind.
Kevin Conmy is a regional vice president, Business Services, at Comcast Business. Reach him at (215) 642-6457 or email@example.com.
Learn more about Comcast Business solutions or contact your local account executive.
Insights Telecommunications is brought to you by Comcast Business
Reducing your above-the-line income is a smart strategy this year as higher tax brackets go into effect.
Monic Ramirez, CPA and senior tax manager at Sensiba San Filippo LLP, says there are several income thresholds that should be managed, and planning should start now in order to avoid costly financial errors at the end of the year.
“Reducing above-the-line income will minimize the effects of the higher tax brackets and maximize the tax savings from deductions,” Ramirez says.
Smart Business spoke with Ramirez about strategies to implement immediately to position yourself for a more favorable tax bill in April 2014.
What are strategies for utilizing savings plans?
I advise clients to maximize their contributions to tax savings and retirement vehicles such as 401(k), 403(b), 457 plans, 529 plans, health savings accounts, simplified employee pension plans and Keogh plans. This year, high income earners who do not implement strategies to maximize their retirement and health savings plan contributions will be taxed on that lost benefit at a much higher rate.
Individuals and their tax advisers should revisit their decisions to contribute to a traditional versus Roth retirement plan. Distributions from Roth IRAs and Roth 401(k) plans are not subject to regular tax or the Medicare investment tax and, therefore, are a more attractive retirement savings vehicle for many individuals. However, if hovering around the threshold for the new Medicare tax, consider moving Roth contributions to a traditional retirement plan to create a tax deduction.
How will the tax increases impact planning for capital gains?
All capital gains are subject to the new 3.8 percent Medicare investment tax. Although long-term capital gains still maintain their preferential rates, high income earners received a 5 percent rate increase on those long-term gains on top of the 3.8 percent tax. Even worse, short-term capital gains are also subject to higher ordinary income rates.
By working with your adviser, you can better manage your tax rates on capital gains. There are tax deferral mechanisms that should be considered, such as a Section 1031 exchange or an installment sale.
An installment sale will spread the gain over several tax periods in order to minimize or entirely avoid the Medicare tax on investment income. Taxpayers should also consider realizing losses on existing stock holdings, while maintaining their investment position by selling at a loss and repurchasing at least 31 days later or swapping it out for a similar, but not identical, investment.
What other tax saving strategies should be discussed with your financial adviser?
In light of recent tax developments, it is important for individuals to work with their financial adviser to build a highly customized tax plan. Plans may include:
- Strategies to avoid at-risk limitations on flow-through investments. If a loss has been incurred, make sure it’s deductible.
- If self-employed, consider any capital expenditures that will be needed in the coming year. Favorable Section 179 deductions and bonus depreciation have been extended through the end of 2013 and can be used to minimize the impact of the new Medicare taxes.
- Consider moving investments into tax-exempt vehicles, such as municipal bonds, to avoid the Medicare investment tax.
While it might seem as if it’s a bit early to start tax planning, right now is the most important time to think about taxes because it may be too late to enact some strategies in December.
Monic Ramirez, CPA, is a senior tax manager at Sensiba San Filippo LLP. Reach her at (408) 776-8900, ext. 5524, or firstname.lastname@example.org.
For more tax planning tips, visit Sensiba's blog.
Insights Accounting is brought to you by Sensiba San Filippo LLP
The 2013 Innovation in Business honorees demonstrate vision, perseverance and the power of follow-through
There are those who would argue that innovation arises out of necessity — a result of such things as sagging sales, increased competition or challenging economic times. But the honorees of this year’s Smart Business Innovation in Business Conference demonstrate that the impetus for innovation does not need to be a reactive one.
This year’s class is dominated by manufacturers — eight of the 10 2013 honorees. Rounding out the group are a higher education institution and a venture capital/commercialization firm.
Of the honorees, several have developed dedicated innovation teams that are devoted to rooting out ideas wherever they originate. Most have designed detailed processes to test new ideas and bring them to market. Others have devoted themselves to research and discovering breakthrough technologies in the health care industry. One of this year’s honorees manufactures interactive science and nature products for kids. And yet another developed the next generation of LED lighting fixtures for the U.S. Navy.
We’ll be recognizing this impressive group of organizations and individuals on Sept. 24 at the 2013 Innovation in Business Conference, where they’ll be honored for their commitment to continuous improvement and refusal to rely on past success.
As part of the celebration, the theme for this year’s panel discussion is “Turnarounds & Transformations,” and we’ll present an insightful conversation with three executives who have been catalysts of change.
■ Steven Demetriou, chairman and CEO, Aleris International Inc.
■ Robert Lee, principal, BLee Capital LLC and former CEO, Swiger Coil
■ Bob Cohen, founder and president, Centrus Group Inc.
We’ll discuss how to rediscover your true north, and why change is imminent no matter what industry you’re in or how much market share your company owns.
You’ll walk away from this event energized — not just by hearing the stories of our winners and speakers, but by also recognizing how and why innovation can be a powerful tool for any organization, no matter the industry or size. ●
Here are this years honorees:
Dr. George Newkome
Vice president for research
Dean of the University of Akron Graduate School
President of the University of Akron Research Foundation
Thanks to the efforts of Dr. George Newkome, vice president for research and dean of the University of Akron Graduate School, the university now offers a library of thousands of resources to hundreds of Northeast Ohio polymer companies.
But that’s not the only thing that makes him a visionary. It’s that he has been able to repeat visionary projects over and over throughout his career. He is consistently asking what he could do to make the path easier for others.
One of Newkome’s first activities at the University of Akron was to work together with Barry Rosenbaum, then technology director at Omnova Solutions, who helped to identify opportunities for shared services between industry and the university.
Omnova Solutions Inc., the Goodyear Tire and Rubber Co. and Exxon Mobil Corp. all had libraries of polymer books and journals, but had duplicative facilities and staff. Newkome proposed that each company donate its library to the University of Akron so publications could be managed at a central location. This ensured superior service and opening the library to polymer companies.
While at the University of South Florida as vice president for research, Newkome founded dozens of innovative and collaborative programs to benefit the University of South Florida and Tampa. Research funding grew from $22 million in 1986 to $184 million in 2001.
In just a little more than a decade at the University of Akron, Newkome, who is also president of the University of Akron Research Foundation, has led growth in research expenditures from $24 million in 2001 to $58 million in 2012 and fostered the formation of 116 active sponsored research projects.
How to reach: University of Akron Research Foundation, (330) 972-7840 or www.uakron.edu/research/uarf.dot
Material development engineer
Food and beverage segment manager
After listening to a number of customer concerns about keeping their food and beverage manufacturing facilities clean, TPC Wire & Cable Corp.’s research and development team — led by Todd Hadbavny, product manager; Keeley Schneider, material development engineer; and Jay Hathaway, food and beverage segment manager — had a flash of insight.
Antimicrobial products have been around for years, most commonly found in household cleaning products — soaps and lotions — as well as in hospitals and other medical facilities.
But the bacteria, fungus and mold that grew on machinery, cables, floors, walls and other equipment were a real hazard. As a supplier of industrial cable, TPC focused its mission on how to use antimicrobial technology as it applied to electrical cable.
The solution was to develop its industrial cable product, Defender, to contain a silver ion-based additive in the jacket. Silver ions attack the cell wall of the microbe, destroying the microbe’s outer defense system within a few hours.
In addition to antimicrobial properties, Defender cable was designed to be flexible. Its small diameter makes it able to fit through tight spaces. The cable can withstand extreme temperatures, harsh chemicals, oils and acids while providing long-term, broad-spectrum protection from bacteria, mold and fungus.
Despite the obvious health benefits the antimicrobial cable provides, it also offers a money-saving solution for its customers. If an inspection by a health department or agency reveals microbial growth, it can lead to fines and possibly a shutdown while the cable is replaced.
Geoff Thrope, CEO of NDI, has founded four unique medical device firms — and hopes more will follow. From Medstim, to Checkpoint Surgical, to SPR Therapeutics and Deep Brain Innovations, Thrope has solidly landed the position of being a leading entrepreneur in the field of neurostimulation.
With more than 30 years of experience, including 15 years in academic research before joining the industry, he is helping make Cleveland an intellectual hub for neuroresearch worldwide. Thrope also is a managing director of the NDI Healthcare Fund, a venture fund focusing on investments in the neurodevice industry.
Thrope’s first company was Medstim, which developed an implanted device to deliver electrical stimulation to nerves that control bladder function, thereby addressing incontinence problems.
Medtronics purchased Medstim in 2008 but Thrope quickly followed that sale by launching Checkpoint Surgical. Checkpoint is a device designed to locate, evaluate and preserve nerves and muscles in surgical procedures for more successful patient outcomes. It is becoming the “standard of care” in many nerve protection cases and was even correctly used on an episode of “Grey’s Anatomy” on ABC-TV.
The third company Thrope helped develop was SPR Therapeutics. It focuses on pain management with its peripheral nerve stimulation products for treating pain.
The fourth company is Deep Brain Innovations. This company is focused on the treatment of people afflicted with Parkinson’s disease. Clinical tests have produced some dramatic results.
Thrope continues to address significant unmet health conditions, improve patients’ lives and provide significant returns to investors.
How to reach: NDI, (216) 378-9106 or www.ndimedical.com
President and CEO
Changing the fry oil in a restaurant is the last thing anyone wants to do. It’s hot and dirty, and you could get hurt handling it. That’s why Frontline International took up the challenge of finding a safer alternative.
While maintaining the fryer is considered the worst job in the kitchen, and may be the greatest source of the revolving door of entry-level hires in restaurants, any interaction with a fryer can also be quite dangerous. Slips and falls are the leading cause of foodservice accidents, followed by burns.
So finding a solution made sense, not only to reduce the hazard, but also to involve the emerging biofuel industry and other secondary markets that use fry oil.
Frontline, under the leadership of president and CEO John Palazzo, developed Smart Oil Management, which, in a nutshell, is plumbing for oil.
Boxed or bulk oil is plumbed to the existing fryer, which in turn is plumbed to a waste oil holding tank. The system is electronically monitored with sensors to ensure that alerts are sent regarding system status — such as how full the tank is or how often fry oil is being changed.
Convenience is added with a “faucet.” With a push of a button, fresh oil flows to the fryer. To empty the fryer, it’s a similar process: push a button, and filtered waste oil flows to the waste tank.
Frontline has won the prestigious National Restaurant Association’s Kitchen Innovations Award for two consecutive years.
How to reach: Frontline International, (330) 861-1100 or www.frontlineii.com
Energy Focus Inc.
You could say Energy Focus Inc. has a bright idea — but that would only be part of the story. Thanks to a process it adopted to go through the expensive and time-consuming steps to obtain a patent, and by following a unique methodology, EFOI is able to protect the advanced technology and ideas that go into its lighting products, allowing the company to innovate the LED field.
When the U.S. Navy recently contracted with EFOI for LED lighting, a portion of the order was for LED fixtures already qualified and manufactured at EFOI. But the remainder required a solution to a legacy 2-foot fluorescent fixture with more than 1 million lamps in total, which is the major general shipboard lighting fixture for the fleet.
EFOI then developed the M1 IntelliTube. A cross-disciplinary team lead by Roger Buelow, CTO, worked almost exclusively for months on the challenges to meet strict military standards.
The success of the M1 IntelliTube and the contract means that 7 percent of the U.S. fleet will now use LED lights. This will save the Navy 1.8 megawatts in power, which translates into 1 million gallons of diesel fuel per year.
In addition, the M1 IntelliTube allows for a 40 percent reduction in total ownership cost over the fixture’s lifetime by eliminating the maintenance/storage burden.
The next step is to supply the rest of the fleet with LED solutions, increase EFOI’s LED military product line, and penetrate emerging markets like the Navy support fleet and ally navies.
How to reach: Energy Focus Inc., (440) 715-1300 or www.energyfocusinc.com