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New Global Study Finds Companies Advanced in Social Business Actively Leveraging Social Data

July 28, 2014 Comments off

New Global Study Finds Companies Advanced in Social Business Actively Leveraging Social Data
Source: Deloitte/MIT

New research released today by MIT Sloan Management Review and Deloitte reveals that nearly two thirds of surveyed companies around the world find social business initiatives —including social media, social software and social networks—are positively impacting their business outcomes.

The report, Moving Beyond Marketing: Generating Social Business Value Across the Enterprise, based on a global survey of more than 4,800 business executives across 26 industries and 109 countries, found that the level of value companies achieve is related to their social business “maturity.”

Respondents who rated their companies further along the social maturity scale were more likely to report their companies practice the following:

  • Apply social business data in the decision making process: Nearly 80 percent analyze social data, and 67 percent integrate it into systems and processes to improve business decisions.
  • Employ a leadership vision that social can bring about fundamental changes: More than 90 percent of respondents say their leaders believe it can create powerful and positive change.
  • Infuse social business into multiple functions across the enterprise: A total of 87 percent use social business to spur innovation.
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VA OIG — Administrative Investigation, Prohibited Personnel Practice and Preferential Treatment, National Cemetery Administration, VA Central Office

July 22, 2014 Comments off

Administrative Investigation, Prohibited Personnel Practice and Preferential Treatment, National Cemetery Administration, VA Central Office (PDF)
Source: U.S. Department of Veterans Affairs, Office of Inspector General

The former Under Secretary for Memorial Affairs engaged in a prohibited personnel practice when he created a position and preselected an employee for that position. He also engaged in preferential treatment of an NCA contractor when he developed a less-than-arm’s-length relationship with the contractor. Further, NCA improperly gave the contractor sole-source contracts to provide one-to-one services to select NCA employees.

Oversight Issues in Mobile Payments

July 17, 2014 Comments off

Oversight Issues in Mobile Payments
Source: International Monetary Fund

This paper examines oversight issues that underlie the potential growth and risks in mobile payments. International experience suggests that financial authorities can develop effective oversight frameworks for new payment methods to safeguard public confidence and financial stability by establishing: (i) a clear legal regime; (ii) proportionate AML/CFT measures to prevent financial integrity risks; (iii) fund safeguarding measures such as insurance, similar guarantee schemes, or “pass through” deposit insurance; (iv) contingency plans for operational disruptions; and (v) risk controls and access criteria in payment systems. Such measures are particularly important for low-income countries where diffusion is becoming more widespread.

Corporate Inversions

July 17, 2014 Comments off

Corporate Inversions
Source: U.S. House of Representatives, Ways and Means Committee (Democrats)

Congress enacted Section 7874 of the Internal Revenue Code in 2004 as a way to discourage U.S. companies from acquiring smaller foreign companies and moving their tax home to a foreign jurisdiction as part of the overall transaction.

Under current law, a corporate inversion will not be respected for U.S. tax purposes if 80% or more of the new combined corporation (incorporated offshore) is owned by historic shareholders of the U.S. corporation (or, in the case of a partnership, interest owners of the partnership). Alternatively, if at least 60% (but less than 80%) of the combined foreign corporation is owned by historic shareholders of the U.S. corporation, the inversion itself will be respected but the expatriated entity will be subject to an “inversion gain,” including restrictions on the use of certain corporate attributes such as net operating losses. However, these unfavorable rules do not apply if the expanded affiliated group (“affiliated group”) that includes the combined corporation has “substantial business activities” (25% of employees by number, employees by compensation, assets, and income) in the foreign country where it is incorporated.

Since the provision was enacted in 2004, there have been almost 50 corporate inversions.

Global Real Estate Tra​nspare​ncy Index 2014

July 17, 2014 Comments off

Global Real Estate Tra​nspare​ncy Index 2014
Source: Jones Lang LaSalle

JLL’s eighth Global Real Estate Transparency Index , covering 102 markets worldwide, shows continued progress in the transparency of commercial real estate around the world. Over 80% of markets have registered improvement since 2012. The top improvers in each survey generally correlate with a surge in foreign direct investment and corporate occupier activity, as investors help to accelerate transparency reforms and governments realise that poor transparency will affect continued inward investment, long-term growth prospects and the quality of life of citizens.​​​​​​​

CEOs and Consumers Disconnected on Sustainable Products and Services, Says Accenture, Havas Media report

July 16, 2014 Comments off

CEOs and Consumers Disconnected on Sustainable Products and Services, Says Accenture, Havas Media report
Source: Accenture

Only a third of consumers regularly consider sustainability in their purchasing decisions, according to a global study by Accenture (ACN: NYSE) and Havas Media RE:PURPOSE, which reveals the reasons for the disconnect between business and consumer expectations of sustainable products and services.

The report, “From Marketing to Mattering”, is based on a survey of 30,000 consumers in 20 countries. The study was commissioned in response and as a companion to the UN Global Compact-Accenture CEO Study on Sustainability, published in 2013, in which two thirds of CEOs admitted that business is not doing enough to address sustainability challenges, similar to the 73 percent of consumers in the latest research that say businesses are failing to take care of the planet and society.

The two studies reveal that, although CEOs see engagement with consumers as the most important single factor motivating them to accelerate progress on sustainability, they are often out of step with what motivates consumers to buy sustainable products and services. 81 percent of CEOs believe that their company’s reputation for sustainability is important to consumers, but the new research shows that less than one-quarter (23 percent) of consumers report that they regularly seek information on the sustainability performance of the brands whose products they purchase.

As result of the disconnect on the importance of a company’s sustainable reputation, only 32 percent of consumers say they ‘often’ or ‘always’ consider sustainability in their purchasing decisions.

The Quality of Official Development Assistance (QuODA): Third Edition

July 14, 2014 Comments off

The Quality of Official Development Assistance (QuODA): Third Edition
Source: Brookings Institution

This is the third edition of our effort to measure the quality of official development assistance (QuODA). Since the first edition, much has changed in the world of aid. Most significantly, the Working Party on Aid Effectiveness was replaced in 2012 with a new Global Partnership for Effective Development Cooperation. This multi-stakeholder group is charged with building a better understanding of how all development partners—official, business and in civil society—can work together to improve impact. The Global Partnership has a stronger representation of emerging economies, civil society and of the business sector, and is starting to debate how to leverage and coordinate the growing diversity of financial flows, knowledge and practical experiences to strengthen development impact.

The Global Partnership has already discussed and determined a new set of indicators of aid effectiveness that it will monitor, and has conducted a base-line survey in 2012 from which we draw. But in this paper, we continue to use our previous methodology focused on indicators that were agreed upon as part of the Paris Declaration on Aid Effectiveness and the Accra Agenda for Action in order to monitor the progress donors have made towards their initial commitments.

This third edition of QuODA focuses on changes over time in donor performance. In the first edition of QuODA, we used 2008 data for aid flows and Paris Monitoring Survey indicators for donor compliance with commitments. In this edition, we use 2012 data for aid, 2013 data from the new Global Partnership Monitoring Framework, and 2011 data for Paris indicators that are no longer measured in the new monitoring framework. The mix of years is not ideal, but for all indicators it provides us an opportunity to see whether there has been progress or not over a span of at least 3 to 4 years.

Another major change in the aid environment is the larger number of development partners that now report on their aid activities to the Development Assistance Committee (DAC). Fourteen countries provide substantial information, and although the largest emerging economies like China and India are not included, there is the beginning of a more comprehensive data base on aid that permits examination of whether these donors behave differently from DAC donors in important ways. The Bill and Melinda Gates Foundation now also reports on its activities, so it can be analyzed in the same framework. Of course, the non-DAC donors and the Gates Foundation are not systematically included in the Paris Monitoring Survey or the Global Partnership Monitoring Framework, so the range of indicators across which they can be compared to DAC donors is more limited than the full QuODA framework. Nevertheless, we believe it is useful to start to ask questions about the revealed characteristics of non-DAC development partners, official and philanthropic. It is our hope that data on additional donors will become more comprehensive over time.

Activist Directors: Determinants and Consequences

July 11, 2014 Comments off

Activist Directors: Determinants and Consequences
Source: Harvard Business School Working Papers

This paper examines the determinants and consequences of hedge fund activism with a focus on activist directors, i.e., those directors appointed in response to demands by activists. Using a sample of 1,969 activism events over the period 2004-2012, we identify 824 activist directors. We find that activists are more likely to gain board seats at smaller firms and those with weaker stock price performance. Activists remain as shareholders longer when they have board seats, with holding periods consistent with conventional notions of “long-term” institutional investors. As in prior research, we find positive announcement-period returns of around 4% to 5% when a firm is targeted by activists and a 2% increase in return on assets over the subsequent one to five years. We find that activist directors are associated with significant strategic and operational actions by firms. We find evidence of increased divestiture, decreased acquisition activity, higher probability of being acquired, lower cash balances, higher payout, greater leverage, higher CEO turnover, lower CEO compensation, and reduced investment. With the exception of the probability of being acquired, these estimated effects are generally greater when activists obtain board representation, consistent with board representation being an important mechanism for bringing about the kinds of changes that activists often demand.

CRS — Access to Broadband Networks: The Net Neutrality Debate (updated)

July 10, 2014 Comments off

Access to Broadband Networks: The Net Neutrality Debate (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

As congressional policy makers continue to debate telecommunications reform, a major point of contention is the question of whether action is needed to ensure unfettered access to the Internet. The move to place restrictions on the owners of the networks that compose and provide access to the Internet, to ensure equal access and non-discriminatory treatment, is referred to as “net neutrality.” While there is no single accepted definition of “net neutrality,” most agree that any such definition should include the general principles that owners of the networks that compose and provide access to the Internet should not control how consumers lawfully use that network, and they should not be able to discriminate against content provider access to that network.

A major focus in the debate is concern over whether it is necessary for policy makers to take steps to ensure access to the Internet for content, services, and applications providers, as well as consumers, and if so, what these steps should be. Some policy makers contend that more specific regulatory guidelines may be necessary to protect the marketplace from potential abuses which could threaten the net neutrality concept. Others contend that existing laws and policies are sufficient to deal with potential anti-competitive behavior and that additional regulations would have negative effects on the expansion and future development of the Internet.

Tipping the Scale: An Analysis of Global Swing States in the Internet Governance Debate

July 10, 2014 Comments off

Tipping the Scale: An Analysis of Global Swing States in the Internet Governance Debate
Source: Centre for International Governance Innovation

In December 2012, numerous news outlets reported on the debate over Internet governance that took place at the World Conference on International Telecommunications (WCIT) in Dubai. It was the first time in nearly a decade that the topic attracted major international media attention. A key aspect of the post-WCIT discussion has centred on the role of “swing states” in this global debate. So far, most of this work has been based on predefined groups of countries or focused on countries based on anecdotal evidence of a vibrant tech community or existing relationships. The study discussed in this paper applied a more systematic approach. The research revealed some interesting patterns among certain groups of states. A core group of potential swing states — a total of 30 countries — are identified based on their voting behaviour at the WCIT, their various memberships and a range of relevant indicators. This list offers a road map for future in-depth studies. Ideally, it will also serve as a resource for practitioners and academics alike for comparison with current efforts and for future strategic planning that focuses on engaging other actors internationally.

Performance for Pay? The Relation Between CEO Incentive Compensation and Future Stock Price Performance

July 9, 2014 Comments off

Performance for Pay? The Relation Between CEO Incentive Compensation and Future Stock Price Performance
Source: Social Science Research Network

We find evidence that CEO pay is negatively related to future stock returns for periods up to three years after sorting on pay. For example, firms that pay their CEOs in the top ten percent of excess pay earn negative abnormal returns over the next three years of approximately -8%. The effect is stronger for CEOs who receive higher incentive pay relative to their peers. Our results appear to be driven by high-pay induced CEO overconfidence that leads to shareholder wealth losses from activities such as overinvestment and value-destroying mergers and acquisitions.

Sustainability goes mainstream: Insights into investor views

July 4, 2014 Comments off

Sustainability goes mainstream: Insights into investor views
Source: PricewaterhouseCoopers

What do investors think about sustainability issues? Do these issues factor into investment strategies and practices? Will they in the future?

Four in five investors responding to our survey said they considered these concepts in one or more investment contexts in the past year. And about 85% expect to consider them three years from now. But investors are not happy with corporate reporting about sustainability—they’re still not getting the information they’re looking for. Investors want to be a part of the sustainability dialogue. And they want direct engagement with the companies in which they invest.

Privacy and Civil Liberties Board Releases Report on the Surveillance Program Operated Pursuant to Section 702 of the Foreign Intelligence Surveillance Act

July 3, 2014 Comments off

Board Releases Report on the Surveillance Program Operated Pursuant to Section 702 of the Foreign Intelligence Surveillance Act
Source: Privacy and Civil Liberties Board

The Board’s report will contain a detailed analysis of the Section 702 program, with a focus on increasing transparency to the public regarding the surveillance program. It will address the Section 702 program’s development and operation, statutory basis, constitutional implications, and whether it strikes the right balance between national security and privacy and civil liberties, and will make recommendations for policy reforms. The report will be unclassified and available to the public. Previously, on January 23, 2014, the Board released a separate unclassified report regarding operation of the telephone records program under Section 215 of the USA PATRIOT Act, as well as on the operations of the Foreign Intelligence Surveillance Court. The Board’s review of these surveillance programs has included three public meetings, receipt of dozens of public comments, meetings with congressional committee staff, advocates and private sector representatives, analysis of classified materials, and briefings by government agencies.

When More Is Not Enough: Executive Greed and Its Influence on Shareholder Wealth

June 25, 2014 Comments off

When More Is Not Enough: Executive Greed and Its Influence on Shareholder Wealth
Source: Journal of Management

The concept of greed is one of the oldest social constructs; however, greed as a managerial attribute that affects firm outcomes has yet to attract scholarly attention in management. In this study, we examine the relationship of CEO greed to shareholder wealth. After anchoring greed to familiar constructs in organizational literature, we test our hypotheses on a sample of over 300 publicly traded firms from multiple industries. As predicted, greed has a negative relationship with shareholder return, but this relationship is moderated by the presence of a powerful, independent board, managerial discretion, and CEO tenure. The contributions of this study, which include refining our understanding of self-interest and opportunism, developing the greed construct, and illustrating its impact on shareholder wealth, are intended to open a new line of inquiry in the management literature.

As risks rise, boards respond A global view of risk committees

June 20, 2014 Comments off

As risks rise, boards respond A global view of risk committees
Source: Deloitte

Boards of directors have been working hard to fulfill their risk oversight responsibilities in a challenging environment. Regulations are changing rapidly in most industries, and vary significantly across countries. Investors, analysts, and the public are demanding greater transparency into risk and risk management, as are creditors, counterparties, and other stakeholders. Many boards legitimately wonder not only what regulators want, but also which approaches to risk oversight actually work.

Deloitte set out to study a specific and very effective risk governance mechanism: board-level risk committees. This report reveals the prevalence of board-level risk committees (whether standalone committees focused solely on risk, or hybrid committees such as audit/risk) based on analysis of 400 large public companies in eight countries.

In Focus: Compliance Trends Survey 2014

June 17, 2014 Comments off

In Focus: Compliance Trends Survey 2014
Source: Deloitte

As the full force of landmark laws such as the Dodd-Frank Act and the Affordable Care Act come to bear, the need for a strong corporate compliance function — and an understanding of what that strong function should look like — has emerged like never before. The Compliance Trends 2014 report shows that Corporate America increasingly acknowledges this idea, but in many cases companies still aren’t investing enough to support a strong compliance function in practice.

Within the report, we have combined the deep knowledge and experience of Deloitte with the broad industry perspective of Compliance Week to answer three questions:

  • Do compliance executives have the appropriate authority and resources to do their jobs?
  • Are compliance executives addressing the right risks?
  • Do compliance executives use the right metrics to measure progress?

CRS — Internet Governance and the Domain Name System: Issues for Congress (updated)

June 16, 2014 Comments off

Internet Governance and the Domain Name System: Issues for Congress (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

The Internet is often described as a “network of networks” because it is not a single physical entity, but hundreds of thousands of interconnected networks linking hundreds of millions of computers around the world. As such, the Internet is international, decentralized, and comprised of networks and infrastructure largely owned and operated by private sector entities. As the Internet grows and becomes more pervasive in all aspects of modern society, the question of how it should be governed becomes more pressing.

Currently, an important aspect of the Internet is governed by a private sector, international organization called the Internet Corporation for Assigned Names and Numbers (ICANN), which manages and oversees some of the critical technical underpinnings of the Internet such as the domain name system and Internet Protocol (IP) addressing. ICANN makes its policy decisions using a multistakeholder model of governance, in which a “bottom-up” collaborative process is open to all constituencies of Internet stakeholders.

National governments have recognized an increasing stake in ICANN policy decisions, especially in cases where Internet policy intersects with national laws addressing such issues as intellectual property, privacy, law enforcement, and cybersecurity. Some governments around the world are advocating increased intergovernmental influence over the way the Internet is governed. For example, specific proposals have been advanced that would create an Internet governance entity within the United Nations (U.N.). Other governments (including the United States), as well as many other Internet stakeholders, oppose these proposals and argue that ICANN’s multistakeholder model is the most appropriate way to govern the Internet. On May 14, 2013, H.R. 1580, which states that “it is the policy of the United States to preserve and advance the successful multistakeholder model that governs the Internet” was passed unanimously by the House.

Report to the Board of Directors of General Motors Company Regarding Ignition Switch Recalls (“Valukas Report”)

June 6, 2014 Comments off

Report to the Board of Directors of General Motors Company Regarding Ignition Switch Recalls (“Valukas Report”)
Source: Jenner & Block (via Detroit News)

As a whole, from beginning to end, the story of the Cobalt is one of numerous failures leading to tragic results for many. As discussed below, many individuals have substantial responsibility for the delay in recalling the Cobalt. These individuals, as well as the GM committees and groups that had responsibility for the Cobalt, failed to remand action in the face of mounting injuries and fatalities, to make themselves or others accountable, and to marshal the information and expertise at their disposal to solve a problem that brought harm to GM’s customers. This report traces the history of the ignition switch, from GM’s design and production of the ignition switch to its belated recall in 2014, ultimately proposing recommendations to help avoid such a tragedy from ever occurring again.

McKinsey Quarterly: Resource revolution: Gathering force

June 6, 2014 Comments off

Resource revolution: Gathering force
Source: McKinsey & Company

Explores how technological advances are revolutionizing resource productivity, the future of lean, why leaders of organizational change must examine their own behavior, how to manage shareholder activists, and the rising risk of cyberattacks.

As risks rise, boards respond; A global view of risk committees

June 4, 2014 Comments off

As risks rise, boards respond; A global view of risk committees
Source: Deloitte

Boards of directors have been working hard to fulfill their risk oversight responsibilities in a challenging environment. Regulations are changing rapidly in most industries, and vary significantly across countries. Investors, analysts, and the public are demanding greater transparency into risk and risk management, as are creditors, counterparties, and other stakeholders. Many boards legitimately wonder not only what regulators want, but also which approaches to risk oversight actually work.

Deloitte set out to study a specific and very effective risk governance mechanism: board-level risk committees. This report reveals the prevalence of board-level risk committees (whether standalone committees focused solely on risk, or hybrid committees such as audit/risk) based on analysis of 400 large public companies in eight countries.

Here’s what we found:

  • Board-level risk committees are well-established and widespread — present in 38% of the 400 companies analyzed. About a quarter (22%) have standalone board-level risk committees, while 16% oversee risk through hybrid board-level committees.
  • As might be expected, board-level risk committees are most prevalent in FSI companies (88%), but are also present in other industries (26%), often to a significant extent, depending on the country.
  • Local regulations affect risk oversight structures. Australia, Brazil, Mexico, Singapore, the UK, and the US have regulations that require risk committees at the board level for FSI companies (sometimes dependent on the type and size of the company).
  • Overall, 62% of all companies analyzed do not have a board-level risk committee. This largely reflects the lack of regulatory requirements for board-level risk committees in non-FSI companies in most countries.
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