Jumat, 10 April 2015

Asuransi Kesehatan Allianz Indonesia

Asuransi kesehatan memberi Anda jaminan terhadap biaya-biaya kesehatan tak terduga. Hal ini meliputi jaminan biaya operasi, rawat inap, rawat jalan, dan periksa gigi—tergantung dengan paket asuransi mana yang Anda ambil. Salah satu penyedia jasa asuransi yang telah memiliki nama ialah Allianz Indonesia. Perusahaan yang berdiri sejak tahun 1980 di Jerman ini menyediakan asuransi yang meliputi asuransi kesehatan, jiwa, syariah dan kumpulan. Hal yang dapat meyakinkan Anda untuk menggunakan jasa Asuransi Kesehatan Allianz Indonesia ialah basis finansial dari perusahaan ini yang selalu stabil sehingga kemungkinan kolapsnya sangat kecil. Dengan demikian Anda tidak perlu khawatir akan kehilangan uang Anda secara sia-sia karena menginvestasikannya di perusahaan asuransi yang rentan terancam bangkrut.

Asuransi kesehatan Allianz Indonesia menawarkan beberapa opsi pilihan asuransi yang dapat Anda pilih sesuai dengan kebutuhan Anda. Pilihan pertama ialah Allianz SmartMed Premier yang memiliki frekuensi pembayaran premi 1 bulan, 3 bulan, 6 bulan dan tahunan. Dengan mengambil Allianz SmartMed Premier, Anda dapat memperoleh manfaat asuransi kesehatan yang lengkap dan sesuai kebutuhan Anda. Hal tersebut meliputi fasilitas rawat inap, rawat jalan dan gigi, serta kelahiran. Sistem yang ditawarkan ialah fasilitas cashless dimana pengguna asuransi kesehatan jenis ini dapat menggunakan kartu yang tinggal digesek untuk jenis pelayanan rawat inap VIP dan kelahiran di seluruh rumah sakit rekanan di Indonesia, Malaysia, Singapura, serta rawat jalan dan gigi (khusus jaringan lokal Indonesia). Selain itu terdapat pula fasilitas penggantian biaya (reimbursement) bagi Anda yang melakukan pelayanan kesehatan di jaringan non-medika seluruh Indonesia, Malaysia dan Singapura.

Pilihan lain yang diberikan oleh asuransi kesehatan Allianz Indonesia ialah Allianz SmartHealth Asuransi Kumpulan. Paket asuransi ini sangat cocok bagi perusahaan yang ingin memberi kenyamanan dengan cara memberi fasilitas perawatan kesehatan bagi karyawan beserta keluarganya. Untuk SmartHealth Classic Premier, fasilitas yang diberikan ialah perlindungan untuk biaya rawat inap serta biaya proses bersalin yang disertai manfaat pemeriksaan kontrol bagi ibu dan bayi selama 30 hari pasca melahirkan di Rumah Sakit. Sementara SmartHealt Blue Sapphire hanya memberi fasilitas rawat inap dan beberapa perlindungan tambahan lainnya. SmartHealth Light Titanium di sisi lain dirancang untuk membantu perusahaan memberikan perlindungan kesehatan. Sistem yang diterapkan Asuransi Kumpulan yaitu cashless khusus di Rumah Sakit atau Klinik Jaringan Allianz. Apabila biaya ternyata lebih besar dari tanggungan asuransi, maka peserta baru harus membayar kelebihan biaya tersebut. Untuk informasi yang lainnya. 

Silahkan anda baca: Harga Samsung Tab 3

Fasilitas yang disediakan asuransi kesehatan Allianz Indonesia lainnya ialah Allianz Asuransi Kesehatan Allisya Care.Asuransi ini dikelola secara syariah dimana terdapat sistem pembagian surplus underwriting bagi peserta asuransi yang tidak mengajukan klaim. Surplus yang dibagikan pada peserta tersebut diambil dari dana tabarru yang terkumpul. Fasilitas yang ditawarkan meliputi produk dasar rawat inap yang wajib diambil, serta produk tambahan seperti rawat jalan, melahirkan, rawat gigi dan santunan harian (opsional). Biaya akomodasi yang ditanggung tidak hanya akomodasi ruangan termasuk ICU, tetapi juga biaya obat-obatan selama perawatan dan biaya pemeriksaan diagnostik, serta biaya biaya administrasi. Sistem yang digunakan pada jenis asuransi kesehatan ini berbeda dengan lainnya, yaitu peserta wajib mengirimkan formulir klaim dan dokumen-dokumen penunjang untuk kemudian mendapat biaya ganti dari asuransi 14 hari setelah semua dokumen lengkap diterima pihak Allianz Indonesia.

Untuk mendaftarkan diri atau perusahaan Anda sebagai peserta asuransi kesehatan Allianz Indonesia, anda dapat datang langsung ke cabang-cabang kantor Allianz yang tersebar di berbagai kota di Indonesia. Anda juga dapat mengunduh brosur fasilitas asuransi di situs resmi Allianz Indonesia sebelum memutuskan jenis asuransi mana yang akan Anda pilih. Banyak orang telah bergabung dengan asuransi kesehatan Allianz, bandingkan dengan asuransi kesehatan lainnya.

Minggu, 15 Februari 2015

If Money Doesn't Buy You Happiness, You're Not Spending It Right

A good chunk of traditional finance research teaches us how to make money, such as optimal investment strategies. But, there's very little on how to spend it. Studies show surprisingly little relationship between money and happiness. One interpretation is that things that make you truly happy can't be bought - but money can allow people to afford healthier food, better medical care, more varied pastimes, better education, and leisure time with friends and family. So an alternative interpretation is that people don't know how to spend it.

That's where behavioral economists and psychologists come in. Elizabeth Dunn (UBC), Daniel Gilbert (Harvard) and Timothy Wilson (Virginia)'s excellent Journal of Consumer Psychology article, "If Money Doesn't Make You Happy, Then You Probably Aren't Spending It Right" surveys a ton of research and distills it to eight succinct guidelines. I summarize five of them here.

1) Buy More Experiences and Fewer Material Goods.

People who fritter their money away on holidays or expensive dinners are seen as wasteful, as there's nothing to show for it afterwards. Renovating your house or buying a better car are more prudent. But, it's actually the former that has the greater effect than happiness. We adapt to things (such as a new conservatory or a flashier car) quickly. But, the memory of an experience (e.g. an African safari) remains with you long after the fact, and the anticipation of the experience also bring utility.

Moreover, "mindfulness" studies systematically find that unhappiness is correlated with mind-wandering. Experiences absorb you and keep you focused on the here and now, but you can be distracted by a dozen things while driving your car.

2) Spend Money on Others Rather Than Yourself.

Scientists believe that one major reason for humans' large brain size is that we are more social than nearly any other animal. Thus, our happiness depends markedly on the quality of our social relationships. The "prosocial behavior" literature consistently finds that subjects report greater happiness after spending money on others rather than themselves - even though they anticipated that they would be happier doing the latter.

3) Buy Many Small Pleasures Instead Of Few Large Ones.

A variety of frequently small pleasures (in the authors' words, "double lattes, uptown pedicures, and high thread-count socks") dominate one big-ticket purchase, such as a front-row concert ticket. This is the well-known economic principle of diminishing marginal utility - a two-week vacation is less enjoyable than two separate one-week vacations. Indeed, studies show that happiness is more associated with the frequency rather than intensity of experiences.

The main reason is the surprise factor of a new experience. Two smaller vacations allow you to explore two different places. Moreover, variety exists even for "everyday" experiences - a beer after work is never the same as the last one, since it will feature different people and different conversations.

4) Buy Less Insurance

This principle doesn't just apply to literal insurance, e.g. over-priced extensive warranties, but also the "insurance" that comes with a generous return policy. Customers prefer Amazon to eBay and Craigslist, despite it being more expensive, because of the option to return a product they don't like. But, as Dan Gilbert discussed in his excellent TED talk The Surprising Science of Happiness (see here for my list of top ten TED talks), whether we like something or not doesn't just depend on the item's attributes - we can consciously choose to like it. Indeed, studies show that you like an item more if you don't have the option to return it.

5) Beware of Comparison Shopping

Websites allow you to compare products on tiny details, which leads to consumers fixating on very small differences and ignoring the similarities on the major characteristics. They can thus miss the forest for the trees and choose the wrong product based on a minor attribute. In addition, doing so wastes substantial time on minutiae, particularly since we typically grow to end up liking the product we buy anyway if its major characteristics are correct (see point 4). 

Minggu, 25 Januari 2015

Dangers of Using a Company-Wide Discount Rate

Any Finance 101 class will emphasize that the appropriate discount rate for a project depends on the project’s own characteristics, not the firm as a whole. If a utilities firm moves into media (e.g. Vivendi), it should use a media beta - not a utilities beta - to calculate the discount rate . However, a survey found that 58% of firms use a single company-wide discount rate for all projects, rather than a discount rate specific to the project’s characteristics. Indeed, when I was in investment banking, several clients would use their own cost of capital to discount a potential M&A target's cash flows. 

But the important question is – does this really matter? Perhaps an ivory-tower academic will tell you the correct weighted average cost of capital (WACC) is 11.524% but if you use 10%, is that good enough? Given the cash flows of a project are so difficult to estimate to begin with, it seems pointless to “fine-tune” the WACC calculation.

An interesting paper, entitled “The WACC Fallacy: The Real Effects of Using a Unique Discount Rate”, addresses the question. The paper is forthcoming in the Journal of Finance and co-authored by Philipp Krueger of Geneva, Augustin Landier of Toulouse and David Thesmar of HEC Paris. 

This paper shows that it matters. The authors first looked at organic investment (capital expenditure, or "capex"). If your core business is utilities and the non-core division is media, you should be using a media discount rate for non-core capex. But, if you incorrectly use a utilities discount rate, the discount rate is too low and you'll be taking too many projects. The authors indeed find that capex in a non-core division is greater if the non-core division has a higher beta than the core division. Moreover, they find the effect is smaller (a) in recent years, consistent with the increase in finance education (e.g. MBAs), (b) for larger divisions – if the non-core division is large, then management puts the effort into getting it right, (c) when management has high equity incentives, as these also give them incentives to get it right.

The authors then turn to M&A. They find that conglomerates tend to buy high-WACC targets rather than low-WACC targets, again consistent with them erroneously using their own WACC to value a target, when they should be using the target’s own high WACC. Moreover, the attraction of studying M&A is the authors can measure the stock market’s reaction to the deal, to quantify how much value is destroyed. They find that shareholder returns are 0.8% lower when the target’s WACC is higher than the acquirer’s WACC. They study 6,115 deals and the average acquirer size is $2bn. Thus, the value destruction is 0.8% * $2bn * 6,115 = $98bn lost to acquirers in aggregate because they don’t apply a simple principle taught in Finance 101!

We often wonder whether textbook finance theory is relevant in the real world – perhaps you don’t need the “academically” right answer and it's sufficient to be close enough. But this paper shows that “getting it right” does make a big difference. 

Jumat, 21 November 2014

Why Banks Should Use Less Debt Financing

In the aftermath of the financial crisis, there have been numerous calls for banks to finance themselves less with debt and more with equity, to reduce the risk of another crisis. But this has been met with great resistance by bankers. They argue that equity is costlier than debt, and so forcing them to use more equity will make it more expensive for them to raise capital. If they can't raise as much capital, they won't be able to lend as much to small businesses and homeowners; if it's more expensive to raise capital, they'll need to take on riskier projects to generate a high enough return to meet their cost of capital. For example, Jamie Dimon of JP Morgan has said (paraphrased): "If they force us to hold more equity, we will have to take on riskier projects to hit our required return on equity".

The Modigliani-Miller theorem, taught in undergrad or MBA finance 101, tells us that (under certain conditions), firm value is independent of capital structure - equity is no more costly than debt. Indeed, Jamie Dimon's seemingly intuitive argument involves not one, not two, but three violations of basic finance theory:

  1. It treats the required return on equity as a constant (as if it were pi or Avogadro's number). But, basic finance theory tells us that it depends on financial risk. If the firm is financed by more equity, it's less risky, and so shareholders demand a lower return on equity. Banks won't need to take on more risk, because the target will have fallen.
  2. Basic finance theory tells us that the required return on equity also depends on business risk. If the firm "takes on riskier projects", shareholders will demand a higher return as a result. Thus, banks won't have an incentive to take on more risk, because this will cause the target to rise.
  3. Equity is not something that you "hold". It doesn't sit idly on the balance sheet doing nothing - the bank can invest or lend the money raised by equity. Equity isn't an asset, it's a liability - it's how a bank finances itself. If a firm finances itself with equity rather than debt (changes its liability mix), it needn't change the projects it invests in (its asset mix).

The fallacies inherent in most bankers' arguments are exposed in Anat Admati and Martin Hellwig's influential book "The Bankers' New Clothes"; see this link for non-technical articles on this topic. However, some bankers may counter that the Modigliani-Miller theorem doesn't hold in the real world. There are valid reasons for why it's advantageous to finance with debt rather than equity - debt gives tax shields, and incentivizes management to work harder to avoid bankruptcy.

But a new paper by Roni Kisin and Asaf Manela of the Olin School of Business at Washington University in St. Louis exposes these arguments - using banks' own actions! They find that bankers' own behavior suggests that they don't view debt as useful - that the above advantages of debt are small in the real world. Their identification is clever. They exploit the fact that, prior to the crisis, banks had access to a loophole - asset-backed commercial paper conduits (a form of securitization) that allowed them to lower their equity capital requirements by 90%.

Using these conduits was costly - the interest rate on asset-backed commercial paper is higher than that on directly-issued commercial paper (which didn't benefit from the loophole). Thus, banks traded off the benefits (of reducing equity capital requirements) with the costs of using the conduit. If financing themselves with equity, rather than debt, truly was costly, banks would have used the conduits to a large degree - particularly since the availability of the loophole was well-known to all banks.

But they didn't. Roni and Asaf estimate that, based on the limited usage of these conduits, it's not costly for banks to finance themselves with equity. Even if banks were to increase their equity ratios from 6% to 16%, this would cost all U.S. banks in aggregate $3.7 billion. The average cost per bank is $143 million, or 4% of annual profits. Lending interest rates would rise by 0.03% and quantities would decrease by 1.5%. While the above numbers are not small, they are far lower than the numbers branded around by bankers, and arguably a small price to pay to substantially reduce the risk of another crisis.

One caveat is that the authors are clear that they quantify the cost of increasing equity capital requirements, rather than the cost of increasing equity capital. It may be that the cost of increasing equity capital requirements is low, not because the cost of raising equity is low, but because banks have other ways of complying with the requirements (e.g. other loopholes, or changing the riskiness of the assets they invest in). Nevertheless, the paper provides innovative evidence that increasing capital requirements is much lower than what many banks claim.

Sabtu, 25 Oktober 2014

How Corporate Credit Ratings Induce Short-Termism

Credit rating agencies were under particular scrutiny in the recent financial crisis, as critics argue they gave too high ratings to securities that turned out to be toxic. One potential culprit is the "issuer-pays" model, where it is the company being rated that pays for credit ratings, which may encourage rating agencies to be overly-generous to win business.

But, a recent paper by my new LBS colleague Taylor Begley points to an important additional cost of corporate credit ratings - and one that arises even if ratings are perfectly accurate. Companies may engage in short-term behavior to achieve a particular credit rating. This problem arises because credit ratings are discrete categories (e.g. AAA, AA+, BB) rather than a continuous number (e.g. 93.2, 87.8). Thus, a company has a strong incentive to just get into the AAA- category than be at the top of the AA+ category.

In turn, a major driver of credit ratings is a company's financial ratios. For example, for firms with an excellent business risk profile, a Debt/EBITDA ratio of 1.5-2.0 typically leads to a rating of AA; a ratio of 2.0-3.0 typically leads to a rating of A. For firms with a fair business risk profile, a Debt/EBITDA ratio of 1.5-2.0 typically leads to a rating of BBB-; a ratio of 2.0-3.0 typically leads to a rating of BB+ (which is below investment-grade, i.e. has "junk" status). (Source: Standard & Poor's Business Risk / Financial Risk Matrix).

These discrete thresholds thus give companies incentives to be lie just below a threshold. They can achieve this by short-term behavior such as cutting research and development (R&D). This increases EBITDA, thus reducing the Debt/EBITDA ratio and potentially meeting the threshold. Importantly, the incentives to engage in short-termism depend on where the firm is compared to the next lowest threshold. A firm with a Debt/EBITDA ratio of 2.1 has strong incentives to engage in short-termism, because it has a high chance of being able to lower it to below 2.0, but a firm with a Debt/EBITDA ratio of 2.5 has much weaker incentives. Taylor indeed finds that firms close to a threshold are significantly more likely to cut not only R&D, but also selling, general, and administrative (SG&A) expenses, which contains expenditure in advertising, information technology, employee training, and other forms of organizational capital.

Other papers have previously found evidence of short-termism to meet other types of thresholds - for example, companies may cut R&D to ensure their earnings fall just above analyst earnings expectations. But a particularly novel finding of this paper is that Taylor is able to document negative long-run effects of such short-termism. Companies close to ratings thresholds subsequently suffer declines in the number of patents that they produce, and also the number of citations to their patents (a measure of the quality of innovation). They also experience declines in profitability and valuation ratios.

The cost of credit ratings that critics typically focus upon is that inaccurate ratings lead to redistributional consequences. If the ratings of a security are too high, the buyer pays too much for them. Thus, the seller wins and the buyer loses. While these redistributional concerns are clearly very important, they don't directly affect the overall size of the pie (sellers get a larger slice, buyers a smaller slice). In contrast, Taylor shows that credit ratings have efficiency (rather than just redistributional) consequences - they affect the overall size of the pie. If companies cut investment to meet ratings thresholds, they erode their future value, making everyone worse off in the long-run. This is a particular concern for the 21st century firm, whose value is especially driven by intangible assets (such as brand strength, innovative capabilities, and corporate culture) which requires several years to build and bear fruit.

The paper certainly does not argue that credit ratings should be scrapped; these costs must be weighed against their numerous benefits. Many financial targets (e.g. analyst earnings expectations) also have the potential to lead to short-termism. Rather, the paper highlights a potential cost to credit ratings that boards may be able to mitigate. One potential remedy that discussed in a previous post is to increase the vesting period of executives' stock and options, to tie them to the long-run performance of the firm. 

Minggu, 12 Oktober 2014

Reforming CEO Pay - The Dangers of Short-Term Incentives

(This post originally appeared on LinkedIn)
Executive pay is a high-profile topic about which almost everyone has an opinion. Many shareholders, workers, and politicians believe that the entire system is broken and requires a substantial overhaul. But, despite being well-intentioned, their suggested reforms may not be targeting the elements of pay that are most critical for shareholder value and society.
Level 1 Thinking: The Level of Pay
Much of the debate is on what I call a Level 1 issue - the level of pay. For example, in September 2013, the SEC mandated disclosure of the ratio of the CEO’s pay to the median employee’s pay. The European Commission is contemplating going further and requiring a binding vote on this ratio. Separately, proposals to increase taxes – most prominently made by Thomas Piketty – are a response to seemingly excessive pay levels.
While high taxes or ratio caps would indeed address income inequality (an important topic, but beyond the focus of this article), it's very unclear that they would do much to improve shareholder (or stakeholder) value. The levels of CEO pay, while very high compared to median employee pay – and thus a politically-charged issue – are actually very small compared to total firm value. For example, median CEO pay in a large US firm is $10 million – only 0.05% of a $20 billion firm. That’s not to say that it’s not important – a firm can't be blasé about $10 million – but that other dimensions may be more important.
Level 2 Thinking: The Sensitivity of Pay
Instead, what matters for firm value isn't the level of pay, but the incentives that it provides to CEOs: as Jensen and Murphy (1990) famously argued, “it’s not how much you pay, but how”. Level 2 thinking studies the sensitivity of pay to performance. Specifically, it looks at how much of a manager’s total pay is comprised of stock and options (which are sensitive to firm value) rather than cash salary (which is less so). As the thinking goes, greater stock and options align the CEO more with shareholders and thus provide superior incentives. Indeed, Jensen and Murphy bemoaned the low equity incentives at the time as evidence that CEOs were “paid like bureaucrats”.
However, while seemingly intuitive, the idea that better-incented CEOs perform better is unclear. Out of all the banks, Lehman Brothers had arguably the compensation scheme closest to what Level 2 thinkers argued is the ideal – very high employee stock ownership. Using a larger sample, Fahlenbrach and Stulz (2011) “find some evidence that banks with CEOs whose incentives were better aligned with the interests of shareholders performed worse and no evidence that they performed better.” Indeed, the European Commission has recently capped banker bonuses at two times salary, seemingly reducing bankers’ incentives to perform well – but also reducing their punishment if things go badly.
Level 3 Thinking: The Structure of Pay
The concern with high equity incentives is that they encourage CEOs to pump up the short-term stock price at the expense of long-run value – for example, writing sub-prime loans and then cashing out their equity before the loans become delinquent. But, the root cause of this problem isn't the amount of stock and options that the CEO has, but their vesting horizon – whether they vest in the short-term or long-term, and thus whether they align the CEO with short-term or long-term shareholder value. Level 3 thinking thus focuses on the structure of pay.
There's anecdotal evidence that horizons mattered in the financial crisis. Angelo Mozilo, the former Countrywide CEO, made $129 million from stock sales in the twelve months prior to the start of the crisis; a Wall Street Journal article entitled “Before the Bust, These CEOs Took Money Off the Table” documented similar practices among other bank CEOs. But, we can't form policy based on a handful of anecdotes - it's important to undertake a systematic study.
In this paper, Vivian Fang (Minnesota), Katharina Lewellen (Dartmouth) and I study how a CEO behaves in years in which he has a significant amount of shares and options vesting. CEOs typically sell their equity upon vesting to diversify, and so vesting equity makes them particularly concerned about the short-term stock price.
We find that, in years in which the CEO has significant equity vesting, he cuts investment in many forms - R&D, advertising, and capital expenditure. Moreover, in these years, he's more likely to exactly meet or just beat analyst earnings’ forecasts – if the forecast is $1.27 per share, he reports earnings of $1.27 or $1.28. Indeed, the magnitude of the investment cuts is just enough to allow the CEO to meet the target. Thus, vesting equity induces the CEO to act myopically – to cut investment to meet short-term targets. These results are robust to controlling for the CEO’s other equity incentives, such as his unvested equity and voluntary holdings of already-vested equity.
In this paper, Luis Goncalves-Pinto (National University of Singapore), Yanbo Wang (INSEAD), Moqi Xu (LSE) and I show that, in months in which the CEO has vesting equity, he releases more news. This is an easy way to pump up the short-term stock price, as news attracts attention to the stock. This attention also increases trading volume, which allows the CEO to cash out his equity in a more liquid market. Indeed, we find that these news releases lead to significant increases in the stock price and trading volume in a 16-day window, but the effect dies down over 31 days, consistent with a temporary attention boost. The median CEO cashes out all of his vesting equity within 7 days, so within the window of inflation.
The increase in news releases only relates to discretionary news (such as conferences, client and product announcements, and special dividends), which are within the CEO’s control, and not non-discretionary news (such as scheduled earnings announcements). Moreover, the CEO reduces discretionary news releases in both the month before and the month after the vesting month, suggesting a strategic reallocation of news into the vesting month and away from adjacent months. In addition to releasing more news items in the vesting month, the CEO releases more positive news – media articles immediately following these news releases contain significantly more positive words than normal.
Why Do We Care?
Both consequences of vesting equity are important. Investment is critical to the long-run health of a company. Indeed, in the 21st century, most firms compete on product quality rather than cost efficiency, for which intangible assets – such as brand strength and innovative capabilities – are particularly important. Building such intangibles requires sustained investment, particularly in R&D and advertising. Moving to news, many stakeholders, such as employees, suppliers, customers, and investors, base their decision on whether to initiate, continue, or terminate their relationship with a firm on news, or on stock prices that are affected by news. In addition to these efficiency consequences, news also has distributional consequences by affecting the price at which shareholders trade. Indeed, Regulation FD aims to “level the playing field” between investors by prohibiting selective disclosure of information. Public news releases to all shareholders achieve this goal – but the CEO may delay news until months in which he has vesting equity.
What Can Be Done?
One solution is to lengthen vesting periods. While increasing vesting horizons from (say) 3 to 5 years may not be as politically alluring to voters as a rant about the level of pay, it will likely have a much greater effect on shareholder value and society. For example, such a change will now incentivize the CEO to engage in a long-term investment with a 4-year horizon.
Can clawbacks achieve the same thing, e.g. pay out a bonus upon good short-term performance and then claw it back if long-term performance lags? Despite being widely heralded and attracting much fanfare, the legality of clawbacks is very unclear: I know of no cases in which a clawback has been successfully implemented. The CEO may have spent the money, or transferred it to a spouse or a relative. Trying to claw back a bonus that you have prematurely paid (based on short-term performance) is like shutting the barn door after the horse has bolted. The best solution is not to pay out the bonus in the first place, but wait until 5 years.
Is the lengthening of a vesting horizon simply kicking the can down the road? All equity has to vest at some point, and doesn’t this mean that the CEO will now act myopically in 5 years’ time rather than 3 years’ time? I have some sympathy with this concern – indeed, one of the other implications of our papers is that boards of directors, and other stakeholders, should scrutinize CEOs in months (or years) in which they have significant equity vesting. Since most of the current focus is on Levels 1 and 2 of the CEO’s contract, most stakeholders don’t pay attention to vesting horizons. But, the main benefit will be on the CEO’s behavior today – such a lengthening will now encourage him to take that 4 year project.
In short, paying CEOs according to the long-term will ensure they have the long-term interests of the firm at heart.

Sabtu, 23 Agustus 2014

Time Management Tips to Boost Your Productivity

(A shorter version of this article was originally published in CityAM. A talk on time management and personal leadership is here.)

At work, often the last thing you can do is work.  Emails flood in, colleagues make urgent requests, and fires need to be fought.  But, a few pointers can help us get the most out of each day.

Focus on the Important, not the Urgent

Traditional time management involves writing a “To Do” list and doing the Urgent tasks first.  It’s extremely addictive to tick Urgent things off your list – but you may end the day having done 9 Urgent tasks, but not the 10th, most important one.  Stephen Covey, in his excellent book “The Seven Habits of Highly Effective People”, instead advocates tackling the Important tasks first.  Urgent tasks are those that you have to do, externally imposed by others, and often low-hanging fruit – so it’s tempting to start with them.  Important tasks are those that you want to do, internally generated by you, such as developing a new idea.  No-one’s nagging you to do them, and they take significant time.  So if we don’t prioritize them, they’ll get swept aside by the Urgent. 

Covey also emphasised that people act differently when keeping score: you’ll run faster if wearing a stopwatch.  The same is true for work.  Have a stopwatch on your desk, and start it when working on an Important task.  Stop it when you’re distracted to surf the internet, or respond to an Urgent email.  Set yourself a target of how much real work you aim to get done that day. It will change your behaviour.

Control Your Email

Urgent email burns a hole in your inbox and demands to be attended to.  How can you focus on the Important, but still meet your deadlines?  Create a sub-folder called “Today”, and another called “This Week”.  When urgent emails come in, file them in the appropriate subfolder.  When they’re out of sight, they’re out of mind, freeing you to do the Important tasks.  Then, in the late afternoon, after the Important duties have been accomplished and when your mind is less sharp, you can turn your attention to these folders.

What if the Important tasks involve writing email?  Select “Work Offline” so that you’re not distracted by incoming email when doing so.  Change your settings so that you don’t have the “new email” little envelope in the bottom right, which demands to be clicked on.  Remove the “new email” chime for the same reason.

Emails to mailing list (e.g. advertising special offers) are neither Urgent nor Important.  Such emails will have “Unsubscribe” at the bottom.  Create a new sub-folder called “Mailing Lists”, and use a filter rule (in Outlook, go to File – Manage Rules and Alerts) to automatically move messages with the word “Unsubscribe” into this sub-folder.  You can read them at the end of the day.

Outsource and Automate

Many emails you send will contain stock phrases, e.g. directions to your office.  In an Outlook email, go to Insert – Quick Parts, and save these phrases, so that you can paste them into an email at a flash. 

For incoming email that you can give a standard response to, but don’t trust an auto-responder, create a sub-folder that your secretary has access to.  File these emails into the sub-folder, and inform your secretary of the stock responses to such emails. 

For non-work-related admin, use a virtual assistant (e.g. AskSunday or GetFriday).  For example, a virtual assistant could download all talks from a website, or delete duplicate photos from your computer. 

Use Natural Stimuli

On the hour, every hour, do a short physical activity – a set of press-ups if you have your own office, a brief walk if not.  This accomplishes two goals.  First, the actual activity is energizing.  Second, you’ll try to complete the task in hand before the next enforced break.  I dislike doing press-ups, so if it’s 10:50am, I think “I only have 10 minutes before an unpleasant activity” and make the best use of them. 

As an alternative to coffee, Jamie Oliver recommends a fresh chilli.  One or two seeds will give you a pick-me up.  Sounds maverick? Maybe so, but a lot of punch can come from something very little.  That’s the art of time management.