CEO Daily Brief – Dec. 9, 2010
December 9 2010 by ChiefExecutive.net
More Than Half of Those Surveyed Say They Are Worse Off Now than When Obama First Took Office
Business CEOs need to pay close attention to a new survey that shows more than half of Americans surveyed say they are worse off now than they were when President Barack Obama took office, two years ago. There is just not a lack of confidence among U.S. consumers, that may influence spending during the holiday shopping season and beyond into 2011. There are real concerns about the fundamental direction of the economy. The Bloomberg survey showed that two-thirds of the respondents think the United States is headed in the wrong direction.
The survey shows that unemployment and jobs are the top U.S. issue. Half of the respondents said joblessness was the top concern. That is double the number who said the top concern was the federal budget deficit and level of government spending. Democrats are split on whether they are doing better than two years ago. Republicans and independents responded more negatively. Democrats and independents indicate unemployment is their top issue. Republicans were divided between unemployment and the budget deficit.
In addition, one third want tax cuts for the middle class to be extended, while more than 25 percent want all tax cuts to expire on Dec. 31. The bipartisan agreement Obama announced this week would keep in place the tax cuts for all income levels, temporarily.
To meet these concerns, and allow the economy to grow, the government needs to do more than just extend tax cuts. It is clear that the federal budget deficit needs to be addressed, and more foreign trade opened, through trade agreements. Public opinion says it’s time for real change.
For more about the survey from Bloomberg, please click here.
CEOs at Non-Profits Need less Meddling, More Support from Board Members
Many CEOs of non-profit organizations have a tough time with their boards of directors. The problems stem from those board members who want to micromanage the chief executive excessively, argues Dan Pallotta, who is a consultant in nonprofit innovation and a social entrepreneur. What is ironic is that many of the meddling board members are themselves in the business sector. The very things that they want to prevent are the same strategies that would succeed in the business sector.
“It’s as if each nonprofit boardroom has some kind of wireless lobotomizing device at the door. Business people enter the board room and proceed to violate every principle that made their businesses successful,” Pallotta says in a recent article for the Harvard Business Review.
Board meddling has a negative impact on non-profit chief executives, too. A recent survey showed that out of 1,932 nonprofit executive directors responding, some three-quarters do not expect to be in their current position in five years. What is even more disturbing, most do not expect to be leading another not-for-profit organization. Those who took part in the survey said “frustrations with boards of directors” are among the top reasons that “add stress to a role that can be challenging even in the best circumstances.” Assumingly, the current economy makes the stress level even worse.
The micromanagement is often explained by board members as some kind of fiduciary duty. But Pallotta calls what they are doing “a dereliction of fiduciary duty” while they “undermine the organization’s potential.” He argues that the non-profit board member needs to ensure there is progress in meeting the organization’s mission. That comes from using donations to ensure that the non-profit grows. In addition, board members need to support the chief executive by giving donations and looking for others to make significant donations, he said.
For more of Pallotta’s argument, from the Harvard Business Review, please click here.
Infrastructure Build-Up in Emerging Economies Will Change Global Economy: McKinsey
The global economy is expected to see the end of low interest rates because emerging economies are poised to undertake a massive build-up in public infrastructure, according to a new report from McKinsey & Co. There is increased demand in these economies for roads, ports, water, power stations, schools, hospitals and other public infrastructure, according to the Financial Times.
The likely shift toward government bonds and fixed-income securities, and away from equities and savings, will increase the cost of capital, says McKinsey. Long-term interest rates could start to rise within the next five years based on the current trends, the consulting firm adds.
Given the new realities, businesses will need to plan accordingly. Bloomberg News explains that those with higher capital productivity (output per dollar invested) will see they have a definite competitive advantage over rival businesses. Businesses which can access direct financing will also have a competitive advantage, Bloomberg reports.
Governments need to plan accordingly, too. Bloomberg said governments where economies are more advanced need to enact policies that promote savings. They also need to have policies where the economy is less dependent on consumption.
Investment strategy will be affected by the trends, too. The study suggests that higher interest rates would benefit commercial and retail banks. Investors, who are concerned about the long-term, may earn better returns from fixed-income investments than they do from equities, McKinsey said. Current low interest rates have benefited equities, while higher interest rates will likely lead new investors to bonds, comments the Financial Times.