Every word counts: business communications can come back to haunt you.

Evidence from business records generated over years and even decades affects an increasing number of civil lawsuits. In fact, damage awards have soared in recent years, some due to explosive content of business communications, gaps in documentation, inflammatory e-mail, or charges of evidence tampering.

Most recently, General Motors was hit with a record $4.9 billion verdict, based largely on an internal memo a staff engineer wrote nearly two decades earlier. Similarly, in lawsuits against large insurers and small service providers, old marketing memos were pivotal evidence. Inflammatory e-mall messages haunted Microsoft in its antitrust trial, and offensive e-mail plagues employers in costly harassment lawsuits. These are just a few examples of business communications created in one context and then "spun" against the corn party in the courtroom.

Equally troublesome are high profile accusations of document shredding. Enron and Andersen are the latest (but not the only) businesses finding themselves on the defensive over when and how they de stroyed evidence. From gigantic civil penalties to criminal obstruction of justice charges, haphazard enforcement of document retention and disposal policies is a legal minefield.

Many managers today are unaware of the legal pitfalls inherent in generating written communications and business records. The fact is that during a trial, the courts may analyze everything from informal memos to performance appraisals to marketing plans, all of which may be turned against the company. Unfortunately, those managers who are informed of the legalities often feel pressured into either over-documenting information, avoiding written communications completely, or using ambiguous language due to fear of lawsuits.

How Courts Use Business Records And Documentation During Litigation

Documentation is a record of an event, discussion, or observation by one or more individuals. Most organizations rely on documentation to record their activities and those of their employees. Any written information, whether formally or informally generated, can be considered documentary evidence if it is pertinent to a legal action, a regulatory proceeding, or a misconduct investigation. Written documents can include both hard copy and electronic records, even those never actually printed.

Most lawsuits ultimately revolve around three simple questions about a business organization:

* What did the company know?

* When did it know?

* What did it do?

Often, written business records can answer each of these questions. In the absence of a written record of the activities that took place, the company's position may be significantly affected. That's why unambiguous, complete, accurate documentation is often invaluable when used in the context of regulatory or judicial proceedings. Additionally, complete records, used as an adjunct to accurate testimony, are important in enhancing a witness's credibility. Primarily, courts use written business records in the following context:

* To tell the story of what occurred in the underlying activities. Business records can reconstruct actual events and aid in establishing the company's good faith, objective actions, and appropriate business activities. Often, the lawsuit's subject matter can span years. When there are no documents to establish the basis for the company's past actions, businesses have a difficult time retelling what happened and supporting their claims.

* To document that management made personnel decisions objectively, consistently, and in accordance with all company policies.

* To refresh a witness's memory or to discredit a witness who gives inconsistent testimony.

* To reconstruct past events, such as personnel decisions or decisions about sales or contacting practices.

* To establish knowledge, notice, or intent of the company or a particular individual at a relevant time.

Effective documentation has several elements. In particular, it should be consistent, understandable, and readable for everyone in the organization. The following 10 principles of effective documentation will help assure that your business records work for--not against--your organization in the courtroom.

1. Write with accuracy and precision.

Be factual with all memos, letters, and other business communications. Include all details: date, time, location, name of persons involved, witnesses, work environment conditions, and necessary action taken or recommended. If your adversary can take your documents out of context or if your records express opinions on the ultimate facts in dispute yet don't contain all the relevant data, then your position may suffer during a lawsuit. Avoid speculation, exaggeration, subjective, or relative descriptions that are at best ambiguous.

Limit the use of terms such as "frequent," "excessive," and "sub-standard," unless you also give the context. Think about your objective for the communication and how you intend others to read it and act upon it. If someone reading the communication could ask "relative to what standard?" then the writing is non-specific. Use objective facts and examples instead.

2. Avoid negative connotations that may be misleading to someone not familiar with the company or the industry.

Avoid slang or shortcuts in terminology. Minimize unnecessary technical jargon by defining the term's meaning in its technical context. Make sure your communications are consistent with the intended recipient's knowledge so that you can defend against a claim that the recipient did not understand the content or requested action. Describe all actions and conclusions objectively, and be honest in assessing the situation (do not rely on second/third party information unless it is specified as such).

3. Know what you're writing about.

When writing about activities or events, stay within your personal knowledge, expertise, and responsibility. Don't speculate or guess as to the meaning of any aspect of a business transaction with which you are not personally familiar.

4. Avoid legal conclusions.

Don't use legal terms in a non-legal sense. For example, "He was negligent be cause he didn't read his e-mail" uses a legal term (negligent) in a lay sense. While it might be unprofessional or otherwise bad business not to read e-mail, it isn't "negligent," which is defined in the law as failure to exercise that degree of care and skill necessary to avoid foreseeable risk of harm to a person or property. Other terms to avoid include "defective," "fraudulent," "misleading," or "discriminatory" unless you have both the expertise and the job responsibility to reach those conclusions.

5. Eliminate all inflammatory, offensive, or otherwise inappropriate language.

Minimize the use of labels, such as "malingerer" or "not a team player," without a description of the underlying factual basis for the evaluation. Also, avoid subjective terms when describing people, as those terms may be misleading to a layperson serving as a juror.

6. Define or clarify technical terms involving your work, including specialized industry terms.

Always consider the communication's purpose. For example, if you are writing to someone outside the company and require that person to take action, use terminology the person will understand. Remember that a lay juror, arbitrator, or judge from outside your industry may later have to consider the effect of your internal and external communications.

7. Close the loop on all significant issues raised in writing.

If someone requests information from you, provide it promptly or notify the person of any foreseeable delays. If an action is requested in writing yet the resolution is not reflected in writing, the courts may later mischaracterize the company's actions.

8. Minimize off-the-cuff responses.

Limit handwritten comments in the margins of business records and rapid e-mail replies when they are not well thought out. These types of communications are often incomplete or misleading. This is especially a concern with e-mail messages, where employees tend to write off-the-cuff conversational messages. These communications don't use the same tone and format expected of business communications, and jurors often believe they reflect the writer's true unedited intentions. Such messages usually become smoking guns when turned against the writer in the courtroom.

9. Control copy distribution of all sensitive records or confidential/proprietary data.

Be sensitive to confidentiality where appropriate. Make sure your employees understand their responsibilities to safeguard proprietary business records, intellectual property, and other company assets from inadvertent disclosure. Also, understand the scope and limitations of attorney-client privileges. Big Tobacco learned the hard way that labeling a document "privileged" doesn't govern whether the document can be safeguarded from production. Privileged exchanges between lawyer and client are limited to those where the client provides facts intended to be a confidential request for legal advice, and the lawyer responds with analysis of those facts. Marketing studies and medical analysis of the addictive powers of nicotine were not privileged, and the courts ultimately sanctioned the companies for trying to rely upon a legal protection that didn't exist.

10. Be consistent in your documentation techniques.

Inconsistency often reflects poorly in the courtroom, especially in the context of performance appraisals when an employee claims that management singled out him or her for negative action. However, consistent doesn't mean inflexible. Rather, consistency enhances the company's ability to defend against discrimination claims when the employer can demonstrate that the needs of the particular job consistently required adherence to concrete, well-articulated performance expectations, and that all similarly situated employees were held to the same standards.

Use Documentation to Your Benefit

To stay competitive, business leaders and their employees must be able to generate and use documentation, including action plans, personnel decisions, external communications, and internal correspondence, without unnecessary fear of putting anything in writing. By using the above guidelines, proactive businesses can develop, distribute, and retain business records that will ultimately protect them from any legal challenge.

COPYRIGHT 2003 Business News Publishing Co.

U.S. business under more scrutiny overseas.

Let's face it. It isn't easy being corporate these days.

The economy is tanking at a pace not seen since the Great Depression. Wall Street financiers have turned to panhandling. And if you listen carefully, the ghosts of Enron, WorldCom and their brethren are clanking loudly in the attic.

The lack of financial and market regulation has been the big topic during the presidential debates. But in some respects, corporations find themselves under more government scrutiny than ever — especially if they do business overseas. In a global market that's just about everybody.

Lawyers at Squire Sanders & Dempsey, Holland & Knight and K&L Gates are busy trying to bulletproof their clients from prosecutors and investigators. While it's no secret that terrorism is the Justice Department's top priority, prosecution under the Foreign Corrupt Practices Act has blossomed to target a pay-to-play culture in a deal-driven world. The 1977 law banned bribery of foreign officials.

The buzz phrase now is due diligence because U.S. companies are responsible for the bad acts of their foreign subsidiaries and the companies they buy.

Rebekah J. Poston, a partner in Squire Sanders' Miami office, said her office has done at least eight FCPA reviews in the last year at companies targeted for possible purchase by corporate clients.

"We are doing FCPA work more than anything," she said. "Companies are buying other companies knowing they have to be able to show that they did an FCPA due diligence because they could have successor liability."

She said the Justice Department is particularly focused on deals in Asia and Eastern Europe.

It's not easy work. The law firm needs to parachute in a forensic accounting team at a foreign business to quickly interview executives and peruse records. The attorneys need to speak the language whether it be in Bratislava, Singapore or Port-au-Prince.

Many times the takeover target is uncooperative.

They think, "You may not even buy us, and we are going to sit here and tell you all this stuff?" Poston said.

But for American businesses, such investigations are a must.

"Conducting due diligence can also be a defense if the government later comes down on the new company saying there has been an FCPA violation, said colleague Jason B. Savitz, who works with Poston on FCPA cases. "We can come in and say, 'Look, there was an investigation, we vetted it out.'"

Miami attorney Peter Prieto, chairman of Holland & Knight's litigation practice, said South Florida's proximity to Latin America makes it a petri dish for FCPA cultivation.

"Any time you have that mix, you are going to have the FCPA," he said. "Both American actions and those of foreign companies are facing FCPA scrutiny."

He noted the sentencing last month of a top executive of the French telecommunications company Alcatel, now Alcatel-Lucent. Christian Sapsizian was sentenced to 30 months in prison by U.S. District Court Judge Patricia Seitz in Miami after admitting $2.5 million in bribes went from the company to the director of a Costa Rican agency responsible for awarding contracts. In 2001, Costa Rica awarded a $149 million mobile network contract to Alcatel.

Even though Sapsizian is a French citizen, prosecutors said he fell under the jurisdiction of the FCPA because the company's U.S. depository receipts were traded on the New York Stock Exchange.

The U.S. Supreme Court last week also decided not to hear the appeal of two former executives of American Rice, who were found guilty in 2005 of bribing Haitian officials to reduce company taxes. Executives David Kay and Douglas Murphy, sentenced to 37 and 63 months in prison, respectively, argued the FCPA didn't apply to tax-related bribes.

The decision left in place a 5th U.S. Circuit Court of Appeals finding that the FCPA can be applied more broadly to operating costs.

"The FCPA Blog" run by the Singapore-based law firm Cassin Law offered a warning, saying the Supreme Court's refusal to get involved "is terrible news for Kay and Murphy and a personal tragedy for them. For the rest of us, it means the Justice Department's so-called 'expansive enforcement' of the FCPA will continue."

Prieto said the white-collar prison sentences serve as an object lesson on foreign business practices.

"It's a world economy and what you are seeing is more enforcement and more prosecution in the U.S. and prosecutions in other countries," he said. "The risk is going to outweigh the benefit. The penalties for FCPA violations to companies are very high and people and executives can face significant prison time."

Prieto said companies have to be very careful as to what might constitute a bribe: an expensive dinner, a gift, a trip to Disney World?

"Unfortunately for business, there is no bright-line rule," Prieto said.

Back at Squire Sanders, attorney Greg Bates keeps track of developments in the FCPA. He said for a long time, the act was rarely prosecuted. But enforcement action heated up in the last seven years after U.S. companies continued to lose contracts to competitors who could bribe officials with impunity.

U.S. authorities started working with foreign governments in Western Europe, Asia and Africa. The United States and about three dozen countries signed an anti-bribery treaty through the Organization for Economic Cooperation and Development, a Marshall Planera body formed to promote the principles of a free market economy.

The countries represent 70 percent of the world's exports.

Sarbanes-Oxley, the legislation Congress passed in the wake of the Enron collapse holding companies more accountable, has also led to more FCPA prosecutions, Bates said. As has referrals from the Labor and Commerce departments to prosecutors, voluntary disclosures, increased cooperation from foreign governments, and simply reading foreign press.

"Not only have prosecutions heated up but also the penalties," Bates said. "Companies are facing astronomical fines. We are talking about $40 million, $30 million fines. The DOJ and the SEC have certainly caused companies to wake up."

In addition to increased corporate penalties, individuals are being severely punished and some are going to prison.

Glenn Gordon, associate regional director in the Securities and Exchange Commission's Miami office, said there has been a definite uptick on FCPA from his perspective. He said there has been increased self-reporting by companies as well as tips from whistle-blowers.

"European countries in the past few years have started passing their own laws to prohibit bribes," he said. "This has been a law that has applied to U.S. businesses for a number of years, but similar conduct in similar situations was not illegal in Europe."

A February report by the Shearman & Sterling law firm said 29 companies were targets of FCPA investigations launched last year compared with nine in 2003. The number of open investigations is approaching 100.

"In addition to FCPA enforcement in the United States, companies are increasingly facing parallel investigations in foreign jurisdictions under other nations' anti-corruption laws," the report states.

The U.S. attorney's office in Miami declined to comment on the uptick in FCPA prosecutions, but Justice's fraud chief said at a conference last week that he expects enforcement to stiffen in the wake of the economic crisis as banks seek cash infusions.

"We've seen the high water mark for FCPA cases," Assistant U.S. Attorney Steven Tyrell, the fraud section chief in Washington, told a meeting of the Securities Industry and Financial Markets Association. "I believe we have yet to reach the crest of the wave."

Jeffrey Maletta, a partner with K&L Gates in Washington, said he wouldn't be surprised in the current environment if the government has to make a choice between continued enforcement of the FCPA or refocusing on culprits who caused the current financial crisis.

"Right now it's certainly a high priority," Maletta said. "Whether that priority will change in light of what is happening remains to be seen. I think there might be a lot of pressure to move in this environment to examining participants in the financial system."

COPYRIGHT 2008 Incisive Media

Agency Says Small Businesses Get Close to a Quarter of U.S. Contracts

The Small Business Administration, assessing the government's success in awarding contracts to small businesses, said Wednesday that $83.2 billion went to those companies in the last fiscal year, a record amount. And it said that the government was close to complying with a law requiring that nearly a quarter of federal contracts go to small businesses.

But critics quickly responded that the figures failed to reflect the full picture of federal contracting.

They argued that small businesses were still not getting their fair share of government contracts. Senator Olympia J. Snowe, Republican of Maine and the ranking minority member of the Senate Committee on Small Business and Entrepreneurship, was among the critics.

''As small businesses represent 99 percent of all firms nationwide and will be vital in leading economic recovery effort,'' she said, ''it is crucial that these enterprises receive every job-creating and capital-generating opportunity in the federal contracting marketplace.''

The S.B.A.'s lack of effective oversight, she said, has been ''indefensible.'' Only three of the 24 government agencies met all their contracting goals for five categories of small businesses, including service-disabled veterans and women.

Representative Nydia M. Velazquez, the New York Democrat who heads the House Small Business Committee, questioned the accuracy of the contracting figures and said, ''Small firms lost out in nearly $4 billion in opportunities.''

The agency's acting administrator, Santanu K. Baruah, who began the job in August, emphasized that the S.B.A. relied mostly on information provided by the agencies like the Defense Department, which actually award the contracts and track them.

Mr. Baruah noted that the S.B.A. had made an effort to ''scrub the data'' of flawed coding and other problems that have led to large companies being listed as small businesses. The agency adopted new rules, as of July 1, 2007, that require more frequent certification to keep corporate subsidiaries from masquerading as small firms.

Mr. Baruah conceded that some $5 billion in contracts had been miscoded as having been awarded to small businesses, a figure reported Wednesday in The Washington Post.

Even so, he noted that ''$5 billion represents a 6 percent error rate,'' a figure which he defended as ''within the realm of reasonable, although that does not mean we should excuse errors.''

The S.B.A.'s statistical scorecard was started last year to measure governmentwide compliance with the Small Business Reauthorization Act. The 1997 law requires the government to award 23 percent of federal contracts to small businesses, which are defined in several ways, including employing fewer than 500 workers. The S.B.A.'s scorecard said 22 percent had been awarded.

COPYRIGHT 2008 The New York Times Company

U.S. business under more scrutiny overseas.

The economy is tanking at a pace not seen since the Great Depression. Wall Street financiers have turned to panhandling. And if you listen carefully, the ghosts of Enron, WorldCom and their brethren are clanking loudly in the attic.

The lack of financial and market regulation has been the big topic during the presidential debates. But in some respects, corporations find themselves under more government scrutiny than ever — especially if they do business overseas. In a global market that's just about everybody.

Lawyers at Squire Sanders & Dempsey, Holland & Knight and K&L Gates are busy trying to bulletproof their clients from prosecutors and investigators. While it's no secret that terrorism is the Justice Department's top priority, prosecution under the Foreign Corrupt Practices Act has blossomed to target a pay-to-play culture in a deal-driven world. The 1977 law banned bribery of foreign officials.

The buzz phrase now is due diligence because U.S. companies are responsible for the bad acts of their foreign subsidiaries and the companies they buy.

Rebekah J. Poston, a partner in Squire Sanders' Miami office, said her office has done at least eight FCPA reviews in the last year at companies targeted for possible purchase by corporate clients.

"We are doing FCPA work more than anything," she said. "Companies are buying other companies knowing they have to be able to show that they did an FCPA due diligence because they could have successor liability."

She said the Justice Department is particularly focused on deals in Asia and Eastern Europe.

It's not easy work. The law firm needs to parachute in a forensic accounting team at a foreign business to quickly interview executives and peruse records. The attorneys need to speak the language whether it be in Bratislava, Singapore or Port-au-Prince.

Many times the takeover target is uncooperative.

They think, "You may not even buy us, and we are going to sit here and tell you all this stuff?" Poston said.

But for American businesses, such investigations are a must.

"Conducting due diligence can also be a defense if the government later comes down on the new company saying there has been an FCPA violation, said colleague Jason B. Savitz, who works with Poston on FCPA cases. "We can come in and say, 'Look, there was an investigation, we vetted it out.'"

Miami attorney Peter Prieto, chairman of Holland & Knight's litigation practice, said South Florida's proximity to Latin America makes it a petri dish for FCPA cultivation.

"Any time you have that mix, you are going to have the FCPA," he said. "Both American actions and those of foreign companies are facing FCPA scrutiny."

He noted the sentencing last month of a top executive of the French telecommunications company Alcatel, now Alcatel-Lucent. Christian Sapsizian was sentenced to 30 months in prison by U.S. District Court Judge Patricia Seitz in Miami after admitting $2.5 million in bribes went from the company to the director of a Costa Rican agency responsible for awarding contracts. In 2001, Costa Rica awarded a $149 million mobile network contract to Alcatel.

Even though Sapsizian is a French citizen, prosecutors said he fell under the jurisdiction of the FCPA because the company's U.S. depository receipts were traded on the New York Stock Exchange.

The U.S. Supreme Court last week also decided not to hear the appeal of two former executives of American Rice, who were found guilty in 2005 of bribing Haitian officials to reduce company taxes. Executives David Kay and Douglas Murphy, sentenced to 37 and 63 months in prison, respectively, argued the FCPA didn't apply to tax-related bribes.

The decision left in place a 5th U.S. Circuit Court of Appeals finding that the FCPA can be applied more broadly to operating costs.

"The FCPA Blog" run by the Singapore-based law firm Cassin Law offered a warning, saying the Supreme Court's refusal to get involved "is terrible news for Kay and Murphy and a personal tragedy for them. For the rest of us, it means the Justice Department's so-called 'expansive enforcement' of the FCPA will continue."

Prieto said the white-collar prison sentences serve as an object lesson on foreign business practices.

"It's a world economy and what you are seeing is more enforcement and more prosecution in the U.S. and prosecutions in other countries," he said. "The risk is going to outweigh the benefit. The penalties for FCPA violations to companies are very high and people and executives can face significant prison time."

Prieto said companies have to be very careful as to what might constitute a bribe: an expensive dinner, a gift, a trip to Disney World?

"Unfortunately for business, there is no bright-line rule," Prieto said.

Back at Squire Sanders, attorney Greg Bates keeps track of developments in the FCPA. He said for a long time, the act was rarely prosecuted. But enforcement action heated up in the last seven years after U.S. companies continued to lose contracts to competitors who could bribe officials with impunity.

U.S. authorities started working with foreign governments in Western Europe, Asia and Africa. The United States and about three dozen countries signed an anti-bribery treaty through the Organization for Economic Cooperation and Development, a Marshall Planera body formed to promote the principles of a free market economy.

The countries represent 70 percent of the world's exports.

Sarbanes-Oxley, the legislation Congress passed in the wake of the Enron collapse holding companies more accountable, has also led to more FCPA prosecutions, Bates said. As has referrals from the Labor and Commerce departments to prosecutors, voluntary disclosures, increased cooperation from foreign governments, and simply reading foreign press.

"Not only have prosecutions heated up but also the penalties," Bates said. "Companies are facing astronomical fines. We are talking about $40 million, $30 million fines. The DOJ and the SEC have certainly caused companies to wake up."

In addition to increased corporate penalties, individuals are being severely punished and some are going to prison.

Glenn Gordon, associate regional director in the Securities and Exchange Commission's Miami office, said there has been a definite uptick on FCPA from his perspective. He said there has been increased self-reporting by companies as well as tips from whistle-blowers.

"European countries in the past few years have started passing their own laws to prohibit bribes," he said. "This has been a law that has applied to U.S. businesses for a number of years, but similar conduct in similar situations was not illegal in Europe."

A February report by the Shearman & Sterling law firm said 29 companies were targets of FCPA investigations launched last year compared with nine in 2003. The number of open investigations is approaching 100.

"In addition to FCPA enforcement in the United States, companies are increasingly facing parallel investigations in foreign jurisdictions under other nations' anti-corruption laws," the report states.

The U.S. attorney's office in Miami declined to comment on the uptick in FCPA prosecutions, but Justice's fraud chief said at a conference last week that he expects enforcement to stiffen in the wake of the economic crisis as banks seek cash infusions.

"We've seen the high water mark for FCPA cases," Assistant U.S. Attorney Steven Tyrell, the fraud section chief in Washington, told a meeting of the Securities Industry and Financial Markets Association. "I believe we have yet to reach the crest of the wave."

Jeffrey Maletta, a partner with K&L Gates in Washington, said he wouldn't be surprised in the current environment if the government has to make a choice between continued enforcement of the FCPA or refocusing on culprits who caused the current financial crisis.

"Right now it's certainly a high priority," Maletta said. "Whether that priority will change in light of what is happening remains to be seen. I think there might be a lot of pressure to move in this environment to examining participants in the financial system."

COPYRIGHT 2008 Incisive Media

New Jobless Claims Reach A 16-Year High, U.S. Says

New claims for unemployment benefits jumped last week to a 16-year high, the Labor Department said Thursday, providing more evidence of a rapidly weakening job market.

The government said new applications for jobless benefits rose to a seasonally adjusted 542,000 from a downwardly revised figure of 515,000 in the previous week. That was much higher than economists' expectations of 505,000, according to a survey by ThomsonReuters.

The department said that was also the highest level of claims since July 1992, when the economy was coming out of a recession.

The four-week average of claims, which smooths out fluctuations, was even worse: it rose to 506,500, the highest in more than 25 years.

In addition, the number of people continuing to claim unemployment insurance rose sharply for the third straight week to more than four million, the highest since December 1982, when the economy was in a recession.

Those figures partly reflect growth in the labor force, which has increased by about half since the early 1980s.

The unemployment rate in October was 6.5 percent, and last year it averaged 4.6 percent.

The Federal Reserve released projections on Wednesday that the jobless rate will climb to 7.1 to 7.6 percent next year, according to documents from the Fed's Oct. 29 closed-door deliberations on interest rate policy.

In another economic report, a private research group said the economy's health declined further in October as stocks, building permits and consumer expectations all fell.

The Conference Board says its monthly forecast of future economic activity declined 0.8 percent in October, worse than the 0.6 percent decrease expected by economists surveyed by Thomson Reuters.

The index, which weighs indicators like manufacturers' new orders and supplier deliveries, has fallen four of the last six months. It rose slightly in September, thanks to federal interventions that increased the money supply.

Senate Extends Benefits

WASHINGTON (Reuters) -- The Senate passed and sent to President Bush on Thursday legislation to extend jobless benefits for people who have been unemployed for a prolonged period in an economy that is losing jobs.

By voice vote, the Senate passed the bill, which had already been approved by the House.

Bush is expected to sign the measure into law.

The bill would give seven more weeks of government unemployment payments to workers who have exhausted their current jobless benefits. For those in states with the highest unemployment rates, an additional 20 weeks would be allowed.

CAPTION(S):

PHOTO: Paul Nawrocki of Beacon, N.Y., wore a signboard this week in Midtown Manhattan advertising his need for a full-time job with benefits. He said he has been looking for work for nine months.

COPYRIGHT 2008 The New York Times Company

Who's Watching the Money?

With the economy worsening and the Bush team adrift, queasy markets are looking to Obama to set the course. But is naming a Treasury secretary enough?

Barack Obama thought he could have a fairly normal transition. Oh, he knew how serious the financial crisis was ("something that we have not seen since the Great Depression," he told "60 Minutes"). But after pledging to tackle the economy "head-on" at a Nov. 7 news conference in Chicago--with 16 of the nation's economic elites standing behind him like the board of America Inc.--Obama apparently felt he'd said enough. There is "only one government and one president at a time," he said, adding that he would apply "deliberate haste" to choosing a Treasury secretary and other cabinet members. Then the president-elect ensconced himself in his transition bunker in Chicago, attending to important matters like discussing the secretary-of-state slot with Hillary Clinton.

Yet with the economic news worsening every day, Obama found he couldn't ignore the growing power vacuum back east. Drained of energy and ideas following its $700 billion bailout program in October, the Bush administration seems to be giving new meaning to the concept of "lame duck." President Bush served as a genial host--but nothing more--at an emergency meeting of the G20 nations that produced no plan. Treasury Secretary Hank Paulson, apparently feeling he too had done enough, blocked a Big Three auto rescue and abruptly abandoned the "distressed asset" buy-up plan he sold to Congress in October as a cure-all. Since those assets--the toxic subprime mortgages that started the collapse in the first place--are still sitting like a dead weight on many firms' balance sheets, frightened investors have begun to wonder all over again which firms are going under and which will survive. Making matters worse, Paulson delivered a rambling history of the crisis at the Reagan Library in California that sounded like a fare-thee-well--two months before he actually leaves office. Federal Reserve chairman Ben Bernanke, meanwhile, found himself almost out of tools, having already pushed interest rates to near zero.

In ordinary times, a leisurely transition and the fact that Congress is full of lame ducks for nine weeks don't matter much. In ordinary times, the lack of civic-minded business leaders with credibility and a desire to exert forceful leadership doesn't matter much either. But as the president-elect has acknowledged, these are not ordinary times. A sense of drift has gripped the politico-economic nexus of New York and Washington, and the markets have begun to fear that what was already a major recession could turn worse. Panic sent the yield on the only known safe investment haven, U.S. Treasury bonds, to record lows of less than 1 percent in some cases. What that means is that people don't even expect to earn profits anymore; they just don't want their money to disappear entirely. Investors have been unwilling to commit capital to a wide range of stock sectors (financial, auto, insurance, housing) because they don't know the amount or scope of federal aid.

So pervasive has the panic become that some critics were starting to point fingers back at Chicago. To be sure, Obama doesn't have the power to do much of anything to right the economy during this transition period, but what he can do is reassure the markets by quickly making clear the course he plans to take, with a detailed map of his economic rescue plan--something the Obama team has been loath to do so far. Even some Obama advisers admitted to a sense of puzzlement over the president-elect's seeming slowness in fleshing out his stimulus and auto-bailout proposals.

As the markets continued to tank, Obama answered his critics in part on Nov. 21, settling on Timothy Geithner as his likely new Treasury secretary. Geithner, the 47-year-old president of the Federal Reserve Bank of New York, is a respected market interventionist who studied at the knee of former Treasury secretary Robert Rubin as an under secretary during the Clinton years. Geithner--who was born two weeks after Obama--has a quick laugh, a sense of irony and a lot of energy, bouncing in and out of rooms at the sedate New York Federal Reserve building. For the past several years Geithner has functioned as Wall Street's fire chief, playing a crucial behind-the-scenes role in the Paulson-Bernanke bailouts (a topic that may cause him some discomfort at his confirmation hearings). Geithner's appointment certainly cheered the markets: the Dow turned on a dime and shot up nearly 6.5 percent on the news.

The Geithner appointment, and Obama's announcement Saturday that he is developing a two-year stimulus plan including new job-creating investments in infrastructure and alternative energy, are signs that he is beginning to grasp the economic rudder. Even so, many say more will be expected from Obama before he takes office. Rep. Barney Frank, chairman of the House Committee on Financial Services, told NEWSWEEK HE has urged the president-elect to make a statement right away asking that Paulson's Troubled Asset Relief Program--or TARP--be redirected for wide-scale mortgage relief. "It has become important for him to speak out about that," Frank told NEWSWEEK. "My sense is that Paulson is steering clear of any further use of the TARP because he doesn't want to pre-empt the president-elect. But the danger is Obama will get blamed for Paulson's decision" to hold back the money. New Jersey Gov. Jon Corzine, another Obama adviser, urged the president-elect to push for a stimulus "north of $600 billion." "You have to pick a program that is going to have overwhelming force," Corzine told NEWSWEEK. To reverse market psychology, Obama should "get something together that could be proposed the moment he's sworn in."

CEOs at top firms across the country are struggling with leadership vacuums of their own. Nowhere is that more obvious than at Citigroup, Wall Street's longtime flagship and for much of this decade the nation's largest financial institution. In the wake of waves of layoffs and an influx of new management, blurred lines of authority have created a continual sense of confusion in its midtown Manhattan headquarters and lower Manhattan trading floors. In early November, many employees were told not to travel for two weeks--either because they could be fired or because they'd be needed to cover for departed employees. Vikram Pandit, the former Morgan Stanley executive and hedge-fund manager elevated to CEO last December to clean up the mess left behind by Charles Prince, has been less than Churchillian. A tepid public speaker, he keeps a low public profile. On Monday, Nov. 17, Pandit called a town-hall meeting at 399 Park Avenue to discuss the need to cut some 50,000 jobs, and then sent an e-mail blast to the shellshocked employees: "We are in a far stronger position going into 2009 than we were going into 2008." Investors disagreed. Citigroup's stock, which had fallen into the single digits for the first time since the 1990s, dived throughout the week, breaking below $4 on Friday, Nov. 21. "The most recent deterioration has taken all of the market's leadership sectors--industrials, energy and materials--down," says Louise Yamada, head of Louise Yamada Technical Research Advisors LLC. "And now there isn't any leadership." In times of recession, consumer staple companies like Campbell Soup are supposed to lead the market to higher ground. But recently they've been slumping too.

Most other CEOs seem to be hunkered down, conserving cash rather than restructuring their businesses. The natural leaders-- establishmentarians like General Electric CEO Jeff Immelt, or JPMorgan Chase's Jamie Dimon, or Michael Dell of Dell Computer--have their own issues to deal with. Even Warren Buffett, the oracle of U.S. capitalism, seems to have clay feet these days: his stock has been scythed by 45 percent since September. And when CEOs do emerge, it's to ask the taxpayers for help, as the chief executives of Ford, General Motors and Chrysler did last week. In occasionally brutal House and Senate hearings, the leaders of these massive enterprises begged for $25 billion in short-term aid while acting as if the screw-ups on the watch weren't their fault, and without offering plans as to how such aid would allow them to dig out of their deep ditch. It didn't help that each had flown into town on his own corporate jet. When asked if he'd consider slashing his compensation to a symbolic dollar, Ford CEO Alan Mulally (2007 compensation: $21.7 million) responded, "No, I think I'm OK where I am."

Nonetheless, Michigan Sen. Carl Levin and the delegation from surrounding states offered an amendment late Thursday to make the companies more accountable for the desperately needed money in an effort to approve the $25 billion package. But Majority Leader Harry Reid, still fearing a resounding "no" from colleagues, postponed a vote on the measure. "Yes, we're kicking the can down the road because that will give us the opportunity to do something positive," he said on Thursday. The Senate did, however, find time to stage a series of bipartisan testimonials for an 85-year-old convicted felon, Alaska Republican Ted Stevens. Congress adjourned Thursday without taking action on the auto industry's request for help, or other issues.

Some see political motives in all this foot-dragging. Obama may want to avoid being linked in any way to the policy failures of the Bush era. Harvard economist Ken Rogoff (a sometime adviser to John McCain during the campaign) says that by not "taking ownership" of the problem now, Obama can reappear dramatically as a savior on Jan. 20 like Franklin Roosevelt in 1933, thereby reclaiming the commanding heights of U.S. politics for the Democratic Party. "It's exactly the FDR model. The [market] may sink another 10 percent, but then they can win elections for another 10 years," Rogoff says. "It makes sense politically to hang Bush out to dry, but Obama has to hang the economy out to dry at the same time." Obama, in other words, may want to turn crisis into opportunity.

Drift is dangerous for several reasons. Uncertainty has a way of freezing markets--who would put money into a situation that's shifting, like planting a foundation in sand? And so in the absence of clarity, the trend is to go lower. Sell now, ask questions later. The VIX index--also known as the fear index, a measure of investors' concerns about volatility--has risen to record levels in recent weeks.

So who is to blame? A spokeswoman for Paulson, Brookly McLaughlin, says the criticism of the Bush administration is unfair. "We're still very much working on programs," she says. "We plan on using our resources aggressively to support the normalization of credit markets and the expansion of credit." Barney Frank says it's unfair to say that Congress and the administration are simply washing their hands until January. "We're responding quite readily," he says. "The Congress did get the administration to help with unemployment insurance. On mortgage foreclosure we've been putting maximum pressure on them. And we're dealing seriously with the auto-industry issue. We've set a time for them to come back" to Congress with a restructuring plan. But a lot more could be done in the next several weeks. Industries can be nationalized, or allowed to fail, with lots of knock-on effects. Right now there are plenty of economic supertankers floating around in stormy seas. Most of the captains are overboard, or belowdecks. And Barack Obama, even before he's sworn in, may have to make his way to the helm.

COPYRIGHT 2008 Newsweek, Inc. All rights reserved

Analysts: U.S. crisis key reason behind Jordan's stock slump.

Analysts and brokers attributed Monday's slump of Amman Stock Exchange (ASE), which dived by 4.28 percent to 3,781 points, to the uncertainty over the U.S. huge bailout plan to avert global financial meltdown, local daily The Jordan Times reported on Tuesday.

"It is too early to judge whether the U.S. rescue plan would succeed in lessening the impact of the global financial crisis or not, but investors are in panic and they are selling, saying they will not wait to see the results of the plan," Jawad Kharouf, president of the Association of Certified Capital Market Professionals, said on Monday.

"What is taking the ASE down is investors' psychology affected by the turmoil in the global financial markets and margin trading, " said Kharouf, adding that the trend of the ASE will be determined at this stage by developments of the U.S. stock market.

However, Kharouf and Nasser Barghouthi, director of a brokerage house affiliated to the Industrial Development Bank, agreed that the drop in the ASE is illogical.

"There is some sense when banks' shares go down under the circumstances because it is the financial and the banking sector that is tumbling across the world. But why should the prices of phosphate, potash, steel and petrol companies drop? There is no logical explanation for that," said Kharouf.

"Prices of several shares are undervalued at the ASE and it is a good time to buy because sooner or later the market will go up," said Barghouthi.

"We expect an influx of foreign investment at this stage, especially since the ASE is an emerging market, where the losses can be minimal," he added.

Bassam Saket, executive chairman of Jordan Securities Commission, said the local financial market is safer for investments than foreign markets as it is protected by monitoring, transparency and constant financial disclosure.

Copyright 2008 XINHUA NEWS AGENCY

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Small businesses cry out for tax cuts.

As Alistair Darling puts the finishing touches to next Monday's Pre-Budget Report, small businesses are demanding that the Chancellor takes urgent action to ease their plight. David Frost, director-general of the British Chamber of Commerce, says: "If things carry on like this, many sound UK businesses will be bust by Christmas."

Campaign groups such as the Federation of Small Businesses have had some success in highlighting the problems caused by banks. Stories abound of lenders tightening credit, refusing loans and hiking charges. That prompted Business Secretary Lord Mandelson to order the big High Street banks to hand over data about the availability and size of lending they are offering to small and medium enterprises (SMEs).

However, while some firms surveyed by the Evening Standard for this article did complain about banks' behaviour, many SMEs said this wasn't their main gripe -- not least because many of them do not have a lot of debt.

Instead, they desperately want the Chancellor to cut tax to help them in the recession. Plainly, every business operates in a unique way and has different suggestions about what can be improved -- ranging from national insurance and VAT to corporation tax and stamp duty on their leases.

SMEs raise many other concerns, even though they recognise the scope for action may be limited. They also suggest:

--Better tax breaks for SMEs and simplifying concessions -- for example, on research and development (R&D).

--Forcing clients to pay bills more quickly. Government is promising to settle its accounts within a few weeks.

--Encouraging landlords to accept monthly rent payments, rather than hefty three-monthly advances.

--Improving the paralysed credit insurance market so firms have cover against default or loss.

SME PERSPECTIVES

Here a variety of SMEs explain how they are coping:

I blame bank for my firm's woes

--Graphic design printers

Tom Phelan, director, Colorset: "The Government has given a [pounds sterling]50 billion bailout to the banks, propping up large businesses -- but it doesn't help small businesses. We lost a [pounds sterling]200,000 contract over the summer and as soon as went into distress our bank HSBC absolutely screwed us. They put us in a 'special situations' department. We had a [pounds sterling]145,000 overdraft and told us we could come down to [pounds sterling]75,000. Then they said we couldn't have that -- we could only have [pounds sterling]35,000. And they wanted us to sign over our [personal] properties and couldn't give us any guarantees if we didn't sign over. We went into administration and I blame the bank 100 percent.

"One thing the Government could do to make life easier is that when it puts out tenders [for new business], these are sometimes 120-page documents. SMEs can't afford to employ a dedicated member of staff to fill it out these applications."

Pass on rate cuts

--Property

Andrew Pegg, managing director, Midas Corporate Consulting: "Government could apply pressure to bring about a fairer payment system for businesses, better regulation, make [clients] honour debts and pay on time. They should encourage banks to push through lower interest rates. We're not seeing rate cuts passed on. Government could encourage banks to lend, and be more relaxed.

"But banks are not the major problem -- it is clients holding on to money to aid their own cashflow, which is why I have to go into overdraft. Bigger organisations are often slow to pay. These late payments have a major impact. Government should give aid to small businesses to keep people in employment."

Pay bills faster

--Consultancy

Anthony Gould, managing partner, ASG/ IMC: "I'm rather cynical about the British Bankers' Association's promises. We've had no problem getting credit because we have a very good record with the banks. But charges have gone up. One major bank has hiked up one of its charges by 300 percent and they have imposed minimum charges on many accounts where before there was none.

"I expect a significant number of small businesses will go under because of an inability to borrow and the lack of credit. Another problem is that big organisations are not good at paying small companies -- they take too long. We pay our overseas staff in US dollars, so our wage bill has soared."

More tax breaks

--Cake-makers

Jemma Wilson, founder, Crumbs & Doilies: "Government should introduce tax breaks for small businesses -- that would be very useful, especially for people starting out. Times are tough. When I'm driving to our market store, I see a huge number of shops which are to let. People are closing down left, right and centre and most small businesses are really struggling. Our banks are treating us fine but we're lucky because we haven't ever asked for any help from them.

"We used to do a lot of corporate thank-you gifts but big businesses think cup-cakes are not top of the corporate agenda any more. But people are now buying them for themselves. When depressed, people turn to sugar."

Stamp duty

--Bicycle manufacturer

Will Butler-Adams, managing director, Brompton: "The Government taxes us in some cases illogically -- we had to pay stamp duty when we renewed our lease, even though we sublet and the leaseholder had already paid duty on its entire lease. Tax breaks for R&D were good [initially] but the next year the Revenue only allowed us to claim 25 percent. It wasn't worth doing all the paperwork."

Rent and VAT

--Retail home furnishings

Victoria Shepherd, co-owner, Cologne & Cotton: "The Government could make it law to persuade landlords to let all businesses pay rents on a monthly basis. At the moment we pay for three months in advance, which is very bad for cashflow. The other thing which would help is if the Government could reduce VAT, that would affect us enormously."

To see more of the Evening Standard, or to subscribe to the newspaper, go to http://www.thisislondon.co.uk.

Copyright (c) 2008, Evening Standard, London

Small businesses, big Web.

When Werner and Uschi Beck opened a coffee house in Bradenton last year, they knew a Web site was a must-have to market their business. Now, the Becks want to do even more on the Internet to market their business Cool Beans Cafe & Arts on Third Avenue East.

In a technology-driven world, that's to be expected, says David Doty, senior vice president of thought leadership and marketing at Interactive Advertising Bureau in New York. "More small businesses are understanding the benefits of advertising not only through their own sites but by building a reputation online," Doty said. "You want to make sure you are where the consumer is and more and more the consumer is online." The Becks, like owners of other locally owned businesses, are turning to social networking sites to gain online exposure. Cool Beans' business profile is featured on a Tampa Bay business network, localshops1.com, and the Becks plan to advertise on MySpace and Facebook by the end of the year. "A lot of the younger people, they look on these Web pages, and that can help us reach more people," Werner Beck said. The Becks said since marketing their business on localshops1.com in August they've had inquiries from areas beyond Bradenton. "We have had people from Tampa and Sarasota calling to find out about us," Uschi Beck said. Ester Venouziou, founder of localshops1.com, started the site in August. Venouziou, a St. Petersburg resident, prefers independent business and wanted to find a way to help promote and support them. "If you spend money in your neighborhood it's more likely to stay in your neighborhood," Venouziou said. Localshops1.com has networking pages for Manatee, Sarasota, Hillsborough, Pinellas, Pasco and Polk counties. The site has 560 businesses listed and 350 registered business members. Business memberships range between $200 to $350 a year. "When I talk to businesses, they're becoming more aware they need to be more proactive in online marketing," Venouziou said. MySpace and Facebook offer build-it-yourself advertisements that allow companies to target a specific audience based on users' interests. The two sites also are appealing to small businesses because they can set the price they're willing to pay each time a user clicks on their ad. "We're relatively new in business, so there's only so much we can afford at this point," Beck said. "We're willing to spend $300 to $400 a month on advertising." Elaine Cordeau, owner of Elaine's Bridal Boutique at 5238 State Road 64 E., said she spends about 75 percent of her marketing budget on the Bradenton store's Web site. The remainder goes toward marketing on theknot.com, an wedding planning site, as well as bridal shows and direct mailers. The bridal store also has a MySpace profile, and Cordeau writes two bridal blogs on the free Web site, blogger.com. Cordeau said the blogs give her a more personal forum to connect with current or potential clients. "I think that a blog makes you more real to the customer as a small business owner," Cordeau said. Doty said blogs are becoming an effective marketing tool because it engages the consumer. "The two-way dialogue is becoming more and more important," Doty said. "When you engage your consumers in a community-like setting you're doing more than just marketing to them. It also helps to build loyalty."

According to the Interactive Advertising Bureau, online advertising revenue for the first six months of 2008 reached $11.5 billion, a 15.2 percent increase from the first half of 2007. In 2007, Internet ad revenues totaled more than $21 billion, and, according to the Interactive Advertising Bureau, online ad spending among small businesses comprised more than double that of large and medium-sized companies. At Mexicali Border Cafe in Bradenton, General Manager Joe Martin said the restaurant offers printable discounts for customers via its MySpace profile, e-mails and Valpak.com. "Our e-mail coupons work phenomenal for us," said Martin, who estimated the restaurant e-mails about 3,000 coupons a month. Martin said he was unsure about how many were used on a monthly basis. Martin said marketing via social networking sites and e-mail is an affordable way to stay competitive compared to television ads. "It's a question of how deep are your pockets compared to Outback and Carrabba's, who have TV commercials that can just whack you," Martin said. "We were doing TV commercials with Bright House, but we are a small business and we just couldn't afford to do it anymore."

James Curren, assistant professor of marketing at USF Sarasota-Manatee, said maintaining a strong online presence is important for staying competitive. "If people can't find you online, they're going to find a whole lot of competing offers," Curren said. "The more opportunities you have to allow people to find you the better." However, Curren said content and moderation is just as important. "It still needs to be managed effectively," Curren said. "If consumers are bombarded, sooner or later the promotions these businesses are trying to do may turn into white noise. Then the consumer is not paying attention when it should count."

To see more of The Bradenton Herald or to subscribe to the newspaper, go to http://www.bradenton.com.

Copyright (c) 2008, The Bradenton Herald, Fla.

Lessons from Global economic crisis

The current economic crisis has taught us three important lessons. One, globalisation has a significant impact on all countries including those that have not opened up completely. Second, innovation must be based on economic fundamentals.

Any irrational exuberance will always come back to haunt us like the present global crisis and third, excessive greed will always have disastrous consequences and development and growth must be inclusive and not limited to a few lucky people.

The MBA curriculum must take the above into account. It must provide global and diversified exposure to students. "Theories and concepts must have global applicability, as should the cases discussed. Students must learn and be able to appreciate the impact of global events - economic as well as cultural. Both the faculty and students may be sourced across different countries.

Well-structured faculty and student exchange programmes can prove to be very effective in this regard," says Sunil Mahajan, professor at the School of Management Technology, International Institute of Information Technology, Pune.

According to Mahajan, in top management schools, a vibrant academic culture is nurtured and skills developed by

students. "Students develop a good grasp of theory and the ability to apply the same by way of various projects they undertake. Close interaction with faculty, business leaders and fellow students provides a useful learning experience, wherein students are groomed to take the initiative and are encouraged to think and take decisions like corporate managers under simulated business environments," he says.

The experience gained is incomparable and stands them in good stead throughout their career.

"An MBA is helpful where there is need to take an integrated, and increasingly global view of how decisions in one discipline may affect others. MBAs talk of a change in identity that comes in taking the degree, and about the confidence that comes from the intellectual rigour of looking at corporate problems academically," says Sujata Khanna, Chairperson, Career Forum Ltd, Pune.

MBAs are represented in a wide range of industry sectors. Currently, 38 per cent are in the area of general management, 25 per cent are concentrated in the consultancy sector and the finance sectors and 14 per cent are employed in both corporate strategy and planning.

The rest are involved in specific management functions in different sectors. "The economic slowdown impacts revenue growth and capital expenditure of most companies. This has definitely slowed down their hiring plans. In fact, many companies are resorting to downsizing. In this scenario, job prospects for students are definitely grim and are likely to remain so for quite sometime," says Prof Sunil Mahajan.

However, Dr Nikhil Agarwal, director Europe Asia Business School (EABS) of Pune, says, "I don't see the problem prolonging for long. You have to remember that qualification and learning are life-long, not just job-centric. Therefore, I would encourage candidates to have a long-term plan in mind. This is a good time to take a break from

work and invest in a good qualification," he says.

"The hiring outlook for MBA graduates has been good so far this year, at least in reputed B-Schools. The type of jobs that an MBA graduate would be going for are a bit tough to find during this period of economic slowdown, especially for high paying consulting and investment banking jobs, there are still other sector jobs available during recession. Other industrial jobs are usually much less dependent on the economic cycle," says Sujata Khanna.

"We expect these efforts to pay off. If taken in the right spirit the current scenario offers the best platform to showcase creative and innovative ideas and solutions, says Dr Uday Salunkhe, Group director, Principal, L N Welingkar Institute of Management, Mumbai.

But the demand for natural growth is bound to be there. Recruitment against wastages, simple expansion and so on will be there. Those B-Schools which present the best talent will command respect and place students. Let us not forget SEZs which will start functioning in the near future. They too will need MBAs. But, it is not going to be the same happy old days, says

Prof. (Col.) A Balasubramanian, executive director, BIMM and president, Sri Balaji Society. "We expect the Services sector to lead the recovery as well as fresh hiring. This sector will experience high growth in the long term, much higher than other sectors. Being manpower intensive, it is best placed to offer jobs to MBA students," says Sunil Mahajan.

Traditional industries like manufacturing and fast moving consumer goods are major recruiters every year. Due to slowdown in financial companies they will be cautious to hire expensive resources. However knowledge-based companies like IT companies will keep hiring MBAs as they have done in the past, says Dr. Nikhil Agarwal.

The insurance and telecom industry appears to be steadily growing not withstanding the economic slowdown. The IT industry is still giving hope though they may have to reduce the intake. Other sectors too will have their natural growth and require MBAs, says Prof. (Col.) Balasubramanian.

COPYRIGHT 2008 Bennett, Coleman & Co. Ltd.

Bond trading rooms send out rate cut signals

Bond dealers - market participants most sensitive to interest rate changes - have never been as bullish about declining interest rates in the past four years, if a key indicator is anything to go by.

The cost of five-year interest rate swaps, or derivative contracts used to guard against rate fluctuations, has dropped to the lowest since 2004. This is because traders are expecting a spate of interest rate cuts in the coming weeks, including a reverse repo cut.

While the five-year yield, the overnight index swap (OIS) closed at under 6% for the first time in four years and the one-year OIS is quoting at 5.59%, as per information on the CCIL website. The OIS is an interest-rate swap allows investors to swap a floating interest rate in exchange for a fixed rate and floating rate (Mibor) and is linked to an overnight inter-bank call money rate and is also used by traders to bet on the direction of rates.

"The OIS market is a lot more proactive in that it reacts to the rate expectations faster than the government securities market," said Sudhir Joshi, head of treasury at HDFC Bank. "It is easier to express an opinion both ways about interest rates here, by going long or short," he added. He pointed out that traders are expecting interest rates to fall drastically judging from the way the OIS yield has headed downward in the past few days.

The Reserve Bank of India (RBI) recently cut the benchmark repurchase rate by 1.5% to 7.5% in the past month, in addition to slashing cash reserve ratio (CRR) and the statutory liquidity ratio (SLR) by 3.5% and 1%, respectively. But the fall in the inflation rate to the most in close to two decades to 8.98% this month has led many dealers to speculate that the government would be less hesitant to go for cuts in the coming days. Not surprisingly, the yield on the benchmark 10-year government bonds, too, has fallen 32 bps from its recent high to end on Wednesday at 7.40%.

Devendra Neogi, head of Quantum AMC - a fund house that also manages fixed income schemes - says that since the OIS market is cash settled, it is partly speculative in nature. However, he points that the market is far from perfect in indicating a trend because the links between MIFOR (a hedge for currency swaps), the government securities market and the OIS are still less than perfect in the country.

Internationally, the OIS yield curve is conventionally between the government securities yield and the corporate bond yield. But in India, the curve still runs below the government securities curve i.e. 9-month, 1-year and 5-year. The OIS swaps are the most widely traded instruments in the market.

COPYRIGHT 2008 Bennett, Coleman & Co. Ltd.

NY stock exchange hunts agency for global business.(New York Stock Exchange )

The New York Stock Exchange is reviewing its global advertising account and is understood to have contacted several agencies and networks in London and New York.

Fallon Minneapolis has been incumbent on the account since 2006, having worked for rival exchange Archipelago until its acquisition by NYSE.

The review, which will be overseen by NYSE marketing director Marissa Ricardo, comes at a critical time, with stock exchanges across the globe struggling with the stock price fluctuations and ramifications of the credit crunch.

The NYSE announced its plans to acquire Archipelago in April 2005, in a deal intended to reorganise the group as a publicly traded company. In April last year, the group completed its merger with Euronext, the European combined stock market, to form NYSE Euronext, the first transatlantic stock exchange.

It is understood the winning agency would need both European and American offices, with a strong presence in both London and New York.

The NYSE is the largest stock exchange in the world by dollar volume, but ranks third in terms of company listings with 3,200 companies, behind the Bombay Stock Exchange and Nasdaq. The exchange trades stocks for 2,800 companies, ranging from blue chips to new high-growth companies.

Fallon, then Fallon McElligot, was appointed to handle Archipelago's advertising in 2000, four years after the electronic trading platform was launched. Its remit was later extended.

Copyright: Centaur Communications Ltd. and licensors

The small business survival guide

Business Management has put together a ?Small Business Survival Guide? for SMEs in the new Europe.

What challenges will enlargement bring? Certainly it will mean greater competition: as the Central and Eastern European markets open up and the free movement of goods and services becomes a reality, firms will have to front up to a whole new set of competitors eager to steal their customers. For many, it has also meant compliance with a raft of new regulations. It will be hard work, but the opportunities enlargement opens up will be worth the wait for those who can stay the distance.


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Seven Dynamics of Change

Whatever the kinds of change that people encounter, there are certain patterns of response that occur and re-occur. It is important that change leaders understand some of these patterns, since they are normal outcomes of the change process. Understanding them allows leaders to avoid over-reacting to the behaviours of people who, at times, seem to be reacting in mysterious, non-adaptive ways.

Ken Blanchard, well known management consultant, has described seven dynamics of change designed to help managers better address employee reactions to change. They are worth summarizing here.

People will feel awkward, ill-at-ease and self-conscious

Whenever you ask people to do things differently, you disrupt their habitual ways of doing things. This tends to make people feel awkward or uncomfortable as they struggle to eliminate the old responses and learn the new. Think back to your own experience and you will discover this theme. Whether it be learning to use a computer, the first time picking up your infant, or dealing with a new reporting relationship, recall the self-consciousness that you probably felt. People want to get it right, and fear that they will appear inadequate.

People initially focus on what they have to give up

Even for positive changes such as promotions, or those that result in more autonomy or authority, people will concentrate on what they will be losing। As a change leader you need to acknowledge the loss of the old ways, and not get frustrated at what may seem to be an irrational or tentative response to change.

People will feel alone even if everyone else is going through the same change

Everyone feels (or wants to feel) that their situation is unique and special. Unfortunately, this tends to increase the sense of isolation for people undergoing change. It is important for the change leader to be proactive and gentle in showing that the employee's situation is understood. If employees see YOU as emotionally and practically supportive during the tough times your position will be enhanced and the change will be easier.

People can handle only so much change

On a personal level, people who undergo too much change within too short a time will become dysfunctional, and in some cases may become physically sick. While some changes are beyond our control, it is important not to pile change upon change upon change. While changes such as downsizing bring opportunity to do other positive things, the timing of additional changes is important. If you are contemplating introducing changes (that are under your control), it may be a good idea to bounce your ideas off employees. A good question to ask is "How would you feel if....."

People are at different levels of readiness for change

Some people thrive and change. It's exciting to them. Others don't. It's threatening to them. Understand that any change will have supporters and people who have difficulty adapting. In time many people who resist initially will come onside. Consider that those people who are more ready for the change can influence others who are less ready. Open discussion allows this influence process to occur.

People will be concerned that they don't have enough resources

People perceive that change takes time and effort, even if it has the long term effect of reducing workload. They are correct that there is a learning time for most change, and that this may affect their work. It is important for change leaders to acknowledge that this may occur, and to offer practical support if possible. In the downsizing scenario this will be even more crucial, since resources themselves are cut. Consider following the downsizing with a worksmart process, whereby job tasks are
reviewed to examine whether they are still necessary.

If you take the pressure off, people will revert to their old behaviour

If people perceive that you are not serious about doing things the new way, they will go back to the old way. Sometimes this ill be in the open, and sometimes this will be covert. While Blanchard uses the word pressure, I prefer to think of it in terms of leadership role. The leader must remind people that there is a new course, and that the new course will remain. Coaching towards the new ways is also important.

Conclusion

It is important for leaders to anticipate and respond to employee concerns and feelings, whether they are expressed in terms of practical issues, or emotional responses. When planning for, and anticipating change, include a detailed reaction analysis. Try to identify the kinds of reactions and questions that employees will have, and prepare your responses. Remember that the success of any change rests with the ability of the leaders to address both the emotional and practical issues, in that order.

1 The seven dynamics of change in bold were taken from an article by Ken Blanchard, and published in The Inside Guide, Oct., 1992. Commentary on each of the principles was written by the Editor of The Public Sector Manager.