The Irish Independent reports that financial organisations are changing how they pay their staff in an effort to move away from the controversial 'bonus culture', a global survey on pay has revealed.
Companies are now shifting the emphasis away from short-term bonus incentive schemes in favour of increased salary, deferred compensation schemes and modified incentive programme design, according to consultancy group Mercer.
Vicki Elliott, worldwide partner of Mercer, said national regulators were trying to make the sector consider risk in their performance measurement and reward schemes so as not to encourage excessive risk-taking.
More than 80pc of all firms surveyed have made, or plan to make, changes to their annual bonus or short-term incentive (STI) plan design.
The majority said they were decreasing the annual cash bonus in the compensation mix, while increasing base salaries and mandatory deferrals.
"Deferring bonuses helps companies to control for short-termism," Ms Elliott said.
Meanwhile, 42pc of respondents have eliminated 'golden parachutes', whereby executives are guaranteed bonus payouts upon departure irrespective of performance -- a practice that generated much debate over 'pay for failure'.
The Irish Independent also reports that thousands of parents have not signed up for the Government's free pre-school year for children as the new term starts today.
It is estimated that around 30,000 children eligible to attend pre-school every day for free for a year are missing out following a poor uptake of the scheme.
As the majority of pre-schools start the new term today, childcare providers are accusing the Government of failing to make people aware of the Early Childhood Care and Education (ECCE) scheme.
It offers children a free year of childcare with providers receiving a set fee from the State based on the number of places filled.
Childcare facilities earn €48.50 per child per week for a two hour and 15 minute daily service for children aged between three and four.
Brought in as a replacement for the Early Childcare Supplement, which was paid directly to parents, it will cost €170m -- just a third of the €480m spent last year on the previous scheme.
Parents who have not yet signed their children up for the scheme have until this Wednesday to enrol. Those who miss this term's cut-off point can still send their children to pre-school in September. A deadline for applications for September has not yet been announced.
Creches said the new scheme, which was designed to aid cash-strapped parents and act as a stimulus to the flagging industry, was only adding to their financial woes.
Sean and Aine Murphy, who run five pre-schools in Co Cork known as Hopscotch Childcare, revealed that they had received just 13 inquiries from parents about the scheme and just two extra children had signed up for the new term. Their numbers in September were down 20pc on the previous year due to the recession and they were hoping for a boost in business once ECCE started.
"Many parents had to keep their children at home instead of sending them to pre-school because the recession made things too difficult," Mr Murphy said.
Disappointing
"We were waiting for the calls (in relation to free childcare) in November and December but they never arrived.
"The payment per child is a drop in income already, but now the numbers haven't increased to balance that out so it is very disappointing."
Mr Murphy said the department had not done enough to inform parents about the new scheme.
They issued an information brochure on ECCE during the summer but no further communication has taken place.
Many parents whose children are not in childcare facilities already are unaware of the scheme.
"That information came out during the holiday period and obviously has been forgotten since," Mr Murphy said.
"Parents have had no other correspondence to say that there is free pre-schooling."
Both the National Children's Nurseries Association (NCNA) and the National Association of Private Childcare Providers have raised concerns about the slow uptake.
"Our members are trying to communicate with as many parents as possible . . . but there has been no concerted national campaign to raise awareness of the scheme," NCNA director of services Teresa Heeney said.
A Department of Children spokeswoman said Minister Barry Andrews had done extensive media interviews in relation to ECCE and also pointed out that a detailed account of the scheme was available on their website.
"The 33 county childcare committees, responsible for promoting the scheme in their respective areas, have held information nights for parents."
The department said they would not have exact figures on how many children were participating in the scheme until the end of the month but stressed they were expecting a significant rise in September.
They said 90,000 pre-school places had been made available under the scheme.
Mr Andrews was already forced to increase the size of capitation grants after providers warned it could drive them out of business.
The Irish Times reports that the owners of Setanta Sports’s pay television business in the United States have agreed to sell the company to Fox Sports International, a company that numbers media magnate Rupert Murdoch as a major shareholder.
Setanta Sports refused to comment on the deal but The Irish Times understands that the sale will close later this week.
The US business is owned by Setanta founders Leonard Ryan and Michael O’Rourke, and Mark O’Meara, a long-serving senior executive with the Irish broadcaster. They rescued this company after Setanta’s main business in Britain collapsed into receivership last year, having failed to make payments to a number of sports bodies, including the Premier League. They also took over Setanta’s businesses in Canada and Australia, which are not affected by this transaction.
This deal does not affect Setanta’s operation in Ireland. Denis Desmond, the major shareholder in Setanta’s Irish business, which was also rescued last year, is not involved with the US company.
It is not clear how much Fox will pay for Setanta Sports USA but its backers were seeking to raise about €15 million in new funding for their international businesses late last year.
Fox and Setanta have co-operated in recent years in securing live sports rights. Fox holds the rights to live Premier League football in England and sub-licensed some of the games to Setanta.
The pair also last year won the US rights to the Champions League from ESPN via a joint bid. They also held the rights to the FA Cup.
Contributors to internet chatrooms in the US last night speculated that Fox had recently revoked its Premier League and Champions League football rights from Setanta Sports North America Ltd, following missed payments by the Irish-based company, and would therefore only pay a nominal sum for the US business.
This could not be confirmed but Setanta’s US website has removed references to coverage of the Premier League and the Champions League. According to its website, Setanta’s US business is available on both cable and satellite in more than 42 million homes in America. It is also available on cable in the Caribbean.
Subscribers pay $14.99 a month for the service, which carries Six Nations and Heineken Cup rugby, GAA matches, club soccer from France and Russia and Manchester United’s MUTV.
The last set of accounts filed for Setanta Sports North America Ltd related to the year ended December 31st, 2006, at which point the company had accumulated losses of $10.6 million. Sources said yesterday that the US arm had not yet reached break-even but that the Canadian business was “making money”.
Since its formation in 1994, Fox Sports International has established itself as a leading sports broadcaster in the US, covering American football, ice hockey, baseball, soccer and a range of major international events.
It operates channels such as Fox Soccer, the Speed Channel and Fox College Sports.
The Irish Times also reports that a new arbitration Bill likely to become law next month will aid exporters in resolving disputes with international partners.
The Oireachtas is set to pass the Arbitration Bill 2008 into law in coming weeks. Once it is enacted, the Republic will become part of recognised global dispute resolution system operated by the United Nations Commission of International Trade Law.
According to Joe Kelly, partner at Dublin law firm AL Goodbody, it will mean that arbitration orders made by the Irish courts can be enforced in most of the world’s trading nations, making it easier for exporters and businesses who deal with firms based in other countries to resolve disagreements.
Mr Kelly explained yesterday that if an Irish business has a disagreement with a trading partner in countries such as Turkey, Iraq, Libya and a range of other jurisdictions, there is no guarantee they will be able get Irish court orders enforced against them.
Their only option is to pursue them through the courts in their home jurisdictions, which is both risky and expensive – sometimes to the point where it is not worth a company’s while pursuing the issue.
However, he pointed out that as most of the world’s trading nations recognise the UN international trade law system, the new law will make it easier to find a solution to disputes through arbitration.
“It will mean that disputes can be resolved by way of arbitration pursuant to this law, and any award made will be enforceable in other countries,”he said.
Mr Kelly added that disputes, which are mainly over money, have become more common since the global recession began two years ago.
Arbitration is the preferred first stop for parties in dispute here and abroad.
Mr Kelly said the Bill will make the Irish framework for this approach identifiable to trade partners and compatible with international practice in this area.
He added that reforming the law will also make it easier for businesses from abroad to trade here.
The Irish Examiner reports that Irish shoppers are continuing to flock to New York despite the downturn with figures indicating numbers are up on last year.
The Dublin-based New York tourist board, NYC & Company, said feedback from two of the largest tour operators, Tour America and Sunway, say that their business to New York City in 2009 was up on the previous year.
Also it said Continental Airlines reported "particularly high" load factors throughout 2009 on their direct services to New York from Belfast, Dublin and Shannon.
It said Continental reported the highest load factor from Ireland of any European destination to New York last year.
It also said that the two Fitzpatrick Hotels in Manhattan reported 90% occupancy in November and December, with 60% of their guests coming from Ireland.
John Donoghue of NYC & Company said: "Whilst the Irish figures to New York City for 2009 are not yet available, I am confident that the 2009 figures will be strong."
In 2008 353,000 Irish people visited New York City, which was up 22% on the previous year and it is expected the number will be up again for 2009. Official figures will not be released until March.
Overall more than 45 million people visited New York last year, making it the most popular tourist destination in the US for the first time since 1990.
The 45.25 million tourists exceeded projections, declining just 3.9% from 2008 versus the 10% expected.
A 3.2% increase in tourism, with an estimated 46.7 million visitors, is expected in 2010. Mayor of New York Michael Bloomberg said: "Over the past eight years, our efforts to make New York City an even more exciting place to visit have helped produce a record number of tourists and create thousands of jobs.
"While tourism declined significantly in cities across the country, we fared far better than most. In fact, for the first time in 20 years, we were the most popular tourism destination in the country, surpassing Orlando, and our leisure and hospitality jobs rose." He added that despite the gains many New York hotels, restaurants, attractions and shops are still struggling as a result of the downturn.
The Financial Times reports that businesses are holding very low stock levels and are reluctant to boost inventories, according to some of Europe’s leading chief executives – providing evidence of lingering doubts about the durability of economic recovery.
Business leaders from consumer goods, chemicals and manufacturing companies have told the Financial Times that they have little idea of when demand will return.
“Orders are being placed at very short notice. Seven days or two weeks maximum. Before it was two months. So visibility is very low and there is not much restocking,” said Feike Sijbesma, chief executive of DSM, the Dutch life sciences group that supplies many industries.
Alan Middleton, head of PA Consulting, the UK management consultancy, said: “I think what you’re seeing is lots of CEOs telling you that we don’t think we’re through [the tough times]. Rather than building up inventory, what they’re doing is they’re just holding tight.”
Fluctuating inventories have been a big influence on overall economic activity since the onset of the crisis. Beginning in late 2008, many companies cut stock levels aggressively.
The end of that destocking is now helping economies to tentative recovery.
Elga Bartsch, economist at Morgan Stanley, said: “The transition from this inventory-led bounce to a more sustainable recovery is probably not going to be a smooth one.”
Inventories’ contribution to European GDP was -5.4 percentage points in the first half of last year but rebounded to add 2.1 percentage points of growth in the second half, according to Morgan Stanley. Their contribution in the first quarter of this year is likely to be just 0.1 percentage point, the bank adds.
Companies say it will be difficult to draw any significance from replenishment of inventory levels in the near future because of the difficulty in distinguishing between this and a genuine increase in demand.
Gary McGann, chief executive of Smurfit Kappa, Europe’s largest maker of cardboard boxes, said: “I’m not sure restocking is a sensible first step, because all it does is confuse factors. What you want is real demand growth, and I think until we have real demand driven growth we’re not really over the hump.”
Some chief executives believe companies could keep low stock levels. “We run our business with substantially lower stocks than before. It might be that people never want to restock again,” said Mr Sijbesma.
Consumer goods companies said the low level of stocks was leading to shortages. Laurent Abadie, chief executive of Panasonic Europe, said some flat-screen TVs had gone out of supply: “Stocks at retailers and manufacturers are very low. We are running into a lot of shortages and we know our competitors are in the same shape.”
The FT also reports that Chinese banks have cemented their position as the most highly valued financial institutions, taking four of the top five slots in a ranking of banks’ share prices as a multiple of their book values.
China Merchants Bank, China Citic, ICBC and China Construction Bank lead the table, followed by Itaú Unibanco of Brazil, all with a price-to-book multiple of more than three.
Over the past six years, the average price-to-book value of the biggest 50 banks has halved from two to one.
This means that investors believe the average bank is worth no more than the value of its balance sheet. Most western banks are trading at well below their book value.
But investors are attaching a growing premium to emerging markets banks, led by China Merchants, the most highly rated of the biggest 50 banks by market capitalisation, on a multiple of 4.3, according to Bloomberg data.
At the start of the last decade, the US dominated the rankings. The top five were Bank of New York Mellon , Lloyds of the UK, Morgan Stanley, Citigroup and Wells Fargo.
Only last year US Bancorp topped the table and Wells Fargo was in the top 10.
The changes, which have seen the top-rated Chinese banks double in valuation over the past year as western rivals have been derated, reflect growing confidence in emerging markets, particularly China and Brazil.
They indicate concerns about the profitability of western institutions stemming from toxic assets and the drive to force banks to increase capital and liquid funds.
Even western investment banks that have thrived over the past year have been left behind in the price-to-book league table. Goldman Sachs is ranked 22nd and JPMorgan 31st.
“Western markets generally are experiencing their worst prospects for 20 years, and that’s in the valuations,”Robert Law, banks analyst at Nomura, said.
“China in particular is a region that is perceived as less vulnerable to global downturn.”
Although Chinese bank valuations were hit by investor nervousness in 2008, the limited fallout they suffered – combined with positively received government stimulus measures – have allowed them to bounce back.
Some fringe developed economies with a reputation for tough regulatory controls and limited direct or indirect exposure to the subprime problem at the root of the crisis have benefited.
Canadian and Australian banks in particular climbed the price-to-book rankings.
The New York Times reports that as it prepares to pay out big bonuses to employees, Goldman Sachs is considering expanding a program that would require executives and top managers to give a certain percentage of their earnings to charity.
The move would be the latest in a series of initiatives by Goldman to soften criticism over the size of its bonuses, which are expected to be among the largest on Wall Street, bringing average pay to about $595,000 for each employee — with far higher amounts for top performers.
Goldman set aside $16.7 billion for compensation in the first nine months of 2009, and in good years, the firm dedicates about three-quarters of its compensation budget to year-end bonuses. The firm is expected to report later this month what could be record profit of about $12 billion for 2009, according to analysts’ estimates, compared with $11.7 billion in 2007. Its final compensation pool and executive bonuses will be announced then.
The firm said last month that its 30 most senior executives would be paid bonuses all in stock, but the bank placed no limit on how large those bonuses might be.
While the details of the latest charity initiative are still under discussion, the firm’s executives have been looking at expanding their current charitable requirements for months and trying to understand whether such gestures would damp public anger over pay, according to a person familiar with the matter who did not want to be identified because of the delicacy of the pay issue.
The charity idea would be similar to a decades-long program at the failed investment bank Bear Stearns, which required more than 1,000 of its top workers to give 4 percent of their pay to charity each year and then checked their tax returns to ensure compliance.
Assuming a similar percentage and level of participation, that would mean Goldman’s top employees would commit to giving hundreds of millions of dollars to charity, though the precise amount would depend on the level of contributions and the number of workers who are required to take part.
It could not be determined whether Goldman would create a new program for its mandated giving or run it through Goldman Sachs Gives, which oversees donor-directed charity funds for Goldman workers. That program was created in 2007, weeks before Goldman paid its chief executive, Lloyd C. Blankfein, $68 million for that year. It required Goldman’s 400 or so partners to give an undisclosed amount to charity each year on their own or through the program.
Goldman declined to comment.
Amid a growing public outcry over big bonuses at Goldman and other Wall Street banks, Goldman in October said the firm itself would donate $200 million to its charitable foundation, nearly doubling its size. (The foundation is separate from GS Gives.) It also created a $500 million fund to lend to small businesses, a sector that has suffered in the tight credit environment. The plan will be overseen in part by Warren E. Buffett, who is a large Goldman investor.
Moreover, the firm — which initially was on track to pay closer to $650,000 to $700,000 on average to its workers — has scaled back planned bonuses by cutting the amount of revenue set aside for compensation, apparently in response to negative public reaction. People familiar with the matter said that Goldman was planning to further reduce the portion of revenue dedicated to compensation in the fourth quarter.
Still, these moves have done little to quell criticism of banker bonuses, and it is unclear if Goldman’s latest idea, if adopted, would alter the public mood and the feeling in Washington that big pay packages are inappropriate given the troubled economy.
On Sunday, Christina D. Romer, head of the president’s top economic council, said on CNN’s “State of the Union” that it was “ridiculous” that banks planned to pay out billions in bonuses for last year.
The payout, she said,“is going to offend the American people. It offends me.”
For their work in 2008, 953 Goldman employees were paid more than $1 million each; the bank accepted $10 billion in federal bailout cash, though it has since repaid the money, as have most other banks, freeing them of government limits on compensation.
Goldman, like its peers, is caught between conflicting constituencies. The bank cut worker pay somewhat last year, and some employees may leave for hedge funds or private equity firms if they are not paid handsomely for their contributions to the firm’s profits. Some shareholders, however, want the bank to divert more of its money to them as dividends, though others think it should pay to keep workers happy.
In the meantime, the public has little sympathy for bankers expecting compensation to return to previous levels.
The most important public relations tactic Goldman and other banks may use, headhunters said, is to instruct their employees to keep their heads down.
“They’ll try to make sure their people aren’t going out and celebrating their financial wins,”said Maurice Toueg, a recruiter with Capstone Partnership.
The NYT also reports that prices for a small but growing number of brand-name drugs have risen more than twofold in recent years as drug makers seek to squeeze greater profits out of often small-selling but vital medicines, according to Congressional investigators.
Medicines like Adderall for attention deficit disorder, Inderal for chest pain and Sumycin for infections were among 416 brand-name drug products whose makers or distributors raised prices at least once by 100 percent or more from 2000 to 2008, investigators found.
These substantial price increases are becoming increasingly common, according to the Government Accountability Office, which conducted the inquiry. In 2000, prices for 28 drug products rose by 100 percent or more. In 2008, 71 had similar increases.
In response to the investigators’ report, which will be released Monday, the Pharmaceutical Research and Manufacturers of America e-mailed a statement saying that drugs represent only 10 percent of the nation’s overall spending on health care.
“Companies make price adjustments independently as a result of market forces, which include everything from patent expirations” to the substantial research costs associated with discovering medicines, the statement said.
In recent years, drug makers have paid greater attention to culling their ample portfolio of medicines. Marginally profitable medicines or small-selling drugs with particularly challenging manufacturing processes were often sold off by large drug makers to smaller companies, which paid for them by immediately increasing the drugs’ prices.
Most of the big price increases ranged from 100 percent to 499 percent, but some of the price increases were far larger, the investigators found. For instance, the prices of 26 brand-name drugs rose more than tenfold. The largest price increase found by the investigators was about 4,200 percent.
Nearly a third of the drugs whose prices were substantially raised were intended to treat depression, anxiety and other disorders of the central nervous system, while many others were intended to treat infections or cardiovascular problems.
The price for a drug intended to treat a rare form of cancer went from $390 for a full course of treatment to more than $3,000, investigators found.
The drugs’ makers were not always behind the price rises. In more than half of the cases disclosed by investigators, the price increases were made by a middleman that bought the medicines from manufacturers and repackaged them for hospitals or doctors.
With thousands of approved medicines, the market for drugs in the United States is enormously complicated. Myriad players — manufacturers, distributors, wholesalers and providers — often play some role in pricing. For some small-selling medicines, prices and availability can change significantly year to year.
But much of the money in the system goes to a relatively small number of huge-selling medicines whose prices start high and are made even higher by modest and frequent price increases. Last year, overall wholesale prices of brand-name drugs rose 9 percent even as the Consumer Price Index fell.
One reason for the price increases might be that drug makers are bracing for the effects of the health care overhaul effort in Congress. Another is that drug makers’ labs have been unusually barren, and that without new products, drug makers view price increases as among the only ways to reliably increase profits.
“It is hard to find a good-faith explanation for why drug prices could go up this much,”said Senator Charles E. Schumer, Democrat of New York.“This report will lead to a strong demand for action by Congress.”
