Three Answers Every Employee Needs

This experience came back to me in late 2010, listening to Steve Kaufman, a senior lecturer at
HBS and the former CEO of Arrow Electronics, presenting at the Forum for Growth and
Innovation. On the topic of acquisitions, Kaufman recounted the standing advice of the former
head of Arrow's acquisition integration team, Betty Jane Hess. "When we make an acquisition",
she said, "every employee has just three questions: 1) Do I have a job? 2) Who do I report to?
And 3) How will I get paid? Until they get answers, nothing else matters." As I've thought more
about this rule of thumb, my sense is that these three little, but very big, questions apply just as
much to our everyday work lives as they do to what we go through during unsettling mergers.
Once we get answers to these questions, we are more likely to really show up to work.

1. Do I have a job? In Maslow's hierarchy of needs, one of our most basic needs is to feel
secure. But once we've got the paycheck that will put food in our stomachs and shelter
over our heads, we need to feel that we belong, that what we do every day matters, and
that we are moving toward our potential. Yes, you go to work, but take it up a level:
what's your real job when you are there? Are you clear about your role? Are others? Do
you like your role? And if you've mastered this question, consider whether you have
created a context where your employees can do likewise.
2. Who do I report to? If you've been through a merger, you know just how blurry the
reporting structure can be. Because senior management is frequently unwilling to make
tough decisions, to their detriment, departments often have co-heads. But uncertainty can
be found in any work situation, not just after a takeover. Not knowing whom you report
to, and therefore by what metrics you will be measured, or simply receiving mixed
messages about whose opinion really matters, can result in chaos. In Jonah Lehrer's
Wired article, "The Uncertainty Effect," he cites the research of Colin Camerer, a
neuroscientist at Caltech who writes that "With less information to go on, [people]
exhibit substantially more activity in the amygdala, a brain area reliably associated with
fear conditioning. In other words, we fill in the gaps of our knowledge with fear. And it's
this inexplicable fright — an irrational by-product of not knowing — that keeps us from
focusing on the possibility of future rewards." If you're looking to increase productivity,
start with clarifying the reporting lines.
3. How will I get paid? Notice that this is not how much. We all want to be paid in cold
hard cash, and preferably a good amount of it. But how else will you be compensated?
What of the intangibles that are ultimately worth far more to most people than dollars and
cents? Many would happily take less salary/bonus and fewer stock options if they knew
that a member of senior management would take a serious interest in them. Wouldn't you
stay at a job longer because of intangibles such as long-term opportunities, the belief that
you are building something, the feeling that you have a seat at the table? Think about
each of the people who work for you. Have you thought about what constitutes good
performance, and how you will pay them — in ways that go beyond financial rewards —
when they perform well?

It's tempting to relegate the asking of these three questions to when there's been a one-time event
— as I did when Sandy Weill acquired Shearson, Salomon, then Citicorp. But that would be
overlooking the real value of this exercise. Whether surviving a merger or simply another day at
the office, answering these three questions goes to the heart of retention and morale. If you can't
answer them, it's time to roll up your sleeves.

Japan earthquake rocks global stock markets

By Roland Jackson
Agence France-Presse
First Posted 19:51:00 03/11/2011

Filed Under: Earthquake, Foreign Exchange Markets, Stock Activity, Asia Australia - East
Asia

LONDON - World equities slid and the safe-haven yen steadied in volatile trade Friday after a
huge earthquake in major economic power Japan, as dealers tracked a euro zone summit and
unrest in the Arab world.

A devastating 8.9-magnitude earth quake rocked Japan on 11th march 2011, unleashing a 10-
metre high tsunami that tossed ships inland and sparked fears that destructive waves could hit
across the Pacific Ocean.

The death toll from the earthquake has now reached 32, including three in Tokyo, according to
press reports.

"A perfect storm batters markets," said analyst Kathleen Brooks at trading site Forex.com.

"Three factors are weighing on market sentiment today: the Japanese earthquake, Spain's
sovereign debt downgrade yesterday (and) continuing problems in the Middle East and the
threat this poses to oil supplies."

"This is having a major impact on stocks, foreign exchange and commodities," she added.
Asian stock markets plunged, with Tokyo diving 1.72 percent and Hong Kong losing 1.55
percent, while shares sank 1.17 percent in New Zealand, where a fatal quake had killed
hundreds in Christchurch last month.

In late morning European deals, the London market lost 0.65 percent, Frankfurt dived 1.07
percent and Paris shed 1.03 percent in value.

The biggest loser in Europe was the insurance sector, which tumbled as traders worried over
the prospect of costly claims from the earthquake -- which was the most powerful ever
recorded in Japan.

"It is the insurers that have been worst hit by the weaker session today as traders fretted about
likely exposures to the Japanese earthquake and tsunami," said City Index analyst Joshua
Raymond.

"The destruction in Japan is convincing investors to cash in some of their (recent) gains in
insurance firms, particularly considering it is too early to know exactly what liabilities will be
placed on firms as a result of the destruction caused in the region and surrounding areas just
yet."

Markets had already been given a poor cue on Wall Street, which sank heavily on Thursday on
worries over higher oil prices and slowing economic growth, with the Dow, Nasdaq and S&P
500 indexes all losing more than 1.8 percent.

In foreign exchange trade, the yen sank to $83.30, the lowest point for two and a half weeks,
before rebounding sharply as dealers sought a safe haven for their cash.

"The initial response of the market was to sell the yen. After due consideration investors
decided it was not an economy-threatening event and returned the yen to its pre-quake levels,"
said MoneyCorp analysts in London.

Prior to news of Japan's quake, which hit just before 0546 GMT, global markets were already
on edge before a eurozone summit in Brussels and amid fresh unrest in the oil-producing
Middle East and North Africa region.

The eurozone debt crisis escalated this week when Moody's slashed Greece's debt ratings and
then downgraded Spain on Thursday -- the latest in a long list of warnings based on fears that
some countries may not repay their debts.

Eurozone leaders are expected to agree on greater economic policy coordination later on
Friday as they try to tame a deep-seated debt crisis made worse by markets sceptical that they
can stop the rot.

"This morning, markets have drifted even lower after Japan is hit by an earthquake and one has
to think when all this is going to stop," said Capital Spreads analyst Simon Denham.

"Earthquakes, tsunamis, sovereign debt crises and civil wars mean investing in equities is not a
safe place to be."

World oil prices dropped on Friday, despite unrest in the world's biggest crude exporter Saudi
Arabia, as dealers banked profits ahead of the weekend.

Oil had spiked to 2.5-year highs in recent days amid escalating violence and supply shortfalls
in Libya, a major producer and exporter of crude.

McDonald’s celebrates 30th year in PH

By Karen Boncocan
INQUIRER.net
First Posted 18:02:00 03/16/2011

Filed Under: Restaurants & catering, Food, Anniversaries

MANILA, Philippines— Ronald McDonald in the Philippines is 30 … and counting. The

popular quick-service restaurant celebrated its anniversary in Makati City Wednesday and
introduced child actress Jillian Ward as its newest ambassador.

McDonald's, now with some 300 outlets in the country, started its operations in Morayta,
Manila’s university belt, way back in 1981.

"Every day since then, we have kept to our commitment to serve nothing but the best-tasting,
affordable food with excellent service," said McDonald's Philippines president and CEO
Kenneth Yang.

"Filipinos were excited for the Big Mac, the famous french fries and our apple pie when the first
store opened," said Margot Torres, McDonald's Philippines vice president for marketing and
communication.

"A nice place," was how McDonald's Philippines' marketing manager, Christina Lao, described
the first restaurant, which has since undergone a re-imaging, and has become a franchise store.
Lao said that Filipinos have come to love McDonald's 30 years into its operations in the country.

Torres said that McDonald’s continues to be successful globally, serving over 60 million
customers in over 100 countries.

McDonald's outlets in the Philippines have adapted to the Filipino palate, adding to their menu
such offerings as McSpaghetti, Chicken McDo and the Burger McDo, which suit Filipinos’ taste.
Sars wants you to pay tax first and argue
later
If you thought that we had account issues with Eskom and City Water who will not hesitate to
cut off services for nonpayment, whether your account is outstanding or not, you had better
think again. Sars have adopted a much harsher stance.

It is a case of pay now and argue later.

Though taxpayers do have the right to request a waiver of payment while they argue their case,
this is rarely granted.

This has now been clarified by the Taxation Second Laws Amendment Act, which came into
effect on February 1 this year.

Provided the taxpayer has a good history with the revenue services and can show persuasive
reasons why they are not liable, Sars might agree to a taxpayer's request to withhold payment
while the dispute continues.

But if Sars does not agree to this payment must be made immediately.

If you fail to pay, Sars can insist that your bank acts as their agents and debit your account to pay
Sars.

Alternatively, Sars will obtain a garnishee order on your salary and insist that your employer
pays them.

It recently came to my attention that this approach by Sars has become even more aggressive in
so far as they can demand that your long-term insurance company acts as their agents in respect
of retirement annuities.

This applies when an individual has indicated their desire to retire and such indication is effected
by applying for a tax directive.

There appears to be confusion between some insurance companies and Sars surrounding the
application for a tax directive.

While Sars have not indicated a change in procedure allowing individuals to cancel a directive
through their insurers, they have expressed concern about the system being abused by individuals
who apply for tax directives merely as part of a financial planning exercise.
It is important to realise that Sars works on an accrual basis. This means that once you've applied
for the directive and it's been granted, it is binding.

Institutions will no longer wait for confirmation from you before deducting the tax if they are
appointed as tax collection agents, in terms on notice IT88, but they will inform you of the tax
implications.

If there is a dispute, you would have to contact Sars directly because only they may authorise a
cancellation.

I understand that if they request payment from an insurer, the insurer is then obliged to inform
you that you have two weeks' notice to settle your tax bill.

Failing settlement, they would be required to pay investment money over on your behalf.

The attitude of Sarsis puzzling because they do not seem to appreciate what hardships might
result for the taxpayer. In the case of retirement, where an employee has done all the calculations
and is reliant on the cash to settle other debt, they may then be faced with a claim by Sars on
their retirement capital.

I do understand that there is a need for the tax net to be broadened. After all, statistics reflect that
less than six million economically active individuals pay their fair share of taxes.

The Sars commissioner, Pravin Gordhan, pointed out that vigorous enforcement had been most
successful in widening this net, through greater international collaboration.

Whenever the revenue service uses an agent to collect outstanding tax, the delinquent tax payer
must realise that interest will also be claimed, plus additional penalties, on the outstanding taxes.

While paying fair taxes is acceptable, most people object to the "pay now and argue later"
system.

But there has been some clarity at last and taxpayers now have the right to dispute their cases

Earthquake and Tsunami in Japan – Global Impact

Client Alert

March 15, 2011

The extraordinary images and reports of the devastation from the Japan earthquake and tsunami
are staggering. While the focus has understandably and appropriately been on the human toll and
concern for the well-being of friends, colleagues and business partners who may be personally
affected by this disaster, its impact will extend far beyond those whose lives and businesses were
immediately disrupted. A recent article in The Wall Street Journal reports that the earthquake
alone may have caused $15 to $35 billion in insured property losses in Japan, and total economic
losses are likely to be significantly more. We already are seeing assessments of the disaster’s
impact on businesses globally, not the least of which involves disruptions to the global
transportation network for products, component parts and supplies.

What to do now: As soon as a potentially covered loss begins, experienced coverage

professionals, such as the lawyers in Proskauer’s Insurance Recovery Practice Group, should be
consulted. Waiting too long to start assessing coverage and quantifying loss can lead to lost
coverage as, for example, covered costs may not be recorded and evidence of loss may not be
kept. In addition, insureds and others with potentially covered business losses should:

1. immediately obtain and review insurance policies;

2. confirm that evidence of loss is organized and maintained to support a claim under any
applicable coverage provisions and track the expenses you incur in preparing the claim
(including lawyers' fees) as many policies often cover such expenses;
3. adhere to any applicable notice and proof of loss provisions in the policies, including obtaining
waivers or tolling agreements from insurers;
4. document loss by making sure to maintain proof of business performance prior to, during, and
after loss;
5. create and maintain evidence of damage, including pictures if necessary.

What to think about in the near term: Given the increased seismological activity and its
devastating effects that we’ve seen over the past few years and months, many companies will
now be thinking about purchasing earthquake and tsunami coverage to handle property damage
and business interruption. It is important to get the insurance you need at a cost you can afford.
By all accounts, the cost of such insurance is likely to increase significantly, and the right
coverage may not be available “off the shelf.” Businesses, for example, may find that flood
exclusions and provisions that narrowly define when coverage is triggered that are found in
typical policies mean that you aren’t adequately insured in the event of an earthquake and
tsunami. This is why it is critical to work with insurance counsel to assure that you are obtaining
the coverage you want and need. Addressing the issue after a disaster strikes may be too late.

In the meantime, if your business does suffer the effects of the Japan earthquake and tsunami,
be it property damage, limited availability of materials (and the resultant increase in price), or
interruption of shipping channels leading to delivery delays, some of the key insurance policy
coverage issues are discussed below. Although claims for such losses will be varied and involve
different types of insurance coverage, they are likely to raise the same issues we deal with in
almost all matters: causation, trigger, notice, quantification and, for insurance claims, number of
occurrences, limits and deductibles, defenses and exclusions, among others.

Property Damage:  If your property was damaged as a result of the earthquake or tsunami, an
immediate review of your property policy to assess coverage is probably reflexive. Policyholders
should be aware, however, that most first-party property policies cover much more than just
physical damage to owned property. Many policies also define property damage to include loss
of use of your property that has not been physically damaged and include additional coverage for
debris removal, demolition and increased cost of construction in the event of physical loss to
covered property.

Business Interruption:  Lost profits are also often covered under one or more provisions of most
property policies. Business interruption insurance is designed to do for the insured what the
business itself would have done had no interruption occurred. This type of coverage usually
comes into play to reimburse an insured for losses sustained due to the necessary total or partial
suspension of the policyholder's operations during a period of interruption. For instance, a hotel
in Hawaii that suffers damage to its property as a result of the tsunami could pursue, under its
business interruption coverage, the profit it lost while repairing the property damage. While the
exact wording and case law interpreting these provisions varies, business interruption provisions
generally require: (a) loss or damage to insured property; (b) interruption of the business due to a
covered loss; (c) loss of income or profits; and (d) the loss must occur within a “period of
restoration.” Business interruption losses often present tricky valuation and calculation issues
that are best analyzed as the loss progresses, rather than after the fact. Your business interruption
coverage may require you to expedite repairs, mitigate losses and/or track expenses in a way that
is not consistent with your normal business practice. It also may provide coverage for the “extra
expense” associated with maintaining production while property is being repaired. Covered extra
expenses generally include such costs as rent, moving and hauling expenses, overtime,
temporary labor, and even advertising. An early evaluation of your coverage can help smooth the
path to making sure covered expenses are properly captured and presented to insurers.
Fortunately, many policies also include coverage for professional fees incurred in quantifying the
loss.

Contingent Business Interruption/Dependent Business Premises:  Today’s global economy

operates along a network of transportation and transportation-related businesses that are highly
interdependent. The network is likely to face significant disruptions over the coming days and
weeks as airports, ports, rail operators and trucking companies adjust to closures caused by the
earthquake and tsunami. That means increased costs and delivery delays for products and
component parts that travel along the global supply chain. Interruption to suppliers' or customers'
utility services would have a similar effect. If either your suppliers or your customers suffer loss
or damage of the type your property damage policy covers, you may have a claim for contingent
business interruption due to your inability to acquire or deliver materials or services. These
provisions generally extend the business interruption coverage to include loss of gross earnings
at the insured’s premises as a result of a supplier’s or customer’s inability to deliver or receive
goods or supplies as a result of damage to its property. Determining whether your policy has
been triggered, the cost and requirement to purchase “cover,” the appropriate period of
restoration, and the anticipated revenue or income had the damage not occurred can all be
complicated issues necessitating the help of experienced coverage counsel.

Service Interruption/Impounded Water:  Many U.S. companies have facilities, or affiliates that
operate facilities, in Japan that have been affected by the widespread power outages since last
week’s earthquake. When utility services to your premises are interrupted, service interruption
coverage may be available to cover your loss of income or extra expense. Policies generally
require damage to the property of a supplier of electricity, gas, water, steam, waste disposal, or
similar services used by the insured to trigger this coverage. Impounded water coverage applies
in the event that water used as a raw material, for power, or in a manufacturing process becomes
unavailable due to damage to dams or reservoirs. These coverages often are limited in duration
and subject to waiting periods or deductibles, and could be limited to damage to property of the
supplier that occurs within 1000 feet of the insured premises. The results of such interruptions,
however, can be far-reaching, from event cancellation, inability to deliver products and closure
of facilities, to contractual penalties for non-completion of orders or loss of covered property, so
a careful review of the policy is essential. 

Civil Authority Restricting Access:  Should a governmental entity issue an order restricting
access to your property, the order may trigger your insurance coverage. Unlike the business
interruption coverage in your policy, some cases have held that no physical damage is required to
invoke the civil authority coverage. While the most common application of this coverage would
be to situations, like floods and hurricanes, where an evacuation order inhibits your ability to
access your property, more complicated situations may arise as well. Airport, beach and
waterway closures, curfews, and closures of financial exchanges and borders, are all types of
civil authority orders that could lead to insurance claims.

Sue-and-Labor Clause: Some policies include a sue-and-labor clause that permits a company to
recover expenses incurred to minimize or prevent covered loss or damage, including business
interruption loss, due to an actual or imminent insurance triggering event. A business, for
example, that purchases and installs on-site emergency generators to prevent or minimize power
outage losses, or takes other precautions to protect covered property against the aftershocks that
invariably follow the main temblor, might be able to recover those expenses. Sue-and-labor
clauses, however, ordinarily provide coverage in limited circumstances, so a business should not
take action to minimize or prevent further losses based on the mistaken assumption that the
incurred costs are covered.

Preparedness is essential to managing and mitigating the risks posed by natural disasters like last
week’s tragic events. Insurance should be a part of this preparation. Whether your business is
coping with a loss today as a result of the Japan earthquake and tsunami or looking to protect
itself from similar losses in the future, Proskauer’s Insurance Recovery Group can help you work
through your insurance issues.