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Monthly Archives: March 2013

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Comment from thebrackpipe.com:  More fallout from Obama’s poor understanding of how businesses and economies work.

Article below by Sherrie Conroy as it appeared in MedTech Insights:

Now that the medical device tax has been implemented and device makers have already made their first payment to the IRS, the focus has turned to getting this thorn in their side repealed.  They have gained some support in that effort, and AdvaMed says that legislation introduced in the US House of Representatives shows the growing bipartisan support for repealing the medical device tax.

“The momentum from the last Congress is carrying over with a broader array of champions working to defeat this terrible tax,” says AdvaMed president and CEO Stephen J. Ubl.  “On both sides of the aisle, members of Congress know the device tax hurts our economy, kills jobs, and slows the march of medical progress needed to fight disease and reduce long-term health costs.  The medical technology industry is united in its commitment to repeal this tax and appreciates the leadership shown in Congress to continue the effort.”

Reps. Erik Paulsen (R-MN) and Ron Kind (D-WI) reintroduced the House repeal bill with more than 175 co-sponsors, including 20 Democrats.  Ubl praised Paulsen and Kind for working together on the repeal effort.  “Patients, the healthcare system, and the American economy are winners when legislators work together like this.  America’s medical technology industry looks forward to assisting in this important repeal effort,” Ubl says.

According to AdvaMed, the tax has already led to layoffs, reductions in planned facility expansions, and other cost-cutting measures, which the association blames for stunting economic growth, impeding innovation, and affecting patient care.  Studies show the tax threatens up to 43,000 jobs nationwide.

The medical technology industry helps employ more than 2 million people in the U.S., and salaries in this sector are 40 percent higher than the national average.

Comment from thebrackpipe.com:  More douchebaggery from one of America’s biggest banks.  Now, does J.P. Morgan snatch ‘supreme douche’ status from Goldman Sachs?  You be the judge.

Article below by Dan Fitzpatrick, Scott Patterson and Gregory Zuckerman of the WSJ:

J.P. Morgan Chase & Co. brushed off internal warnings and misled regulators and investors about the scope of losses on its “London whale” trades last year, according to a scathing Senate report.

One risk gauge at the largest U.S. bank projected in February 2012 that the firm could lose $6.3 billion on the trades.  But the warning was dismissed by a key risk manager as “garbage,” according to the 301-page report by the Senate’s Permanent Subcommittee on Investigations.  The New York company’s trading losses ultimately exceeded $6 billion.

The report, the product of more than 50 interviews and a review of 90,000 documents, found that the bank ignored alarms triggered weeks and in some cases months before Chief Executive James Dimon dismissed concerns about them as a “tempest in a teapot” on an April 13, 2012, earnings conference call.  “While we have repeatedly acknowledged mistakes, our senior management acted in good faith and never had any intent to mislead anyone,” J.P. Morgan said Thursday.

The Senate effort is the first comprehensive account of an episode that has hit the company’s reputation for risk management, which once was viewed as the best on Wall Street.  J.P. Morgan’s board halved Mr. Dimon’s 2012 pay following the trading losses, even as the company posted a record profit of $21.3 billion.

In an unrelated move, on Thursday the Federal Reserve cited the company for weaknesses in its capital planning and said J.P. Morgan would have to resubmit this year a plan to expand its share buyback and raise its dividend.

Senate investigators “found a trading operation that piled on risk, ignored limits on risk taking, hid losses, dodged oversight and misinformed the public,” said Sen. Carl Levin (D., Mich.), head of the subcommittee, in a press briefing Thursday.

The panel’s report, which includes 1,654 footnotes, details several episodes previously reported by The Wall Street Journal—including the doubts and reservations of the J.P. Morgan trader nicknamed the “London whale” and pressure exerted on him to boost valuations on the losing positions.

The report shows that traders at the bank’s Chief Investment Office were highly paid.   Former Chief Investment Officer Ina Drew was paid a combined $29 million for 2010 and 2011.  Achilles Macris, the trader in charge of the unit’s Europe operations, pulled in $31.75 million over the two years, and Bruno Iksil, nicknamed for his large trading positions, made $14.1 million.

On Friday, several J.P. Morgan officials who oversaw the trades, including Ms. Drew, will testify before the Senate panel.  While Mr. Dimon won’t testify, Mr. Levin said at the Thursday press briefing that the subcommittee might hold additional hearings.

The panel will also question officials with the Office of the Comptroller of the Currency, the bank’s front-line regulator, including its head, Thomas Curry.

Sen. John McCain (R., Ariz.), ranking member of the subcommittee, said the firm “misled investors and the American taxpayer,” calling the losses a “massive failure not only by J.P. Morgan but also by the federal government.”

An OCC spokesman said in a statement Thursday that the regulator recognizes “shortcomings” in its supervision and is taking “steps to improve our supervisory process.”

The Chief Investment Office, which manages the bank’s excess cash, was a little known profit center that pulled off winning trades through the financial crisis and into 2011.

But then a group of traders in its London office, which included Mr. Iksil, started building a complicated position in indexes that track the health of a group of companies.  That bet morphed into a hard-to-unwind position that led to losses starting in January 2012.

In mid-March 2012, Mr. Iksil called the positions “more and more monstrous” and referred to the values the company had booked them at as “idiotic,” according to recorded conversations released by the panel.  Another trader told Mr. Iksil that the outcome of the trading would be “a big fiasco” and “big drama when, in fact, everybody should have…seen it coming a long time ago.”

Later in March, Mr. Iksil became despondent as the losses mounted.  “It is over/it is hopeless now…I tell you, they are going to trash/destroy us,” he says in one message to a colleague.  Ms. Drew also became alarmed as she learned that the size of the positions was growing.  “Ina is freaking,” said one risk manager, referring to Ms. Drew.

Ms. Drew and lawyers for Messrs. Iksil and Macris couldn’t be reached for comment.

J.P. Morgan has acknowledged in its own reports on the trading fiasco that some expressed concerns about the portfolio as early as January 2012 and traders placed inaccurate values on certain positions as they debated the size of the losses in late March and early April.

But the Senate report alleges that traders began hiding these losses as early as January 2012 and the bank didn’t have a problem with how the positions were being treated.  A May 10 internal assessment from the bank’s controller concluded that the pricing decisions were “consistent with industry practices.”

J.P. Morgan has acknowledged it didn’t have the necessary limits in place to catch the mounting problems.

But the Senate panel concludes J.P. Morgan disregarded multiple warnings.  Of the five big risk measures that are tracked almost continuously at the bank, all five were breached during the first three months of 2012.  From Jan. 1 through April 30, the measures were breached more than 330 times.

In February 2012, a warning system known as the Comprehensive Risk Measure showed the portfolio could incur a yearly loss of $6.3 billion, the report said.  Peter Weiland, who at the time was a top risk executive called the $6.3 billion estimate “garbage” in an email to one trader.  But the head of the bank’s model risk group, C.S. Venkatakrishnan, defended the model and attributed the sizable figure to the additional positions taken in the portfolio.  He communicated that in an email to Ms. Drew and chief risk officer John Hogan, among others.

On April 10, when the total losses in the portfolio climbed above $1 billion for the first time due to a one day loss of $412 million, Chief Financial Officer Douglas Braunstein said to Mr. Hogan in an email: “A bit more than we thought.”

Mr. Hogan replied: “Lovely.”

The OCC told the panel that J.P. Morgan provided “material misrepresentations” about the size of the losses and denied the positions had been valued unfairly despite disputes with counterparties about prices assigned to certain positions.  Mr. Dimon was aware of the disputes, the panel’s report said.

Comment from thebrackpipe.com:  Hmmm, not quite sure what to think about this one.  I’m concerned that the insurance companies were so influential in getting this fee added… for employers or beneficiaries to absorb.  Thoughts?  Please comment.

Article below by Janet Adamy of the Wall Street Journal:

Employers are bracing for a little-noticed fee in the federal health-care law that will charge them $63 for each person they insure next year, one of the clearest cost increases companies face when the law takes full effect.

Companies and other plan providers will together pay $25 billion over three years to create a fund for insurance companies to offset the cost of covering people with high medical bills.

The fees will hit most large U.S. employers, and several have been lobbying to change the program, contending the levy is unfair because it subsidizes individually purchased plans that won’t cover their workers.  Boeing Co. and a union health plan covering retirees of General MotorsFord Motor Co. and Chrysler, among other groups, have asked federal regulators to exclude or shield their insurance recipients from the fee.

Insurance companies, which helped put the fee in the law, say the fee is essential to prevent rates from skyrocketing when insurers get an influx of unhealthy customers next year.  The fee is part of a new insurance landscape created by the health law that will forbid insurers from denying coverage to people with pre-existing conditions.

The $63 fee will apply to plans covering millions of Americans in 2014.  It applies to employers that assume the risk for workers’ medical bills, and many private plans sold by insurers.  The fee will be smaller for 2015 and 2016, though regulators haven’t set those amounts.

Few noticed the fee when the 2010 Affordable Care Act passed.  Employers have spent recent months trying to peel it back, but final regulations published Monday in the Federal Register left it largely intact.

“It’s caught most employers, if not all employers, by surprise,” said Steve Wojcik, vice president of public policy at the National Business Group on Health in Washington, which represents large employers.  “They’re very upset about it.”

The fee comes on top of other costs employers expect to face.  Proponents of the law say it eventually will lower employers’ health costs by expanding insurance coverage to 30 million Americans, meaning employers won’t subsidize their unpaid medical bills.

Administrators for employee health plans have warned federal regulators they could pare insurance benefits to absorb the fee.  Some benefits experts expect employers will at least partially pass on the $63 to workers.

Boeing estimates the fee will apply to about 405,000 workers and dependents it insures, costing the Chicago-based plane maker an estimated $25 million in 2014.  The company spends $2.5 billion annually on health and insurance-related benefits.

Doug Kight, a Boeing vice president of strategy, compensation and benefits, told Health and Human Services Secretary Kathleen Sebelius in a December letter the aircraft maker was “concerned about the significant cost impact” of the fee.  Among other things, he effectively asked her to reduce the levy to account for the fact that Boeing’s workers aren’t part of the insurance system that can tap the reimbursement fund.

The UAW Retiree Medical Benefits Trust, which covers 806,000 retirees of General Motors, Ford, Chrysler and their dependents, asked HHS to exempt all its beneficiaries from the levy.  It argued the trust, which is independent from the auto makers, shouldn’t face the fee because its plans operate under terms set in federal district and bankruptcy courts in 2009.

The top lobbying groups for large employers, including the U.S. Chamber of Commerce and the Business Roundtable, also voiced concerns about the fee and asked regulators to delay its collection.

In the regulations published Monday, HHS declined to whittle down the levy for firms such as Boeing, citing the law’s requirements.  It said the fee wouldn’t apply to the plans of retirees whose primary coverage is Medicare, which would exclude many retired autoworkers, but it declined to categorically exempt workers in court-structured benefits plans.

A Boeing spokesman said the final regulations don’t appear to address the major issues it raised with regulators.  A spokeswoman for the UAW trust declined to comment.

Federal regulators say they have heeded employers’ complaints about the fee and tweaked details of the program.  They opted to collect the levy nationally instead of through each state, moved the collection date to the end of next year and calculated the fee on a per capita basis instead of as a percentage of premiums.

“We’ve tried to really work with the employers and issuers in trying to make the application of this program as least burdensome as possible,” said Michael Hash, director of the HHS Office of Health Reform.

In 2014, insurers will be able to tap part of the $25 billion to offset medical costs from high-risk individual-market consumers that total between $60,000 and $250,000 a year.  Employers and other insurance issuers will pay $63 in 2014 for every worker, spouse, child and certain retirees they cover.

Of the fees collected, $20 billion will go toward paying high medical claims.  HHS says the remaining $5 billion will be used to retroactively offset an earlier program that reimbursed employers insuring early retirees through 2011.  Under that program, Boeing received $50 million and the UAW trust received $387 million, according to a federal summary of the payouts.

A Boeing spokesman said the retiree program “was not advertised as a program prefunded by the government to be paid back at a later time,” and that the law’s net financial impact on Boeing is negative.  The UAW trust declined to comment.

HHS says the high-risk program will lower premiums for people who buy plans through the individual insurance market by between 10% and 15%.  For insurance plans overall, the fee is expected to raise premiums next year by about 1%, and less in the subsequent two years of the program.

Insurance companies defend the fees, saying they will indirectly benefit employers. Companies subsidize the cost of caring for the uninsured by paying higher medical and insurance prices for workers.  Moving high-risk consumers into insurance policies will minimize that problem, they say.

These uninsured “had been the individuals going to the emergency room,” said Karen Ignagni, president of America’s Health Insurance Plans, an insurer trade group in Washington.  “The employers definitely were picking that up.”

Other health plans that tried and failed to win a federal exemption from the fee include so-called multiemployer insurance plans, which are jointly run by unions and employers.  About 20 million Americans are covered by such plans.  Federal regulators told these plans they lacked the authority to exclude them from the levy.

Those who sought an exemption include several benefit funds covering New York home-care workers, dietary aides and nursing assistants who belong to the Service Employees International Union.  The funds, which insure 331,000 people, predict the fee will cost them $21 million next year.

Eliminating life insurance and vision benefits would offset only half the fee, the funds said in a December letter to federal regulators.  Trustees would have to eliminate the entire durable-medical-equipment benefit to come close to offsetting the additional cost.

“The funds would be bearing additional costs without gaining any additional protections,” said Mitra Behroozi, executive director of 1199 SEIU Benefit and Pension Funds, in her letter to regulators.  Through a spokeswoman, Ms. Behroozi said the fund won’t follow through on cutting benefits, and that regulators addressed some of their concerns.

The benefit fund for 1199 SEIU received $4 million from the health law’s early retiree program.  Ms. Behroozi said through the spokeswoman that “the funds will still pay millions of our members’ dedicated health-care dollars in fees to the individual health-insurance market that would otherwise be used for their own coverage.”

Article below by Tony Schwartz from the Harvard Business Review:

For more than a decade now, I’ve struggled to define what fuels the most sustainably productive work environment — not just on behalf of the large corporate clients we serve, but also for my own employees at The Energy Project.  Perhaps nothing I’ve uncovered is as important as trust.

Much as employers understandably hunger for one-size-fits-all policies and practices, what motivates human beings remains stubbornly complex, opaque, and difficult to unravel.  Perhaps that’s why I felt so viscerally the shortsightedness and futility of Marissa Mayer’s decision to order Yahoo employees who had been working from home to move back to the office, and Hubert Joly’s to do the same at Best Buy.

Here’s the problem:  Employees who want to game the system are going to do so inside or outside the office.  Supervising them more closely is costly, enervating, and it’s ultimately a losing game.  As for highly motivated employees who’ve been working from home, all they’re likely to feel about being called back to the office is resentful — and more inclined to look for new jobs.

At its heart, the problem for Mayer and Joly is lack of trust.  For whatever reasons, they’ve lost trust that their employees can make responsible adult decisions for themselves about how to best get their work done and add value to the company.  Distrust begets distrust in return.  It kills motivation rather than sparking it.  Treat employees like children and you increase the odds they’ll act like children.  You reap what you sow — for better and for worse.

As an employer, I stay focused on one primary question about each employee:  What is going to free, fuel, and inspire this person to bring the best of him or herself to work every day, most sustainably?  My goal is to meet those needs in the best ways I can, without undue expense to others.

In the end, I’m much less concerned with where people do their work than with the value they’re able create wherever they happen to do it.  The value exchange here is autonomy (grounded in trust) for accountability.

As CEO, I myself work from home for an hour or two in the mornings most days because it’s quiet and free of distractions.  I find it’s the best way for me to get writing and other high-focus activities accomplished, and I know that’s true for many other business leaders.

One of the senior members of our team is a 35-year-old woman with three children under the age of nine.  She lives 90 minutes from work.  I’d love to have her at our offices every day, because I enjoy being able to interact with her around issues as they arise.  I also just like having her around as a colleague.

But to make that possible she’d have to invest three withering hours commuting each day — a huge cost, not just in time, but also in energy, for work and for her family.  Demanding that she make that trip every day would only prompt progressive fatigue, resentment, and impaired performance.

Instead, we settled from the start on having her come to the office two days a week, which is when we schedule our key meetings.  Those days also provide time for spontaneous brainstorming of ideas across the team.

Another one of our team members, a woman with two teenage kids, travels frequently in her role. When she gets back from trips, she typically works from home the next day — both to recover, and to have more time for her family.

Two of our other staffers — one male and one female — work mostly at the office out of personal preference, but also have young kids and work from home on some days when their kids are on vacation, or get sick.

Two younger, married team members recently requested permission to move to Amsterdam for eight months — for no other reason than they wanted to experience another culture.  For a moment, I bridled.  But since technology makes it possible for them to do their jobs from anywhere, we were able to make it happen.  They agreed to work during our regular office hours, and to visit our office for a week every two months.  So far it seems to be working seamlessly.

Every one of these people is highly productive.  I do have moments when I find myself wishing all of our team members were in the office more, and even wondering what they’re doing when I haven’t heard from them.

When those feelings arise, I take a deep breath and remind myself that my colleagues are adults, capable of making their own decisions about how best to get their work done, and that all good relationships involve some compromise.

It gets back to trust.  Give it, and you get it back. In over a decade, no employee has ever chosen to leave our company.  The better you meet people’s needs, the better they’ll meet yours.

http://blogs.hbr.org/schwartz/2013/03/treat-employees-with-trust.html