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Bonus Bonanza

Their short-term cowboy tactics were in many ways responsible for the current economic mess, yet countless Wall Street executives will be getting bonuses this year. Huge signing fees, retention awards and severance packages are still part of the game – and are still tied only tenuously to performance. Does this throw some light on the compensation saga surrounding former SAA chief executive Khaya Ngqula?

Kevin Bloom

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Let’s say it’s the mid-1990s and you’re a senior at an Ivy League college on the east coast of the United States. For most of your undergraduate career, you’ve been debating whether to go into medicine or teaching – you’ve always cherished the idea that one day you’d do some good in the world. In the last few months, though, a third option has crept into the mix. It seems that the most talented people in your year, the half-dozen overachievers who’ve been your competition since you were a freshman, have all signed up for postgraduate business degrees. They want to be investment bankers, they tell you, or go into private equity. They want to measure themselves against the best, they say. They want to work on Wall Street.

You delay the decision for as long as possible, but somehow you know your mind’s made up – you must continue to pit yourself against the elite of your generation. So you enrol at Wharton Business School, and a few years later you leave with a degree that gets you a job as a junior assistant at Merrill Lynch. For almost a decade you put in ten- to fourteen-hour workdays, trying to catch the attention of the partners. You succeed. By the time you’re in your early thirties, you’re a trader earning US$180 000 a year. In 2006, aged 32, you take home a bonus of US$5 million.

Comparatively, that’s not too bad. You’re doing better than many, worse than only a few. According to the New York Times, there are one hundred people at your firm that year –
employees on the salary wrung just below you – who take home bonuses of US$1 million. But at Goldman Sachs, your firm’s major competition, you have it on good authority that fifty people got bonuses of US$20 million. And then there are the guys at the top. Goldman’s CEO, Lloyd Blankfein, is rumoured to have cleared over US$60 million. Your own chief executive, E. Stanley O’Neal, pocketed US$46 million.

Two years later, over a September weekend that will go down in Wall Street history, your 94-year-old firm is sold to Bank of America for US$50 billion, sidestepping the bankruptcy that awaits Lehman Brothers the following Monday. And while it’s plain to every banker you know that something fundamental has shifted on the Street, nobody seriously believes there’ll be no bonus season in 2008. Bonuses, after all, are the entire point of the game.

As for the global consequences of the game, you can’t be expected to take any heat for that. I mean, c’mon, you didn’t invent the system, you just played it, did what was expected. How were you supposed to know that in a country called South Africa, where the income gap between rich and poor is amongst the highest in the world, your industry’s example would compound the problem? What does it have to do with you that executives at a power supplier called Eskom got richly rewarded for failing to do their jobs? How is it your fault that some airline CEO named Khaya Ngqula paid himself monthly retention bonuses on the taxpayers’ dime?

You have nothing to do with any of it, you tell yourself. Like most of your colleagues, what still concerns you most is the size of your annual cheque.

The story of Merrill Lynch’s post-collapse attitude to employee remuneration – and the attendant story of why many Merrill employees still believe they are entitled to their annual windfalls – is worth telling for two reasons. First, it’s an attitude that’s garnered far less press than that of global insurer AIG, whose decision to award staff bonuses soon after receiving US$85 billion in government bailout money provoked the ire of millions of US taxpayers; second, in its under-the-radar manner, Merrill’s attitude appears to be emblematic of the majority of Wall Street banks that have been devastated by the current crisis. Put another way, what makes the Merrill story interesting is that nothing about it is exceptional.

The story starts in 2006, when the company’s earnings were US$7,5 billion, an all-time record. That year, more than half of the revenues were generated by the fixed-income division, which meant that around a third of the total US$6 billion bonus pool got allocated to the division’s 2 000 employees. It didn’t matter that a large percentage of these revenues were linked to financial instruments whereby risky home mortgages had been converted into bonds, or that the fixed-income division (which had devised the instruments) pushed yet further into the mortgage business even as the housing bubble began to burst – it didn’t matter, because by then all the bonuses had been paid.

As mentioned, at the top of the bonus pile that year was the CEO, E. Stanley O’Neal. Following him (although not too closely) was Dow Kim, head of the fixed-income division, who was awarded a bonus of US$35 million. In third place, at US$20 million, was Kim’s deputy, Osman Semerci. Although the company has since written down its investments by around US$54 billion and subsequent losses have amounted to more than three times the 2006 profit, neither O’Neal nor Kim nor Semerci were ever asked to pay a cent back. In fact, when it became apparent that O’Neal had driven the firm to the precipice through his aggressive and reckless strategies, he wasn’t even fired – he was allowed to resign, which entitled him to a further US$161 million in deferred compensation and stock.

So it came as no surprise when, in December 2008, O’Neal’s replacement, John Thain, requested a US$10 million bonus for ensuring that Merrill didn’t meet the same end as its long-time rival Lehman Brothers. Thain had been lured to the firm by a US$15 million signing fee and a multi-year pay packet that was supposed to be worth between US$50 million and US$120 million, dependent on what he did with the share price. But because of the huge toxic debt he had unwittingly inherited, the ratcheted targets became a mirage – all he had to show for his efforts, after the signing fee, was his US$750 000 salary. Surely he was entitled to a paltry US$10 million for saving the bank; a number, as Vanity Fair writer Michael Shnayerson wryly noted, equivalent to a ‘25-cent tip on the deal’ with Bank of America.

Unfortunately for him, and much to the concern of bankers everywhere, Thain wasn’t entitled. Merrill’s directors couldn’t help noticing that public opinion had turned against them – Bank of America had recently been awarded US$15 billion in taxpayers’ bailout money, and was now about to take the US$10 billion earmarked for Merrill – and a bonus for the new CEO would send the wrong message. Also, there was New York attorney general Andrew Cuomo to consider, a man who was making his name by leading a crusade against outsized executive compensation at firms that had been saved from bankruptcy by the federal government. In October 2008, Cuomo sent a letter to the boards of firms including Goldman Sachs, Morgan Stanley, JP Morgan Chase and Merrill Lynch itself, laying out in emphatic terms his aversion to the awarding of bonuses under current circumstances. In November, apparently succumbing to the pressure, Goldman CEO Blankfein announced his intention to forgo the year-end package that between 2003 and 2007 had netted him over US$210 million; all he would be taking this year, Blankfein said, was his US$600 000 salary. A few weeks later, the chief executive of Morgan Stanley, John Mack, followed suit.

Which begs the question: In December 2008, when Thain insisted on his right to a US$10 million bonus, was he just being stubborn? Or were the ‘magnanimous’ gestures of his peers perhaps a bit too much for him to stomach?

As Vanity Fair’s Shnayerson observes, the 440 partners at Goldman Sachs are taking bonuses this year: ‘Maybe in many cases not the $12 million to $15 million each got in 2007 – more like packages worth $3 million to $4 million.’ Bizarrely, the US$10,9 billion in compensation and benefits that is to be divided amongst Goldman’s 30 000 employees is exactly equal to what US taxpayers have recently handed the firm in bailout money.

A Goldman spokesman, clearly flailing, explained to Vanity Fair that employee compensation comes out of ‘business activities’, meaning a different place on the balance sheet to where the government cheque sits. Either the spokesman’s words betray the fact that investment bankers think non-investment bankers are financially illiterate, or he genuinely believes that despite a US$7,2 billion write down in toxic securities the Goldman staff deserves to be rewarded. Or both.

The story at Morgan Stanley and AIG is much the same. Taxpayers still seem to be footing the bill for the lavish lifestyles of countless financial executives whose short-term thinking (fuelled by irrational reward structures) dragged the United States – and the world – into this crisis to begin with. Examples of Wall Street’s deeply entrenched pathologies abound. At Merrill, for instance, the new head of growth and acquisitions, who started work in September, was retrenched after only three months on the job because of the sale to Bank of America. His contractual severance package, according to the Wall Street Journal, may have been as high as US$25 million. No wonder Thain was embittered by his board’s unwillingness to throw him a meagre US$10 million for actually doing some work.

Viewed in this context, the compensation saga involving former SAA chief executive Khaya Ngqula is different in degree but not – arguably – in kind. Ngqula was suspended in February, pending the outcome of an investigation into an alleged conflict of interest. The source of Ngqula’s troubles was his assumed interference in the award of a R3,5 billion catering contract to a consortium whose shareholders included his wife and his business partner. While on the surface it may appear that none of the Wall Street CEOs have been tainted with a smell of corruption quite as pungent, at a few levels down it starts getting harder to distinguish the stink. Like hundreds of Wall Street high-flyers, Ngqula appears to have enriched himself at the ultimate expense of the taxpayer – over the last few years, bailout payments to the national carrier from South African government coffers have run into the billions.

Yes, Ngqula took helicopter rides to same-city meetings at the South African citizen’s expense. But we’d do well to remember that one week after AIG was promised US$85 billion from the US government, the firm’s top employees went on a hugely expensive junket where spa charges alone amounted to US$23 000. Yes, Ngqula was paid a R68 000 monthly ‘retention bonus’, his golden handshake is rumoured to be R8 million, and his slice of the allegedly improper catering contract is anyone’s guess. But should such numbers not be viewed in the light, say, of Merrill Lynch’s US$161 million parting gift to E. Stanley O’Neal? Or the US$600 million in ‘retention awards’ that AIG will split amongst 5 000 key employees despite the unprecedented public outcry?

Which of course does not absolve Ngqula or his cronies of charges of undue enrichment. It just begs the question whether the fault’s with the system-at-large, a system that starts on Wall Street and spreads throughout the entire free market world. When the majority of a country’s brightest students aspire to be the 32-year-old in Manhattan who’s pulling down a US$5 million bonus, when pay is decoupled from the long-term health of a firm and anchored only to short-term profit, when humungous retention packages are awarded for just showing up, there’s bound to be a whole lot of collateral damage. Ngqula, it seems, is ours.

Like hundreds of Wall Street high-flyers, Ngqula appears to have enriched himself at the ultimate expense of the taxpayer – over the last few years, bailout payments to the national carrier from South African government coffers have run  into the billions.

Kevin Bloom, an award-winning South African journalist, is currently a writing fellow at the Wits Institute of Social and Economic Research (WISER). His first book, Ways of Staying, a narrative non-fiction journey through selected concerns of contemporary South African life, was released by Picador Africa in May 2009.

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Business Landscape

Load Shedding – How To Stay Productive

We’ve all already had massive interruptions from load shedding and it’s not going away anytime soon so, instead of being caught out each time and losing productivity, let’s stay steps ahead of the outages and make sure that our productivity stays where it should be…

Warrick Kernes

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They say that prevention is better than cure and with load shedding the best cure is to have a generator, backup power inverter or UPS (Uninterrupted Power Supply) set up to kick in when the lights go out. If you don’t have this in place then you will want to understand when you will be affected and how to minimise the impact of this on your work.

The first step is to know when your area is scheduled for load shedding. You can find out by downloading the free app called Loadshedding Notifier which tells you when Eskom has scheduled areas to be turned off. We’ve already seen that the lights don’t always go out when they are scheduled to do so but it’s better to be prepared than to be caught in the dark.

Many entrepreneurs rely on their normal routine to drive their productivity but once you know that your routine is going to be interrupted then it’s time to re-plan your day. You could plan to get up earlier to avoid traffic or to start work super early so that you get through your priority work before the power goes off.

Arrange your to-do list so that you can get through the highest priority and income producing activities first and then you can get around to the rest of your work. Prioritising your daily actions becomes even more crucial when you have limited time. You can also plan priority work for when the power is out; just imagine how many sales calls you can make when not being interrupted by emails.

If you work from home check if the neighbouring suburbs will have power so you can go work at one of the cafes. Most cafes have free wifi but it can be slow and these networks aren’t always secured so it’s preferable to have your own 3G dongle so that you don’t rely on others for internet.

A few more load shedding quick tips:

  • Work in the cloud so that all your work is backed up automatically and not lost if you suddenly lose power.
  • Unplug devices when the power is out to avoid damage from potential surges when power is restored.
  • Keep your electronics charged up such as; headphones, cell phone, laptop battery, powerbank, 3G dongle.

If your computer battery dies or you run out of things to do then create a list of work that you and your team can do which doesn’t require computers or internet. An impromptu team building lunch or a good old brain storming session could prove incredibly valuable or if your team isn’t up for that then the storeroom could probably use a clean.

If all else fails don’t panic as you can always just go for a walk, meditate, spend time with the kids or go to the gym to clear your mind.

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Business Landscape

4 Tips To Create A Great Conference / Workshop / Event In 2019

Being able to host a great workshop or event is an essential skill for anyone in creative and innovative businesses. Your event will have a major impact – that is guaranteed. However, whether it is a positive or negative impact depends on the how well the event was put together and executed.

Revel Africa

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Your business is fantastic. You work with amazing people, and your industry is dynamic and evolving. There are so many exciting ways available to you to share your good stories: social media, podcasts, videos, live streaming, emails. But the trend we’re seeing of more workshops and conferences is the most exciting, and effective. Why? Because people still do business with people, and face-to-face still has more impact than anything digital.

Being able to host a great workshop or event is an essential skill for anyone in creative and innovative businesses. Your event will have a major impact – that is guaranteed. However, whether it is a positive or negative impact depends on the how well the event was put together and executed.

Here are 4 top tips to create and host amazing events this year

1. Purpose

Identify the purpose of the event. Is it to train clients or future clients on the latest trends in your industry in a bid to position yourself as the subject matter expert? Is it to bring a large multi-campus business together into one space to unite them and refocus and energise them? Is it to bring creative minds together to solve a problem? Answer these questions and you will know if you need a small, vibrant workshop, a large, slick event, or a creative team-building conference.

Plus, having a really clear understanding of why you’re doing this event is the best way to deal with the stress of putting it all together. Anchor yourself to the core reason behind the event, and it will not only propel you forward through the process, but will also make a lot of the decisions easier to make as you go.

2. Prepare

If you are going to host an event, then embrace the reality of late nights, money stress, volatile emotions and extended periods when your nearest and dearest, your social life and your free time take a back seat. There’s no nice way of saying it – an event is a huge responsibility and one that will take up a lot of your time.

The best advice we can give you is to find an event planner straight off to help you put your best foot forward at your event and deliver on your vision for the event. That way, once they’ve done all the heavy lifting, all you have to do is arrive on the day of the event looking fresh, fabulous, and stress-free and allow yourself to revel in its success. Your event planner would have handled everything for you, from haggling with suppliers, to sourcing the best locations at great prices, and should even handle the headache of RSVPs. In the Western Cape and Gauteng we highly recommend Revel Africa for bespoke events and innovative ideas that fit your budget.

Whether you use an event planner or not, you will need to think these through.

  • Decide on a theme – A theme helps to unify your ideas, source expert speakers, and market to the right people. Pick something simple, catchy and on topic. You can even go so far as creating a mission statement for the event to keep your efforts focused, such as, “We care a whole lot about this topic / industry / situation and we couldn’t find a conference that matched what we want and need. Our goal is to bring something that is welcoming and inspiring, where the talks are fresh, and the snacks are even fresher. We’d love you to join us and celebrate the people (including you!) who make this industry great.”
  • Prepare a budget and make bookings – Knowing what your budget is will help you set the price for delegates if it is not an in-house event. Here are the most common items you need to budget for, and book:
    • Venue – Once you’ve found a venue within the price and date range that you had in mind, you can fix the date for the event.
    • Transportation – For out-of-town delegates.
    • Catering – Events can rise and fall on the quality of the food provided. Shop around for this one and request taste-tests.
    • Speaker – Start thinking about speakers very early on, as all the good ones get snapped up fairly far in advance, so if you want your top choices, secure them as soon as possible. For interactive staff sales training we recommend Mark Berger, and for your MC / Inspiration needs, we recommend Warrior Ric.
    • Activities – Think of icebreakers and activities to get people out of observation mode and into participation mode.
    • Marketing – If this event is for external delegates, invest in a good marketing agency for social media, printed marketing collateral, banners, brochures, website updates, and paid media.
    • Team members – Select, and brief the team that will help you with this event.
    • Invitations – Once you have a date, venue, and keynote speakers, you can send out your invitation. Managing RSVPs and payment effectively is critical. Quicket can be a useful payment portal for events.
  • Daily emails: Once the conference has started, send out a daily email outlining the itinerary for that day. Keynote speakers and times, social events, meal plans, highlighted sessions, even the daily weather report can all help the attendee feel more prepared and connected when they reach the event. You can use Mailchimp or any other of the great bulk mailer platforms available.
  • FAQ: An FAQ is great for questions that come up again and again. The answers can be published on an event FAQ page on your website and the link sent in the daily mails. Questions like:
    • Are sessions be recorded? When will they be available?
    • Is parking available?
    • What’s the Wi-Fi password?

3. Productivity

Be mindful of who is attending the session and whether or not the session’s content is suitable to them. A talk that is too basic, too advanced, too demographically narrow, or too far off-topic for the conference – no matter how famous the speaker is – will bring the session’s productivity to a grinding halt.

Another great thing to consider is self-directed co-ordination as a great way to meet new people or to connect with people you’ve known for a long time. Using a Twitter hashtag, a Slack team, a Telegram group, are a great communication channel for the event to ensure attendees easily find information about how to network with each other. If your event is more technical, you could also create a wiki during the event to enable sub-communities to self-organise on the day and share content.

When it comes to how productive the sessions are, as the event planner it might be tempting to participate in the day’s events. However, as a facilitator your role is to remain objective and observe. You can’t facilitate and participate at the same time. Keep scanning the room to sense the mood and energy; keep discussions on track by asking great questions; constantly keep the end goal in mind. Typically, a good facilitator or event planner is often invisible on the day of the event.

4. Participation

There are many creative ways to structure the day’s proceedings to facilitate maximum participation.

  1. Campfire sessions – These start like a traditional presentation, with a speaker at the front of the room presenting an idea to a group of people. However, after 15 or 20 minutes, the presenter becomes the facilitator and shifts the focus of discussion to the audience, inviting comments, insights and questions from those around the room. Campfire sessions allow attendees to drive their own learning and share experiences with others, which also assists with networking.
  2. Birds of a Feather (BOF) – BOF groups are small, informal gatherings of people with a common interest or area of expertise who join up to work together, typically over lunch or during the morning coffee break. You can suggest BOF groups for attendees to join or they can create their own. Sessions don’t have a pre-planned agenda and are aimed at encouraging discussion and networking.
  3. Lightning Talks – As the name suggests, lightning talks give speakers no more than 10 minutes to make their presentation. Because speakers don’t have time to waffle, the presentations are to the point, which keeps audiences focused and energised. A window of between 30 to 60 minutes is usually given to lightning talks, which can allow for up to 12 speakers to be heard.
  4. Silent Disco Talks – This is where many speakers present at once within the same room, while delegates – wearing wireless headphones with channels that they can switch between – choose who they want to listen to. Delegates enjoy bite-sized pieces of information and are always tuned in to something that interests them.
  5. World Café – This simple, effective, and flexible format is ideal for hosting large group discussions. Start the first round of discussion with groups of four to six people sitting around a table, and present each group with a question. After 15 minutes, each member of the group moves to a different table. Once all rounds have been completed, key points from each table are presented to the whole group for a final collective discussion.
  6. Storytelling – This is where speakers tell real-life stories that help illustrate or enhance themes in the conference. The story should contain a beginning, a middle and an end, with characters and plots, like adversity and triumph. Stories should be 15 minutes long, with 10 minutes provided for Q&A afterwards.

Here’s to hosting many great workshops and events this year.

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Business Landscape

What Is Business Insurance And Why Does Your Business Need It?

Your business asset insurance cost will go up if you add on more items, but this is common with all insurances. Not sure why you need it? Find out more information below.

Amy Galbraith

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You need to protect your business against all eventualities. This means that you need to have the ability to pay for any physical or legal damages that might occur, such as a client claiming that they were injured while on your property or an asset being stolen from your property. And business insurance in South Africa is a necessity if you want to apply for business finance, as the bank will need to see that your assets are insured.

You might be wondering now, as a business owner, “What is business asset insurance?” It’s insurance which insures your assets, such as vehicles, electronic equipment, and your business premises. You can also opt to have business car insurance if you have a company car that is used by your employees. Your business asset insurance cost will go up if you add on more items, but this is common with all insurances. Not sure why you need it? Find out more information below.

It protects your assets

Whether you are a small business just setting up or an established company, you likely have assets that are important to keep your business functioning. This could be a business vehicle that you use to transport goods to clients or computers that are vital to your employees.

If you do not insure these assets, you will need to pay for repairing and replacing that might need to happen out of your own funds. And this can become extremely expensive, depending on what has been damaged, lost or stolen. Another reason why you need business asset insurance is that there might be a natural disaster or “act of God” that occurs, such as a fire or flood, which could damage your equipment, meaning that it needs to be replaced.

It protects you from legal issues

Some of the problems that businesses face include legal issues, which can become costly and tiresome. These issues can be handled easily and efficiently if your business insurance to help pay for legal fees and settlement fees with the client or employee who is issuing the complaint.

In the case of being sued or taken to court, it is useful to have a business insurance offering available to help you. If you do not have this type of insurance, you will soon see that legal costs can become exorbitant. Legal issues can also reflect negatively on your company in the eyes of other clients or employees, but having business insurance can help to clear up any problems effectively and without any drama.

Your business will not shut down due to incidents

If your business vehicle is stolen or if the equipment is damaged, this could lead to your business closing for a period while you try to recoup your loss of money. This could lead to you losing even more money which could be highly detrimental to the success of your business.

Your insurance company will be able to compensate you the lost funds, granted that the issue is covered by the insurance cover you have in place. This will allow you to stay open despite the fact that you are experiencing difficulties due to equipment not working or other problems. You could even opt for emergency assistance if there is a natural disaster which will keep you, your employees and even your property safe from damage.

Your employees will be protected

Your employees are the backbone of your company. And, as such, you should have protection in place for them. You should have workers’ compensation coverage in place so that should your company lose money or be unable to pay your staff, their needs will still be covered.

And business insurance will protect them from any possible lawsuits that could be lodged against them by clients or customers. It can become highly expensive to pay for these out of your own pocket. Protecting your employees protects your business, so be sure to invest in insurance which offers workers’ compensation as well as disability cover to protect your employees.

Think smart for your future

Having business asset insurance and business insurance is important to both small businesses and large corporations. This is because your assets will be protected from theft and damage, which can be costly to replace and repair. You will also be able to weather any legal storm that might come your way, as well as being able to protect your employees and their welfare.

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