The enemies of trust

Researchers have established that trust is critical to organizational effectiveness. Being trustworthy yourself, however, does not guarantee that you are capable of building trust in an organization. That takes old-fashioned managerial virtues like consistency, clear communication, and a willingness to tackle awkward questions. It also requires a good defense: You must protect trust from its enemies. Any act of bad management erodes trust, so the list of potential enemies is endless. Among the most common enemies of trust, though, are inconsistent messages from top management, inconsistent standards, a willingness to tolerate incompetence or bad behavior, dishonest feedback, a failure to trust others to do good work, a tendency to ignore painful or politically charged situations, consistent corporate underperformance, and rumors. Fending off these enemies must be at the top of every chief executive's agenda. But even with constant vigilance, an organization and its leaders will sometimes lose people's trust. During a crisis, managers should enlist the help of an objective third party--chances are you won't be thinking clearly--and be available physically and emotionally. If you "go dark" in the face of a crisis, employees will worry about the company's survival, about their own capacity to cope, and about your abilities as a leader. And if trust has broken down so badly that your only choice is to start over, you can do so by figuring out exactly how the breach of trust happened, ascertaining the depth and breadth of the loss, owning up to the loss instead of downplaying it, and identifying as precisely as possible the specific changes you must make to rebuild trust.     

The geography of trust

Leaders who rely forever on the same internal advisers, entrusting them with issues of ever greater sensitivity and consequence, run the risk of being sold short and possibly betrayed. Alternatively, lone-wolf leaders who trust no one may make enormous, yet preventable, mistakes when trying to sort through difficult decisions. A sophisticated understanding of trust can protect leaders from both fates. During the past decade, author and consultant Saj-nicole Joni studied leadership in more than 150 European and North American companies. Her research reveals three fundamental types of trustpersonal trust, expertise trust, and structural trust. Executives may persevere in relationships that are based on personal trust, no matter how exalted their leadership roles become. But such relationships are unlikely to remain static. They also probably won't provide the kinds of deep, often specialized knowledge leaders need. In circumstances where advisers' competence matters as much as their character, expertise trust--reliance on an adviser's ability in a specific subject--enters the picture. In organizations, leaders develop expertise trust by working closely with people who consistently demonstrate their mastery of particular subjects or processes. Structural trust refers to how roles and ambitions influence advisers' perspectives and candor. It shifts constantly as people rise through organizations. High-level structural trust can provide leaders with pure insight and information--but advisers in positions of the highest structural trust generally reside outside organizations. These advisers provide leaders with insights that their organizations cannot. High-performing leaders' most enduring--and most valuable--relationships are characterized by enormous levels of all three kinds of trust.     

When to trust your gut

Many top executives say they routinely make big decisions without relying on any logical analysis. Instead, they call upon their "intuition," "gut instinct," "hunches," or "inner voice"--but they can't describe the process much more than that. What exactly is gut instinct? In this article, author Alden Hayashi interviews top executives from companies such as America Online and Johnson and Johnson to find out how they make decisions. Hayashi also presents the research of leading scientists who suggest that our emotions and feelings might not only be important in our intuitive ability to make good decisions but may actually be essential. Specifically, one theory contends that our emotions help us filter various options quickly, even if we're not consciously aware of the screening. Other research suggests that professional judgment can often be reduced to patterns and rules; indeed, truly inspired decisions seem to require an ability to see similar patterns across disparate fields. A CEO who possesses that ability can craft a perfect strategy by detecting patterns that others either overlook or mistake for random noise. But various traits of human nature can easily cloud our intuitive decision making. One potential pitfall is our tendency to see patterns where none exist. Thus, continual self-checking and feedback are crucial, and some organizations have made these processes part of their corporate culture.     

The decision to outsource risk management services

We apply transaction cost economics to identify factors influencing companies’ decision to internally generate or outsource risk management services. A unique sample is used which combines publicly available data with private information supplied by 281 Australian listed companies. We find that expenditure on research and development, greater technological uncertainty, more competitive environments, more overseas sales and transaction frequency are associated with less outsourcing of risk management services. Uncertainty due to environmental diversity is associated with more outsourcing of risk management services. Companies that outsource risk management services also have lower staff turnover and provide more specialised training and longer contracts for risk management suppliers.     

银信合作叫停之后

就在信托公司等待股指期货放行之际,监管层叫停2万亿元银信合作业务的哨声,给市场增添了许多紧张气息。     

Don't trust your gut

Making high-stakes business decisions has always been hard. But in recent decades, it's become tougher than ever. The choices facing managers and the data requiring analysis have multiplied even as the time for analyzing them has shrunk. One simple decision-making tool, human intuition, seems to offer a reliable alternative to painstaking fact gathering and analysis. Encouraged by scientific research on intuition, top managers feel increasingly confident that, when faced with complicated choices, they can just trust their gut. The trust in intuition is understandable. But it's also dangerous. Intuition has its place in decision making--you should not ignore your instincts any more than you should ignore your conscience--but anyone who thinks that intuition is a substitute for reason is indulging in a romantic delusion. Detached from rigorous analysis, intuition is a fickle and undependable guide. And while some have argued that intuition becomes more valuable in highly complex and changeable environments, the opposite is actually true. The more options you have to evaluate, the more data you have to weigh, and the more unprecedented the challenges you face, the less you should rely on instinct and the more on reason and analysis. So how do you analyze more in less time? The answer may lie in technology. Powerful new decision-support tools can help executives quickly sort through vast numbers of alternatives and pick the best ones. When combined with the experience, insight, and analytical skills of a good management team, these tools offer companies a way to make consistently sound and rational choices even in the face of bewildering complexity--a capability that intuition will never match.     

The future of futures decision making

At the dawn of a new millennium, with the past one thousand years ready for reflection and the up-coming one thousand years primed for exciting new adventures, humankind seems to be trapped in the box of myopic, short-term decision making. Voices pleading to expand the horizons of our decision making to ensure sustainability of our species and countless other species on this earth are currently drowned out by a cacophony of voices trumpeting economic globalization, rapid technology development, and real-time financial markets. While futures decision making is not much in evidence today, the question addressed by this paper is whether futures decision making is even possible. Are there inherent constraints in our ability to make decisions that encompass time frames covering centuries if not millennia? An enormous amount of research has been conducted in the general area of decision making over the past several decades. Much has been learned about the psychology of human decision making and decision making within organizations. Countless methods have been developed to guide decision making. Recent work in areas such as imprecise probability and complex adaptive systems is beginning to provide boundaries as to what can be known about the future. This paper reviews much of this diverse literature and synthesizes important research findings across several disciplines to identify numerous significant barriers to futures decision making. The paper presents several recommendations on how to improve futures decision making in the future.     

The case of the downsizing decision

New CEO Charles Rampart's decision to make deep across-the-board cuts at Universal Products Company, Ltd. presents division manager Andrew Jordan with a thorny problem. Plagued by slow growth, a declining stock price, and an increasingly skeptical investment community, UPC needs to control costs and control them fast. But Jordan's division is the most profitable in the company, and the 11% cut proposed by Rampart could destroy already shaky morale and seriously threaten the division's ability to compete. "There comes a time in every manager's career when he has to fight a bad decision made by his boss," argues Sam Godwyn, Jordan's vice president for marketing and sales. "To cut across the board is to take a blunt axe to the company when a surgeon's scalpel is called for." He suggests it is better to line up support for an alternative plan that links cuts to a long-term strategy and that differentiates between successful and unsuccessful divisions. "It would be a terrible mistake for us to focus only on the narrow needs of the division when the future of the whole company is at stake," counters Mary Wyatt, Jordan's vice president for finance. Yes, the downsizing will hurt the division in the short term, but the real issue is getting behind the new CEO. Supporting the downsizing decision is a necessary investment in this future credibility and effectiveness--whatever the short-term costs. Four commentators debate Jordan's dilemma and how he should resolve it.     

The pricing of real estate investment trust initial public offerings

This paper examines the pricing of Initial Public Offerings (IPOs) of Real Estate Investment Trusts (REITs). Unlike standard corporations, evidence suggests that REIT IPOs are correctly priced in the initial market. Significant negative initial-day return for mortgage REITs is found to be a function of using the bid price to calculate returns for those securities, which trade initially over the counter (OTC). If the bid-ask average or the ask price is used in calculating returns, any apparent overpricing disappears. Additionally, we find that once transactions costs are considered, an investor is better off purchasing a REIT on the offering.     

Technological advances and the decision to invest

Technological advances impact a firm’s investment decision, as they affect the investment cost. They can also affect the profitability due to demand shocks. We study a firm’s optimal investment decision when technological advances occur as surprises and induce uncertain reductions in the investment cost and in earnings. Despite this complex setting we derive closed-form solutions for the investment option value and the investment threshold. When technological advances only impact the investment cost, we demonstrate significant contributions compared to existing research, which restricts the analysis by keeping the expected investment cost path constant. For example, we show that, albeit the investment threshold is constant, the option value is very sensitive in the expected impact of technological advances. Leaving the restrictive setting, we obtain more intuitive results, e.g. that more frequent technological advances increase the option value. When technological advances impact future earnings we find important long-term effects: the investment threshold increases, whereas the option value decreases. Finally, earnings volatility postpones investment, while uncertainty due to technological advances expedites investment.     

The decision to list abroad: The case of ADRs and foreign IPOs by Chinese companies

This paper examines the decision to list abroad by Chinese companies in the form of ADRs and foreign IPOs from 1993 to 2005. Our sample consists of 33 ADRs, 218 foreign IPOs, and a sample of 1418 domestic listings. We find evidence to support that issuers are motivated to cross-list due to the legal and accounting standards of the foreign markets, more stringent listing requirements and closer regulatory monitoring, significant demands for external capital due to rapid growth, an expanded shareholder base, and foreign expertise. The motives and firm factors differ by the type of issue (ADR versus foreign IPO) and by the market in which the foreign exchange is located (Hong Kong versus Singapore). Subsequent to the listing events, issuers experience a significant drop in profitability, tangible assets ratio, and asset turnover. There is no significant change in capital expenditure. Stock returns after the listing events are generally negative for ADR and foreign IPO stocks. More significantly, these stocks under-perform the market in the post-event window ranging from 3 days to 3 years.     

Building data-driven trust with physicians

Steps healthcare finance executives should take to develop a data-driven, transparent approach to working with physicians should include the following: Show the assumptions behind the data. Explain the rationale or methodology behind the assumptions and be sure there are no flaws in how conclusions are drawn from the data sets. Explain why the metrics used are representative of the physician's practice. Account for all data gaps in metrics or benchmarks, but explain how the data represent the best option for going forward.     

信托登记制度的探讨

文章探讨了我国信托登记制度。     

Individual approaches to futures thinking and decision making

This paper presents results of a second international web-based survey designed to gather data about how individuals approach thinking about their futures and making decisions regarding their futures. Five hundred and five respondents from 38 countries participated in the survey. Similar to the first survey, the sample has gender, age and religious diversity but is not representative with respect to education, income and race/ethnicity. The results suggest that the external environment provides a great deal of stimuli for people to think about the future (e.g., special occasions like New Years day, birthdays, and funerals). Individuals tend to think about the future more in the morning, and just before bed. Overall, most respondents experience happiness, confidence, and lightness when thinking about the future. Respondents employ many different approaches to thinking about the future, such as relying on personal past experiences, imagining future situations, and relying on their personal intuitions. Most respondents do not pattern their futures decision making on decisions made by others or on tradition. Most respondents believe that their thinking about the future is very worthwhile; most develop plans and take decisive action as a result of their efforts. About three quarters of the respondents report that they are able to predict their personal futures at least one-half of the time. Most respondents face few barriers to thinking about the future, although many reported it would be nice to have more energy, be able to concentrate better, and be able to better organize their thoughts. Females report that thinking about the future is a more emotional experience than it is for males. Males, on the other hand, have more confidence in their futures-oriented decision making abilities. Age plays a big part in how individuals relate to and think about the future. Younger respondents think more about the future more times during the day and find thinking about the future more fearful and anxious. They also pattern their decisions more on those made by others and older individuals. Older respondents tend to rely a great deal upon their lifetime of experiences and worry less about the future. Middle-aged respondents report worrying more about financial and career issues and report that thinking about the future can be emotionally draining.     

Determinants of the corporate decision to capitalize interest

Until 1974, firms could choose, within GAAP, to capitalize or expense interest costs associated with capital expenditures. The predominant practice had been to treat interest as a period expense. However, in 1974, the Securities and Exchange Commission imposed a moratorium on further adoption of interest capitalization by non-regulated firms. This study empirically examines economic factors potentially influencing firms' decisions to expense or capitalize interest prior to the SEC moratorium. We hypothesize that the choice may be affected by (1) the existence of management compensation agreements tied to reported earnings, (2) debt covenant constraints, and (3) the political costs (for some firms) of reporting higher earnings.When compared to the control group, our findings are that (1) the frequency of explicit management compensation packages was not greater for the interest capitalization group, (2) firms with financial ratios closer to likely debt agreement constraints (on dividends, interest coverage, and leverage) tended to elect interest capitalization, and (3) other than the largest firms in the ‘politically sensitive’ petroleum refining industry, the larger firms were more likely to capitalize interest.     

The split capital investment trust saga: Lessons for financial services marketing

The split capital investment trust boom at the end of the 1990s demonstrated that product innovation and financial engineering can lead to the creation of dangerous products whose risks are not understood by investors. It also emphasised the need for careful marketing of investment products. This involves identifying the needs of investors, creating products to meet those needs, promoting and selling those products, and managing client relationships after the sale. Particular issues that should be addressed include the need to educate clients and adequate stress testing of new products.     

Societal trust and corporate tax avoidance

Using an international sample of firms from 25 countries and a country-level index for societal trust, we document that societal trust is negatively associated with tax avoidance, even after controlling for other institutional determinants, such as home country legal institutions and tax system characteristics. We explore the effects of two country-level institutional characteristics—strength of legal institutions and capital market pressure—on the relation between societal trust and tax avoidance. We find that the relation between trust and tax avoidance is less pronounced when the legal institutions in a country are stronger and is more pronounced when the capital market pressure is stronger. Finally, we examine the relation between societal trust and tax evasion, an extreme and illegal form of tax avoidance. We show that societal trust is negatively related to tax evasion and the negative relation is less pronounced when legal institutions are stronger.