Austerity Speak: Goldman Sachs CEO Not The First

Lloyd Blankfein's stand against austerity in the short term for the U.S. economy has many backers

Not A Socialist: Lloyd Blankfein. Picture courtesy: Telegraph.co.uk

By Francis Adams

Goldman Sachs Inc Chief Executive Officer and Group Chairman, Lloyd Blankfein was not alone or the only one in making the assertion, on Wednesday, that austerity measures in the short term is bad for the U.S. economy.
   "You can't austere yourself into a higher GDP," said Blankfein, who is also the chairman of the largest US investment bank. Responding to a query during a talk at the Canadian Club of Toronto in Bay Street, Blankfein said he was in support of budget cutbacks and changes that will help spur growth in the long term but was against large-scale slashing of expenditure programs.
  His comments drew widespread, rather global coverage by the print, broadcast and web media, barring a few who chose to focus on his exit from the CEO's position he has held for the past six years. The austerity remark made by Blankfein is though not new.
  In April, Christina Romer, Professor of Economics at the University of California, Berkeley who also served as the chairperson of the Council of Economic Advisers in the Obama administration from January 2009 to September 2010, said in her speech "Fiscal Policy in Crisis: Lesson and Policy Implications" delivered at the International Monetary Fund Fiscal Forum that "fiscal changes have large effects on output and employment in the near term, and that unsustainable budget deficits over the long term eventually lead to ruin."
  She maintained that the strategies implemented by both Europe and the United States were flawed and would fail to successfully bail the U.S. out of the trio --- financial, unemployment and fiscal -- of crises.
  Backing the IMF's finding, Romer said that "countries that have moved immediately to fiscal austerity have experienced worse growth performance than countries that have not."

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   Daniel Gros, Director of the Centre for European Policy Studies, Brussels had raised the austerity issue way back in November last year. In an article "Can austerity be self-defeating?" Gros sought to address the growing concern in Europe with the debt to GDP ratio. "The perspective here is that ‘austerity’ might be self-defeating in the sense that the resulting GDP drop is so large that the debt/GDP ratio increases. This matters since the debt/GDP ratio is often taken by financial markets as an indicator of the sustainability. Thus a lower deficit might actually heighten tensions in financial markets," he wrote.
  Among the solutions Gros suggested for looking beyond austerity and thinking of viable alternatives was the key role strongly capitalized banks would play by creating additional capital buffers, a point echoed by Blankfein when he said "Banks should have more capital and more liquidity."
  Gros, in his article, though warned that despite growing calls for reconsidering fiscal austerity programs in the face of underemployment of labor and capital on potential output, the premise of poor growth in countries reeling from disastrous fiscal positions was not sufficient as evidence against fiscal austerity. "Where sovereign risk is high, fiscal tightening remains an important avenue to bring down deficits at a limited cost to economic activity, as risk premiums recede over time. In addition, fiscal austerity may well have important unobserved benefits, by preventing greater macroeconomic instability which tends to arise in the presence of high sovereign risk," Gros wrote.
  The International Handbook of Labour Unions: Responses to Neo-Liberalism while discussing the global recession, its effect of labor and neo-liberalism and American labor deduced that "the neo-liberal austerity packages being pursued by a wide range of governments through 2009-10 appear to be generating a sense of injustice among sufficiently large number of people to provide the raw material for continued collective action and protests."
  In her speech, Romer, who said that "not only does immediate austerity accomplish little in terms of near-term debt burdens, the longer-run effects may also be limited" advocated back-loaded austerity. In other words, she called for giving deficit reduction measures a pass during such crisis at the same time focusing on adopting policies that will gradually phase in actual spending cuts and tax increases.
  On Wednesday, Blankfein had to reiterate that he is not a socialist as he allayed fears of further recessionary setbacks saying "The punch line is this: The world is not going to come to an end - we are going to muddle through."
  However, there are several star-striped economists who believe that next year may turn out to be equally difficult. So, will we be forced to revisit E.P. Thompson’s concept of ‘moral economy’ on a global level? No. Blankfein's two-goals suggestion that the economic system should expand and spread global wealth, goals that both, the world's oldest and largest democracies, the United States and India, are following is the answer and it involves Transnational Capitalists (TNC) and their Transnational investments.

Readers are encouraged to feel free and post their comments on the article. The author can be reached at francisadams@francisadams14.com. Why 14? That's my day of birth.

PS: The audience stats displayed by Google on my blog:

Pageviews by browser:  Firefox is leading with a 45% share, followed by Chrome with 29%, Internet Explorer at 13% and the remaining shared by SimplePie, Safari and Opera.

Pageviews by Operating Systems: Windows leads with 72%, with Linux second at 16%; Macintosh and iPhone at 8 and 2% respectively.

Which one of these are you using?

 
  

HCL's Nayar Has Set a Benchmark For Peers

In his latest blog, the HCL Tech CEO exhorts his peers to listen to Gen Y and involve them in the decision-making process

Gen Y, according to Nayar,  has a refreshingly different point of view that adds a new shape to existing thinking 

By Francis Adams

For Generation Y, the sky is not so high.

People from this generation (those born in and after 1980) have a leg up over and mind ahead of their predecessors, the Baby Boomers (born between 1945 to 1964) and Generation X (born between 1965 to 1980) because of their familiarity, in many cases mastery, with technology, communications and the multi media.

Referred to by various names such as, Echo Boomers (because of the considerable increase in birth rates in the 80s and 90s), Millenials, Internet Generation or  the Net Generation, Nexters, Generation We and Global Generation, Gen Y has been entering the workforce fully empowered and discerning amidst chaos yet socially delirious, thus, allowing the Baby Boomers and Gen X to label them capricious.

Vineet Nayar.
Pic courtesy hcltech.com

Vineet Nayar, Vice Chairman and CEO of the $4.2 billion HCL Technologies Limited and a Baby Boomer, is among few corporate bosses worldwide who have been spotting, nurturing and helping unleash the true potential and talent that Gen Y has to offer.

"I work with young minds; zealous and restless young leaders who are passionate about changing the world," says Nayar in his latest blog "The goldmine of the  “beginner’s mind” – has your team tapped it?"

Visibly, the only Indian CEO and among a handful globally who is an active  blogger, Nayar is credited as the radical thinker --- he realized the needs and  value of Gen Y much ahead of his peers -- who initiated HCL Tech's 'Employees  First, Customers Second' (EFCS) strategy that has transformed the company into a global information technology services giant.

According to the company's website, it is among the only seven from more than 3,000 technology companies in the Bloomberg database that has a revenue of more than $2.5 billion and a market capitalization of more than $5 billion.

Nayar, who has also written the widely acclaimed book "Employees First, Customers Second: Turning Conventional Management Upside Down" says in his blog that most managers in the corporate world are guilty of not involving the young members in the team in the decision-making process or on critical projects.

He wishes CEOs paid more attention by shunning legacy systems and decoupling power and position and instead broaden their leadership by empowering employees to take up responsibility for change. Nayar proferred this view in another blog  "CEOs, Get Out of the Way!" that he wrote for the Harvard Business Review.

To Nayar, Gen Y's is the beginner's mind, one with endless opportunities and possibilities and which has a "refreshingly different point of view that adds a  new shape to existing thinking." He has quoted Shunryu Suzuki, the famous Zen teacher and author of Zen Mind, Beginner’s Mind who has said: "In the beginner’s  mind there are many possibilities, in the expert’s mind there are few."

To a large extent, Nayar's actions reflect the Zen Mind taught by Shunryu Suzuki. Zen Mind, according to the book, is one that is neither your ordinary nor your personal mind, but one which makes you "notice yourself, to go beyond  the words and wonder what your own mind and being are. This is the purpose of all Zen teaching -- to make you wonder and to answer that wondering with the deepest expression of your own nature."

Both, Nayar's blogs as well as Shunryu Suzuki's book are must-read for today's Gen Y and other corporate head honchos.

On his part, Nayar has set a benchmark for other CEOs, those with none or poor social media presence, on how not to shy away from it, rather embrace it to create your personal brand.  By doing so, CEOs are likely to put an end to murmurs that, according to personal branding expert Tanvi Bhatt, includes: "The moment you walk into a roomful of Dignitaries, Nobody recognizes You!

Alternately, CEOs will also benefit if they heed to Nayar's call that says: "Listen to these young people. They have the courage and conviction to think afresh and make a positive change."

Tuesday Morning's New Day, New Deal

The discount retailer names former Big Lots executive and 'Master Merchandiser' Brady Churches as new CEO

By Francis Adams

Tuesday Morning Corporation, listed TUES on the NASDAQ in its quest to find the ideal candidate to guide the company in its next stage, on Tuesday, announced the appointment of Brady Churches as new CEO. Churches has also been named on the company's Board. 

   The Dallas-based company's Chairman of the Board, Bruce Quinnell told RTT News that the Board was on the lookout for a 'Master Merchandiser' and Brady was the most suitable to take that position.

 "Brady's track record of merchandising excellence, combined with his high-energy, entrepreneurial mindset, will serve Tuesday Morning very well," Quinnell said.

   According to NASDAQ, Churches, who began his career in 1976 at Big Lots Inc., played a crucial role in  transforming the company from an automotive discount retailer into a market leader in the off-price retail industry during his 20-year tenure. He also served as Big Lots president from 1993 to 1995.

  Most recently, Churches, 54, was President of Columbus, Ohio-based Marketing Results, Ltd. He also served as president of Value City Department Stores' home store unit from 2002 through 2006.

Kathleen Mason

   Tuesday Morning had named Michael Marchetti, its executive vice president and chief operating officer, as interim CEO after removing Kathleen Mason as president and Chief Executive Officer on June 5. 

    Mason, who had headed the company for more than a decade, last month, filed a discrimination charge with the Equal Employment Opportunity Commission saying the company fired her after learning she had breast cancer. She is also seeking unspecified damages and her job back.

    According to Business Week, "Tuesday Morning said in a statement last month that Mason's termination was lawful. It also said that the accusation was without merit and that it intends to defend itself against the claims."

  The Wall Street Journal said that Mason "was removed from her job in early June after a 12-year run as Tuesday Morning's head that saw the company's stock fall nearly 60%. An activist investor, Becker Drapkin Management LP, had agitated for Ms. Mason to be replaced, and the day she was fired the company said its full-year sales and profit would be worse than expected."

   Tuesday Morning is a leading retailer of upscale decorative home accessories and housewares in the United States. The company opened its first store in 1974 and, today, operates 861 stores in 43 states.

   How does the company's business work? "We purchase first quality, brand name merchandise at closeout pricing and, in turn, sell it at prices significantly below those generally charged by department stores and specialty and catalog retailers. We do not sell seconds, irregulars, refurbished or factory rejects," the company says.

    Tuesday Morning says that such brand name merchandise is available to discount retailers at low prices owing to various factors, "including the inability of a manufacturer to sell merchandise through regular channels, the discontinuance of merchandise due to a style or color change, the cancellation of orders placed by other retailers and the termination of business by a manufacturer or wholesaler."

  The company also benefits, occasionally, when a manufacturer has excess raw material or production capacity. "Typically, closeout retailers have lower merchandise costs, capital expenditures and operating costs, which allows for the sale of merchandise at prices lower than other retailers," Tuesday Morning says.

Citi And Vikram Pandit Putting Their Mouth Where Future Business is

The third largest U.S. bank by assets is rightly upbeat about expanding business in the Asian and Latin American markets

By Francis Adams

Vikram Pandit

Citigroup Inc., CEO Vikram Pandit is putting his mouth where the bank's future business is - the emerging markets of Asia and Latin America, thus, laying to rest calls from his predecessor Sandy Weill that Top U.S. banks must split into smaller ones to help taxpayers save money.

  Citi, which is celebrating its 200th anniversary this year, on Tuesday, became the first global and Western bank to offer standalone credit cards in China, that is, without having to tie up with any local bank or financial institution.
  Last week, Citi Asia Pacific swept a whopping 26 awards involving corporate/institutional and consumer banks. Of the 15 trophies it won from 16 contenders in the corporate/institutional internet banks in Asian markets category, four -- Hong Kong, Malaysia, Singapore and Sri Lanka  -- made their debut victories.
 Of the 14 consumer markets in the Asia Pacific region, Citi won the Best Consumer Internet Bank in seven including Australia, Guam, Indonesia, India, Philippines, South Korea and Thailand.
 Citi is trying to wriggle out of the slump it has experienced from the Saturated U.S. and UK and other European markets as well as the slide in trading and investment banking.


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  Currently, 50 per cent of the bank's business comes from emerging markets. "When you look at our business, the biggest growth trend is in our ability and our requirement to serve those emerging-market multinationals in the way we used to serve and continue to serve some of the developed-market multinationals," Pandit told the Financial Times.
  The newspaper reported that from the time Pandit tookover, Citi had successfully shed $600bn in assets and 60 different companies under its banner. As a result, Pandit said, the current Citi is essentially the old Citicorp.
  "That's a tried and proven strategy. Why did it work? Because it was a strategy based upon operating the business and serving clients and not a strategy based on deal making. That's the fundamental difference," Pandit told FT.
  The back to basics approach is undoubtedly reflected throughout Citi and is paying it rich reward. Last week, Citi Cards CEO, Jud Linville, while referring to its customers wrote in a blog on the bank's web site: "We keep working to improve the basics. Over the next few months, you will begin receiving a redesigned monthly statement that is easier to read and understand. Based on your input, we simplified the format to fit on a regular letter-size piece of paper so your statement is easier to file. Your payment information is highlighted right upfront where you can find it quickly, along with a summary of any rewards or benefits you have earned."