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2021 In Focus

A look back at some of our best moments from 2021. As we explored topics ranging from Remote working, HGV Driver Shortages, Climate Change, Cryptocurrency, the COVID pandemic, Rebranding, though to Development through Play and much much more. So grab a snack and relive 2021 In Focus!

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All views expressed in this editorial are solely that of the author, and are not expressed on behalf of The Analyst, its affiliates, or staff.

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CEO pay hike and the pandemic

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Chief executives of public corporations are compensated by way of salary, bonus, stock, stock options, and even through use of company jets. It’s well-known that CEO pay has always been high but it’s also been increasing at a disproportionately fast rate for many decades; in the 1990s this trend increased a lot. A significant portion of CEO pay however, is not actual salary. It’s more related to stock or stock options and it’s this non-salary component which has increased over time. 

According to a survey by Stanford University 74% of Americans did not agree with the fact that CEOs are paid so much more compared to the average worker. Only 16% thought CEOs were paid what they should be paid. CEO salaries have been skyrocketing over the years and this trend hasn’t stopped nor reversed during the pandemic. At a time when firms are laying off employees, this news is both shocking and disturbing. 

Companies want to hire above average CEOs on the assumption that their firms will reflect above average performances. A study by the Institute of Policy Studies in 2019, shows that 80% of S&P 500 firms paid their CEO a huge 100 times more than their average employee. And the average employee would have to work for a back-breaking 100 years in order to make what a typical CEO earns in just one year. 

Another study by the Economic Policy Institute found that in 2020 throughout the pandemic, CEOs of the top 350 firms were paid an incredible 351 times more compared to the average worker, which is naturally disconcerting for the common stakeholder. Additionally, CEO compensation has risen by a huge 19% in 2020 whilst the pay of a rank and file worker increased by only 4% and there were also massive layoffs and decline in sales. It’s been calculated that the median CEO-to-employee pay ratio during 2020 was 227:1 – significantly up on the previous year of 191:1.

Although apparently the salaries of some CEOs were reduced after the pandemic, which received admiration from some sections of the media, in reality these cuts were practically reversed by big bonuses. For example, thousands of workers were furloughed by Hilton Worldwide Holdings Inc. and 2,100 corporate positions were removed. In response, apparently the CEO and some other top executives cut their base salaries. But according to the company filings with the SEC, their total compensation was doubled. So the base salary cuts were mostly symbolic. 

The Tax Excessive CEO Pay Act was proposed in 2021, to penalise companies which overpay their CEO or top executives. Any company which pays their top executives more than 50 times that of a median worker, will have to pay 0.5 percentage points or more on their tax rates depending on the discrepancy of pay. As an example, Walmart would have had to pay up to $854.9 million more in taxes in 2020 if this law had been in effect. 

The expectations that higher pay will attract better talent results in the exorbitant pay packages for top executives although these expectations are not always borne out. CEO salaries do not necessarily link directly to their performance. They are paid more if the company’s stock prices rise but this does not always mean those companies are performing better. Stock prices might be rising due to other economic factors or just due to government support measures. 

Companies may feel pressured into constantly having to increase their CEO pay in order to compete with the market. Rewarding bosses who’ve steered their organisation through the tough times with inflation-busting salaries is a strategy to stop them leaving. But the trend of executive pay benchmarking is not healthy. There is a counter argument that there is no scarcity of talent to justify overpayments at the expense of long term company goals. 

429 large-cap US companies were sampled between 2006 and 2015 in a report by MSCI, which found that companies which paid lower than median total pay outperformed other corporations by as much as 39%. It was a study about companies where CEO compensation was linked with performance. On the contrary shareholders’ returns were found to be higher where CEOs’ pay was in lower percentages. 

When the subject of CEO salaries gets a lot of attention in the media and is constantly scrutinised it can be counterproductive. Instead of companies keeping a check on that component of CEO pay which is counterproductive because it is not performance based (base salary), the pay for performance approach may be avoided altogether. It is feared that in such situations executives are not rewarded for performance nor are they penalized for poor performance (no performance based bonuses). 

Although it’s generally believed that a big portion of executive pay includes company stock, it’s mostly mentioned in terms of its value or what its proportion is out of total pay. However, more meaningful analysis is needed to see what percentage of company stock is owned by the CEO. The higher the percentage of shares owned by the CEO creates a direct link between shareholders’ stake and that of the CEO. It’s also believed that stocks instead of stock options are a better way to link pay to performance. Similarly, just because an executive is paid via bonus does not automatically mean it is linked to performance. This payment can be in fact misleading unless it is actually linked with performance. 

There is a perspective that it doesn’t matter how much CEOs are paid, what really matters is how they’re paid and what they were paid in the past years. Transparency in executive pay will help in restoring confidence. Compensation committees should make sure that CEO pay is according to the organisation’s philosophy, long term goals, and risk appetite. The widening gap between CEO compensation and workers’ salary is not a healthy sign for the economy and it means the middle class is disappearing. The rising focus on income inequality has resulted in increased attention to CEO pay. In many instances shareholders get to vote on the board’s decision of pay and agree to it. However, it’s no surprise to see shareholders from Starbucks and AT&T starting to vote against the executive compensation as executive pay packages have begun to balloon. 

All views expressed in this editorial are solely that of the author, and are not expressed on behalf of The Analyst, its affiliates, or staff.

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Giving to Charity in a Digital World – In Focus

Giving to charity is something that some do on a regular basis, others give on occasion and yet there are a few that are just reluctant for whichever reason. In this episode of ‘In Focus’ we dig into the ideas around giving to charity and how digitalisation in this industry is transforming the ways in which we donate, removing any barriers in donating. Join us as we speak to Sean Donnelly from RoundUps.org

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The fan owned model

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Fan ownership within English football is not practiced at the top tier but the story is different when you start going down the pyramid. 

A simple explanation of this intriguing system of ownership is that it brings the fans closer to the day-to-day running of the club with an elected executive, president or fans trust. Alternatively, the overwhelming majority of clubs in the top five league in Europe are privately owned and, therefore, commercialisation and personal wealth is prioritised. The fan essentially becomes a “customer”. 

A conversation that sparked the ownership model into question was the monstrous idea of creating a Super League. This blasphemous and egregious idea capitulated within days from wide led condemnation by fans and politicians. This conversation has come into light once again within the English Football League with the recent takeover of Newcastle Football Club by the Saudi led Consortium.

The simple explanation might not cover all the bases of the concept. There are different types of fan ownership. 

The Bundesliga adopts the ‘50+1’ rule. This ensures that the fans have majority ownership alongside a wealthy business owner. This allows fans to directly have a say without the compromise of a wealthy owner. Further to that, there are clubs which work alongside a privately owned businessperson. A fan owned trust works directly with heavy influence on the decision. Finally, some clubs are wholly and exclusively run by fans. They have a democratic structure in place – one member, one vote. They buy their membership through a season ticket.

Some big clubs around the world, including Bayern Munich, Barcelona and Real Madrid, have adopted various system of fan ownership.

However, closer to home, there are several clubs which boast fan owned membership models. Most famously, AFC Wimbledon. They opposed the movement of their club facilities to Milton Keynes. But their rise from non-league Football to professional has been well documented. They were astonishingly promoted six times in 13 seasons. Now, they are in the same league as their arch-rival and nemesis MK Dons, the very team formed upon the original club’s move. 

Another interesting club which broke the news was FC United of Manchester. A section of the fans opposed the ownership of the Glazer family of Manchester United in 2005. They created a club in protest and are now situated in the 7th tier of English Football league system. 

The idea of fan ownership to many sounds like an exciting project. But it does come with its challenges – the biggest being finance. Finance is key within football, without it, it is nearly impossible to run a club. Smaller and tighter budgets inevitably mean not attracting the best talent around the country and having to settle for mediocre. The dedication, religious-like-devotion and passion is still present.

A review was made by parliament looking at the current model and possible improvements to protect football clubs from joining “off-shore” leagues. At the publication of the ‘Fan-led review of Football governance – final report and recommendation’, some key recommendations were: a new Independent Regulator of English Football, new directors and owners test, and supporters to be consulted properly. An eye should be kept on whether this is truly implemented given Prime Minister Boris Johnson, at the time of the Super League, promising a ‘legislative bomb’ to stop the Super League. With the final report, it has the artillery and ammunition to waive off any scent of rejoicing the idea of a Super League for English clubs.

The problem to understand now is which, if any, action is taken by the government through legislative action. Will it go strong and disruptive or more like a gentle slap on the wrist? English football is a huge asset to the country, and it requires tough action. Fan ownership may be a difficult approach to implement and force clubs to action upon. But the importance of fans and the role they play within the day-to-day, cannot be overlooked. Therefore, fans need to have a greater say than just be viewed as “customers”. 

Football promotes a culture of togetherness, brotherhood and emotion. The ethos of football would have been snatched away by the Super League. The beauty of Football is seeing everyone play it, regardless of your background, colour, gender, creed, religion or status. This unification can be strengthened within clubs if fans are given a larger role than just being consulted.

All views expressed in this editorial are solely that of the author, and are not expressed on behalf of The Analyst, its affiliates, or staff.

Umar is currently studying the Legal Practice Course. He has a LLB Law and LLM International Human Rights Law degree. When he is not studying or volunteering, he likes to Cycle and play Football

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Vishal Garg, CEO of Better.com, apologizes for firing employees over Zoom

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Vishal Garg, the CEO of Better.com mass fired about 900 employees over Zoom on 1st December 2021. The employees that were laid off were unaware that this would happen when logging into the Zoom meeting. 

A video shows Garg firing an employee on call by starting off with “if you’re on this call, you are part of the unlucky group that is being laid off,” and following it with “your employment here is terminated effective immediately.” After this video went viral and there was public outrage, Garg issued a public apology. The apology statement stated “I own the decision to do the layoffs, but in communicating it I blundered the execution. In doing so, I embarrassed you” and “I realize that the way I communicated this news made a difficult situation worse. I am deeply sorry and am committed to learning from this situation and doing more to be the leader that you expect me to be.” This Zoom call lasted about three minutes and laid off 9% of the employees just before Christmas. One fired employee said that “I was sitting here thinking, ‘what the hell?’” while keeping their identity hidden, they also added “I thought I was safe. I had perfect reviews and thought I was an integral part of the team. It’s a bummer because I know I worked really hard to help build up that company, and it looks like I just wasted my time.”

Interestingly, a day before the layoff, the company received $750 million cash from its bankers. This company was founded by Garg in 2014 with the goal of “re-engineering the mortgage process,” according to their website. Unfortunately, days after he laid off so many employees, he was seen on an anonymous professional network, commenting about his employees being unproductive. Allegedly he posted on Blind “you guys know that at least 250 of the people terminated were working an average of two hours a day while clocking in eight hours+ a day in the payroll system? They were stealing from you and stealing from our customers who pay the bills that pay our bills. Get educated.” This isn’t the first controversy that Garg was in as in 2020 an email was obtained by Forbes which said “you are TOO DAMN SLOW. You are a bunch of DUMB DOLPHINS and…DUMB DOLPHINS get caught in nets and eaten by sharks. SO STOP IT. STOP IT. STOP IT RIGHT NOW. YOU ARE EMBARRASSING ME.”

Needless to say, his apology does not seem that sincere considering all the past controversies that he has been in. Hopefully, the laid-off workers will get an appropriate apology and be able to find suitable work where they feel appreciated for their time and efforts. 

All views expressed in this editorial are solely that of the author, and are not expressed on behalf of The Analyst, its affiliates, or staff.

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The biggest challenges facing managers in the current economic climate

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The current economic climate is undoubtedly a very challenging one – not only for new managers, but for experienced and veteran managers in almost every industry. As a result of ‘the Great Lockdown,’ a Covid-19 recession began in February 2020 and has been touted as the worst global financial crises since the Great Depression. This was characterised by the contraction of the global economy by 3.5% and resulted in high inflations, high unemployment rates, depreciation of major as well as minor currencies, low GDPs and per capita incomes all over the world. The downturn impact of this, evidently brought trying moments for virtually all industries around the world particularly with the onset of the stock market crash.  

The exigencies of the time implied that the strongest of managerial skills was required for organizations to maintain economic activity and navigate the doldrums of the pandemic. The finest of business acumen is a necessity although daunting for managers. Despite the challenges in almost every industry of all economies, there are several opportunities that managers can capitalise on to overcome these challenges and significantly improve their managerial competencies.

Demonstrating leadership through effective use of power and influence, is necessary during the recession. The scale of the pandemic and unpredictability remains challenging as managers deal with disrupted business models and managing the psychological impact of the pandemic on employees. The first fundamental principle for a manager to be successful is for him or her to assume that leadership position rather than just see himself or herself as a manager. As author John Maxwell states, the main difference between the two is that leadership is about influencing people to follow, while management focuses on maintaining systems and processes. Managers must therefore rely on their influence to re-organise the work processes and policies for a positive work environment. One of such qualities is ‘compassion leadership’, which encourages staff to regard a manager as reliable and keeps them focused on productivity rather than speculation and anxiety which are detrimental to productivity under challenging circumstances. 

Managers have also been saddled with the burden of making tough decision such as protecting employee health and safety, re-structuring policies or work processes, re-delegating tasks and even for worst hit industries, laying off employees or reducing salaries to keep businesses afloat and maintain productivity. The absence from work by highly skilled staff due to infections and identifying temporary replacements were inevitable. This was more aggravated in situations where managers were also prone to infections which meant that their roles may have also required interim support. Instead of making data-driven decisions, managers had to make unplanned – but reasonable – decisions. This required strategy and innovation; most of which challenged the status quo to sustain businesses. Apple for instance, was among the first large retailers to close most of its stores globally in response to the pandemic. Such a decision was critical to controlling the spread of the virus although not part of the company’s initial strategies for the business. Most organisations were compelled to adopt a more digital approach to their business processes, thus such decisions saw them cut their future digitalisation plans from taking years to weeks. 

As the current economic environment is not favourable for businesses, another challenge for new mangers is addressing the skills gap by upskilling themselves and subordinates to develop skills and competencies necessary to keep them effective, re-organise their business models and improve on performance. Even before the current crisis, changing technologies and new ways of working were disrupting jobs and the skills employees needed to do them. As most businesses switched to online, this implied an investment in people, technologies and systems to enable employees develop the required skill for managing e-commerce businesses. According to a report by McKinsey & Co., the focus of CFOs has shifted toward crisis management and away from longer-term responsibilities such as strategic leadership, organizational change, and finance capabilities. High display of competence was therefore required in performance, to keep up with the keen competition in the market. As Linda A Hill stated in her book: Becoming a Manager: How New Managers Master the Challenges of Leadership “new managers find it challenging to develop the myriad of technical, human and conceptual competences necessary to be effective managers. But the vast majority are more surprised and unnerved by the unexpected necessity of developing new attitudes, mind-set, and values consistent with their new positions.”

The urgency of lockdowns compelled managers to implement short-term ideas under challenging circumstances. Despite all these challenges and more in an economic trying moment like we have, there are many opportunities out there for new managers in all industries. The paradigm shift from the traditional ways of doing things, to a new, more innovative, and highly advanced way of working presents new managers with great opportunities in their industries of operation. The global economy is poised for a post-recession recovery,  and it is appropriate to re-structure business models for the medium to long term. For managers, the necessity for reinforcement of concrete business continuity plans cannot be over-emphasised. The practical experience learned from the impact of the pandemic, should be a learning curve toward implementing feasible strategies to mitigate the impact of uncontrollable threats such as a pandemic to a businesses’ operations. 

Embracing e-commerce and e-purchasing are also great opportunities available to new managers in most industries. Through trade liberalization and globalization, managers can take their businesses outside of the geographical boundaries. E-commerce and the recently added M-commerce are important opportunities available to managers to facilitate trades of such nature. Instead of the traditional hustle of carrying products around the world to advertise, new managers can now reach bigger target groups while stationed in one geographical area. 

The economic climate might not be the very best now.  But what new managers must realise is that the confrontation of challenges in any industry is inevitable. However, these challenges if addressed comprehensively, can become opportunities to derive competitive edge over other managers and help their businesses to thrive in industry. 

All views expressed in this editorial are solely that of the author, and are not expressed on behalf of The Analyst, its affiliates, or staff.

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Twitter reports a 37% increase in revenue

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Despite Apple’s new policies enforcing privacy-related changes to iOS 14, Twitter has reported a 37% increase in revenue. The social media company reported their solid third-quarter earnings on Tuesday where the revenue, as well as user growth, matched the analyst’s expectations.

According to Twitter, their revenue was $1.28 billion which is 37% more than the previous year. The user growth grew from five million to 211 million in the same time period as well. Moreover, most of their growth was because of advertisement sales which rose by 41% from the previous year. Twitter CEO, Jack Dorsey stated that “I am proud of our third-quarter results. We’re improving personalization; facilitating conversation, delivering relevant news, and finding new ways to help people get paid on Twitter.” Twitter CFO, Ned Segal, released a statement in which he said “our focus is paying off, and we are pleased with our performance in the third quarter, with revenue up 37% year over-year, reflecting strength across all major products and geographies,” adding “we continued to drive increased value for our advertiser’s thanks to revenue product innovation, including progress on our brand and direct response offerings, strong sales execution, and a broad increase in advertiser demand. These factors contributed to 41% year-over-year growth in ad revenue in Q3.”

This is a shock to Twitter’s social-media rivals who had a negative impact due to Apple’s security changes. Facebook Inc. and Snap Inc. reported a slow growth rate due to the rules making it harder for advertisers to target their advertisements. 

According to CNBC, the growth according to the Twitter report and Wall Street’s estimates are:

∙       Earnings: 18 cents per share, adjusted vs. 15 cents as expected by analysts polled by Refinitiv.

∙       Revenue: $1.284 billion vs. $1.285 billion as expected by analysts polled by Refinitiv.

∙       Monetizable daily active users (mDAUs): 211 million vs. 211.9 million as expected by analysts polled by StreetAccount.

However, due to legal settlements, the net loss of Twitter this year was $537 million. They had to pay $809.5 million to settle a lawsuit for misleading investors about how much their user base was increasing as well as the amount of user interaction of their platform. It is interesting to note how Twitter found a way through the obstacles that they faced and managed to not be significantly impacted by Apple’s policies.

All views expressed in this editorial are solely that of the author, and are not expressed on behalf of The Analyst, its affiliates, or staff.

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