Monday, July 30, 2012

Too costly to kill?

The death penalty, besides being a question of morality, is also becoming a question of cost. But the cost of crime must also be considered

James Ellis, Chief Criminal Judge, Oregon put forward the point quite succinctly, “Whether you’re for it or against it (capital punishment), I think the fact is that Oregon simply can’t afford it.” The rising cost of capital punishment is becoming a ground reality across the world; thus forcing nations to reconsider it.

According to the California Commission, the entire infrastructure behind an execution system costs $137 million per year, but a system without the death penalty costs only $11.5 million in California (as per 2008 data). A 2003 legislative audit in Kansas noted that the estimated cost of an execution case ($1.26 million) was 70% more than the cost of an analogous non-execution case ($740,000). As per the Urban Institute (2008), the cost of execution cases amounts to almost 3 times more as compared to non-execution cases in Maryland. Similar comprehensive studies are not readily available in other countries, but the fact that the death penalty is considerably more expensive is amply clear. Most costs relating to capital punishment occur prior to and during trial; not in post-conviction proceedings as the trial period becomes too lengthy over the time for execution. As per the Florida Department of Corrections, the average length of stay on death row prior to execution is 12.68 years.

However, this doesn’t nullify the relevance of death sentences, as it’s also important to calculate the cost of crime to a nation. According to Georgetown University Professor of Public Policy Jens Ludwig, the cost of crime to the US economy is around $2 trillion per year.




Posted by at
Labels: , , , , , , , , , , ,

Saturday, July 28, 2012

Let There be Synergies

India’s it Story so far was that of a few big players and a number of smaller ones. Now it’s time that some M&As Balance this Anomaly out

It has long been said that the Indian IT/ITeS and BPO sector is quite prone to M&A activity. For the IT/ITeS sector, the reason is that it has traditionally been akin to a comet with a small head and a long tail. Apart from the top few companies that steadily moved up the value chain and also build differentiated vertical expertise particularly in BFSI, a large part of the sector has traditionally thrived on pricing. That advantage has steadily eroded with other software destinations like Vietnam, China, et al coming into the picture; and this nightmare is particularly real for the BPO sector. In fact, they are also competing with home countries. This year, UK-based firms Aviva, BT, Santander and New Call Telecom decided to move their centres back to the home country citing rising joblessness there, the need for an onsite model and also the rising costs in India. Moreover, with the issue on visas wherein US lawmakers have passed norms restricting H1B visas to Indian companies and also hiked visa fees by around $2000, the cost of doing business with the main market – the US is steadily going up. In the subsequent negotiations over handling this row, US is looking for more Indian companies to hire overseas, and this is another trend that could significantly alter the cost model. There are further problems for them back home, as the STPI tax benefit was not renewed this year. For smaller IT players, margins are typically at around 15% and they may find it hard to survive.

Finally, the uncertainty in the global environment persists, and is particularly riskier for IT companies that are heavily dependent on exports. Some impact has already been seen on larger firms as the Q1 results indicate. Infosys Technologies saw net revenues of Rs.74.85 billion in the first quarter, a growth of 3.2% qoq while EBITDA declined by 6.4% qoq to touch Rs.21.76 billion. The guidance for the second quarter USD revenue growth has analysts somewhat concerned as it is just 3.5-5%; considering that the quarter is normally the strongest for the company. Wipro reported a drop in Q1 net profit by 2.9% qoq to record Rs.13.35 billion and revenues jumped by 3% qoq to Rs.85.64 billion. While Infosys has talked about the risk of reduced client spending, TCS (even though its results were better) and Wipro have admitted that they are facing an uncertain environment apart from currency fluctuations. Smaller players could be under serious distress in the coming months as a global slowdown begins to take shape.


Posted by at
Labels: , , , , , , , , , , , , , , , ,

Friday, July 27, 2012

Prof. Jim Heskett, Baker Foundation Professor, Emeritus, at Harvard Business School

The Word Profit has Provoked a Wide Range of Issues and Emotions among Respondents & Businesses around The World. It also Launched Debates, and many readers Argued for Measures of Success other than Profit, writes Prof. Jim Heskett, Baker Foundation Professor, Emeritus, at Harvard Business School.

Charles Green (founder and CEO of Trusted Advisor Associates) continues the discussion by suggesting, “The really interesting question raised is: if profitability is higher when pursued as a by-product than when it is pursued directly, why then do managers (irrationally) choose to pursue profit directly rather than indirectly? I think the answer is to be found more in psychology than in economics.” Does that account for the increasing interest in the field of behavioural economics? What do you think? H. L. Hencken once said, “For every problem there is a solution that is simple, direct... and wrong.” This brings to mind experiences with leaders of the most profitable organisations that I have observed. Almost to a person, they treat profit as a by-product of other things to which they devote most of their attention, things such as a focused strategy that delivers results to carefully-selected customers while pursuing policies and practices that leverage results over costs, hiring people with the right attitude (one that fits with the organisation’s culture), and proper training and organisation (often in teams). Financial targets are given no more or less emphasis than targets associated with employee and customer engagement, often by means of some kind of balanced scorecard. Rewards and recognition – whether based on the performance of the entire company, teams, or individuals – reflect this philosophy. The idea is to create what my colleague, Michael Beer, calls a “high commitment, high performance” (HCHP) organisation.

This idea has been addressed at length in a new book, Obliquity, by British economist John Kay. You might guess that Kay thinks profit as a “direct goal” is overrated, otherwise he wouldn’t have much substance for a book on the subject. Kay argues that business problems cannot be solved by drawing a straight line between cause and long-term effect because they are so complex, a manager’s information so incomplete, the competitive environment so complicated, analytic techniques so inadequate, and the number of things over which a manager has control so limited, that it is impossible to make the connection with any assurance. As Kay puts it, “The mistake is to make inferences about the relationships between outcomes and processes when we cannot observe and do not understand the processes themselves.” The argument is that those things that contribute to long-term shareholder value will be revealed and achieved by realising intermediate goals or through some kind of overarching mission and vision that helps an organisation achieve long-term shareholder value as well. Of course, it assumes that we know what those things (missions, visions, intermediate goals) are and that we have some understanding of how they contribute ultimately to shareholder value.

There is some empirical evidence to support Kay’s thesis. For example, Fortune’s 100 Best Places to Work regularly produce more profit than a matched set of competitors. Kay’s response to this would probably be, “What does that prove?”
If it can be demonstrated that this approach yields more profit, why doesn’t the leadership of more organisations pursue profit through “indirect” means? Or is it, as Kay might ask, as simple as this? Can this philosophy be carried too far? Is it compatible with the need in a public company to “make the numbers” every quarter? Is it dangerous or misleading to give too much emphasis to the idea that profits are a by-product of many other policies and practices? Is it wise to communicate this concept to all levels of an organisation? If so, how is this best done without confusing people?

Is profit as a “direct goal” overrated? And if it is, why then is it so frequently found among goals?
Coordinated by: Steven Philip Warner


Posted by at
Labels: , , , , , , , , , , , ,

Thursday, July 26, 2012

Kashmir on The Backburner

Now that Even Pakistan has Woken up to The Evils of Terrorism (or has it?), Is it possible for The Two Countries to Work Together?

When Pakistan’s Gibraltar Operation against India failed in 1965, the then Foreign Minister of Pakistan, Zulfiqar Ali Bhutto, vowed in frustration that “Pakistan would wage a war of a 1,000 years, a war of defence.” Stephen P Cohen, senior fellow at Brooking Institute, opined recently that “the Indo-Pakistan conflict, which includes Kashmir besides many other problems, will last for 100 years or even more.”

While putting a number to the years is really ignoring the gravity of the situation, this acrimony really doesn’t appear to be vanishing very soon. And interestingly, this is despite Kashmir going on the back burner in recent times. Discussion on the same between the two nations came to a standstill post the 26/11 attacks. Since then, the prime agenda for high level diplomatic interactions has been terrorism. In three diplomatic meetings between the foreign secretaries of both nations – in July 2009 on the sidelines of NAM meeting, then in September on the eve of the annual UN General Assembly session, and in February 2011 during the SAARC conference – the main agenda was terrorism, a speedy probe on 26/11, Rana, Headley, et al. The agenda remained the same when the Prime Ministers of both countries met in Pittsburg for the G20 summit. America’s successful ‘hunt Osama’ expedition in May followed by a series of terror strikes on Pakistani soil further enhanced the focus on terrorism.

So while Kashmir may remain important over the long term, given the fact that confidence building measures build anything but confidence, this is a good time for India to perhaps earn sincere brownie points by engaging Pakistan economically.


Posted by at
Labels: , , , , , , , , , , , , , , ,

Tuesday, July 24, 2012

With a Defence like This...

Debris Dumped into The Sea by Military Operations causes havoc for Marine as well as Human life. Unfortunately, all Advice is yet Unheeded

Ex-British PM Margaret Thatcher had a doctrine regarding ocean pollution caused by perilous military activities: conservatism is good for actions with long term negative consequences! Her vision formed the cornerstone of the London Dumping Convention that banned the release of military debris into the seas. Consequences notwithstanding, a majority of countries do not have such a convention and freely release military debris into the oceans, causing enormous damage to marine lives.

At the recent UN International Marine Debris Clearance conference, Paul Walker, director of Global Green inferred that a massive 8000 tonne of hazardous material has been plunked near Hawaii by the US army. US vessels have been dumping 34 million litres of untreated liquid waste and 16 tonne of plastic waste every month! Alarmingly, more than 400,000 rockets and bombs are drifting around US coasts! During the Cold War, under the shield of the Iron Curtain, the Soviet Union released 2.5 million curies of radioactive material into the Arctic Ocean, the Sea of Japan, the Barents Sea, and the Kara Sea, according to the Yablokov report. France carried out 137 nuclear tests under the sea between 1975 and 1996, creating an artificial crater with a diameter of 140 meters. The tests conducted in French Polynesia caused havoc to 1 million cubic meters of sand and coral. Japan’s seas are contaminated with chemical weapons with a total bulk of over 6,600 tons. And that is not counting the most recent irradiated water being released from the Fukushima plant.

But if military debris isn’t dumped in oceans, then where? Research institutes like Coastal Zone Enhancement Program in US or Swedish Geotechnical Institute talk about measures like recycling and reuse of oceanic debris.


Posted by at
Labels: , , , , , , , , , , , , ,

Friday, July 20, 2012

Time for a ‘Crude’ Landing, People!

The Current Surge in Global crude Oil Prices puts forth two basic Questions – what are The Underlying causes and what’s The Worst we can expect. While The Most Pessimistic Projections may prove untrue, The World is Indeed staring in The Face of another crude shock that could derail Global Recovery

Be it the oil shock of the 1970s or the impending oil crisis of 2011; the spike in oil prices in both cases has been the consequence of a combustible mix of geology and geopolitics; with the latter inflicting much more of the damage. The turmoil in Egypt, Tunisia, Yemen, Libya and the consequent fears of disruption of Suez Canal and SUMED pipeline have led to oil prices breaching the $100 per barrel mark (on February 24, 2011 it touched $120 per barrel, well short of the July 2008 peak of $147 per barrel). The continued political upheaval in Libya, which produces approximately 1.6 million barrels per day and accounts for close to 2% of global oil output, will further escalate prices and dampen the fragile global economic recovery.

As the ‘Day of Rage’ rules the roost throughout the Middle East and North Africa (MENA) region, oil-supply side vulnerabilities can only increase. It is to be noted that the MENA region is home to about 60% of global crude oil and 45% of the world’s natural gas reserves. Given such dynamic statistics, any disruption in the supply of resources from this region will tantamount to a significant price rise. Though Saudi Arabia and other OPEC members are bent on meeting the challenges, fear of underinvestment in the MENA region will undoubtedly push oil prices northwards.

Amidst this scenario, research houses are forecasting that oil prices could well surge to $220 per barrel (as suggested by Tokyo-based Nomura Holdings). With the bitter aftertaste of the economic crisis still lingering across the globe, the forecasts of spiralling crude oil prices is an indication that we could be in for a reversal of the global economic recovery, as if it wasn’t sluggish enough already.

Even if one assumes that the current spike is merely a result of speculation and that the dust would soon settle down; the potential loss is huge. As per estimates, the British economy would have to wipe out £45 billion in the next two years if oil prices surge to $160 per barrel this year. The economic recovery in the US too could be hurt; it is estimated that every $1 surge in oil prices would cost the consumers $1 billion over the course of a year. The entire episode of unrest has seen the West Texas Intermediate (WTI) and other crude oil spot price increase by about $15 per barrel since mid-February. The US Energy Information Administration (EIA), in its latest outlook (Short -Term Energy Outlook, published on March 8, 2011), has raised its forecasts for the average cost of crude oil to refiners to $105 per barrel in 2011, $14 higher than its previous outlook. However, EIA has raised its 2011 forecast for WTI by only $9 per barrel to $102 per barrel, because of the projected continued price discount for this type of crude. EIA has further projected a small increase in crude oil prices in 2012, with refiner acquisition cost for crude oil averaging $106 per barrel and WTI averaging $105 per barrel.

At best these projections are but optimistic in nature. BMO Capital Markets further goes on to suggest that given the lag and the cumulative 46% increase in WTI between 2009 and 2011, the oil price increase will reduce the US economic growth by 0.7% (a huge figure in their case). Substantially higher prices (as forecasted by Nomura) arising from a supply shock would also significantly heighten the risk of a renewed recession. The current political problem is more grave than the geopolitical problem of the 1970’s, since the problems have spread to the entire MENA region.


Posted by at
Labels: , , , , , , , , , , , , , ,
Subscribe to: Posts (Atom)