Sunday, July 28th, 2019


When tragedy strikes, having a succession plan helps businesses to rise above the grief

PETALING JAYA: It is said that in life, nothing is certain except death and taxes. While there has been much emphasis given to taxes by businesses, the same cannot be said about death.

Perhaps one of the events that generated the biggest ripples across the business world was the passing of Steve Jobs in 2011, the co-founder and CEO of Apple Inc whose legacy is synonymous with the US tech giant.

While Jobs’ battle with pancreatic cancer allowed the company time to lay out a succession plan of sorts, other businesses might not be so fortunate in that regard.

In the Easter day bombings in Sri Lanka, Danish billionaire, Anders Holch Povlsen, the man behind the British online fashion retailer, lost three children in the terror attack that could have claimed his life as well.

For businesses, the death of a leader has a significant impact on the organisation and the public.

According to O Psych Sdn Bhd CEO and organisational psychologist Hetal Doshi, the impact of the loss in an organisation’s leadership stems from the intimacy of their relationship.

“Presented with the news about a person’s passing, the initial reaction is usually surprise followed by curiosity and, finally, there will be some reminiscing of an event or memory related to the person. In death, these intimate memories will impact an organisation.”

On the whole, she said, organisations should try to recover from the death of their leader quickly, as businesses need to have longevity looking at the bigger picture five to ten years down the line.

In dealing with death, she recommends that companies take the opportunity to have powerful memorials and celebrate the departed leader with the successor and the board of directors showing solidarity in paying their respects.

“Having a discussion on the purpose of life in a company and in general is a valuable opportunity, rather than to sweep it under the rug.”

For successors, navigating the void left by a departed leader could be difficult.

“Successors would do best respecting the life and work of the previous leader, whilst rallying their teams emotionally towards an even greater future.”

She said the successor do not have to worry about being compared because time will heal those wounds and they should move towards building their own legacy.

In today’s corporate world, Hetal regards US tech giant Microsoft as a great example in paving the way for future leaders. Its founder Bill Gates has been promoting the other leaders in the company and focusing on his own philanthropic endeavours instead.

However, not all businesses are equal in this respect.

Hetal said for family and dynastic business, the rules of engagement are different. As opposed to those with a regular corporate structure, legacies are extremely valuable to family businesses, as it is part of their brand story.

“For family businesses, referencing the previous leader is something that is encouraged as you want to strengthen emotional ties based on the values of the previous leader.”

Hetal said businesses in high-risk industries such as oil & gas, mining and airlines should also emphasise the importance in mediating death at the workplace.

In such industries, it is important that the leadership does not adopt a “business as usual” approach following a tragedy as it will be perceived as an unempathetic organisation.

She pointed out that the dangerous profession fosters a much closer ties between colleagues given the risk and circumstances involved.

France aiming for digital tax deal with US by late August

France aiming for digital tax deal with US by late August

PARIS: France wants to reach a deal with the US on taxing tech giants by a Group of Seven (G7) meeting in late August, Economy Minister Bruno Le Maire (pix) said on Saturday.

He was responding to US President Donald Trump, who on Friday vowed “substantial” retaliation against France for a law passed this month on taxing digital companies even if their headquarters are elsewhere.

The law would affect US-based global giants like Google, Apple, Facebook and Amazon, among others.

Trump denounced French President Emmanuel Macron’s “foolishness”, though they discussed the issue by phone on Friday, according to the White House.

Macron confirmed that he had a “long” conversation with Trump, stressing the pair would “continue to work together in view of the G7”. “We will discuss international taxation, trade and collective security,” he said on Saturday.

His office earlier said Macron had told Trump that the tax on the tech giants was not just in France’s interest but was something they both had a stake in.

Neither side revealed if they had also discussed Trump’s threat to tax French wines in retaliation.

Le Maire took the same line at a news conference on Saturday: “We wish to work closely with our American friends on a universal tax on digital activities. We hope between now and the end of August – the G7 heads of state meeting in Biarritz – to reach an agreement.”

Leaders of the Group of Seven highly industrialised countries are to meet in the southwestern French city on Aug 24-26.

Le Maire emphasised that “there is no desire to specifically target American companies”, since the 3% tax would be levied on revenues generated from services to French consumers by all of the world’s largest tech firms, including Chinese and European ones.

But Deputy White House spokesman Judd Deere noted earlier that France’s digital services tax was already the subject of an investigation at the US Trade Representative’s office, potentially opening the door to economic sanctions.

“The Trump administration has consistently stated that it will not sit idly by and tolerate discrimination against US-based firms,” Deere said in a statement.

The French law aims to plug a taxation gap that has seen some internet heavyweights paying next to nothing in European countries where they make huge profits, because their legal base is in smaller European Union states.

France has said it would withdraw the tax if an international agreement was reached, and Paris hopes to include all Organisation for Economic Cooperation and Development – a Paris-based forum that advises the world’s advanced economies – countries by the end of 2020.

After a year of Trump pressure, Fed struggles to communicate

WASHINGTON: For the first time since the Great Recession a decade ago, the US Federal Reserve (Fed) is poised to cut interest rates, shoring up America’s defences as the global economy weakens.

It will mark a striking about-face for the central bank, reversing a rate increase announced just seven months ago.

And the policy flip comes as the central bank has suffered a number of awkward stumbles in communications, as it has tried to communicate confidence in the economy, while at the same time a readiness to support continued expansion.

Fed officials have had to backtrack and clarify recent statements, and amid President Donald Trump’s blistering, year-long public campaign against Fed chair Jerome Powell, one central banker seemed to offer himself as an alternative for the leadership position.

Meanwhile, although the rate cut this week is almost universally expected, economists disagree on whether the Fed is making the right move. Indeed, cutting rates now could appear highly unusual: the Fed has never done so with unemployment so low.

New York Fed president John Williams, the influential vice chair of the Fed’s monetary policy committee, said this month that acting quickly to cut the key lending rate could “vaccinate” an economy against “disease” later on.

But his office later scrambled to clarify that the comment was referring to the history of monetary policy and was not a prediction of how the Fed would act on July 31.

Trump pounced almost immediately: “I like New York Fed president John Williams’ first statement much better than his second.”

Diane Swonk, chief economist at Grant Thornton, said the Fed’s communication blunders did not help it withstand Trump’s onslaught and his demand for lower borrowing rates.

“The president might have been right for the wrong reasons because he was destroying the economy himself,” she told AFP, saying the damage from the trade battles with China and others has been underestimated.

So “even when they do the right thing it looks like they’re capitulating”, she said, undermining their credibility.

Trump’s vocal and repeated attacks on the Fed are unprecedented. And Swonk warned it could backfire. “What the president’s doing now is undermining the most powerful tool the Fed has when he’s going to need it most.”

James Bullard, the dovish president of the St Louis Federal Reserve Bank, who like Trump has advocated a rate cut, said recently that he would take the job of Fed chair if offered.

In the context of reports that Trump has considered removing or demoting Powell, Bullard’s comments do little to reinforce confidence in the Fed chief.

Powell has repeatedly said the political considerations have no impact on the Fed’s policy committee. But even the economic case is opaque.

There are signs the economy does not need central bank stimulus: consumer spending is solid and job growth is steady, not to mention record stock prices on Wall Street.

“For what it’s worth, we think any rate cut is a mistake,” economist Ian Shepherdson said in a recent note to clients.

But others argue the Fed will be making up for the error it made in December.

The Fed raised rates in December despite signs of a weakening global economy and Trump’s multiple global trade conflicts. But central bankers now cite those same reasons as a justification for cutting rates.

“I do believe the Fed made a mistake and they know it,” Quincy Krosby, chief market strategist at Prudential Financial, told AFP.

And there are a number of reasons to be worried.

Gross domestic product growth slowed this year. Manufacturing is in recession. The housing market has stumbled. Business investment is flat-lining amid uncertainty caused by the trade wars.

Powell told lawmakers this month that Trump’s trade wars with China and Europe were a “shock” to American business confidence.

Meanwhile, Europe and China are faltering, eating into demand for US exports and raising the prospect of contagion, while the possibility of a no-deal Brexit, with its uncertain consequences, draws nearer every day.

Revised government data released Friday show that at the end of 2018 growth was only half as strong as previously reported – taking the wind out of the economy’s sails at the start of this year.

Fed officials have had to backtrack and clarify recent statements. – REUTERSPIX

End of theme park dispute a positive for Genting

PETALING JAYA: The settlement of the legal dispute between Genting Malaysia Bhd and Twentieth Century Fox via a restated memorandum of agreement, which grants Genting the use of certain Fox intellectual properties (IP), is a positive move, said analysts.

Following the full resolution of the legal dispute between the two parties, PublicInvest Research has revised upwards its visitor growth assumption, which it cut to 3%, after the announcement of the legal proceedings in November 2018.

“As such, we raise our FY20-FY21 earnings by 5-11% after factoring in higher visitor arrival of 5-6%,” it said in a report last Friday.

Despite the positive view on the resolution, the research house believes that the restated agreement contains less attractive terms for Genting, compared with the original agreement since it is only allowed to utilise certain Fox IP and the theme park would have to blend in non-Fox IP.

It also said that the theme park will be renamed, possibly without the Fox brand name.

“Nothing was disclosed on fee payment but the original agreement stated that Fox would only start receiving annual fees and royalties after the park opened,” it said.

“This was subsequently amended in 2014 and 2017, allowing Fox to receive payments immediately.”

PublicInvest Research noted that Genting is updating its development and construction plans to complete the outdoor theme park, which is expected to open next year.

Hong Leong Investment Bank (HLIB) Research also expressed its optimism over the development, as the new theme park will be the first theme park in Asia with Fox’s IP, despite the new terms.

“We believe excitement will return as this will still be the first theme park in Asia with Fox’s IP, and is likely to increase footprint,” it said.

With the resolution of the dispute, HLIB Research does not discount the possibility of the theme park opening sooner than expected.

“We note that the outdoor theme park is near completion and reckon it may be able to launch sometime in 2020,” it added.

It noted that several local newspapers had carried employment advertisements for Genting’s theme park division over the past week.

The research house believes that the dispute resolution and clearer direction of the theme park will act as an upswing factor for the stock in the near term.

“Currently, we have penciled 26.6 million visitors for FY20. Holding all else constant, our sensitivity analysis shows that for every 10% increase in visitors (from our assumption), will increase earnings before interest, tax, depreciation and amortisation (ebitda) by about 6.5% and earnings by about 8%,” it said.

Foreign funds seen returning to Bursa, say experts

KUALA LUMPUR, July 28 — International funds made a comeback into Bursa Malaysia from Monday to Thursday, registering a foreign net inflow of RM56.9 million compared with last week’s total foreign net outflow of RM6.9 million. MIDF Amanah…

After a year of Trump pressure, US Fed struggles to communicate

WASHINGTON, July 28 — For the first time since the Great Recession a decade ago, the US Federal Reserve is poised to cut interest rates, shoring up America’s defenses as the global economy weakens. It will mark a striking about-face for the…

Trump threatens not to recognise China’s special status at WTO

PARIS, July 28 — President Donald Trump on Friday threatened to withdraw recognition of the special “developing nation” status of China and other relatively rich countries at the World Trade Organisation unless changes are made to the body’s…

France aiming for US digital tax deal by late August, says minister

PARIS, July 28 — France wants to reach a deal with the US on taxing tech giants by a G7 meeting in late August, Economy Minister Bruno Le Maire said yesterday. He was responding to US President Donald Trump, who on Friday vowed “substantial”…