Month: October 2012

Ross Mandell, former head of Sky Capital Holdings, was indicted in July
2009 on charges he and five others defrauded investors in a scheme US
prosecutors claim pressured people to buy stock from what they called a
“trans-Atlantic boiler room” with operations in London and New York.

Released on $5m bail, the 53-year-old Mandell faces up to 25 years in prison, if found guilty.

Mandell
has yet to secure a television deal for his show, but insists he has
“serious interest” from TV networks. Eager to prove he’s got a hot story
and a cast of intriguing characters, including his wife and his mixed
martial arts buddies, Mandell has already begun filming.

“This is not about money for me,” Mandell said in explaining his rationale for the show, tentatively titled “Facing Life.”

“This is about facing the public, clearing my name and the legacy of my wife and children,” he said.

He also wants to humanise himself.

“People
think that I’m a beast, that I’m an animal,” he told reporters. “I’m
not…I’m a loving human being, I’m a sober man, I’m God-fearing and a
member of Alcoholics Anonymous.”

If he gets a TV show, Mandell
would be among a growing number of people who have sought redemption on
prime-time TV after getting in trouble with the law.

Following
his impeachment, former Illinois Governor Rod Blagojevich appeared on
NBC’s “Celebrity Apprentice.” NFL football star Michael Vick, convicted
of animal cruelty, was on the BET network with a show, “The Michael Vick
Project,” in an attempt to reveal his softer side that included scenes
of him volunteering at an animal shelter.

Mandell, who lives in
Boca Raton, Florida, claims he was set up by the US government because
of his work helping bring US companies to the London Stock Exchange.

“I took the business from them, that’s why I’m being targeted now,” Mandell said.

And,
like the boxer he is in his spare time, Mandell refuses to go down
without a fight. “I’d rather die on my feet than live on my knees,” he
said.

The draft, due to be approved next month, would make Internet Service Providers (ISPs) like Fastweb and Telecom Italia, and Web sites like Google’s YouTube, responsible for monitoring TV content on their pages, industry experts say.

It comes as Google’s YouTube unit is engaged in a legal battle with Mediaset, controlled by Prime Minister Silvio Berlusconi. Italy’s largest media group wants 500 million euros in damages from YouTube for copyright infringement.

“As it is written at the moment … the law would certainly help Mediaset in the procedure it has open against Google,” Paolo Nuti, president of the Italian Internet Providers Association, told reporters. However, he said he did not think the law was written expressly for this purpose.

The proposed regulations would make internet sites as liable as television stations for their content and subject to hefty fines by the AGCOM media watchdog, according to a 33-page draft.

“If this happens it would sweep away Internet 2.0,” Nuti said. “It would transform internet platforms into judges or tribunals.”

Italy’s parliament, which is holding consultations with civil groups and internet associations, is due to present a non-binding opinion to Silvio Berlusconi’s government by early February. The draft decree only requires presidential approval.

Raffaele Nardacchione, director of the Asstel association of telecommunications providers which represents ISPs like Fastweb and Tiscali, said the decree far exceeded the terms of the original European directive by extending the definition of audiovisual media to Internet firms and by tightening copyright.

Marco Pancini, senior European public policy counsel for Google, said that if the decree remained unchanged it would materially affect the company’s business in Italy.

“The first step is to discuss this with Italian authorities to try to find a solution and we think this is do-able,” he told reporters. “The next step, if the law stays as it is, is going to be to discuss this with the European authorities.”

Commission could investigate
EU sources told reporters on Tuesday the Commission could open an investigation into the decree for infringing EU norms.

Even the head of AGCOM, Corrado Calabro, told reporters on the sidelines of a parliamentary hearing on Tuesday the decree should be revised because it would “deform” the EU directive.

The draft legislation has also raised criticism from freedom of speech groups like Italy’s Article 21, which said in a statement the decree “deviously attacks the freedom to operate on the Web” and would “block any possibility of modern development of the country”.

Italy has one of the lowest rates of ADSL Internet usage in western Europe, according to the European Commission’s 2009 Information Society Report. E-commerce is also struggling. Only around 10 percent of Italians buy online compared with around 55 percent of Britons and Germans.

Industry officials warned the new decree would postpone the development of the web even further.

“Any internet company will make investments where the legislative system is economical and the opportunities for investment are greatest,” said Nuti.

The heady days of oil at $147 a barrel will now seem a distant memory for many small to mid-cap oil and gas companies. An increasing number of them face rising payments to service debt facilities taken on during the boom to fund ambitious growth strategies or, indeed, the need to pay down debt facilities as the value of the collateral for such facilities – the cashflows from their oil and gas reserves – has plummeted. And all this in an environment where lending banks are increasingly under pressure to pull in loans and reduce balance sheet exposures. Many of the companies affected have some difficult choices ahead if they are to weather the storm and it is those choices (together with the attitudes of the lending banks) that will have a significant impact on the success, failure or consolidation of companies in this sector. This article examines some of the debt structures (focusing, in particular, on borrowing base facilities) taken on by small to mid-cap oil and gas companies, and considers some of the options which may be available to deal with and manage debt repayment obligations.

During the period of bumper oil prices, many oil and gas companies took on substantial amounts of debt to finance the development of upstream assets. A lot of this debt is in the form of borrowing base facilities (“BBFs”) under which the amount capable of being borrowed from time to time is calculated by reference to net present value of cashflows from their reserves, which of course varies according to oil and gas prices. The borrowing base is typically redetermined every six months and a repayment will be necessary if the outstandings exceed the new borrowing base amount. BBFs are structured as reducing revolving facilities so that after perhaps the first couple of years of the term of the facility, the lenders’ commitments step down every six months, coincidental with the redetermination of the borrowing base. So in fact any repayment will be the greater of the amount required to reduce the outstandings to the new borrowing base amount and the amount needed to reduce the outstandings to the reduced aggregate commitments of the lenders.

BBFs typically have a term of between five and seven years (subject to a reserve tail date, if earlier), so the step down in commitments after any initial grace period is likely to be fairly steep. Traditionally, BBFs were built around a portfolio of assets with a good mix between producing and non-producing assets, giving considerable comfort that the borrower would have sufficient cash flow from producing assets to meet any committed expenditure, service interest and pay down principal as required on redetermination dates. More recently, the BBF model was adapted for companies with a much bigger development element in their asset portfolio, resulting in a financing more akin to a project financing, though without the full panoply of controls typical of a traditional project financing.

An invariable principle under BBFs, however, is that to qualify as borrowing base assets, the assets in question must at least have received final development plan (“FDP”) approval. Historically, lending banks would not fund appraisal expenditure in respect of pre-FDP assets. But in an apparently benign environment of high commodity prices and deep liquidity, facilities to fund such expenditure became available. These facilities are called Undeveloped Asset Backed facilities (“UDABs”) or Pre-Sanction Facilities (“PSFs”) and have typically been made in conjunction with a BBF or at least as a precursor to a BBF, albeit only by a small number of specialist banks. Debt structures generally became more complex, possibly involving several layers of different types of debt including senior, stretch senior, mezzanine, UDAB/PSF and corporate level (and hence structurally subordinated) convertible bonds. Multi-layering of debt was used to increase leverage for the purposes of allowing small to medium-sized companies to acquire fairly large portfolios of assets or to fund fairly sizeable developments. Having said all that, the fundamentals of reserve-based financing have remained fairly conservative compared to forms of lending in other sectors; the available debt amounts under BBFs calculated by reference to the six-monthly projections have not in themselves been excessive, and under UDABs/PSFs the value ascribed to each barrel of oil in the ground is only a very few dollars. The problems have largely arisen where groups have incurred exploration and appraisal expenditure on non-borrowing base assets and that expenditure is not included in the projection. The expenditure may be incurred by a member of the group which is not a BBF borrower but, nevertheless, it represents a drain on the cash of the group which might otherwise have been available as “equity” to support the development activities which are taking place within the ambit of the BBF.

During the development boom in 2007/2008, capex commitments were entered into, which in some cases are now proving difficult to curtail quickly. The upshot is that, with the fall in oil and gas prices resulting in lower borrowing base amounts, a significant number of oil and gas companies are finding themselves in a liquidity trap. Some companies are in the fortunate position of having sufficient cash reserves, or production rates, to enable them to service their debt obligations in the near to medium term. For others, however, the liquidity trap referred to above means they need to consider urgently solutions to service their debt obligations. These solutions can involve the renegotiation of facilities, raising equity from current shareholders, raising cash from a strategic investor or mergers with other companies. Probably the most obvious option for borrowers is to renegotiate repayment terms. However, in the current economic climate, and given the difficulties which many of the lending banks themselves are in at the moment, they are not able to be as accommodating as they might have been in more normal times to requests from borrowers for debt service holidays and reschedulings. Accommodation may be forthcoming, but it will probably come at a significant cost, and may be on the condition that a “for sale” sign is put up by the borrower over some of its crown jewel assets, with the proceeds being used to pay down the bank debt. A quick∞fire sale of assets, while not ideal, may be the only option for some if debt facilities are being slowly but surely recalled. The problem with this strategy is that the price gained for such assets may be at a discount to their value as a result of the need to inject cash quickly.

For some companies the problems associated with restructuring of debt will lead them to look at raising equity, either through existing shareholders or via a third-party injection of cash from a strategic investor. Raising equity from existing shareholders is, however, difficult in the current market. Not every small or mid-cap oil and gas company is in the enviable position that Tullow Oil (a FTSE 100 company) was at the start of 2009. Tullow successfully raised £402m by way of a placing of shares in order to, among other things, fund exploration and development opportunities in Ghana and to commercialise its assets in Uganda. It is worth remembering that Tullow was able to do this off the back of major exploration and appraisal success in both Ghana and Uganda.

An injection of cash from a new strategic investor is also an option. Such cash might be injected for shares (in which case there is the issue of how existing shareholders will react to the dilution) or it may be injected at the asset level. In autumn 2008, Dyas (a wholly owned subsidiary of SHV, the largest privately owned conglomerate in The Netherlands) acquired a 25.25 percent interest in Ithaca Energy’s North Sea oil and gas assets, and also stepped into the shoes of RBS under Ithaca Energy’s UDAB facility. The next few months will be a crucial time for several small to mid-cap oil and gas companies faced with onerous debt repayment obligations, and there may well be difficult times ahead if the credit situation does not improve and oil prices do not rise. For some, lending banks will continue to provide finance and shareholders (or new investors) will agree to inject new cash. There is no doubt, however, that the sector has taken a hit in the last few months and many are speculating that there are some good deals to be had for larger companies with the cash and the desire to purchase a bolt-on company (or asset portfolio) with attractive production, reserves or resources. 2009 may well see consolidation in the sector and certainly more surprises in these uncertain times.

Ashurst is a leading international law firm advising corporates and financial institutions, with core businesses in mergers and acquisitions, corporate and structured finance and the development and financing of assets in the energy, transport and infrastructure sectors.

Riddled as it is with seemingly intractable long-term problems, does Southern Italy have a future? The answer, avers affable Naples-based lawyer Ludovico Capuano, is a resounding “Yes!”.

“Of course, the region is still economically backward when compared to other parts of Italy and certainly so against Northern Europe,” he says, but adds: “Yes, It has brought tears to the eyes of politicians, businesspeople and certainly the local community down the years but many of us who live here still perceive that there is enormous unfulfilled potential.

“The euro and our country’s European Union membership have helped us enormously – and let’s face it, Italy is still in the G8 only because of its EU status – but most of those in power in Rome as well as so many people in the industrial north – and especially those who support the Northern League – perceive Southern Italians as being lazy, corrupt ne’r-do-wells and actively resist the flow of both EU and national government investment in our direction.”

Directing a boutique law firm that was founded by his uncle, Fulvio Capuano, who has vast experience in real estate dealings, Ludovico Capuno, who cites the corporate, trust and shipping sectors of law as his own specialities, sees himself as a man with a mission: “There is very real long∞term potential here but companies from outside the region and from abroad who are looking to invest, whether it be from setting up their own operations in the South or through M&A’s, need to be able to log on to the depth of local knowledge and contacts that only a local law firm like ours can offer.”

The practice started 20 years ago as a spin-off from a civil law notary’s firm managed by Capuano’s father, Nicola Capuano; it currently employs five lawyers and two associates in its busy Naples office: “For the present that’s a good workable size for a boutique firm like ours but we look to broad horizons and now have representation in the UK, Dubai and China, as well as elsewhere here in Italy,” says Ludovico.

So what advantages are there for clients using a small law practice like Capuano & Partners, rather than a large, international firm?: “Well, Italians like to do business with people who’s hands they can shake, rather than work at arm’s length. Person-to-person contact is crucial among people who are from a place where family ties matter enormously. It’s often been said that you can’t do business with an Italian until you have broken bread together.

The personal touch
“In our firm, we pride ourselves on providing a truly tailor∞made service, and we are close to our clients – 24 hours a day, seven days a week.

“The big law firms are all to be found in Rome and the North – in big industrial and business centres like Milan and Turin – and don’t tend to venture into Naples. That’s an advantage for us. Conversely, given the lower levels of economic activity here there are less potential clients than we’d find elsewhere.”

Italy has not been able to avoid the current global economic malaise and while others are talking confidently of imminent recovery, Italy has probably still not yet seen the worst of it, believes Ludovico: “We haven’t seen the bottom of the recession yet and I reckon it will be late 2010 before our country’s recovery starts to gather momentum,” he says.

“Inflation is now very low. In fact, we are almost in a deflation situation. At the same time, interest rates remain unhelpfully high because banks apply high spreads to their contracts.

“The M&A sector is starting to warm up once more but things are currently at the talking stage rather than the signing-off of any big deals being immminent.

“Similarly, IPO activity has tended to be placed on hold. Last year we signed a partnership deal with Borsa Italiana, the national stock exchange, and we are working with them to inform and persuade companies of the advantages that an IPO could bring them. Unfortunately, due to the global crisis, our interested clients have put their plans on hold but I hope that by the end of 2010 and into 2011 we will be able to bring them to the market.

“Similarly, the property sector is sluggish here in Naples, especially following the major blow to confidence when the old-established and well-respected Risanamento property development company – an organisation with roots going back to the 19th Century – filed a petition for bankruptcy protection.

“There are still some criminality problems within the construction industry in Naples and we need firm government help in combating this but, at the end of the day, real estate is still a key sector for us because Italians tend to be far more interested in putting their money into property than in buying stocks and shares, so prices have not really fallen a lot.

“Much Italian investment in this sector is still heading abroad, however. Italians have always had a penchant for acquiring property in places like London and New York.”

In these tough times, the legal profession has taken its share of the hammer blows: “The big law firms, especially those working in banking and finance, have had to cut their staffing levels though boutique firms like ours have ridden the storm somewhat better.

“In employment terms, there’s an underlying problem which is un-related to the economic crisis: there are simply too many young people in Italy who want to become lawyers when they finish their university studies.

“To get things really moving here, we need a strong mayor and more help from national government. Naples is a beautiful city but often noisy, dirty, smelly and congested. Progress on infrastructure improvements has been painfully slow. The roads are in a bad state and the subway extension, which is adding a new line and half a dozen new stations has taken a ridiculous 13 years and is still not yet finished. Worse still, the highway to Reggio Calabria is still incomplete 30 years after work started!

“To get things moving, we need to attract bigger, more vibrant companies. At present there are just three listed companies in the entire Campania region and one of them, Ladoria – which is in the food business – is government controlled at present.”

Like everything else, the legal sector has become increasingly complex and international: “Even a small, provincial firm like ours today needs to take a global view. I see our own opportunities arising within our core businesses – that is, real estate and corporate. For our clients, that principally means London, New York and Dubai in the property market and London and Shanghai when it comes to corporate activity.

“We were planning to open an office of our own in Shanghai, where one of our best clients, Nordmeccanica is opening a factory in September. Our expansion is temporarily on hold but that’s a question of delay rather than cancellation.”

The key to getting the engine of growth running again could be a reform of the Italian tax system and a speeding up of the legal process: “Parliament has just approved a major reform of the judicial system but we will have to wait and see if this has a real impact. At present, the civil trial process can take as much as 15 to 20 years, which is obviously unacceptable.

“As for tax, I don’t see any way of making it a less complex matter though one recent development has been parliamentary approval of a tax amnesty which has been designed to persuade Italians to bring money back from tax havens abroad, notably Switzerland, a move which will produce some much needed revenues for a government that is strapped for cash at the moment.”

Ludovico believes Naples has a number of strong USP’s the rest of us should know about: “It’s a vibrant, outward looking city that has a cosmopolitan view of the world. After all, we’ve been occupied and ruled down the years by the Greeks, the Romans, the Arabs, the Normans and the Spanish. Neapolitans don’t always see themselves as Italians. This was, after all, a kingdom in its own right, but they definitely feel part of the international community. Don’t forget, it’s Italy’s second largest port, after Genoa – and it’s very much open for business.”

Further information: www.capuanoepartners.com

The current global financial crisis has put both businesses and employees under an enormous amount of strain over the past six months. Companies, even those that have been established for many many years and have in the past overcome problems, are facing new challenges as the situation unfolds across the globe.

Theft by employees
In Italy we have observed an increase in cases being brought forward involving theft by employees – at all levels – which has been rather surprising. The situations have involved anything from physical theft of both company property and property belonging to other staff members, to data theft … and even fiddling expense claims and accounts. On a psychological level, of course people are worried about losing their jobs, but theft can only weaken the position of a company as it removes valuable assets – whether physical or intellectual.

In December 2008 the Institute for Corporate Productivity released ‘Workplace Theft Pulse’ which was a survey of 392 American businesses that indicated that 27 percent of large businesses (with 10,000 or more employees) and 15 percent of small to medium sized businesses had witnessed – as economic conditions worsened – an increase in theft by employees. This particular survey covered not only physical theft and data theft – but also ‘time theft’ which involves employees using company time for personal or non – work related reasons.

We do not have the exact statistics on employee theft for the Italian market – however in the past six months LABLAW has been contacted by companies more and more frequently to address this issue. Previously in Italy – when an employee was prosecuted for physical or data theft, the sentences handed out by judges were not terribly severe, unless there was a particularly strong case for suffered damages connected to the value of goods, or in cases where non-compete covenants were breached or trade and industrial secrets were breached. Recently we have seen judges in Italy becoming less lenient with their treatment of employees accused of theft – meaning that the penalties – including jail time – have become more severe.

In Italy ‘time theft’ is more of a disciplinary concern rather than judicial one – however it can easily become part of a legal proceeding to terminate an employment contract. There are actions that companies can take and processes which can be implemented in order to help protect a business’s assets – whether they be physical or intellectual. LABLAW regularly advises clients on these matters as part of their assistance with the day to day management of an activity.

Pensions at risk?
Pensions are an extremely delicate subject. Many American and English citizens have seen the value of their personal pensions either decrease or become at risk as they are invested in a falling stock market or tied to an employer that may be having difficulty. In addition to this, as more and more people become unemployed there are fewer and fewer contributions being made to the social security system through the taxation of payrolls.

To complicate matters further, there are cases such as General Motors of Canada Ltd which requested assistance from the government as their ratio of retired workers on the company pension scheme was more than double the number of active employees (14,000 workers supporting a pension scheme covering 34,000 people). And what about the 42,000 retired employees who were members of the Nortel UK pension scheme before its parent company filed for bankruptcy protection on January 14th, 2009? There are institutions in many countries (such as the UK’s Pension Protection Fund) which step in to assist with pensions when companies fail – however, at the time of the writing of this article the future of these two pension funds is still uncertain.

Italy is fortunate in that the state pension is predominantly guaranteed by the government.

In addition, the use of private and corporate pension funds invested in the stock market and other financial instruments is not as prevalent as in the UK and America.

That is not to say however that the subject of pensions in Italy is not delicate matter. For example, in the private sector, the old system was revised a few years ago and now employees must contribute for 35∞40 years into the system in order to receive a pension guaranteed by the state. Of course the actual amount paid out to the retiree has always been a point of discussion. The old system based the value on the average of the salary of employee’s last 5∞10 working years. The new system – which came into effect with a series of reforms brought about by laws which were approved in the 1990’s – now takes the value of the employee’s salary over their working life and pays only a percentage of the amounts accrued over the entire period.

In response to the current financial crisis, Italy is also making strategic moves towards protecting pensions.At the beginning of April, Giulio Tremonti, the Italian Minister of the Economy, was quoted in Il Corriere della Sera ( April 5th, 2009) saying “We have decided to move a large part of money from the public balance sheet towards social welfare, which does not provoke the breaking of the deficit and is, for now, sufficient.” For now, Italy appears to be safe on this front.

Opportunities to save jobs
It is not all doom and gloom. In fact, from the crisis may emerge opportunities for companies to rethink the organisational structure of their work force. It is actually at times like these that employees may be the key to a company’s success. A loss of employees may also mean a loss of valuable skills, quality of service, the ability to generate sales and also a loss of production capability. The choices which management make have repercussions beyond the bottom line of the spreadsheet.

In the Anglo∞Saxon press there have been more and more articles emerging about management presenting employees with two options – job cuts or voluntary reductions in salaries across the board in order to save the jobs of their colleagues. There have even been a few reported instances of employees approaching management with proposals of reduced work times and salaries in order to try to stave off inevitable reductions in the workforce. These are excellent examples of an employee-employer relationship… that is working together as a team for the good of the company.

However in Italy it may not be so easy to implement this approach as there are quite strict employment laws, set up to protect the workers, especially when it comes to working times and conditions. Most people employed by medium and large enterprises would fall into CCNL bands (which are national collective agreements known in Italy as Contratto Collettivo Nazionale di Lavoro) which govern not only the range of their salary – but also how many hours employees work each day.

Saying that, there are two examples of flexible instruments Italian businesses can implement in order to buffer the effects of the financial crisis. They are through the use of cassa integrazione or through the use of autogestione.

In simple terms, with cassa integrazione employees are put – in English terms – ‘on gardening leave’. That is their work is ‘suspended’ and they are sent home. In this case they do not lose their jobs and through INPS (Istituto Nazionale Previdenza Sociale), the worker still receives a salary – even though it will not be 100 percent of what they would be paid if they were in full employment. The idea is that companies are temporarily relieved of paying salaries and employment related taxes for a certain amount of days a year. More importantly however, it limits the risk for a business of losing valuable knowledge and resources when the market picks up again.

With autogestione an agreement is created between an employee and an employer allowing the employee to agree to a part∞time work contract in exchange for a 10-20 percent decrease in salary and the forfeit of any bonuses. Again, when the market picks up in the future the employee has the right to claim back their original role in the company with the original benefits. Again this is a simplified explanation of the meaning of autogestione which is intended to illustrate options available to businesses in times of crisis.

There are many complex rules and regulations governing both cassa integrazione and autogestione. LABLAW is a point of reference for both businesses and managers who need to study solutions and strategies in order to safely navigate the waters in these uncertain economic times. Dismissals, reductions in the workforce, downsizings, collective dismissals… there are now two new avenues to explore – the ones which could save both jobs and one’s company in the future.

LABLAW
In the past few months LABLAW has seen an increase in client requests for legal advice and assistance. In fact the firm has seen a 30 percent growth in activity in the first two months of 2009 in comparison to the same period the previous year. “It is during uncertain times, like these, that businesses need to protect themselves the most,” says founding partner Francesco Rotondi. “In fact, in order to meet the increasing demands of both our new and established clients,” continues founding partner Luca Failla, “we are expanding to Rome – not only with a new LABLAW office but also with a new project called Anthropos, in collaboration with EOS Srl (www.eosmc.com).”

“The objective of Anthropos,” elaborates Francesco Rotondi, “is to offer a specialised human resources consultancy for businesses that do not have this function internally.” LABLAW’s professional team has over 20 years of experience assisting clients with the management of human resources, employee contracts and benefits, reductions in the workforce – including collective dismissals – pensions and trade union negotiations. Today this employment law boutique employs over 15 professionals, all of whom, through their academic education, their postgraduate courses, masters degrees and through their work experience, have a very specific expertise in labour law and industrial relations.

LABLAW is the winner of New Economy’s “Best Italian Employment & Labour Law Team 2009”. In 2008 LABLAW also won World Finance’s Award for the “Best Italian Industrial Relations and Labour Law Team.” LABLAW – after just three years of activity – was recognised in 2008 by Legal 500, as one of the top three employment and labour law firms in Italy. This leading international legal directory said that LABLAW ‘is particularly famed for its ‘marvellous’ employment-related dispute practice. Clients appreciate the team’s ‘trustworthy and concise advice. Lawyers are extremely service- focused – you can get a hold of them 24/7

Further information:
LABLAW
Failla Rotondi & Partners
Piazza San Babila, Galleria Passarella, 1, 20122 Milano
+39 02 30 31 11
info@lablaw.com
www.lablaw.com

The global economy remains bleak. Yet a distressed global economy does not stop large swathes of people retiring, beginning new pension plans, moving to new jobs or being rewarded properly for their outstanding contributions to their employer. Yes, the employee benefits market place has been shaken by the downturn, but it’s also increasingly responding to it in new, dynamic ways.

“In fact,” says Margrit Schmid, “a financially challenging environment increases the demand for appropriate solutions as deficiencies in state and private systems become even more obvious and accentuated.”

Certainly the need for practical, innovative employee benefits packages also increases when interest rates plunge and returns on savings – be it in cash or the stock market – diminish. It’s also a time when increasingly employers turn to benefit providers seeking security and reliability.

These qualities remain deeply ingrained into Swiss Life Network’s values from the start. “We continue,” says Schmid, “to focus on meeting clients needs with sustainable, top-quality solutions. With our multilingual organisation of highly experienced professionals in Zurich, Luxembourg, and several satellite locations we remain always physically close to our customers and active as their partner worldwide, for every aspect of employee benefits.”

You don’t have to look far to see how Swiss Life Network’s portfolio of products will support your own needs.

Multinational pooling options
Its range of highly competitive solutions include cover for death, disability and as well as illness and accident. These are available for both local and mobile employees. Depending on size you could opt for a company-specific plan allowing you to change the parameters of this arrangement as your own circumstance change while optimising the costs of your employee benefit coverage around the world. Or you can start via a multi-client pool supplying you with many of the advantages of pooling. Both choices mean huge levels of transparency on both global and local levels – plus the ability to gain a wealth of valuable information in the process about your employees and your own cost base.

Expatriate solutions
An ex-pat package can be demanding to be put together. No individual is quite the same, and most ex-pat solutions need to be highly tailored. Every multinational has its own very distinct needs and requirements. However Swiss Life Network has huge experience in developing and designing a package that is right for all your expatriates. We’re the right partner to explore and develop packages which also communicate clearly to your employees that they are indeed hugely valued.

Pension solutions
Swiss Life Network has a wide a range of innovative and highly flexible pension plans – including European pension solutions under the EU IORP Directive. Needless to say Swiss Life Network are experts at designing efficient and cost-effective plans to suit your own requirements. It’s also of huge importance that any pension plan is compliant with the fast-changing legal compliant environment. Says Margrit Schmid, “We leave nothing to chance. Ever.”

A bespoke relationship from the start
For Swiss Life Network the client is its centre of gravity – and the two parties are in constant exchange. “Our solutions reflect what our clients tell us, as far as it is economically viable,” says Schmid.

Whenever Schmid has a conversation with a client she is always learning something new – every time. And she always gets feedback on how solutions and products could be further improved and tweaked. But Schmid knows it’s tricky to always get the balance right, especially between off-the-peg solutions and a bespoke approach that always matches client needs exactly. “Swiss Life Network offers the ability to fine-tune product offerings to specific client requirements.

“For many years we base our value proposition on a set of modular solutions that are continuously adjusted to our clients’ needs. This ensures each client gets a reasonable customer specific bespoke solution, combined with high efficiency and top-quality service.”

Some employee benefits are still often seen as a welcome cost factor to some corporates. But when they look again says Schmid, more and more employers appreciate the added value of employee benefit solutions for their employees. “Added value is not just restricted to increased staff loyalty and retention,” she says. “Making sure employees don’t have to worry about the future leads to improved performance and hence contributes towards the employer’s bottom line. It also enables employers to prove their appreciation of their employees by providing benefits even in economically challenging times. Appropriate employee benefits are also, I would say, a very strong HR tool.”

Cost-effective solutions
Margrit Schmid knows all too well the huge emphasis and pressure on cost-control – which directly results in price pressures on benefit solutions. “We are constantly working on improving our cost-benefit ratios – however prices must still be sustainable from the provider point of view. Our modular system lets us determine with each client which solutions are most appropriate. And by using pooling, our clients can directly improve their cost outlays for pure risk solutions.”

Swiss Life Network’s success is built on three main foundations:

• Its long-term relationships with their own selected Network Partners, who are all industry leaders in their respective markets;

• Flexible and modular offerings for clients, their brokers and consultants. They always listen carefully to their clients and business partners and are constantly developing new solutions;

• Long-standing relationships with clients who continue to entrust their global employee benefit solutions to Swiss Life Network’s organisation, without whom they would not be where they are today.

Times they are-a-changing
How might employee benefit models change over time however? Schmid says financial service regulation is increasingly adding considerable pressure on providers and distributors. “This regulation will probably influence benefit design and our approach to clients, while transparency requirements will force clients to ask for more information and demand more transparent solutions. We are well-positioned to meet these needs thanks to our modular solutions, which already offer extensive information and transparency.”

Based on annual rankings, Schmid knows Swiss Life Network to be the leading provider in the global employee benefits market. “And we’re continuing to experience year-on-year increases in new business, and new global relationships. Our services are clearly in demand. We also regularly ask our clients for feedback, in order to keep improving our offering.”

Did you know?
Swiss Life Network is an association of more than 50 leading life and pension insurance companies worldwide, each in its own market a leading player of employee benefits. With this global presence the Swiss Life Network is the ideal partner for multinational companies for employee benefit solutions worldwide.

The Swiss Life Network is operated by Corporate Solutions, a transnational business unit of Swiss Life, a leading European life and pension insurer.

Swiss Life Network’s multi-lingual staff spread across all the main regions where multinational companies operate. Clients’ always have one main point of contact and access to worldwide expertise and professional experience in employee benefit solutions systematically developed over more than 40 years.

Further information:www.swisslife-network.com; www.swisslife.com

British Airways saw its shares rise by 5.3 pence to 131.8 pence after announcing that 7,000 of its airline staff have agreed to accept voluntary pay cuts. The company hopes that this move, which includes 800 staff who will forego their salary entitlement for one month – effectively working for free. Thousands of members of the beleaguered airline’s staff volunteered to take unpaid leave or work part-time by late June 2009. BA hopes to save £10m and forestall any action that would lead to redundancies. The company reported an annual loss of £375m, caused by higher fuel costs and the slump in demand created by the recession. In spite of this initiative, the losses led to 2,500 job cuts.

Although chief executive Willie Walsh and other senior executives within the company are taking part by foregoing a month of their own salary, and in spite of thanks given by Walsh himself, not everyone is so pleased by the initiative. Some members of the cabin crew were furious. Unions like Unite aren’t so happy about the deal too, which will see members of staff on around £11,000 per annum having to go without any means to pay their bills. In stark contrast Walsh earns £740,000 a year, and therefore a £61,000 pay cut isn’t going to hurt his wallet too much.

The airline’s pilots have nevertheless been urged by their own union, Balpa, to accept shares in the company in return for the pay cuts. To accept these shares could be risky, particularly the firm’s shares tumbled at one point when Virgin Airlines boss, Sir Richard Branson, suggested that BA was no longer worth anything. Pilots will also be required to increase their working hours, which will spark health and safety concerns. If any fatal or injurious accidents were ever to be caused by this, BA could be prosecuted under legislation, ranging from legislation such as the Health and Safety Offences Act 2008 and perhaps even the 2007 Corporate Manslaughter and Corporate Homicide Act.

There is also no guarantee that jobs can actually be saved. Walsh recently predicted at a conference in Paris, according to the Financial Times, that “the worst of this recession is still ahead of us.” Therefore the pay cuts can’t promise BA’s survival, nor will they necessarily prevent any need for further compulsory or voluntary redundancies from happening.
Curt Finch, CEO of ‘time-tracking’ software company Journyx, believes that the “natural result of this strategy is that you will lose your most talented people and all of the losers will stay.” He suggests that an across the board eight percent pay cut would be more successful, “but perhaps the unions make that impossible.” Citing Warren Buffet, he says, “The airline industry as a whole has never made money in a single year since the Wright brothers invented powered flight: when have they not been whining?”

Anyway, what is the legal position? Can BA and other companies really expect staff to work for no pay? There is nothing to stop them in law, providing their staff members agree to the offer and are not forced to accept it. The UK government seems to accept that drastic times lead to radical measures. “It is for businesses, employees and their representative to decide how they respond to the current economic climate”, says Department for Business, Innovation and Skills spokesman Alex Hamilton. He warns that employers should nevertheless comply with current employment legislation, including the National Minimum Wage.

To force an employee to work without pay would be unlawful, according to Jacqui McGuigan of TMP Solicitors. Employment contracts don’t usually have a clause that allows an employer to reduce the pay of that particular member of staff involved in the agreement. To force someone to take a pay cut would not only be bad for employee-employer relations, but it could also lead to a rise to a claim under the Employment Rights Act 1996. Such an unlawful action would also be a breach of contract. So with the consent of its employees, British Airways is fully entitled to lay off staff on a temporary basis or “offer short-time working as a means to avoid making staff redundant and saving costs”, she explains.

Consideration should also be given to the Working Time Regulations, and the Information and Consultation of Employees Regulations. Companies need to ensure that they comply with any existing laws, consult and gain the consent of their employees and their representative to avoid what could otherwise create a situation where costly legal action is begun against them.

“To impose a pay cut would leave an employer open to an employee bringing a case of unfair dismissal”, says David Morrison – a partner of The Khan Partnership. The law is on the side of the employees, but they would most probably have to resign to bring a claim to a tribunal. They could then claim for “constructive dismissal within a reasonable period”, he explains. However, this would mean having to find a new job and that’s not an option for many people during this recession. So in many cases, most people wouldn’t have much of a choice when faced with an offer of a pay cut or redundancy. Most employees of any company facing the same situation as BA’s staff will elect to keep their jobs – no matter what it takes.

Greed is officially passé. Once celebrated as the engine that fuelled a booming global economy, greed is now blamed as a root cause of crash and recession.

Next to go could be vindictiveness. Not because in our new downturn economy we all want to be nicer to each other. Rather, as research from the universities of Bonn and Maastricht suggests, being nasty to other people is not in our own self interest.

People who live by an “eye for an eye” philosophy just don’t do as well in life, the researchers found. They experience more unemployment than other people, they have fewer friends, and they are generally less satisfied with their lives.
Social scientists talk about reciprocity. If you respond to a kind act, such as an invitation to dinner, with a kind act in return, then you are displaying what’s called positive reciprocity.

And if you avenge a perceived unfairness with something nasty in return, then that’s negative reciprocity. Some people incline to being positive, others negative, and some do both.

The researchers used data gathered by the German Institute for Economic Research to find out about attitudes to reciprocity.

They asked a selection of Germans to state, for example, to what extent they would repay a favour or, on the other hand, an insult on a tit∞for∞tat basis. These answers were then matched with other data in the survey that described how happy people were, their employment experiences and so on.

They found some interesting patterns. People who tend to be positively reciprocal are very sensitive to workplace incentives, for example.

Offer them a good pay rate, and they will be more likely to work overtime than people who are negatively reciprocal. That means they tend to earn more money.

This is in stark contrast to vindictive people. With such people the equation “more money = more work” does not always apply. Even pay cuts are not an effective means of bringing negatively reciprocal people back into line.

Ultimately the danger arises that they will take revenge – for example, by refusing to work, or by sabotage. “On the basis of these theoretical considerations it would be natural to expect that negatively reciprocal people are more likely to lose their jobs”, says Professor Armin Falk of Bonn University.

“Consequently, negatively reciprocal people experience a significantly higher rate of unemployment”.

The message seems to be this: in tough economic times, avoid greedy vindictive people. No wonder investment bankers are so unpopular just now.

Reputable business schools offering accredited MBA programmes rightly point out that there have been significant changes in the design and delivery of the MBA over recent years. The qualification has retained its relevance, value and continuing appeal precisely because it has adapted and responded to changing business needs and practices.  

However, there are some who argue that, in the current climate, a more fundamental review of the MBA is called for if it is to deliver business leaders with the skills, knowledge and capabilities required for the future. Ten years ago the MBA might have been described as a qualification primarily for young high-flying executives working in finance or consulting. Originating in the US, MBA full-time programmes were typically delivered over two years and teaching methods relied heavily on ‘chalk and talk’ and the case study approach. The focus was on the core functions of business such as finance, economics, accounting, strategy, marketing, operations and quantitative analysis. But this scenario has changed.  

Through its research, the Association of MBAs, which accredits 167 leading business schools around the world to offer MBA programmes, has demonstrated the changing nature of the MBA and the increasing diversity of students enrolling for the qualification. The average age of an MBA student is now 33 and these students come to business school with a significant amount of work experience and practical skills. Roughly 70 percent of MBA students are enrolled on part time courses or other ‘flexible learning’ options. Part-time and distance learning courses attract a higher number of women students – a group which business schools have historically found it hard to attract to the MBA. And typically these days the full-time MBA is delivered in one year rather than two.

The curriculum has also changed, with most of today’s courses including topics such as change management, business ethics, sustainability and leadership skills. Learning tends to be in groups with students working on real business projects and, at the same time, discovering the challenges of working in multi-cultural teams. And today’s MBA students are far more diverse, coming from a range of employment sectors and with wider career horizons. Now over 70 percent of MBA graduates are working outside the traditional fields of finance and consulting, and a significant proportion are choosing to work in small businesses.   

When we ask students and graduates about their motivation for doing an MBA and what they got out of their investment, most talk first about their self development, new learning and the experience of working with other intelligent, experienced professionals. The impact of the MBA on their career and salary is still a key benefit, but this is no longer the sole motivation or the most valued outcome.

So what next for the MBA? In 2009 the Association of MBAs conducted a global survey of MBA alumni, employers and accredited business schools in a major project to assess the impact of the economic downturn on the MBA. We wanted to identify the skills, competences and knowledge that MBAs need in the context of world economic events in order to be successful future business leaders. The report’s findings confirmed that the MBA already delivers more than just career advancement.

Alumni particularly value the ability they have acquired, through their learning, to understand the complexity of business, to apply strategic thinking and to manage change in organisations. Not surprisingly, given recent events, there was a view amongst those surveyed that the MBA needs to place more emphasis on areas such as sustainability, ethics and risk management. In fact the dominant view expressed by respondents was that the MBA should focus more on stakeholder rather than shareholder value and that the course content should be much broader. There should be more coverage of areas such as entrepreneurship, creativity and innovation as well as the CSR-related subjects.

One of its leading faculties, “Business, Economics and Statististics” is going to celebrate 250 years of existence in 2013.

At present, about 85,000 students are enrolled at the University of Vienna, in 182 courses, of which 54 are Bachelor programmes, 112 Masters programmes, five Diploma programmes and 11 PhD programmes. The University of Vienna is also the largest teaching and research institution in Austria with close to 8,600 employees, 6,500 of which are scientists and academics.

The University has always been strongly orientated towards international research and teaching and today continues to maintain strong relationships with other countries, having formed ERASMUS alliances with all 311 partner universities involved in the scheme. Thanks to this partnership agreement, students from approximately 130 countries attend more than 10,000 lectures at the University of Vienna every year.
 
An outstanding faculty
At the heart of this revered institution lies the Faculty of Business, Economics and Statistics. Building upon a track record of excellence in research, this Faculty has established a range of prominent PhD programmes, which serve  to bolster the University’s status as one of the top research institutions in Europe.
 
The achievements of the Faculty of Business, Economics and Statistics are most visible in its league table rankings. In 2009 the Department of Business Administration secured first place in the Handelsblatt league table, while at the same time its researchers in the field of business administration achieved three places (1st, 2nd, 4th) out of the first four in the ‘life work’ category.
 
In addition to this, in previous years the Department of Economics within the Faculty had been placed seventh in the Handelsblatt ranking 2008, and the same place had also been reserved for the University of Vienna in the THES-QS World University Rankings 2008. The discipline of Economics is catered for by the Vienna Graduate School of Economics, a newly-founded graduate school. The school is a collaboration of the University of Vienna and the Institute of Advanced Studies and it is financed by a research grant provided by the Austrian Science Foundation. The school will take in a first batch of students in autumn semester of 2010.
 
Such glowing accolades are testament to the quality of the doctorate programmes, and graduates of these programmes boast some reputable names. Joseph Schumpeter, an Alma Mater of the University of Vienna, was a leading light in the development of economic analysis at the beginning of the 20th century. He obtained a PhD at the University in 1906. One of the most notable alumni of recent years is Peter Löscher, the president and CEO of German corporate giant Siemens, who holds an MBA in economics from the University.
 
The single attribute of a PhD programme that distinguishes it from any other academic programme can be summarised in a single word: Research. A PhD degree requires extended study and intense intellectual effort. The Faculty of Business, Economics and Statistics at the University of Vienna aims to recruit PhD students from among the best in the world; those who are the best qualified, the most motivated and who are dedicated to performing research.
 
The Faculty promotes a scientific mode of working and thinking, based on critical queries in the relevant contexts, rather than the mere reproduction of commonly accepted knowledge. PhD programmes are offered in the research fields of Economics, Finance, Logistics and Operations Management, Management, and Statistics and Operations Research.

The Economics Department accepts around ten candidates per year, and the Department of Finance just five or six. The Management and Operations Management Department takes on around 30 scholars.
 
Raising the bar
So what sets the University aside from other leading European institutions? One key attribute is the rich history of the university. Born in an age when social enlightenment was sweeping across Europe, the university provided a new form of education to the rapidly-changing Austro-Hungarian Empire. Today the university, located at a pivotal point between Eastern and Western Europe, caters for the developing needs of former ‘Eastern Bloc’ countries, and in this way is proud to continue to offer education on the back of social reform.
 
English is the language of choice within the university, not merely because it is the international language of business but because it acknowledges that the best professors are found internationally, not locally.
 
Furthermore, political developments over the last decade have contributed to the university’s development. In 2002, with the election of a new Conservative government, the university got under private law but is still financed by public authority. One of the key benefits of this new arrangement was that the government took a greater interest in the management of the university, and set in place a three∞year development plan, which is reviewed every three years. This goes a long way to ensuring that the university’s business targets and educational objectives are monitored and achieved.
 
Being under private law, the university has more flexibility in  terms of pay, and is able to secure the services of some of the world’s leading professors with the offer of lucrative contracts. Previously, wages had been based primarily on the age of the academic and their length of tenure.

The new public funding/private ownership arrangement has also allowed the university to obtain new equipment and to embark on the construction of a new 40m euro Research Faculty to complement the Faculty of Business, Economics and Statistics, which, in addition to having the convenience of being located in the centre of Vienna, offers improved library and computer facilities and is helping to pioneer the new branch of Experimental Economics.
 
A further result of this partnership has been the establishment of an institution that can roughly be translated as the University of Applied Science. Adhering to a model similar to the UK’s former Polytechnic system, this offers students a more practical and slightly lower level of education than the main University itself.
 
Another key differentiator is the active encouragement of interdepartmental collaborations. As an example, the department of Economics has formed active partnerships with a number of its departments. In addition to creating new research groups with the Mathematics department it works closely with the department of Psychology, creating the new discipline of experimental economics and a new Masters programme of quantitative economics. In real terms, this means that rather than merely discussing economics, the department is able to reach real numerical conclusions.

For those exceptionally talented, research- focused students contemplating on embarking on the next stage of their academic careers, the Faculty of Business, Economics and Statistics offers an unparalleled educational experience, within an outstanding academic institution that has a unique blend of Austro-Hungarian heritage and a progressive approach to education.

The HSG has shown itself to be highly successful, having been consistently ranked among Europe’s leading business universities. The University of St.Gallen is partner of the CEMS Master’s Programme in International Management, ranked number one worldwide by the Financial Times in 2009.

Its holistic education, which meets the highest academic standards, has earned it the seal of approval of the EQUIS and AACSB accreditations. Academic degrees can be obtained at the Bachelor’s, Master’s and Doctoral levels. In addition, the University of St.Gallen offers first-class and comprehensive courses in executive education. Thanks to an increasing number of programmes taught in English, the HSG has shown itself to be
attractive to international students.

The focal points of research at the university
of St.Gallen are crystallised in its 40 institutes and research centres, which constitute an integral part of the university. The institutes, which are largely autonomous and mostly self-financing, still remain closely connected to university operations.

HSG Alumni, the organisation of former students of the University of St.Gallen, consists of more than 19,000 members and 90 clubs.

Commitment with an international reach
HSG students do not merely pursue their studies but also devote their time to a wide variety of activities in more than 80 student associations and initiatives. One of them, the St.Gallen Symposium (ISC), is of international significance. It is organised annually by students, provides the forum for a dialogue between 600 top-class decision-makers from trade and industry, academia, society and politics, as well as 200 selected students from around the world. The 40th Symposium dealt with the topic of “Entrepreneurs – Agents of Change” and took place at the University of St.Gallen on 6th and 7th May 2010.

Executive education at the HSG
The University of St.Gallen has always understood executive education to be one of its central tasks besides basic education and research. The integrative  approach of the Executive School of Management, Technology and Law (ES-HSG) and the St.Gallen Management Model help practitioners to better master their responsibilities and to practice holistic management. The diverse system of institutes and chairs at the University of St.Gallen forms the platform for a comprehensive range of executive education programmes. It is implementation∞ and practice∞oriented and meets the highest academic standards.

The Master’s Programme in Strategy and International Management (SIM)
The SIM is the flagship management programme for tomorrow’s global leaders at the University of St.Gallen (HSG). As one of the leading providers of outstanding education in management, it generates exceptional value for students, employers and society. Graduates are equipped with the necessary competencies for outstanding careers as respected and responsible managers, business consultants and entrepreneurs in the global marketplace. Most students sign professional contracts before completing their studies. SIM students are an exclusive and diverse group of highly motivated and ambitious personalities. They clearly differentiate themselves from peers through a convincing track record, exceptional career prospects and the benefits of an inspiring worldwide community network. Students enjoy a first∞class learning environment allowing small interactive classes featuring high cultural diversity and taught by experienced faculty, that combines academic rigor with managerial relevance. The famous St.Gallen Management Model forms the heart of the curriculum and allows for an integrative approach to studying management.

Further information: www.unisg.ch; info@unisg.ch; www.stgallen-symposium.org; www.es.unisg.ch; executive.school@unisg.ch; sim@unisg.ch