Sunday, 12 December 2004
Chief executives enjoy rising remuneration
In a story titled "CEOs and their Indian rope trick
", The Economist
says that executive pay should reflect performance, with total remuneration fluctuating with company performance. However, it reports that in practice, there has been little sign of that.
[T]op executives' remuneration spiralled up, with the stockmarket as a whole, in the boom years at the end of the 1990s. But it continued to levitate thereafter, like the subject of an Indian rope trick. Mercer, a consultancy, says that the median compensation of bosses of big American firms...rose from $5.2m in 2000 to over $7m in 2001, a year when tumbling share prices cut shareholders' assets by some 12%.
As a result, the difference in pay between top executives and their workers has grown.
In 1991 the pay of the average American large-company boss was about 140 times that of the average worker; by last year, it was over 500 times, and growing. Last year's 7.2% rise in the average American boss's total compensation is worth over $400,000--nice work, if you can get it.The Economist
adds that the European chief executive's pay lags behind that of the American. According to the Hay Group, a consultancy, the basic salary of the chief executive is about the same on both sides of the Atlantic, but while variable pay adds only 150 percent to that in Europe, it adds 400 percent in America.The Economist
highlights several initiatives to address the issue of high executive pay. One was by CalPERS, America's largest public pension fund, to hold "directors and compensation committees more accountable for their actions". Another is the possible introduction of accounting rules that would compel American companies next year to treat share options as expenses to discourage their use (share options allow executives to profit from increases in the price of their company's shares, even when the price movements are not directly attributable to the executives).
Of course, the way that the boards of most corporations are structured, chief executives usually have an advantage in determining their own remuneration anyway. Individual shareholders often lack voting clout, with shareholdings divided among many parties. Even the majority shareholder -- sometimes represented by just an officer from the parent company -- would likely have less at stake when determining the chief executive's pay than the latter himself.
Furthermore, the chief executive, placed between the shareholders and the rest of the company, controls information flow to and from the company, while also being able to play off shareholders against each other. Thus, politically astute chief executives can concentrate actual power in the boardroom in themselves instead of the shareholders, where it rightfully belongs.
All these factors give chief executives an advantage in squeezing out lucrative remuneration for themselves. Regulation to improve corporate governance and dampen executive remuneration works best when it takes this advantage into account.
Friday, 3 December 2004
Stress and ageing
It is commonly believed that stress accelerates ageing. Scientists have new evidence that this is indeed so.
A team from the University of California at San Francisco has found that the stress of caring for a sick child can add about 10 or more years to the biological age of a woman's cells. It does this by affecting key pieces of DNA called telomeres which are involved in regulating cell division, they say.
Telomeres are strips of DNA at the end of chromosomes which appear to protect and stabilise the chromosome ends. However, they shorten each time a cell divides, until there is nothing left, making the cell more defect-prone after division and increasing the risk of age-related disorders. The tendency for telomeres to shorten at cell division can be mitigated by an enzyme called telomerase, which helps to regenerate the ends.
The study examined 58 women, which included 39 healthy, pre-menopausal women who were primary caregivers for a child with a chronic illness, and 19 age-matched mothers of healthy children who served as a control group.
All the women completed questionnaires asking them to evaluate the level of stress they felt they had been under during the previous month. Blood samples were also taken so scientists could carry out DNA analysis of telomeres. Levels of telomerase in immune cells were also measured.
There was no difference in the telomere length of the two groups. However, in the 14 women with the highest stress scores, telomeres averaged 3,110 units in length; the 14 with the lowest stress had telomeres that averaged 3,660 units. The scientists translate this shortening to 9 to 17 additional years of ageing.
Within the care-giving group, the longer that a woman had been a care-giver, the shorter was the length of telomeres.
The higher-stress group was also found to have lower levels of telomerase in immune cells. The researchers, led by Dr Elissa S. Epel, said this implied the immune cells could function less well and could die sooner.
It was also found that the high-stress women also had higher oxidative stress levels -- cumulative damage caused by molecules called "free radicals" -- which has been shown to speed up the shortening of telomeres in other studies.
The researchers were not able to say exactly how stress affects telomeres, but suggested that their findings showed how cellular aging could be a way in which psychological stress was linked to the earlier onset of age-related diseases.
This study has been published in the Proceedings of the National Academy of Sciences. It represents an important step towards the recognition among health experts that psychological health plays an important part in physical health.
Wednesday, 17 November 2004
Colin Powell steps down as secretary of state
US Secretary of State Colin Powell has resigned. He will be replaced by national security adviser Condoleezza Rice.
The Washington Post (quoted by Matthew Yglesias
) had this to say:
Mr. Powell's departure may well lead to fewer arguments and more consistent action by a second Bush administration as a team of officials closer to Mr. Cheney and Mr. Rumsfeld takes over at the State Department. Yet it is a measure of the stunning absence of accountability under Mr. Bush that it is Mr. Powell who leaves, while the architects of the failed and even disastrous policies he opposed, from postwar Iraq to Guantanamo Bay and Abu Ghraib, remain in office.
Matthew Yglesias's own take on the resignation is that
...Powell is not being let go despite having been right so much as he is being sacked because he was right. Meanwhile, since Don Rumsfeld was wrong, George W. Bush can't fire him, because firing him would be an admission that Rumsfeld was wrong and Bush, therefore, was wrong to side with him.
Interesting point. Does this mean then that President Bush will continue the same foreign policy as in his first term? Not necessarily. Even assuming that it is true that Bush is not willing to publicly acknowledge Rumsfeld's foreign policy mistake by removing him from his appointment, that does not necessarily imply that he has not privately acknowledged it.
Time will tell.
Thursday, 4 November 2004
Democrats let down by flaw in democracy
President George W. Bush has won another four years in office. Even before the declaration of his victory, however, Nicholas Kristof had written in the New York Times
how the Democratic Party was let down by the very people it was supposed to help.
In the aftermath of the civil war that the United States has just fought, one result is clear: The Democratic Party's first priority should be to reconnect with the American heartland... Mr John Kerry's supporters...should be feeling wretched about the millions of farmers, factory workers and waitresses who ended up voting -- utterly against their own interests -- for Republicans.
One of the Republican Party's major successes over the past few decades has been to persuade many of the working poor to vote for tax breaks for billionaires. Democrats are still effective on bread-and-butter issues such as health care, but they come across in much of America as arrogant and out of touch the moment the discussion shifts to values... To put it another way, Democrats peddle issues, and Republicans sell values...
"The Republicans are smarter," mused Oregon governor Ted Kulongoski, a Democrat. "They've created...these social issues to get the public to stop looking at what's happening to them economically. What we once thought -- that people would vote in their economic self-interest -- is not true, and we Democrats haven't figured out how to deal with that."
To appeal to middle America, Democratic leaders do not need to carry guns to church services and shoot grizzlies on the way. But a starting point would be to shed their inhibitions about talking about faith, and to work more with religious groups. Otherwise, the Democratic Party's efforts to improve the lives of working-class Americans in the long run will be blocked by the very people the Democrats aim to help.
The Democrats' handling of specific issues often score well with the more educated Americans who can understand the complexities of their arguments. However, the rest of the country have trouble understanding these arguments and thus will not be impressed.
This is a reminder of the well known flaw in democracy that people often don't know what is best for them. This makes it difficult for them to effectively exercise their right to vote.
Education, information, freedom of speech -- these are all prerequisites for a properly-functioning democracy. It appears that even in the United States -- the richest and most advanced nation on Earth -- not all of these prerequisites are fully met.
Monday, 25 October 2004
Health care and the market
Recently, The New York Times
carried an article by Donald L. Barlett and James B. Steele on health care in the United States. In the article, the authors assert that Americans do not have adequate health insurance coverage because of "the inability of market-based, for-profit medicine to deliver on the political promises".
We spend more per capita on health care than any other developed country. Yet on the important yardsticks, like life expectancy measured in healthy years, we don't even rank among the top 20 nations. In fact, according to the World Health Organisation, we come in an embarrassing 29th.
The authors claim that the market fails in the following:The money in health care is in disease treatment whereas good health care requires disease prevention.The market focuses on demand rather than on need, and carries out marketing to create that demand.The United States government does not exert influence over prescription drug prices, so Americans pay more for these drugs.
The authors recommends the following:
What's needed to control the costs and to provide basic health and hospitalisation coverage for all Americans is an independent agency that would set national health care policy, collect medical fees, pay claims, reimburse doctors fairly and restrain runaway drug prices -- a single-payer system that would eliminate the costly, inefficient bureaucracy generated by thousands of different plans.
However, the authors' recommendation must be treated with a high degree of skepticism. In my opinion, the problem lies not in the fact that the market cannot deliver proper health care to Americans but that the United States has failed to provide an efficient, competitive market.
The health care market is always likely to be controlled by health care professionals because of the concentration of knowledge in the latter. An efficient market requires a free flow of information. When information between service providers and consumers is as unbalanced as it usually is in health care, the resultant market is also unlikely to be very free.
Therefore, health care regulation must focus on redressing this imbalance. Instead, health care regulation in the United States has often further distorted the free market.
Many economists have already pointed out that onerous safety requirements in drug regulation raises the cost of bringing new drugs to the market, which are then passed on to consumers with the help of patent laws that restrict competition. Contrary to what the authors assert, the United States already influences drug prices through safety and patent regulation. But because the influence is by way of reducing effective competition, prices go up.
Which makes it ironic that the authors want a single agency to control the entire health care system. The single agency will be devoid of competition and be one huge bureaucracy, with all its attendant inefficiency and disregard of market needs typical of such bureaucracies. It is hardly likely to result in an affordable and accessible health care system for the United States.
Friday, 15 October 2004
Cross-strait talks unlikely in the near future
Taiwan President Chen Shui-bian had, on 10 October, called for a resumption of cross-strait talks between China and Taiwan. However, because of his failure to accept the one-China principle, China has now rejected his proposal.
On 13 October, Zhang Mingqing, spokesman for China's Taiwan Affairs Office, responded to President Chen: "Chen Shui-bian claims that he has intentions of easing tension and confrontation across the strait, but in his speech he obstinately sticks to his stand of one country on each side across the strait."
Zhang called the remarks "an open and audacious expression of Taiwan independence", adding that it "constitutes another grave provocation to the peace and stability across the Taiwan Strait".
China wants the one-China principle to be acknowledged by Taiwan before starting talks. Agreement on this principle, according to Beijing, was the basis on which the two sides met in Hong Kong in 1992, and is often called the 1992 consensus.
Zhang reiterated China's stand on the 1992 consensus on 13 October: "It is our consistent stand and we have reiterated many times that if Taiwan authorities acknowledge the 1992 consensus, cross-strait dialogue and talks can be resumed immediately. This stand has never changed."
And it is unlikely to change in the near future. China wants unification. Taiwan wants greater communication links for its businesses. Starting talks without agreement on the one-China principle confers relatively little benefit to the mainland, but suits the Taiwanese government just fine.
For the latter reason, cross-strait talks is a bargaining chip which Beijing would want to withhold until Taiwan concedes on the one-China principle. And as long as President Chen panders to the pro-independence groups in Taiwan, that concession is unlikely to happen.
Friday, 8 October 2004
US lifestyle worsens children's health
A recent New York Times report stated what many people already think: A US life-style is not healthy.
Foreign-born children are healthier when they arrive in the United States than those of the same age who were born in the country, a study shows. But the longer immigrant children stay in the US, adopting the diet and lifestyle of their peers, the unhealthier they are likely to become, according to the report released this week.
The study is a synthesis of several national studies by the David and Lucile Packard Foundation, a California philanthropy that studies the well-being of children.
The report suggests that a language barrier may ironically help immigrants.
"It's a bit of a twist," said Ms Kathleen Harris, director of the National Longitudinal Study of Adolescent Health...cited in the report. "Linguistic isolation is a protective thing because it slows assimilation, and most people think assimilation is good." But, she added, "in this case, assimilation means adopting unhealthy behaviour and risk factors from which they are protected in their own culture".
The report stated that among first generation of immigrant adolescents, there was less asthma, less obesity and fewer school days missed than was the case among the second generation, that is, those born in the US to immigrant parents. The foreign-born children were also less involved in substance use, sex, delinquency and violence.
Apparently, an American life-style is not what it's cracked up to be. Then again, I am sure there are many who never thought it was.
Monday, 4 October 2004
China tightening media reporting on Japan
A recent Asia News Network despatch reported that China is tightening controls on its domestic media reporting on Japan to rein in anti-Japanese views. This is supposed to be an attempt to prevent bilateral relations with Japan from deteriorating.
I can understand the reason for the measure. Nationalist sentiment in China is very strong. So strong that it is often irrational, with individuals hitting out in emotional outbursts whenever perceptions of slight against the Chinese people are evoked.
And Chinese sentiment against Japan has always been strong as a result of the latter's wartime atrocities. During the Asian Cup football championship held in China in July and August, the crowd regularly jeered the Japanese team, and supported any other team that played against Japan.
Singapore also became the target of mainland Chinese ire when then-Deputy Prime Minister Lee Hsien Loong visited Taiwan (see my earlier post, "Lee Hsien Loong's Taiwan visit unleashes storm from China
Such expressions of negative sentiment are obviously unproductive. China may be an emerging giant, but it still cannot afford to alienate its neighbours and friends.
Clamping down on the media, however, may not be the most constructive way of handling the situation. At a time when China is supposed to be opening up to the world, what the Chinese people need is more information, not less. And controlling the official media does not prevent negative sentiments from being disseminated through the Internet.
Perhaps a more constructive way of handling the situation is by combating negative public views with positive ones. Government officials could point out the many benefits that China derives from its relations with Japan, such as investment and technology transfer, while downplaying past grievances.
The only problem with this, of course, is that such a course of action requires more effort on the part of the Chinese government and takes longer for the results to become obvious.
So it looks like we are stuck with China continuing to use the old technique of media control to achieve its official aims.
Sunday, 26 September 2004
Kidnapping rages on in Iraq
In the wake of the American occupation of Iraq, kidnappings have been occurring on a regular basis. More than 100 foreigners have been kidnapped in Iraq since Saddam Hussein was toppled about one and a half years ago, and about 30 have been killed. Many more Iraqis have also been kidnapped.
Last week, two American civil engineers were beheaded, while another Briton is threatened with the same fate. In the same week, six Egyptians and four Iraqis working for the country's cell-phone company Iraqna were also kidnapped.
Some experts think that these kidnappers are essentially interested in the publicity. Others think that common criminals have joined the fray, working with insurgents to profit from what has been called a "hostage economy" where political groups "outsource" the seizures to criminal gangs for money.
Steve Casteel, the United States' senior adviser to Iraq's Interior Ministry, says that the terrorists use kidnapping to intimidate and enforce their will as well as impose a sense of insecurity on Iraqis.
The media's role in promoting the kidnappings have also come under scrutiny. Most media companies outside the Arab world are now refraining from showing the most graphic and horrific scenes -- that is, the beheading -- but the mere reporting of these events give the terrorists the publicity they seek.
As Lord Tebbit, the former Tory Cabinet minister who was himself a victim of terrorism in the Brighton bombing 20 years ago, said: "We let this dominate the news agenda. It's meat and drink to the hostage takers."
Andrew Neil, the broadcaster and former editor of the Sunday Times, agreed, although he rejected calls for censorship. "We are playing into the hands of the terrorists... It seems to me they're rather sophisticated: they can see our TV on the web and our tabloids, and they know how it's playing. Having said all that, I see no alternative. In a free country with a free press we have to cover the news."
Ultimately, stemming the kidnapping has to come from improved law and order in Iraq itself. How that is to be done is the key question.
Christopher Beese, chief operating officer of ArmorGroup, a security company operating in Iraq, is not very confident that the question can be easily answered. "The Iraq situation is new. They are not looking for money," he said. "We have a new dimension facing us. It may well be that we do not find an answer to it."
Casteel, however, believes the police will prevail if they "stay the course". But he cautioned that that could take a long time.
Monday, 20 September 2004
Eating habits and age
A study by nutritionists at the University of Newcastle has found that adults eat twice as much fruits and vegetables as they did when they were children and take in less fat and sugar.
The study, which is published in the academic journal Appetite
, looked at the eating habits of 200 children aged 11 and 12 and then revisited the same people in their early 30s.
The finding should not come as too much of a surprise. For one thing, adults are more aware of the health consequences of a poor diet. And the fact that the consequences are more imminent for them should provide them with greater motivation to improve their eating habits.
Of course, knowing that adults eat more fruits and vegetables and less fat and sugar than children is one thing. The other question is whether they should actually start younger.
Animal studies have shown that extremely low-calorie diets produce considerably extended life spans. Significantly greater life-span extensions are achieved when the low-calorie diets are started young than when started in adulthood.
It is likely that a similar difference should apply to the high fruit/vegetable and low fat/sugar diet.
However, animal studies also show that undernutrition in young animals also cause stunted growth. That is obviously not ideal for our children.
It is not necessarily true that what is healthy for adults is also healthy for children.
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