Tuesday, February 17, 2009

She Knows IT

Catherine Brune, senior vice president and chief information officer for insurance giant Allstate Corp. (Northbrook, IL) gave an excellent interview today to Ben Worthen: CIO Interview, Wall Street Journal, February 17, 2009:

Shifting Priorities: Allstate's Catherine Brune talks about what IT should -- and shouldn't -- do in a recession.

See: http://online.wsj.com/article/SB123447763114179467.html

Great advice on many levels. Her ideas about Allstate’s IT Infrastructure Library just makes terrific good sense, especially the search for “best practices” all of the time, everywhere.

Make it easy for employees to get the IT services you provide and they need.

"It started with the dream that everyone would have a common language to describe our [IT] services and that when anyone needed a service they would know exactly where to go. We built a catalog of 700 things that we do."

Make it easy for the customer to tell you what they want and need.

"[One IT team has] been working inside one of our operations groups trying to find barriers to satisfying customers that we create with our internal processes."

It’s refreshing to hear a woman who understands what it takes to succeed in today’s business world:

"I feel that when I am in a conversation at one of the advisory boards I am on, what I say is listened to. I am respected."

Technology today provides incredible opportunities for women to apply their skills and capabilities to solve relevant human problems:

"Today, you want experts who can watch people use your product or visit your Web site, gather information and come back and help create the perfect solution."

Finally, one other point: Let’s be sure our Guidance Counselors are educated and trained to foster the type of talent we need in the contemporary workplace. If today’s GC’s are playing 30 year old mind-games with little girls, then let’s get them out of our schools.

"I spend a lot of time making sure young women are not afraid to get into math and sciences. I have a daughter, and a few years ago she had been recommended for a science and math curriculum. And her counselor talked her out of it. She said, "There are only going to be two girls in there, so you won't like it." [Emphasis added] My daughter is a social butterfly, but also a good math and science student. I said, "Guess what, I don't care if you don't like it, because this could be your calling.""

Ms. Brune’s advice to readers is also great advice to young women aspiring to leadership roles:

"Don't ever take your eye off continuous improvement."

Clean Up Taxes the EZ Way

Finally, someone truly “gets it.” In his L.A. Times Opinion piece, today, Professor Kutz discusses the underlying problems and issues we need to address if we want to stop with the Zoe Baird crises with every new administration.

Clean up taxes the EZ way: The government should devise a simpler system to deal with household employees. by Christopher Kutz (professor of law in the Jurisprudence & Social Policy Program at UC Berkeley Law School and director of the Kadish Center for Morality, Law & Public Affairs) in the Los Angeles Times: OPINION, February 17, 2009

See:
http://www.latimes.com/news/opinion/commentary/la-oe-kutz17-2009feb17,0,7691987.story

Household workers are essential to today’s economy. They are not the same as fulltime, production workers; therefore the tax laws should deal at the level of the household taxpayer rather than, as currently constituted, at the corporate finance level.

This truly is an area where we need to have some insight from the people who have to manage this Kafka-esque world of state AND federal paperwork, instruction forms, quarterly submissions, deductions, and so forth.

Most families do not want to avoid paying fair and reasonable obligations on behalf of household workers. Those people are saving our lives by helping us out. But households also do not have a great deal of financial advice, let alone time to process this garbage paperwork let alone deal with bureaucrats at state and federal levels.

You want the money?? The best incentive to collect the household wage taxes is to make the process so simple a Congressman could do it, all by HIMself.

Monday, February 9, 2009

What REALLY Needs to be Done to the SEC

See: Henry Markopolos’ Testimony: Part II: Rebuilding the SEC

Herny Markopolos spent nine years trying to gat the attention of SEC regulators to look into the massive fraud perpetrated by Bernie Madoff. In his February 4, 2009 testimony before House Finance Committee, Mr. Markopolos leveled both barrels at the SEC. Most journalists read his exciting Part I: "what I learned and how I tried to do."

Almost all journalists fell asleep when they got to Part II which is much more important because it tells Chair Mary Shapiro and Congress exactly what they had better do to fix the mess that is the regulatory quagmire in New York and Washington, DC.

Here are the Cliff Notes to his recommendations.

Sunday, February 8, 2009

Why Should Women Be the Only Ones With Ethics?

Nicholas Kristof, NY Times Op Ed. columnist, surmised that we might have been better off had we had Lehman Brothers and Sisters instead of just Lehman Bros.

[Mistress of the Universe, New York Times, February 8, 2009]

The eight failed financial institutions had 14 women out of 95 directors (15%). Indy Mac had 1 woman director out of 10, Countrywide had 0 women out of 9 directors, Bear Stearns had 0 women out of 12, Lehman Bros. had 1 woman out of 11 directors, AIG had 2 women out of 13, Wachovia had 3 out of 16, Washington Mutual had 3 out of 13 and Merrill Lynch had 4 out of 11 directors.

Among the five surviving (for now) major financial institutions, there are 14 women out of 71 directors (20%). Goldman Sachs Inc. has 2 women on a board of 13 directors, Citigroup has 2 out of 15, Morgan Stanly has 2 out of 11, and Wells Fargo and Bank of America each as 4 women directors on a board of 16.

Does a 5% difference in the share of skirts on a board really predict success vs. failure? Maybe another explanation might be having a larger board of 14 directors on average (survivors) vs. just 12 directors on average (failed).

Then again, maybe the real "magic" is not in the number or the percentages, but rather the quality of the directors on the boards of the financial institution. How many people even know the women on the financial boards of directors? The women on the boards at so-called failed banks are as top-notch as you could find.

It would seem that someone who made it to the rank of Rear Admiral, as did Marsha Johnson Evans, would make a pretty good choice of a corporate director for Lehman Bros. even without considering her three years’ experience as President and CEO of the American Red Cross.

Nora Johnson, retired Vice Chair of the Goldman Sachs Group, and Virginia M. Rometty, SVP of IBM Business Services, certainly should have been the quality of director that AIG needed.

Wachovia had talent in abundance on its board: Attorney Maryellen Herringer, who came over from Golden West Financial, certainly is one of the most highly respected and competent women directors, as is Ruth Shaw with extensive experience as head of Duke Energy. Dona Davis Young is head of The Phoenix Companies (wealth management and insurance).

Washington Mutual’s three included Mary E. Pugh, one of the sharpest fixed-income money management experts in the country; Margaret Osmer McQuade, who is President of Qualitas International, an international consulting firm now focused on international politics, economics, and media; previously she was a television producer and correspondent for CBS News and ABC News. Regina T. Montoya, CEO of the New America Alliance, focused on economic empowerment for the Latino community.

Merrill Lynch’s four directors included Carol T. Christ, President of Smith College, New Zealand Barrister and Solicitor Judith Mayhew Jonas, Chairman of the Royal Opera House; Attorney Aulana L. Peters, a former commissioner of the SEC; Ann N. Reese, co-founder and co-executive director of the Center for Adoption Policy, former principal of an equity investment firm, and former EVP and CFO of ITT corporation.

IndyMac Bancorp’s directors included Lydia H. Kennard, former Executive Director of Los Angeles World Airports.

These are not light-weights by any stretch of the imagination. They are on a par with the women directors on the surviving firms, make no mistake about it. They are peers to any of the men on those boards. Yet, they represent less than 1 out of 5 people watching over our financial futures. Where were the other 4 directors? Where were the whole host of other financial people at the SEC, the OCC, the OTC, the CFTC, the IRS, HUD, FHA, FMae, -- all those people who were getting paid to manage risk, protect consumers and oversee investors?

It is not the number of women, the percentage of women, the absence of women, or the size of the board that might explain or predict the failure of boards to guide their entities through the latest fiasco. It’s certainly not the quantity of testosterone in a room. It is much more likely that board members and corporate leaders today must provide significantly more rigorous oversight of their organizations under incredibly complex duress.

The bigger problem is failed regulatory oversight, as documented in spades by Henry Markopolos’ February 4, 2009 testimony before the House Finance Committee damning the SEC re: Bernie Madoff. If that were not enough, we also have the failed due diligence of our credit rating agencies and so-called stock research professionals. To this we might add failed managerial oversight within the corporations themselves, followed by broad-based financial illiteracy among our American investors. We also have a Congress that cannot make up its mind whether it wants to give Wall Street the keys to our financial futures, through de-regulation, or to micro-manage business from the smoke-filled rooms of campaign junkets hosted by lobbyists who used to be Senators and Representatives. Congress, today, could not write a bill that the average citizen could understand: they outsource the task to an infinite array of professional and trade associations representing private interests rather than the public weal. We get what we deserve.

Maybe we should stop looking for magic bullets, like adding more skirts to the boardroom mix. Why should we expect women alone, among all of us, to be the ones responsible for cleaning up the mess that boy-wunderkinds, like Michael Milken with his financial junk, keep trying to hype to the American investment community?

I’m all in favor of taking the best ideas from the financial marketplace, like Muriel Siebert’s financial literacy ideas or Mary Lee Widener’s wisdom about counseling subprime borrowers or Sheila Bair’s recommendations for how to do sound loan modifications. But, I really do not care about the genetic make up of my ethical role models: they can have one X or two in their DNA. All I want is leaders who know and care about the difference between right and wrong. I want leaders who understand that every action, every decision they make, will produce consequences. And I want them to accept direct, personal responsibility for the negative as well as the positive effects of their choices.

Tuesday, February 3, 2009

Not a Bad Week At All

Maybe it's not as bad a week as we think it is.

Ok, we lost two major public servants: Nancy Killifer was an excellent candidate for White House Chief Performance Officer (hey, she coined the phrase). She withdrew because she could not expect to enforce rules dealing with financial accountability when she had experienced an unemployment tax lien on her property. Tom Daschle, another excellent candidate and noted authority in heath care advocacy, withdrew because of his much more significant oversights of taxes not paid on consulting income. How would he have been able to address fiscal responsibility in the healthcare sector if he couldn’t do it in his own private business? I’m still wondering how Timothy Geithner squeaked through, but then he probably is the last Democrat standing who understands anything about TARP.

They say that about $290 MILLION goes uncollected annually due to unpaid nanny taxes, unpaid domestic workers, and errors of improper calculations of taxes due or not due as private consultants or sole proprietors. The irony is that most Americans are pretty decent taxpayers most of the time. (At least pretty good compared to the tax paying record of our Fortune 500 firms.) So, it’s a miracle that more of our hardworking citizens actually make it through the quagmire of the IRS paperwork to pay the household taxes they do pay.

I just recently re-read the "Instructions" for household workers and for the 1099-MISC forms for contractors, and I’m ready to throw up my hands in disgust. The "instructions" from the IRS are pure examples of the results you get when you put 100s of monkeys into a room with typewriters. And don't talk to me about the Paperwork Savings phrasing of the documents -- that's just Kafka-esque!

If we have to lose talent like Nancy Killifer and Tom Daschle in order to focus on the real problem, then it’s not been that bad a week after all. If we learn something from this mess, this week, it should be that it’s not these good people who really are to blame. Rather it is our horrible, terrible, convoluted, sick, biased, discriminatory, unfair, and confusing tax code that must be simplified in order for us to meet today’s level of intelligence and in order for us to collect enough money to bail us out of this horrific mess that people like Nancy Killifer and Tom Daschle were supposed to help us address in the first place.

It’s the Tax Code, STUPID!

Refreshing Insights from Judith Estrin

"Must-see-TV" includes McKinsey & Co.’s conversation with Judith Estrin, veteran Silicon Valley executive, entrepreneur, and author, interviewed by Lenny T. Mendonca, director of McKinsey’s San Francisco office, and David Sims, managing editor of mckinseyquarterly.com (conducted: October 2008 in Palo Alto, CA).

View it at "How to fix the innovation gap: A conversation with Judy Estrin"
at The McKinsey Quarterly.com

See her book, Closing the Innovation Gap: Reigniting the Spark of Creativity in a Global Economy, at her web site: The Innvoation Gap.