Your Company Needs Independent Workers, at least start with an independent NED in your Board, because to be really INDEPENDENT matters

Your Company Needs Independent Workers, at least start with an independent NED in your Board,

because to be really INDEPENDENT matters

There has been a lot of debate over the past year about the merits of the “gig economy”—where people work on a project or contract basis instead of holding down jobs as traditional full-time employees. Presidential candidates have weighed in on the pluses and minuses of “gig” or contingent work. Lawsuits against on-demand work companies like Uber and Handy are widely covered in the press while investors continue to pour billions of dollars into similar startups.

For the most part, these discussions and debates have focused on companies like Uber and Lyft that connect independent contractors with customers to provide consumer services. More often ignored is the growing population of contingent workers, including independent contractors, statement-of-work-based labor, and freelancers who provide services to corporations. But this is a growing population of workers, many of whom are highly skilled.

Attracting, retaining, and managing these highly skilled workers will require new ways of thinking about talent management and the role that external talent plays. Companies will need to become “the client of choice” for these high-end contractors.

Recent research illustrates the growing corporate use of contingent workers:

Our own research reinforces these findings. The MBO Partners 2015 State of Independence workforce study found that 6.4 million Americans report that they provide professional services to corporations on a contingent or contract basis. Of these, about 2 million report earning $75,000 or more last year.

Not only is this group large—by way of comparison, this is substantially more than the roughly 4 million Americans who work in the automotive industry, including those working in car dealerships and automotive parts retailing—it’s also growing. Our study shows the number of contingent workers providing professional services to corporations has been growing at about three times the rate of overall employment over the past five years.

Two broad shifts—one on the employer side, the other on the worker side—are driving this boom. First, companies increasingly need a flexible workforce to compete globally. In our research we heard from company leaders that their businesses are turning to independent workers to increase business flexibility and agility. Independent workers allow them to quickly and efficiently scale staffing up and down to meet shifts in demand and changing business circumstances in an increasingly volatile and always-changing global economy. Businesses are also turning to highly skilled independent workers due to difficulties in attracting and retaining employees with hard-to-find specialized talents.

Second, many skilled professionals want independence and are going into contingent work to gain greater work/life flexibility, autonomy, and control over their careers. These highly talented professionals are realizing they are able to go off on their own and make as much or even more money — so they’re doing just that.

These professionals are in demand, and they know it. According to our research, 83% say they have a lot of choice or some choice over who they work with. Only 17% report having little or no choice over who they work with. In other words, these talented professionals can choose what to work on and with whom to work.

So what do these highly skilled independent workers want from their clients?

Being paid well and on time is obviously important to independent workers. But less obvious — and generally more important — are the non-monetary reasons independents choose their clients.

Skilled independents want the ability to control their lives, have meaningful work, and to be part of the team. When it comes to deciding which clients to work with, 96% selected “Value my work” as an important client attribute. Right behind was “Allow me control over my schedule” (89%) and “Allow me control over my work” (88%). “Treat me as part of the team” came in fourth. While independents value their autonomy and don’t want to be traditional employees, they also want to be treated as contributing team members.

Skilled independents are also looking for support services and administrative help. These include a reasonable legal agreement process, quick and efficient onboarding, timely responses to issues or questions about their arrangement.

Beyond administrative help, independents prefer clients that offer additional services that make it easier for them to be successful, such as job boards showing potential new opportunities, access to training programs so they can expand their skills, and opportunities to participate in networking events and meet-ups with client employees and other contract workers.

Companies have long strived to become employers of choice for full-time regular employees — the surge in employer rankings and websites like and demonstrate the importance of doing that. But with non-employees increasingly bringing much-needed talent, companies need to broaden their definition of what it means to be a “great place to work.”

Pros and Cons of replacing paper currency with e-currency

mirco balatti

Paper currency is deeply ingrained in the public’s image of government and country, and any attempt to change long-standing monetary conventions raises a host of complex issues. Despite huge and ongoing technological advances in electronic transactions technologies, it has remained surprisingly durable, even if its major uses seem to be buried in the world underground and illegal economy. There are many arguments for not disturbing the status quo, ranging from the importance of seigniorage revenues to civil liberties arguments.

Nevertheless, it is important to ask whether currency in paper form has outlived its usefulness. And although today’s crypto-currencies fall far short of being true currencies – for one thing their prices are simply too volatile – the underlying technologies may ultimately strengthen the menu of electronic payments options. With many central banks now near or at the zero interest rate bound, there are increasingly strong arguments for exploring how paper…

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FINTECH, could Square’s business be a Wall Street darling?

A tiny part of Square’s business could make it a Wall Street darling

Square finished a bumpy ride to the public markets on Thursday, losing half of its value in its IPO pricing and then popping 45% on its first day of trading.

As the IPO buzz and excitement settles, questions about the digital-payments company’s business prospects are taking center stage.

Square’s revenue growth is slowing while losses widen, and some wonder whether its core payment-processing business is getting commoditized with shrinking margins.

But there’s a tiny part of Square that may hold the key to taking the company beyond its core business: Square Capital.

Square Capital is its cash-advance unit that has processed more than $300 million since its launch in May 2014.

It’s a tiny portion of Square’s overall business — looped under “software and data products,” which accounts for less than 4% of Square’s total sales — but it is believed to be growing significantly faster, with richer-margins than the rest of Square.

And as Square moves forward as a public company, Square Capital will play a bigger role convincing investors of its future upside.

Gillette’s razor-blade model

While the nifty credit-card swipers that plug into smartphones and tablets are often touted as evidence of Square’s innovation, the company’s future success may rely on the more old-fashioned business of making loans.

“Square can monetize [Capital] very efficiently. It allows them to build up a high-margin revenue stream to complement the traditional lines of business,” Battery Ventures’ general partner Roger Lee told Business Insider.

Battery Ventures is not a Square investor.

Square Capital follows a traditional merchant cash advance (MCA) model that lets pre-qualified Square merchants borrow money and pay back gradually. Borrowers return a small, fixed percentage of its daily sales, meaning that the more you sell, the more you return, and vice versa on a slow day.

Square makes money by charging a small percentage of premium, usually around 10% of the total, on top of the advances. It also charges a service fee when the advance comes through a third-party lender. In any case, it’s a highly efficient, low-cost business model. “Software and data products” had an over 60% gross margin vs. 36% gross margin for its core payments business.

It’s also growing fast. The broader Software and Data Products group generated $35.6 million in revenue in the first nine months of 2015, a 6X jump from the same period last year, while doling out $1 million a day to its merchants. The product is proving to be sticky, too: Nearly 90% of the merchants are choosing a repeat advance, according to Square’s prospectus.

Square deviceCourtesy of Square Inc.

Battery Ventures’ Lee said that the model could potentially evolve into something more significant that somewhat resembles Gillette’s classic razor-blade model — in which the commoditized razor grabs market share, while the higher-margin razor blades rake in the real profits.

“Think of the credit-card reader as the razor, and the loan as the razor blade,” Lee added. “The reader is basically an enabler of a much more interesting lending business. It’ll drive their long-term profitability and equity value.”

Square seems aware of this, too. Just recently, it poached top Yahoo executive Jackie Reses as the new head of Square Capital. In its IPO prospectus, Square points out the advance service as a potential future growth driver.

“Although Square Capital currently does not contribute a significant amount of revenue to our business relative to our payments and POS services, our software and data-product revenue, including revenue derived from Square Capital, has grown quickly, and we expect these products will contribute a larger portion of our total revenue over time,” it writes.

Huge market opportunity

Square’s primary market is small-business owners, and Square Capital solves a problem every small-business owner struggles with: cash flow.

Banks have traditionally overlooked small-business loans because of their low margin and high-default risk nature.

But a number of online-lending and cash-advance services in recent years have made it cheaper to acquire and process loans/advances, while using better technology and data analysis to lower default risks.

Square Capital, for example, only extends the advances to its existing users, whose financial data is already shared with Square. That allows it to have a full understanding of the merchant’s sales history and future projections, and safely determine the cash-advance terms accordingly.

This is a market that’s been hit particularly hard after the recession and never fully recovered, leaving a gaping hole for services like Square Capital to come in. The value of loan originations to US small businesses has been nearly cut in half since 2007, while banks are still slow the embrace this market.

“The 2008 financial crisis left hundreds of thousands of small businesses with pent-up demand for working capital to grow their businesses. Only 2.4 million traditional loans were originated to businesses with $1 million or less in revenue in 2013, down 54% from 2007,” BI Intelligence writes in a report.

Value Of LoansBI Intelligence

Still a long way to go

As Square admits in its S-1 filing, Square Capital is still in its early stages. In some ways, it’s also a limited product because it’s only available to the small business owners that use Square, and you can’t take out multiple advances before paying back your initial one.

“Square’s merchants are smaller,” IVP’s general partner, Eric Liaw, said, estimating that the average Square Capital advance to be less than $30,000. Online-lending marketplaces, like OnDeck, in which Liaw’s invested in, typically make six-figure loans, resulting in higher fees for the company processing it.

Square will certainly want to expand its lending to a broader swath of businesses, but that will require licenses with stricter conditions and more regulatory compliance, all of which mean increased costs.

“As our business continues to develop and expand, we may become subject to additional rules and regulations. For example, if our Square Capital program shifts from an MCA model to a loan model, state and federal rules concerning lending could become applicable,” Square wrote in its S-1.

Still, Square Capital seems to be in a good place with more room to grow, especially if Square can continue to expand its merchant base.

“The product itself will have unique advantages in the market, and it’s a big market,” Lee said. “If they focus on it, and execute it, it can be a big success for them.”

CEO’s guide to gender equality

CEO’s guide to gender equality

The case for gender equality is strong. Why is progress so slow?

Progressive executives know that gender equality is not only the right thing to do but also the smart thing. That’s why more CEOs, heads of state, and university leaders are committing themselves to gender-equality goals for the institutions they lead.

But gender equality is proving difficult to achieve. How can companies and public institutions move more quickly? This CEO’s guide synthesizes multiple sources to make quick sense of a complex issue.

The promise of gender equality

Gender equality gets a lot of attention these days, and for good reason: it is not only an issue of fairness but also, for companies, a matter of attracting the best workers, at least half of whom are women. There is also considerable economic value at stake for companies and nations.

A new study by the McKinsey Global Institute finds that the world economy could add trillions of dollars in growth during the next ten years if countries met best-in-region scores for improving women’s participation in the labor force (Exhibit 1). Countries in Latin America, for example, would aim to achieve Chile’s annual rate of increase, 1.9 percentage points, while East and Southeast Asian countries would try to match Singapore’s improvement of 1.1 percentage points a year.

The difficulty

Big as the prize may be, gender equality still eludes companies around the globe. Despite modest improvements in the past few years, women are underrepresented at every level in the corporate pipeline—especially the senior level (Exhibit 2).

Why is progress in gender equality so hard to achieve? A number of factors are involved, but one leading reason is undoubtedly unconscious bias. Film actress Geena Davis believes that it results, in part, from lopsided male representation in television and film—a long-standing trend observed by the Institute on Gender in Media that she founded. “When we present the data to studios and content creators,” she says, “their jaws are on the ground. In family films, the ratio of male to female characters is 3:1. Shockingly, the ratio of male to female characters has been exactly the same since 1946. Of the characters with jobs, 81 percent are male.”

Perception gaps may also be an obstacle. McKinsey research on diversity shows that fewer men than women acknowledge the challenges faced by female employees at work. For instance, when asked whether “even with equal skills and qualifications, women have much more difficulty reaching top-management positions,” the gender divide was striking: 93 percent of women agreed with the statement, but just 58 percent of men. And while just 5 percent of women disagreed with the statement, some 28 percent of men did (See exhibit 3).

What’s more, women hear mixed messages about their own careers. “Think of a career like a marathon,” says Facebook chief operating officer and Lean In founder Sheryl Sandberg. “Long, grueling, ultimately rewarding. What voices do the men hear from the beginning? ‘You’ve got this. Keep going. Great race ahead of you.’ What do the women hear from day one out of college? ‘You sure you want to run? Marathon’s really long. You’re probably not going to want to finish. Don’t you want kids one day?’ The voices for men get stronger, ‘Yes, go. You’ve got this.’ The voices for women can get openly hostile. ‘Are you sure you should be running when your kids need you at home?’”

The solution

As top executives think about pressing forward with their own gender initiatives, they can start with four prescriptions.

Get committed. The first might seem self-evident: change initiatives must be a strategic priority to have any chance of success. Yet gender equality was a top-ten strategic priority for only 28 percent of companies in 2010, when a third didn’t have it on the strategic agenda at all. The situation improved somewhat by 2015, but there’s still a long way to go—especially given the clear link between leaders’ role modeling and time allocation—and the success rate of transformations, as Exhibit 4 shows.

Broaden your action. Our research shows that gender equality requires executives to intervene across a broad range of factors, setting in motion disparate resources and people for years at a time. The focus in these interventions must be to help women become better leaders—and to design conditions under which they can. Crucial aspects include sponsoring (and not just mentoring) women, neutralizing the effects of maternity leaves on career advancement and wage increases, and evolving the criteria companies use for promotions to include a diversity of leadership styles. To learn how eBay embarked on a journey to bring more women into its top ranks, see “Realizing the power of talented women.”

Hold challenging conversations. Companies that make progress tend to hold a series ofchallenging conversations about gender issues among their executive teams. The following five questions can help spur these discussions:

  1. Where are the women in our talent pipeline?
  2. What skills are we helping women build?
  3. Do we provide sponsors as well as role models?
  4. Are we rooting out unconscious bias?
  5. How much are our policies helping?

Sweat the small stuff. Ian Narev, CEO of the Commonwealth Bank of Australia, notes that gender equality requires a bias for action. “I like focusing on processes because it helps us get past any ‘warm and fuzzy’ elements of diversity and into action levers. For example, we discovered we had an anachronistic process that classified women on maternity leave as ‘over quota, unattached,’ which, among other things, essentially meant they couldn’t keep their cell phones or laptops. This policy may not have been initiated by anyone still at the bank, but it had gone unexamined and was preventing us from staying in contact with parents on leave and therefore [from] allowing us to work with them to create more flexible return options. Fixing it was easy; spotting it was harder.”

Are we on the way to creating gender equality in the corporate world? Present trends may not be encouraging, but greater commitment from CEOs, combined with a willingness to stay the course on big transformational-change projects, could help finally resolve an issue that’s long overdue for fixing.

Italy’s economic recovery is not what it seems

Italy’s economic recovery is not what it seems

Ask to Maltaway, Why Malta is a great opportunity for Italian Business and Skilled People as well

Italian Prime Minister Matteo Renzi looks on as he arrives to meet Ireland's Prime Minister Enda Kenny at the Chigi palace in Rome, Italy, July 10, 2015. REUTERS/ Max Rossi©Reuters

Italian prime minister Matteo Renzi

Yoram Gutgeld last week made one of the most astonishing economic statements I have heard in a long time. The adviser to Prime Minister Matteo Renzi said in an interview that Italy’s economy was immune to global developments for the next 12 to 24 months because of the tax cuts and reforms of the present administration.

The idea that a G7 club of rich nations is immune to the global economy is ludicrous. This is the 21st century. Granted, Mr Gutgeld may have spoken as the prime minister’s spin-doctor. That is part of his job. But what worries me is that the Italian government is not ready for when the impact of the slowdown in China and emerging markets hits Europe. Friday’s preliminary figures for eurozone gross domestic product show that the slowdown has started. Italy’s quarter-on-quarter growth rates have been falling: from 0.4 per cent in the first quarter to 0.3 per cent in the second to 0.2 per cent in the third.

Italy’s ability to sustain a healthy rate of growth is critical — for the country’s political stability, for its young people with no hope of finding work, for debt sustainability and in particular for its future in the eurozone. The euro has brought Italy nothing but stagnation. Real GDP is now at the same level as at the start of 2000, a year after the euro was launched. GDP today is 9 per cent below the pre-crisis level in early 2008.

If Italy fails to bounce back strongly from this recession, it is hard to see how it can stay in the eurozone. At some point it might well be in the country’s undisputed economic self-interest to leave and devalue. So when we ask whether the economic recovery is sustainable, we are not having a technical dialogue about economics. We are talking about Italy’s future in Europe.

There are three reasons why I am sceptical. The first is evident in last Friday’s GDP data. Italy is not exceptional.

The second reason is the lack of restructuring of Italian banks. The stock of non-performing loans as a percentage of all loans is about 10 per cent, which is close to the peak level in the current cycle. Many of the small and medium-sized banks are in effect insolvent. The clean-up of the banking system — following the 2008 crisis and the two subsequent recessions — has yet to happen. If it does, it will take place in a much tougher regulatory environment. From next year EU “bail-in” rules take effect. Then the Italian government will no longer simply be able to bail out banks but will have to make bondholders and depositors pay up first. Can we be sure the rotten banks will continue to sustain the recovery in this environment?

My third concern is Mr Renzi’s fiscal policy choices. His priority has been to ensure that these create more winners than losers. This is exactly what Silvio Berlusconi did when prime minister. And it should come as no surprise that Mr Renzi ends up with similar policies. Instead of reforming the public administration or the judiciary, he has opted for a cut in the housing tax. This will win votes but will not deliver the change to the economy. We have been here before.

The danger of this strategy is that it could go horribly wrong if the economic shock is big enough and the banking sector weak enough. On current projections, Italy’s 2016 budget deficit will be 2.2-2.4 per cent, depending on how you account for the cost of addressing the refugee crisis. This includes flexibility clauses that Rome has negotiated with the European Commission to take account of that cost. The original deficit goal would have been 1.4 per cent for 2016, but the EU has allowed more leeway because of economic reforms.

I have no objections to any measure to loosen the grip of austerity. But if the downturn comes along with a banking crisis, the 2.4 per cent could easily turn into 3.4 per cent or 4.4 per cent. At that point all flexibility will come to an abrupt halt. Italy will once again have to tighten policy as the economy slows.

Another non-elected “technical” government might take over. Italy might never choose to leave the eurozone for political reasons. But, if Mr Renzi’s calculations prove wrong, Italy will be at the point where it would be rational to leave for economic reasons.


10 themes will dominate world finance markets 2016

10 themes will dominate world finance markets 2016

The experts at Goldman Sachs have begun rolling out their outlooks for 2016.

In a client note on Thursday, they outlined what they believe will be the top-10 themes across global markets in the new year, which inform their various forecasts for stocks, bonds, commodities, currencies, and everything else in between.

“Growth has consistently disappointed over the past several years, but this has not prevented risky assets from increasing substantially,” the strategists, including Charles Himmelberg, wrote. “In 2016, we expect activity to continue to expand in the advanced economies, led mostly by the consumer.”

For stocks, Goldman forecast that the S&P 500 would end next year at 2,100, implying only a 5% return from current levels. And, betting on the US dollar, and against the euro and the yen, is Goldman’s top trade recommendation for 2016.

The themes reiterate some of the same big discourses of 2015, like monetary policy divergence, lower-for-longer commodity prices, and modest S&P 500 returns.

These are the 10 themes from Goldman’s report.

1. Stable global growth

1. Stable global growth

Goldman Sachs

The strategists project that global GDP will rise to 3.6% next year from an expected post-crisis bottom of 3.2% in 2015. This should calm concerns that developed markets are stuck in “secular stagnation,” or slow growth with little investment and excess saving.

They wrote that “for investors, the relative stability of the growth outlook for both DM and EM economies should be sufficient to offset concerns about the downside risks implied by this year’s slowdown in global manufacturing activity, tightening of US financial conditions and prospective rate hikes by the Fed.”

Source: Goldman Sachs

2. Lower inflation, but not by as much as expected

With the unemployment rate at a seven-year low of 5%, inflation is not likely to fall by as much as markets have priced in. That’s because labor-market slack is less, and the unemployment rate is dipping to a range that would push inflation higher.

“As US unemployment rates reach our forecast of 4.6%, we expect to see an unwind of the deflation premium that is still priced into rates and inflation markets,” the analysts wrote.

“In sharp contrast to the loose intuition that ‘low commodity prices are deflationary’, commodity-price inflation could easily exceed 20% next year,” they forecast.

Source: Goldman Sachs

3. Sustained monetary policy divergence

“While one of the lessons of 2015 is that the Fed will likely be cautious about giving a green light to large and rapid US Dollar appreciation, the resilience of the US economy in the face of the substantial Dollar appreciation since mid-2014 gives us confidence that the Fed will ultimately tolerate further Dollar strength as it tightens policy through 2016,” the analysts wrote.

On the other hand, the European Central Bank and the Bank of Japan would still be dovish amid the “fragility of their recoveries.”

Source: Goldman Sachs

4. Lower oil prices

4. Lower oil prices


US oil inventories are at the highest levels for this time of year in nearly a century, and the risk that they could reach full capacity is growing.

“On current trends, our team does not expect the limits of storage capacity to be reached,” the analysts wrote. “But there is always the risk that demand will unexpectedly fall short (or that supply will surprise), at which point the only way to clear the excess supply in the physical market for oil is with sharp price declines.”

Source: Goldman Sachs

5. A broad decline in commodity prices, in varying degrees

5. A broad decline in commodity prices, in varying degrees

The rationale here is that supply of CapEx commodities like steel and iron ore is harder to take off the market. The high fixed costs of facilities like mines makes it more expensive to suddenly shut them down, and so producers are more willing to continue producing if there’s demand.

But OpEx commodities like shale oil can cheaply be removed and restarted, although that means producers have less incentive to do so.

They wrote: “For 2016, we expect the ‘lower for longer’ theme for commodity prices to continue, but with the additional ‘demand tilt’. Namely, that China’s efforts to rebalance demand from investment to consumption should reduce demand for CapEx commodities (such as steel, cement, and iron ore) much more than it reduces demand for OpEx commodities (such as energy and aluminum).”

Source: Goldman Sachs

6. The global savings glut is reversing

6. The global savings glut is reversing

Goldman Sachs

The “global savings glut,” a term coined by former fed chair Ben Bernanke, was created as oil prices rallied in the late 2000s.

The strategists wrote: “The surges in petrodollar savings in the pre- and post-crisis periods are clearly visible. Equally visible, if less remarked upon, is the recent collapse of petrodollar savings following the collapse of global energy prices. In addition, Exhibit 7 shows the EM FX reserves, too, appear to have peaked (another source of saving cited by Bernanke). In our view, these savings declines are bearish for rates, just as they were arguably bullish for rates during the pre-crisis period.”

Source: Goldman Sachs

7. Limited stock market returns

Goldman’s price target for the S&P 500 in 2016 is 2,100, implying just a 5% increase from current levels.

“Due to the delayed timing of rate hikes, the downside risk to price-earnings multiples is probably greater this year because the positive growth surprises that would normally accompany rate hikes are arguably behind us. Since our US GDP forecast envisions mild deceleration in 2016, equities and other risky assets will likely bear the brunt of rate hikes without the usual buffer of better growth data.”

Source: Goldman Sachs

8. An emerging market slowdown

Oil-producing countries will continue to feel the pinch of low oil prices on their economies.

“But in EMs like Russia and Mexico, where currency depreciation has helped absorb the terms-of-trade shock, the remaining adjustments to government and private-sector balances should be correspondingly less painful,” the analysts wrote. “We are more concerned about places with pegged exchange rates (such as Nigeria and Saudi Arabia), where the burden of adjustment falls more squarely on government fiscal balances, domestic households and corporates (and in the limit, the exchange rate peg may itself be at risk).”

Source: Goldman Sachs

9. Low liquidity is the ‘new normal’

Bond market liquidity has been a hot topic and concern in markets this year.

“It is difficult to see how these market conditions can improve much in 2016. The trends in post-trade visibility and CDS volumes noted above are unlikely to improve, nor is the regulatory treatment of trading books likely to improve. On the contrary, recent evidence suggests that the burdens of balance sheet restrictions imposed by the new regulatory environment continue to mount. Nor do we see any reason to think regulatory remedies are imminent. We therefore do not have much reason to expect market liquidity conditions will improve in 2016.”

Source: Goldman Sachs

10. Corporate earnings may bounce back

Corporate earnings growth plunged during the Great Recession, rebounded from 2010 during the earlier years of the recovery, and are now soft again.

The last time this pattern happened was in the mid-to-late 1990s, and it was followed by a sharp drop. The similarity has some worried about what will happen next.

The analysts wrote: “Indeed, the stable-to-rising rising trend in median margins is one of the more remarkable features of the corporate sector during the post-crisis period. The disappointment is real revenue growth, which has twice experienced a mild ‘revenue recession’ during the post-crisis period after never having experienced one over the prior 30 years. Thus, assuming margins are maintained, we see ample scope for renewed growth of revenue and earnings via the corporate sector’s beta to firming US and global GDP growth.”

Moving money with blockchain and bitcoin

Moving money across borders is expensive, time consuming, and subject to regulatory costs. By incorporating blockchain and bitcoin, new entrants are betting they can make the process cheaper and faster, opening up a profitable niche of their own

One of Silicon Valley’s premiere venture capital firms is making a bet that bitcoin will make it easier for businesses to move money around the world.

Kleiner Perkins Caufield & Byers was part of $12.5 million investment in Align Commerce, a San Francisco-based startup that uses bitcoin to enable cross-border money transfers. (KPCB is a well-known technology investor that has made notable investments in companies such as AOL, Google, and This is KPCB’s first investment in the bitcoin world, according to the Wall Street Journal.

The investment highlights growing interest in using bitcoin—and the blockchain technology behind the well-known digital currency—to revamp the way people send money between countries. As the system stands, moving money across borders is expensive, time consuming, and subject to regulatory costs. By incorporating blockchain and bitcoin, new entrants are betting they can make the process cheaper and faster, opening up a profitable niche of their own.

Companies big and small have been increasingly interested in the market. American Express made an investment in Abra, another cross-border blockchain based transfer service, last month. It was American Express’ first investment in the bitcoin world. Bank of America filed a related patent recently for technology that would allow it to use bitcoin for transferring funds between countries.

Align Commerce focuses on business customers, which the company says historically have paid hefty fees for global bank transfers. The strategy stands out from many of the bitcoin startups focused on retail consumers rather than businesses.

 “Existing systems have seen little innovation in the face of game-changing new technologies, and the entire experience is overdue for a radically different approach,” said Marwan Forzley, chief executive of Align Commerce, in a prepared statement.

Headaches with the CEO Pay Ratio Rule

Headaches with the CEO Pay Ratio Rule

In August, 2015 the Securities and Exchange Commission (SEC) adopted final rules requiring public companies to disclose the ratio of CEO pay to the median employee pay for their first fiscal year beginning on or after January 1, 2017.

Public companies will have to disclose 1) their CEO’s total annual compensation, 2) the median total annual compensation of all their other employees, and 3) the ratio between the two values.
There is much to digest with these rules and not enough space to address them here. I want to focus on the part having to do with non-U.S. employees since they are included in the definition of all employees.
Companies lobbied heavily for the SEC to let them exclude overseas employees from the calculation. This was probably because wages are higher in the United States than in almost every other country in the world and the more foreign workers that are included, the higher a multinational’s pay ratio will be.
As the SEC itself acknowledges, the disclosed ratios will not provide insight as to whether a company’s compensation is appropriate. The pay ratio of a particular company depends on a variety of factors, such as the industry in which the company operates, the geographical locations of the company, the types of employees that make up the company (i.e., professional vs. hourly), the company’s business structure, and the competitive market.
I couldn’t agree more and shudder to think about the monumental task of educating employees as well as the public at large who will have access to this information in company proxy statements.
The rules allow for certain employees to be excluded in the pay ratio calculation but again space does not permit discussing here. Regardless of these exclusions I want to focus on those employees that will be included.
One of the biggest problems I see is with determining median pay.

The “median employee” is one that is at the 50th percentile, or the “middle employee,” calculated by ordering the compensation of all employees (other than the CEO) from highest to lowest, with half of the employees having higher compensation and half having lower compensation.
This is an easy exercise when a company has only U.S. employees. Companies that have employees outside the U.S. have it considerably tougher. The rule says that in making its median employee identification, a company may make cost-of-living adjustments to the compensation of employees in countries other than the CEO’s and this is where it begins to get fuzzy.
The SEC says that cost-of-living adjustments could be based on purchasing power parity (PPP). A company that uses cost-of-living adjustments to present the pay ratio must also disclose the median employee’s annual total compensation and pay ratio without the cost-of-living adjustments. So what is PPP? The PPP conversion factor is the number of units of a country’s currency required to buy the same amounts of goods and services in a foreign market as the US$ would buy in the United States.
For the life of me I can’t see how using PPP or any “cost of living” adjustment makes sense. I’ve been involved with expat pay packages where COLA’s are one of the components. The purpose is to equalize purchasing power of household goods and services between the home and host countries. It’s not at all about comparing pay — just purchasing power.
I have searched high and low and cannot find specifics on just how using PPP would be used in calculating pay. Everyone seems to be lying low on this one — even the most “august” consulting firms. Hopefully a few more precise methods of calculation will surface over time.
There is no need to push the panic button now as this rule may be overturned between now and 2018— but Compensation professionals should put it on their growing list of potential fun projects for the future.

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