Archive for May, 2010

Inhibiting Employee Voice

Wednesday, May 26th, 2010

Employees fears of losing their job in this economic environment and supervisors who, either knowingly or unknowingly, discourage their employees from speaking up are just two examples of the many reasons why employees may feel uncomfortable voicing their opinions in the workplace.

Harvard Business Review’s research blog recently posted the second of a series of four posts addressing why employees don’t speak up within organizations. Guest commentators include Smeal Professor of Organizational Behavior and Human Resources Management David Harrison, James Detert, assistant professor of management at Cornell’s Johnson School, and Ethan R. Burris, assistant professor of management at the University of Texas at Austin’s McCombs School of Business.

Smeal’s Linda Treviño, Distinguished Professor of Organizational Behavior and Ethics, worked on a study with Detert, recently published in Organization Science, addressing this very issue. Detert and Treviño discussed “skip-level leaders,” which is any leader above one’s immediate supervisor, and how these leaders can inhibit employee voice within an organization.

Below are excerpts from an article discussing their study on Smeal’s “Research with Impact” site.

“These skip-level leaders need to get outside their offices and other formal venues,” says Treviño. “They need to go to these distal subordinates and break down barriers, perhaps by sitting down one-on-one in the cafeteria, playing down authority differences, and sincerely expressing their desire for the truth. They must listen carefully and then respond, letting the employee know that action was taken to address the concern.”

In order to increase voice within the organizations, managers need to be aware of the effect of their authority role and pay close attention to the opportunities they have to directly impact voice. “There’s a real lack of understanding on the part of many leaders about the fear they may provoke just by virtue of being an authority figure,” says Treviño.

The researchers indicate that their findings have implications for leadership evaluation and training programs as well. “Leadership evaluations for anyone with skip-level subordinates should require input from employees at all levels,” write Detert and Treviño, “because leaders may find that whereas direct reports find them open or accessible, distal subordinates do not.”

“If leaders truly want to hear all employees’ concerns and improvement ideas, they must proactively and consciously create opportunities for direct, informal interaction with employees at multiple levels, build trust by consistently welcoming feedback, following up on it, and reporting back about action taken,” the researchers write.

To read the entire article, visit this link.

Tags: D. Harrison, Inhibit employee voice, Organizational leadership, Skip-level leaders, Trevino
Posted in News | 11 Comments

Mortgage Tax Deduction Myths

Tuesday, May 18th, 2010

Recently on Just Listed, the news website of the Pennsylvania Association of REALTORS, Smeal’s Austin Jaffe outlined eight myths about the mortgage interest tax deduction. They are:

1. The deductibility of mortgage interest is relatively recent in origin.
2. The current system treats all borrowers the same.
3. The current system, by providing tax deductions for borrowers, makes housing a good investment.
4. The current system helps young homeowners via the mortgage deduction.
5. The deduction of mortgage interest is a worldwide phenomenon.
6. Deducting mortgage interest is a stabilizing force in housing markets.
7. The mortgage interest deduction is the largest tax break available to households.
8. New proposals in Congress will limit or eliminate the mortgage deduction.

Read more about these myths in Jaffe’s post on Just Listed.

Tags: Jaffe, Real Estate, Taxes
Posted in News | 24 Comments

A Simpler Fix for Ratings Agencies

Friday, May 14th, 2010

“The Senate approved a provision that would thrust the government into the process of determining who rates complex bond deals, in a move to end alleged conflicts of interest blamed by some for worsening the financial crisis,” The Wall Street Journal reports. “The amendment aims to resolve what’s considered one of the thorniest problems in financial markets: Bond issuers choose ratings agencies and pay for ratings, meaning raters’ revenues depend on the very firms whose bonds they are asked to judge. Under the new provision, the Securities and Exchange Commission would instead establish and oversee a powerful credit-rating board that would act as a middleman between issuers seeking ratings and the rating agencies.”

Years ago, Smeal’s J. Edward Ketz proposed a much simpler way to remedy this conflict of interest in a manner that doesn’t establish an entirely new regulatory scheme. From a 2008 Ketz column on SmartPros.com:

The fundamental problem with credit ratings is the conflict of interest caused by the issuer’s paying the rating agency. Because such a conflict of interest exists, various potential problems surface since employees—in particular managers and analysts—know how they are compensated. Even if the credit rating agency is smart enough to avoid direct linkages between compensation and ratings, there nevertheless is an association. All employees know that their continued employment, their salaries, and their promotions depend upon their contributions to the real business of the organization.

… The real solution is simple and existed prior to 1970. Require the credit rating agencies to charge the users of its information instead of charging those they investigate. The conflict of interest is completely removed. Not only that, but you reinstate a market mechanism: If the users really want the information, they will pay for it. And if the market has sufficient competition, the price will be the value of the information.

Tags: Banking, Business Law, Economic Crisis, Finance, Ketz, Politics
Posted in News | 1 Comment

Financial Regulators Need Better Data

Thursday, May 6th, 2010

Writing in today’s Financial Times with former Chairman of the Federal Housing Finance Board Allan Mendelowitz, Smeal’s John Liechty argues that Washington needs to collect more and better financial data to effectively regulate financial markets and prevent another great recession. Liechty and Mendelowitz, founding members of the Committee to Establish the NationaI Institute of Finance, argue in favor of the establishment of the Office of Financial Research (OFR), as proposed in the financial reform bill currently on the floor of the Senate, which would collect and analyze complex financial data to respond to systemic financial threats.

An excerpt:

Irrespective of the new authorities that are included in the final bill, regulators and policy-makers charged with exercising these authorities cannot use them effectively to improve the safety and stability of our financial markets if they are flying blind. The data the OFR will collect and the research and analysis that the OFR will undertake are essential to the success of the core legislative objective of enhancing financial market stability; and, they are critical for the ultimate success of broader financial reform.

The OFR will enable regulators to better understand complex financial products, more effectively uncover fraud, better monitor risks from large financial institutions, and for the first time see the critical linkages between important institutions in the market.

Only the most ardent opponent of regulation would oppose providing regulators and policy-makers with the data, research, and monitoring tools needed to provide for the safety and security for our financial markets. The cost of regulators continuing to fly blind is a cost that the U.S taxpayers cannot afford.

Tags: Economic Crisis, Finance, Liechty, Politics
Posted in News | 27 Comments