This week Portugal officially became the third euro-zone country to seek a financial bailout from the European Union (EU) and the International Monetary Fund (IMF). Preliminary estimates are that Portugal will need a bailout of around €80 billion ($114 billion), though a final determination of the bailout size has yet to be made. The country was thrown into political crisis last month after Prime Minister Jose Socrates resigned when the nation’s parliament failed to pass an austerity budget. Portugal’s cash reserves are dwindling and the country has nearly $10 billion in debt due before June 15. Portugal was able to issue debt earlier this week, but at a steep interest rate price. Portugal had been depending on its domestic banks to absorb shaky government debt, but Portugal’s banks were hesitant to assume more government debt after the European Central Bank (ECB) indicated that the bonds could no longer be used as collateral for ECB loans. One concern is that now that Portugal has sought financial assistance, attention will shift to Spain, but Portugal’s bailout has seemed inevitable for weeks and yet the situation in Spain seems stable. Even if Portugal is the last euro-zone country to need financial assistance, the EU must still contend with three countries that have required billions of dollars in aid and are still not completely out of the woods with their financial challenges. For instance, Portugal hasn’t had a balanced budget or a surplus in more than 30 years and has amassed debt equal to more than 80% of the nation’s gross domestic product.

QUESTIONS FOR DISCUSSION:

1. Should the EU and the IMF negotiate a rescue package with Portugal now or wait until after the national elections on June 5 when the issue of who is in charge of the country is answered?
2. Portugal is Western Europe’s poorest country and its growth has trailed the rest of the euro zone over the past decade. How can the EU strike a balance between imposing austerity measures but yet still allowing a path for economic development for the country?
3. European finance ministers met this weekend in Budapest and hope that the bailout of Portugal and the plans to adjust the temporary euro-zone bailout facilities created last year will draw a line under the trade bloc’s sovereign debt crisis. Will the debt crisis likely be contained to Greece, Ireland and Portugal?

SOURCE: Kowsmann, P., & Forelle, C. (2011, April 7). Portugal pleads for rescue. Wall Street Journal, pp. A1, A14. (Retrievable online at: http://online.wsj.com/article/SB10001424052748704101604576246294138576346.html)

Related video clip: Portugal Seeks EU Bailout. (Retrievable online at: http://www.reuters.com/news/video?videoId=200971046)

Related video clip: EU Considering Portugal Bailout. (Retrievable online at: http://www.reuters.com/news/video?videoId=201222729)

It seems everyone is obsessed with measurement these days. In fact, you probably started your course by talking about research that informs current management thinking or the importance of quantitative analysis or quality management. The fact is lots of things are measured. If you haven’t already, you will soon be examining individual behavior. The author contends that individual behavior is difficult to measure and factors that predict performance success over the long haul are often not included in typical measures of performance. These measures – maximum performance measures – are quick, seemingly straightforward, and easily gather data on a large group. But the measures have little value beyond the test conditions themselves.

QUESTIONS:

1. Let’s begin with a review. In a general sense, why do supermarkets care about the speed of cashiers, NFL teams care about 40-yard dash times, or colleges care about scores on standardized tests? Do these things constitute data, information, or both? What does (or would) make these measurements useful information?
2. Which major responsibility in the human resource management process is covered by the NFL Scouting Combine? What about the SAT? What about measuring cashier speed? There are two basic criteria associated with employment tests. Which is being called into question in the article when it contrasts maximum versus typical performance?
3. If typical performance is trustworthy and accurately measured, would you be confident enough to make the decision to hire or reject a job candidate on that alone? If not, what else would you consider? If you are comfortable making the decision based on typical performance, would you be able to defend the practice in a court of law?

SOURCE: J. Lehrer, “Measurements That Mislead,” Wall Street Journal (Retrievable online at http://online.wsj.com/article/SB10001424052748704471904576230931647955902.html?mod=WeekendHeader_Rotator)

The author’s recent shopping experience in New York City is chronicled. Suffice it to say, she did not have a positive experience and has advice to offer for improving service to customers. The problems Ms. Barrows encountered speak to the importance of individual behavior in the workplace.

QUESTIONS:

1. Why is job satisfaction important? If you have retail experience, describe the variety of customers/customer demands that you experience. How might these different interactions influence job satisfaction? What is the best way to ensure employee engagement in jobs that require high levels of customer contact?
2. Two related, but different, retail stores. One sells lingerie; the other sells men’s hats. Both stores are staffed by male employees. Is there any reason to believe that job involvement might be an issue in either situation? What about organizational commitment? Discuss the reasons for your answers.
3. What role does emotion play in the way we work? Comment on the emotional intelligence of the two salespeople based on the brief exchange with Ms. Barrows and her companion. What factors might influence their responses? As you imagine possibilities, discuss how you would handle similar situations.

SOURCE: S. Barrows, “Please Don’t Squeeze the Lingerie,” Globe and Mail (Retrievable online at http://www.theglobeandmail.com/report-on-business/your-business/business-categories/customer-experience/why-being-touchy-feely-improves-the-bottom-line/article1837494/)

Just days after his resignation from Berkshire Hathaway, David Sokol, the former heir apparent to Warren Buffet discussed his plans for the future. Justifying the actions that were reported as the basis for his resignation, Sokol claimed he did nothing wrong. Instead, he contended that the resignation was a move he considered for at least two years. He discounts talk that he was supposed to take over Berkshire Hathaway and indicates that he wants to start a similar company of his own.

QUESTIONS:

1. Carefully read the details of David Sokol’s dealings with Lubrizol. All situations have an ethics component to some degree. What are the ethical issues here? Was Sokol’s behavior ethical? Why or why not?
2. Mr. Sokol defends his stock purchase as evidence that he had strong faith in Lubrizol. What alternative view of ethics is expressed in this explanation?
3. Make an argument that an ethical dilemma existed. Of the dilemmas presented in the text, which one most closely fits the situation at Berkshire?
4. Assuming Warren Buffett asked Mr. Sokol to resign, what do you think about his handling of the situation? Does it reflect ethical decision making?

SOURCE: J. Funk, “Ex-Berkshire Exec Sokol Says He Wants to Start ‘Mini’ Berkshire Hathaway,” USA Today (Retrievable online at http://www.usatoday.com/money/industries/insurance/2011-03-31-sokol-berkshire-hathaway.htm)

India announced new policies on Thursday governing foreign direct investment (FDI). A foreign firm that entered into a joint venture with an Indian firm prior to 2005 will no longer be required to obtain a no-objection certificate from its partner before establishing a wholly-owned subsidiary in the same field of business in the country. Foreign firms felt that the policy was being misused by some Indian companies that would use the policy as leverage to extract financial concessions or to block new companies. Firms who entered the Indian market after 2005 already did not need to receive approval from their joint venture partners to expand operations. India is seeking to reverse a notable drop in FDI flows. FDI in the current financial year for April 2010-January 2011 is $22.1 billion compared to the $37.8 billion recorded in the full fiscal year ended March 31, 2010.

QUESTIONS FOR DISCUSSION:

1. Although India is a vast and growing market, many multinational corporations are concerned about the unpredictability of doing business in India. Is India still too high risk for foreign investment or is it a market that cannot be ignored due to its size?
2. The business environment in India is characterized as having murky laws and poorly defined regulations. How can India tackle the bureaucracy of its systems and improve the transparency of its business regulations?
3. Many in India believe that it is important to protect India’s numerous small businesses and mom and pop stores from foreign competition. How are the new policies likely to impact India’s local enterprises?

SOURCE: Sircar, S. (2011, April 1). India eases its rules on foreign investment. Wall Street Journal, p. B5. (Retrievable online at: http://online.wsj.com/article/SB10001424052748703712504576233893758349276.html)

RELATED ARTICLE: Denyer, S., & Lakshmi, R. (2011, April 2). India frustrates foreign investors with its unpredictable tax policies. The Washington Post. (Retrievable online at:
http://www.washingtonpost.com/world/india-frustrates-foreign-investors-with-its-unpredictable-tax-policies/2011/03/17/AFVpacLC_story_1.html)

Investors reacted with great concern after the government of Zimbabwe announced new policies that require foreign-owned firms to surrender to indigenous Zimbabweans majority ownership stakes in local mining companies. The policies were announced as part of the implementation of an indigenization law the country enacted in 2008. Foreign-owned mining companies with a net asset value of at least $1 have until May 9 to submit plans to the government on how they plan to complete the indigenization process and must sell their stakes by September 25. Previously the government had suggested that firms with a net asset value of less than $500,000 would be exempt from the policy. The foreign firms would have to sell their stakes to a few designated government entities or create employee share-ownership programs. Given that there are limited potential buyers and there is great concern about how Zimbabwe will get the money it needs to pay for the shares, it is unlikely that foreign mining firms would get fair market value for their ownership stakes. Moreover, the nation’s indigenization minister, jointly with the foreign firm, will calculate the value of the firm’s shares by taking into account the “state’s sovereign ownership of the mineral or minerals exploited or proposed to be exploited” by the foreign firm. Chinese companies will be exempt from the indigenization regulations.

1. QUESTIONS FOR DISCUSSION:
   Analyze the advantages and disadvantages to Zimbabwe of this indigenization program.
2. How should foreign mining firms respond to the proposals announced this week? What options do the firms have to try to stop the indigenization program?
3. Zimbabwe is a resource-rich country but yet struggles to promote long-term economic growth. How could the United States and other advanced economies best help Zimbabwe to prosper?

SOURCE: Maylie, D., & Mutsaka, F. (2011, March 29). Zimbabwe shuts out foreign miners. Wall Street Journal, p. A15. (Retrievable online at: http://online.wsj.com/article/SB10001424052748704559904576228400007716110.html)

Before Hilary Clinton and Sarah Palin, there was Geraldine Ferraro. A little known representative from New York, Ms. Ferraro was selected by Walter Mondale as his running mate on the 1984 Presidential ticket. In some respects, Ms. Ferraro stole the spotlight, not just because of the uniqueness of her candidacy, but also for her inspiring speeches. In the end, the Mondale-Ferraro ticket was not successful. That did not stop Ferraro’s political aspirations, but her later years were characterized more by her legal efforts in defense of women. Ms. Ferraro died on March 26 following a long battle with blood cancer.

QUESTIONS:

1. Review the definition for leadership and then describe characteristics/accomplishments that made Geraldine Ferraro a leader.
2. Select one base of power that you believe best represents Ms. Ferraro as a leader. Why did you make your selection?
3. What accomplishments qualify Ms. Ferraro as a servant leader?
4. Was Ferraro a transformational leader? What behaviors (listed in the text) influenced your answer?
5. Arguably, women have a better chance being elected President than they did when Ms. Ferraro was the Vice Presidential nominee in 1984. Discuss reasons why they still have not broken through this particular barrier.

SOURCE: Associated Press, “Geraldine Ferraro, Political Groundbreaker, Dies at 75,” Wall Street Journal (Retrievable online at http://online.wsj.com/article/SB10001424052748704517404576224733849476412.html?mod=WSJ_hp_MIDDLETopStories)

See related article: D. Jackson, “Geraldine Ferraro, First Female Veep Nominee, Dies,” USA Today (Retrievable online at http://content.usatoday.com/communities/theoval/post/2011/03/geraldine-ferraro-first-female-veep-nominee-dies/1)

Related video:

In a move reminiscent of Steve Jobs’ return to Apple, Larry Page is about regain control of Google. Page was the founding CEO, but handed over control to Eric Schmidt in 2001. Now Schmidt is retiring and Page is about step back into the former role. He is wasting no time implementing changes he believes are necessary to make Google more “lean and mean.” One noticeable change is making top executives more accessible to all employees. Page is looking to streamline projects and push decision making down the organization.

QUESTIONS:

1. What type of divisional structure does Google utilize? Upon what do you base your answer? Comment on the effectiveness of this design arrangement.
2. The opening paragraphs of the article describe Google as a bureaucracy. Just what does this mean? How does a company like Google become a bureaucracy? What are the advantages of such an arrangement? Why, in this case, may it have become a problem?
3. When incoming CEO Larry Page says he wants the company to “act more like a start-up than an incumbent,” what type of design is he advocating? What changes need to be made?
4. In what ways does Page appear to be implementing decentralization with centralization?

SOURCE: A. Efrati, “At Google, Page Aims to Clear Red Tape,” Wall Street Journal (Retrievable online at http://online.wsj.com/article/SB10001424052748703784004576220902706041400.html?mod=WSJ_hp_LEFTWhatsNewsCollection)

SOURCE: cbsnews.com

DATE: March 27, 2011

This segment from the 60 Minutes episode airing March 27, 2011, profiles how the American tax code encourages U.S. companies to invest abroad rather than in the United States. After Japan’s tax code is revised in April, according to this segment the United States will have the highest corporate tax rate in the developed world. Other countries, such as Ireland, have dramatically lowered their corporate tax rates to encourage foreign investment. In order to lower their corporate tax bills, U.S. companies are increasingly shifting parts of their operations to tax havens such as the small town of Zug, Switzerland. Even though their operations may be no more than a mailbox or a mailing address in Switzerland, the companies are able to save thousands of dollars by not having to report income as U.S.-based income. Since the American tax code allows firms to defer taxes on income until the money is repatriated to the United States, many firms reinvest their funds abroad or park their money overseas. Many governmental officials in the United States want to revise the tax code to force companies to pay higher U.S. taxes. Many businesses, including Cisco CEO John Chambers, want to see the United States lower its corporate tax rates to put the United States on a more even playing field than other nations. Companies such as Cisco are leaving their money abroad rather than returning it to the States. The segment indicates that U.S. companies have $1.2 trillion that they are refusing to return to the States.

QUESTIONS FOR DISCUSSION:

1. Countries that lower their corporate tax rates often believe that the increase in employment more than offsets the loss corporate tax revenue. Would it be wise for the U.S. to lower its tax rates?
2. The CEO of Cisco, John Chambers, is advocating for a one-time tax break to allow U.S. companies to bring foreign money home at a dramatically lower rate, arguing the move would stimulate the economy and create jobs. What would be the advantages and disadvantages of implementing such a policy?
3. Do businesses have a moral obligation to pay their “fair share of taxes” or is their primary objective to serve the firm’s shareholders?

Portugal’s Prime Minister Jose Socrates resigned on Wednesday after Portugal’s parliament rejected a budget proposal. The austerity measures included in the budget included spending cuts and tax increases and the proposal was widely unpopular. The defeat of the budget is likely to force Portugal to accept a bailout from the European Union (EU) and the International Monetary Fund (IMF), but lack of clear leadership authority in the country may make it difficult for an agreement to be reached. Although EU’s bailout funds are adequate to handle Portugal’s likely financing needs, the greatest concern about a possible bailout of Portugal is that investor fears may shift next to Spain. Spain is the euro zone’s fourth-largest economy and is currently trying to deal with a weak banking system. The situation in Portugal overshadowed a previously scheduled EU summit this weekend. Mr. Socrates has resisted calls for Portugal to accept a bailout and believes that if Portugal accepts a bailout now, the austerity measures that will be a condition of accessing the funds will likely be more restrictive than the austerity measures his government rejected this week. The political turmoil has pushed government borrowing costs to unaffordable levels and ratings agencies have downgraded Portuguese debt.

QUESTIONS FOR DISCUSSION:

1. If Portugal does request a bailout from the EU and the IMF it would be the third euro-zone country to do so in the last year. How much impact would a Portugal bailout likely have on the value of the euro? Have investors become desensitized to euro-zone bailouts?
2. If Portugal does receive a bailout, this is likely to shift investor attention to Spain, which is widely regarded as too big to fail and too big to save. What can the EU do to prevent financial contagion from negatively impacting Spain?
3. One of the challenges the EU faces in its current quest to restructure the emergency bailout program the countries created in May is whether investors should be forced to bear any of the costs of a subsequent EU bailout. What are the advantages and disadvantages that would be created by allowing Portugal to default on its sovereign debt?

SOURCE: Kowsmann, P., & Lewis, J. T. (2011, March 24). New phase in Europe crisis. Wall Street Journal, pp. A1, A12. (Retrievable online at: http://online.wsj.com/article/SB10001424052748704050204576218480566706182.html)

Related video clip: EU Summit Clouded by Portugal Crisis. (Retrievable online at: http://www.youtube.com/watch?v=FFZ_bpusSi4)

Related video clip: Portugal PM Jose Socrates Resigns after Budget Rejected. (Retrievable online at: http://www.bbc.co.uk/news/world-europe-12844020)