Hrcases’s

February 2, 2009

‘Scam-hit Satyam unlikely to exist’

Filed under: Fiasco, Satyam, Scams — Tags: , , , — hrcases @ 12:48 pm

Troubles keep mounting for Satyam Computer Services. Some of its top clients namely, Citigroup, Merrill Lynch, Novartis and GlaxoSmithKline are in talks to move their business from the Hyderabad based company to other Indian IT firms.

In the meantime, the number of potential suitors to acquire the beleaguered firm is growing by the day. As many as six companies from the manufacturing, information technology and private equity space have shown interest to buy out the firm. The newly constituted board has narrowed down on a list of three possible candidates for a Chief Executive Officer (CEO) and Chief Financial Officer (CFO), is also mulling providing legal immunity to the new management leadership team from being liable to the previous records of the company.

According to a study by research firm Gartner, the scam-stricken Satyam Computers is unlikely to exist in its current form. It is expected to discontinue some of its businesses, service lines or cease to exist in certain geographies by 2010. The study indicated that even the name Satyam may not exist for long. Satyam’s ability to sign on new clients during 2009 has significantly diminished, says the study. “In addition, it will be challenged to invest in client engagements, staff developments or R&D – all critical elements for IT services,” said Gartner’s Vice President for Research, Frances Karamouzis. For the study, Gartner interviewed representatives of over 30 top Fortune 500 clients of Satyam, 20 top non-Satyam clients, the board of Satyam and CEOs of six tier-I Indian IT firms including TCS, Wipro, Infosys Technologies, Cognizant and HCL.

Gartner believes that Satyam’s ability to regain the trust and credibility has diminished. Satyam has 690 global customers, of which 185 are Fortune 500 companies. A significant number of these clients have already sent some kind of inquiry to other vendors in India. Source: The Times of India group.

July 15, 2008

US CEO Compensation Trends

The US economy is slowing down. Due to this, the large companies are aiming to link pay to performance. Hence, CEO total direct compensation is also declining.

Based upon the analysis of 350 companies within the Fortune 1000, Mercer has concluded that CEO’s would now have to depend heavily on performance based pays.

Mercer’s database of 350 companies consists of three categories.

• Top 50 with revenue of $40 billion or more

• Large with revenue of $7.4 billion or more

• Mid-size with revenue of $1.2 billion or more

Mercer analyzed median total direct compensation for CEOs, defined as base salary, short-term incentive compensation and expected value of long term incentives granted in the fiscal year.

For CEOs of the top 50 companies, median total direct compensation represented 15.8 percent reduction from the prior year.

The median total direct compensation of the CEOs of large companies did not change much from the previous year.

The CEOs of mid-size companies had a modest reduction in median total direct compensation from the previous year.

In the case of jumbo companies, the dive in total direct compensation was driven by a sharp decline in long-term incentive grant values, down 18.9%.

Over the years, the components of pay varied among the three company categories. The base salary constitutes only 19% of CEO compensation. The base salary increased only by moderate amounts amongst the three categories.

• Increase by 3.9% in the top 50 companies’ CEO

• Increase by 4.2% for large companies’ CEO

• Increase by 3.0% for mid-size companies’ CEO

The annual cash incentives on the other hand declined.

• By 13.5 % in the top 50 companies

• By 16.9 % in the mid-size companies

• By 1.6 % in the large companies

The center of the CEO compensation is long term incentives (in the form of equity). The current trend is long-term incentives (cash and equity) awards based on achieving specified performance goals.

Today, companies are considering strictly the various drivers of long-term economic value, reassessing performance metrics and realigning variable compensation. In this scenario, pay for performance is slowly becoming important.

Mercer’s analysis showed that there has not been much difference in the company-funded perquisites such as personal aircraft use, club dues and personal financial advice etc…

“Shareholders, who are experiencing deteriorating returns, are becoming more activist than ever and want to see compensation outcomes linked to sustained financial and share price results,” said Diane Doubleday, global leader of Mercer’s executive remuneration services.

If the economic outlook continues to be uncertain and unpredictable, there will be debates at many companies about whether they need to adjust, reduce, or even eliminate performance-based equity.

Source: http://www.mercer.com

July 8, 2008

Leadership Shortage

Filed under: Latest Trends in HR, Leadership — Tags: , , , — hrcases @ 7:26 pm

The major problem hovering over the competitive business scenario is global talent shortage. In the near future, organizations will have to scramble and compete to find new talent, especially the managers and executives.

Various top notch consultants and management gurus claim that this is going to be one of the biggest issues businesses must deal with in the next decade.

So what’s the deal? And how do we handle the current situation?

There is a potential leadership shortage looming on the horizon. Organizations’ claim that they can’t find enough talent to re-supply their dwindling management ranks. But they would certainly do much better if they rethought their approach to selecting, developing and managing their talent.

Organizations should aim at turning raw talent into successful leaders. Traditionally, leadership potential was viewed as a one-dimensional resource. Over the past few years as organizations have grown in complexity and size, many of the roles have become highly diverse and complex.

Most organizations have neglected the change, as a result their managers and executives find themselves struggling and failing, and in the process inflicting damage on their organizations. It’s not that these individuals can’t be good leaders. But they aren’t prepared for the complexity and scope of the roles in which they find themselves.

Nowhere is this more obvious than at the very top, where CEOs are crashing and failing in appalling numbers. Most of these problems have been due to a lack of alignment between the role and the abilities of the individual filling that role.

Today, organizations need to worry less about the dearth of leadership talent and focus more on better understanding the specific demands of today’s highly varied leadership roles. With this understanding of their leadership needs, organizations would also be able to refine and modify their actual leadership structure, thereby reducing their outdated models.

No doubt as the workforce shrinks, there would be a “WAR FOR TALENT”. Organizations would be required to address the leadership talent in the context of their business strategy, their required operating model, their resulting organizational structure, and the changing and emerging roles these dynamics are shaping.

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