China media share expertise with GH

The Shanghai office of GolinHarris recently held a media gathering in a relaxing afternoon tea format. The event turned out to be a great chance to build relationships with 16 top lifestyle journalists and senior food and beverage (F&B) reporters, who shared their insights with the GH team. Here are some of the key learnings of the afternoon:

GolinHarris had afternoon tea with local media

Be in media source lists
Most reporters have source list. When they need to write a story on a particular topic, they will first contact people from this pool. You can join the source list by being informative, friendly and quotable.

Photos speak louder than words
Journalists receive hundreds of e-mail from company and PR agencies in addition to attending various events each day. Great photos speak louder than words, and an exclusive media photo shooting will usually guarantee a better report.

What will be "in” in 2009?
Healthy eating and living will continue to be a top lifestyle and F&B topic. In light of the current global economic crisis, many articles will tie in somehow to this issue—for example, do-it-yourself dishes and how to eat smart and economically.

Which Knowledge Opinion Leaders (KOLs) are you interested in?
For lifestyle and F&B media, specialists work better than celebrities. Nutritionists are popular in some areas, while medical doctors may be more authoritative in other fields. In mainland China, local specialists are preferred over those from Hong Kong and Taiwan. A knowledgeable specialist always adds more value to media events.

Top exec pay: going beyond risk and reward

Na Boon Chong, Director, Consulting, Southeast Asia, Aon Consulting Asia Pacific Executive compensation has again become a hot topic after most Wall Street firms suffered significant losses and governments around the world injected hundreds of billions of dollars into financial institutions. At the heart of the financial crisis that has paralyzed global financial markets is a mystery: How could top executives of the world's most sophisticated financial institutions stake the lives of their businesses on substandard mortgage-backed securities? While there are many contributing factors (operating at different levels) to the financial crisis, including the global economic imbalances between fast-growing emerging markets and mature markets, the role of the regulators and rating agencies, the operating model of the financial industry, and risk management methodologies and techniques, there is also one factor at the behavioral level—that is, how executive performance is measured and incentivized. The conventional wisdom in executive compensation is that high risks deserve high rewards. The board of directors is entrusted to monitor how executives grow the business and mitigate the downside risks in generating shareholder value, and then reward them accordingly. However, if the risk levels and duration are not priced into the relationship between performance and rewards, executives may be tempted to take excessive risks that could break the companies they work for, and get rewarded before that happens. As what we have observed in this global financial crisis, when the "unthinkable” happened, the companies and the shareholders suffered huge losses. The executives lost their jobs but got to keep the rewards given to them at an earlier time. Something clearly is not working right. Risk-taking is part and parcel of doing business. How should executives be rewarded for taking the appropriate risks in order to grow the business, not just in the short term but in a sustainable manner? Some are arguing that the problem lies in excessive compensation, which led to a risky shift in executive behaviors. While excessive compensation is unwise and does not make business sense, the more fundamental question is not whether a bonus payout is too high in absolute terms, but how to make sure that the executives share the losses as well as the gains, and to make sure that executives have struck a good balance among profitability, growth, risk and long-term sustainability. When offering compensation plans to the executives in today's environment, the board of directors would expect to meet significantly more challenges. A number of the global banks are experimenting with new compensation models as a result of the crisis. A few examples: UBS is implementing a cash balance plan that has a deduction feature which reduces the individual account for losses, breach of compliance and risk control, and other performance conditions. Morgan Stanley is introducing both deferred and claw-back provisions (see definitions below) into its bonus plan. Credit Suisse is linking the incentive pool with bad assets based on the rationale that only if the bad assets turn around will there be money in the pool. While there is no such thing as a perfect model, however, there are definitely steps and principles that a board compensation committee can consider undertaking. Firstly, audit the executive compensation plans to ensure they are aligned to support the business goals, not merely following what others are doing in the marketplace. Always ensure the compensation level is right for the level of contribution and performance. If it is not, then the chances of talent walking out the door are high, even in bad times. Or, it may sow the seeds of discontentment in the future. Review the compensation tools, such as cash, performance stock, stock options and convertible units to ensure that the use of these tools is thought through and works in a coherent way to support the current intent. For example, simply granting executives more options to account for the underwater option value in today's stock market may not be wise without attaching any performance conditions. Identify and remove those compensation plan features that incentivize short-term behavior at the expense of the longer-term goals. Consider the issue of measuring performance in relative and absolute terms. Pros and cons Both approaches have their advantages and disadvantages. One would need to determine what is appropriate for the business in the current downturn—when the whole market is down, how much would you reward the executives for doing better than their counterparts at the competitors? The answer may be a hybrid that rewards top relative performance as long as some absolute threshold is exceeded. Determine the appropriate performance measures. There are shareholder-friendly measures such as share price, EPS and TSR. There are also business measures that are critically important for executives to focuse on, such as revenue, profit, cash flow, margin and credit quality. Include an accurate "price” of risks in all profitability calculations. Granted that targets are hard to preset in this turbulent time, a certain degree of discretion is needed to evaluate these factors after the fact. Measure performance at the company level and avoid having individual businesses taking a first call on "their” profits unless they are autonomous units bearing their full funding costs. Decide on the timeframe to measure performance. While the short term should remain one year to coincide with the budgeting cycle, the timeframe for long-term incentives is less clear as it needs to parallel the business cycle. Also, the past pattern of business cycles is disrupted at the moment. Consider the use of deferred bonus or claw-back provisions in the plans. The former refers to bonus plans that do not pay out fully at the end of the financial year but defer a portion to the next two to three years. The latter refers to clauses that stipulate that the incentives could be taken back in future years if certain conditions (such as profit realization) are not met. Decide on the weights to be given to the short-term vs. long-term incentives. Traditionally, the long-term incentives have been weighted one to two times the amount of the short-term incentives. This may increase as the emphasis over long-term results takes prominence. Lastly, create a "partnership” mindset and mechanisms in the company, going beyond stock ownership, by breaking down barriers between those designing and those taking risks. Compensation is only one of the levers in shaping executive behavior. Leadership values and beliefs as well as role models convey strong messages and confer intangible rewards. Leadership, performance and compensation are the three priorities for the governing boards in terms of managing executive behavior. Unprecedented times call for unprecedented solutions. This is the time to be creative and get ahead of the curve.