Do happier workers lead to better investment returns?
Why does bad management even exist? Not only does it make you miserable: It makes you no money either.
Bad management leads to bad morale and bad results. Anyone who’s worked for a badly run organization has seen this in action. And fresh evidence comes from some amazing new research on mutual-fund companies from Elias Ohneberg and Pedro Saffi at Cambridge University’s Judge business school.
In a nutshell, they found that if the employees at a fund company are unhappy, the company’s mutual funds are likely to produce poor investment results. If the employees are happy, there’s a good chance the funds will perform really well.
“Mutual-fund managers [who] work for companies with higher employee satisfaction perform better,” they say.
Saffi tells me that the performance gap between funds at the happiest companies and those at the unhappiest works out at around 1.44 percentage points a year.
In investment terms, that is huge.
Read: Are you nearing retirement? Here’s how to transition your portfolio from growth to income.
This is the result of a deep and detailed analysis. The pair looked at 437 mutual-fund companies managing a total of 3,266 funds. They studied them over a full 10-year period, from 2009 to 2019.
How did they measure employee satisfaction? They looked at all the reviews that staff posted at Glassdoor.com, a website on which employees give job seekers the inside dope on what it’s actually like to work somewhere. They focused specifically on employees who had job titles relevant to mutual-fund performance, typically meaning titles related to research, trading and fund management.
And then they looked at the performance of the companies’ funds against their benchmarks.
Just a 1-point increase on the 5-point scale of average employee satisfaction leads to 0.36 percentage point in “alpha” or higher investment performance, when adjusted for things like investment style and objectives.
This was only true when they measured the satisfaction of employees working on asset management jobs, and not for those in the rest of the company, they found.
Do the funds perform better because the employees are happier — or are the employees happier because the funds are performing better? Saffi tells me he and Ohneberg can’t be sure, but they ran a clever test to see if they could find out. They looked at mutual funds at fund companies that were taken over by happier companies. The result? Those funds ended up doing better — much better.
It’s a heroic research study. And it’s intuitive. With apologies to Tolstoy, who once wrote that “every unhappy family is unhappy in its own way,” unhappy organizations tend to share a lot of similarities, including “busywork,” bad processes and self-serving bosses who are deeply cunning morons. The employees work longer hours but achieve less. A lot of energy is wasted on internal conflict.
The question is why these organizations persist. As Ohneberg and Saffi show, they are bad for business as well as bad for everything else.
Personally, I blame management consultants. (I used to be one.) They help keep client firms alive that should be allowed to die.
Yet Gallup, after surveying 112,000 organizations in 96 countries worldwide, reports that 60% of people are emotionally detached at work and 19% are miserable. In the U.S. and Canada, 50% said they experienced “a lot” of stress during the workday and 41% a lot of worry. Just 33%, one in three, said they felt engaged.
Oh, and the U.S. came out on top of all the regions in the world. Just 14% of European workers felt engaged at work. A third of workers in India and adjacent countries felt a lot of anger during the workday.
Gallup estimates — guesses — that low employee engagement costs the world $7.8 trillion annually, lowering GDP by 11%. Well, maybe. But, according to the new research, it costs money.
Ohneberg and Saffi don’t say which fund companies have the happiest employees. But before investing in a mutual fund, it might be worth checking the employee ratings at Glassdoor.
Biden's first veto: Stops block of ESG retirement climate investment – USA TODAY
WASHINGTON — President Joe Biden issued his first veto Monday after Congress voted to block a Labor Department rule allowing retirement plans to weigh the long-term impacts of social factors and climate change on investments — a move Republicans say is a “woke” policy that hurts retirees’ pockets.
“I just signed this veto because the legislation passed by the Congress would put at risk retirement savings of individuals across the country,” Biden said in a video posted to Twitter. “They couldn’t take into consideration investments that would be impacted by climate impacted by overpaying executives.”
Senate Republicans, along with two Democrats, voted on the measure March 1, needing only a simple majority for it to pass. Sens. Jon Tester, D-Mont., and Joe Manchin, D-W.Va., who are both up for reelection next year in Republican states, voted with Republicans.
The GOP-controlled House of Representatives voted on the legislation last month. In a message to the House, Biden said “Retirement plan fiduciaries should be able to consider any factor that maximizes financial returns for retirees across the country.
“That is not controversial – that is common sense,” he said.
Ahead of the bill going to his desk, Biden said he would veto it. A two-thirds majority of Congress would be needed to override Biden’s veto.
President Donald Trump vetoed 10 bills, while President Barack Obama vetoed 12 bills.
What is ESG?
Environmental, social and governance or ESG for short, is an investing strategy that takes into account businesses’ environmental and social risks as part of a wider financial analysis.
It is popular with major pension funds that invest the retirements of millions of workers as well as retail investors.
Republicans call ESG ‘woke’
Republican lawmakers and conservative advocacy groups have decried the ESG rule.
Florida Gov. Ron DeSantis, who will likely run for the 2024 GOP presidential nomination, has become a leader in the anti-ESG movement.
Many conservative states, such as Florida, Texas and West Virginia have launched investigations because of the rule.
Conservative advocacy groups backed by right-wing donors have mounted a campaign in statehouses across the country. They say that ESG is just another example of “woke” influence on big business.
Reach Rebecca Morin at Twitter @RebeccaMorin_
Biden issues his first veto on retirement investment resolution – CNN
President Joe Biden issued the first veto of his presidency Monday on a resolution to overturn a retirement investment rule that allows managers of retirement funds to consider the impact of climate change and other environmental, social and governance factors when picking investments.
Republican lawmakers led the push to pass the resolution through Congress, arguing the rule is “woke” policy that pushes a liberal agenda on Americans and will hurt retirees’ bottom lines, while Democrats say it’s not about ideology and will help investors.
The resolution, which would rescind a Department of Labor rule, passed both chambers of Congress with Democratic Sens. Joe Manchin of West Virginia and Jon Tester of Montana voting with Republicans in the Senate.
“I just signed this veto because legislation passed by the Congress would put at risk the retirement savings of individuals across the country. They couldn’t take into consideration investments that wouldn’t be impacted by climate, impacted by overpaying executives, and that’s why I decided to veto it – it makes sense to veto it,” Biden said in a video posted to social media Monday afternoon.
Biden is seen signing the veto in the video, taken in the Oval Office earlier Monday.
The veto makes good on Biden’s frequent promise to veto legislation passed by the GOP-controlled House he disagrees with. Even before Republicans took control of that chamber, Biden often mentioned his ability to nix their priorities. “The good news is I’ll have a veto pen,” he told a group of donors in Chicago just days before November’s midterm elections.
Opponents of the rule could try to override Biden’s veto, but at this point it appears unlikely they could get the two-thirds majority needed in each chamber to do so.
Biden’s first presidential veto reflects the reality of a changed political order in Washington with Republicans now in control of the House after they won back the chamber from Democrats in the 2022 midterm elections.
Previously, Democrats controlled both the House and the Senate. Now, the president’s party only has a majority in the Senate.
Most legislation passed by the current GOP-controlled House will not be able to pass the Democratic-controlled Senate. But the resolution to overturn the investment rule only needed a simple majority to pass in the Senate. Republican lawmakers advanced it under the Congressional Review Act, which allows Congress to roll back regulations from the executive branch without needing to clear the 60-vote threshold in the Senate that is necessary for most legislation.
Opponents of the rule have argued that it politicizes retirement investments and that the Biden administration is using it as a way to promote a liberal agenda.
Republican Sen. John Barrasso of Wyoming said at a news conference earlier this year, “What’s happened here is the woke and weaponized bureaucracy at the Department of Labor has come out with new regulations on retirement funds, and they want retirement funds to be invested in things that are consistent with their very liberal, left-wing agenda.”
Supporters of the rule argue that it is not a mandate – it allows, but does not require, the consideration of environmental, social and governance factors in investment selection.
Senate Majority Leader Chuck Schumer said in defense of the rule that Republicans are “using the same tired attacks we’ve heard for a while now that this is more wokeness. … But Republicans are missing or ignoring an important point: Nothing in the (Labor Department) rule imposes a mandate.”
“This isn’t about ideological preference, it’s about looking at the biggest picture possible for investments to minimize risk and maximize returns,” he said, noting it’s a narrow rule that is “literally allowing the free market to do its work.”
The statement of administration policy warning that Biden would veto the measure if presented with it similarly states, “the 2022 rule is not a mandate – it does not require any fiduciary to make investment decisions based solely on ESG factors. The rule simply makes sure that retirement plan fiduciaries must engage in a risk and return analysis of their investment decisions and recognizes that these factors can be relevant to that analysis.”
This story has been updated with additional developments.
Exclusive-Credit Suisse tells staff plans for investment banking to be informed later -memo – Yahoo Canada Finance
By Engen Tham and Julie Zhu
SHANGHAI/HONG KONG (Reuters) -Credit Suisse told staff its wealth assets are operationally separate from UBS for now, but once they merged clients might want to consider moving some assets to another bank if concentration was a concern, according to an internal memo.
The memo, dated Sunday and seen by Reuters, gave talking points to Credit Suisse staff for client conversations after a historic Swiss-backed acquisition of the troubled bank by UBS Group.
“For now, assets are still legally separated. Once that changes, you (clients) may of course want to consider moving some of your assets to another bank if concentration is a concern,” the memo said.
That response was suggested to Credit Suisse staff if they were asked by clients what they should do if they were also a UBS client and wanted to avoid too much asset concentration, which can be a concern for wealthy customers.
In a package orchestrated by Swiss regulators on Sunday, UBS will pay 3 billion Swiss francs ($3.23 billion) for 167-year-old Credit Suisse and assume up to $5.4 billion in losses.
UBS will become the undisputed global leader in managing money for the wealthy through the takeover of its main rival, triggering some concerns about concentration risks for clients.
Credit Suisse also told staff to inform clients that plans for its investment banking business will be communicated in due course as details of its acquisition by UBS were still being worked out, according to the memo.
“We do not expect there to be any disruption to client services. We are fully focused on ensuring a smooth transition and seamless experience for our valued clients and customers,” a Credit Suisse spokesperson said.
Credit Suisse is also going ahead with its annual Asia Investment Conference in Hong Kong, starting on Tuesday, the spokesperson said, adding the event, however, would now be closed to media.
In a separate memo on Sunday, the bank told employees that its day-to-day operations were unaffected after it agreed to the UBS takeover.
“Our branches and our global offices will remain open, and all colleagues are expected to and should continue to come to work,” Credit Suisse said in the memo sent globally and seen by Reuters.
Reuters reported on Friday, citing sources, that a number of major banks including Societe Generale SA and Deutsche Bank AG were restricting new trades involving Credit Suisse or its securities.
Regarding counterparties having stopped business with Credit Suisse, the bank said in the client talking points memo that it believed the transaction “will help to restore confidence to the financial markets more broadly.”
Market players remain concerned about the next moves at Credit Suisse and the impact on employees, investors and clients.
UBS Chairman Colm Kelleher told a media conference that it would wind down Credit Suisse’s investment bank, which has thousands of employees worldwide. UBS said it expected annual cost savings of some $7 billion by 2027.
(Reporting by Engen Tham in Shgnghai and Julie Zhu in Hong Kong; Additional reporting by Scott Murdoch in Sydney; Editing by Sumeet Chatterjee, Himani Sarkar and Jamie Freed)
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