Tuesday, August 27, 2013

Contributions to society’s well-being

I recently spent some time in the US to attend a conference. I was reading the daily newspaper and an article caught my attention. It reported on a representative study by the Pew Research Center asking adults about which profession they thought was the one contributing the most to society’s well being and the least respectively.
On the top of the list were the military (78%), teachers (72%) and then medical doctors (66%). This makes sense due to the fact that since 9/11 the Americans have a higher need for security and hold the importance of the military very high. Also, the average citizen can experience the positive impact of education and health firsthand. As a lecturer on strategic management I found the low ranking of business executives (24%) who made it second to last on the list, just behind journalists (28%) and above lawyers (18%) quite worrisome. Therefore teachers were rated three times higher than managers. But they are not paid three times as much as managers, but rather 30 times less! Once again, this study shows that the reputation of business leaders has dropped to a very low level. The survey confirms the outcome of a plebiscite in Switzerland (a sample survey of a special kind). It was a proposal that translates into “the fat cat initiative” which was widely accepted, showing that many managers were in fact not.
Many causes for this negative sentiment toward managers can be discussed. For example the double reward for strategic misperformance of top managers: Before 2007 managers of major Swiss banks were rewarded with big bonuses for risky growth (investment banking) and acquisitions of financial institutions of all kinds. Today these bankers are rewarded even more for reversing the strategy of their predecessors, selling supposedly unprofitable and risky parts of business. Despite the fact that either the one or the other strategy must be wrong, high “performance” bonuses where paid in both cases. It could also be discussed that citizens increasingly tend to disapprove of valuating firms on the grounds of their short-term success. It doesn’t seem to impress them that speculators at the stock market think otherwise.
As a lecturer of strategic management I think about what I could do to improve the standing of leaders in business. I think that on the one hand educators should regularly draw attention to the issue (e.g. in case studies) that when decisions in business are made not to solely consider monetary results but to also assess the effects the decision has on society. Value creation for all stakeholders is the issue! Further, in my opinion educators in management studies should apply this socially responsible strategy to their research projects and particularly to the evaluation of research results.
It should be noted that the renowned Academy of Management aspires “to inspire and enable a better world” in their vision statement (and not a higher income for managers!). This undoubtedly means not to propagate the short-term shareholder value thinking in research and teaching but to rise to the challenge to “contribute to society’s well-being”. If business leaders perform convincingly in this aspect their reputation in society ought to improve in the future.

Edwin Rühli

Thursday, August 15, 2013

Long-term care in Thailand: A Swiss Perspective

In Thailand, private investors from Switzerland are funding a resort for older people in need of long-term care. This pilot Project offers 50 places in a nursing home focused exclusively on Swiss patients and their spouses. According to the investors, the resort’s services include twenty-four-seven assistance, comparable to the standards applied in Switzerland. Due to an overwhelming public and private demand for the limited number of places, follow-on resorts are planned not only for persons in need of long-term care, but also for patients suffering from burnout or addiction.
In Switzerland, more than one hundred thousand older people are in need of permanent medical assistance and experts estimate that this number will triple until 2050. Research revealed that there would be an additional demand of one hundred thousand places in nursing homes in the next 15 years. The problem is that the average monthly costs related to long-term care is about CHF 11’000 (USD 10’000) per person, what cannot be funded sustainably neither by the current Swiss health-care system nor by private contributions. From this perspective, the resort in Thailand is both an attempt to approach the demographic problems of modern societies, but also a profitable business model. Because the monthly costs for long-term care in Thailand are less than half of those in Switzerland, the private investors are calculating with a financial return of more than five percent for their resort.
I have a somewhat uneasy feeling regarding long-term care resorts for Swiss older people in Thailand due to two reasons. First, I dislike the imagination of living in one of the richest countries in the world, which society is not able or willing to find sustainable approaches or solutions for its demographic issues. In my opinion, purely economic considerations fall short of taking into account the complex problem of increasing health-care costs in most of modern societies. In short, sending persons in need of long-term care to Thailand because of economic reasons is the failure of a whole society to take over responsibility and to show solidarity with its older people.
Second, sending older people to Thailand because of the financial costs related to long-term care is a striking example of the economic primacy in many of today’s social-political considerations. For example, a leading Swiss expert in the field of gerontology recently stated that if a dement person does not recognize the own apartment anymore, it would not make any difference if he or she lives in Switzerland or Thailand. This statement completely neglects an older person as being embedded in a family or a broader social context. To find sustainable and integrative solutions for the complex problem of the rising health-care costs, economic considerations have to serve the needs of a society and the people it is made of.

Tom Schneider