Economic+Downturn+&+Cultural+Differences

This is just another short news story about different countries and their reactions to the economic crisis. It's an interesting spin on the stimulus checks we receive here in the U.S. Many people took the money from the stimulus checks and saved it or paid down credit card bills, not many spent it. This system encourages citizens to spend the money. I don't know how much this has to do with culture or politics but I saw it as a definite difference in the reactions to the economic crisis. = = =Boy wins rights to tropical island in lottery= 1 hr 29 mins ago TAIPEI (Reuters) – A 4-year-old boy has won the use of an uninhabited tropical island, with white sand beaches and clear turquoise waters, in a Taiwan lottery aimed at boosting spending during an economic downturn. Officials said Yeh Chien-wei, who won the prize at Thursday's draw, will get exclusive rights to the tiny plot in the Taiwan Strait from May through September. Penghu County, an offshore archipelago, will provide food, drinks, water and electricity to the boy. He has been quoted in local media saying he wants to play in the sea. "Penghu has a lot of islands, and that one has water and electricity, so someone can really enjoy it," said county economic promotion official Lu Yan-chang, explaining why use of the island, which also has a cabin, was offered as a prize. Counties elsewhere in Taiwan have offered cars, houses and other prizes to encourage locals to spend consumer vouchers worth T$3,600 ($103) that the government gave to every citizen in January to encourage spending to help boost the sagging economy. Penghu, which comprises 64 islands, is known for its beautiful beaches and water sports. According to the terms of the prize, the boy and up to seven family members can visit the island five times, for trips that last a maximum of three days. (Reporting by Ralph Jennings, editing by Miral Fahmy) ___________________________________________________________________________________________________________________

I found this article about the different reactions U.S. CEO's had compared to Indian CEO's to the economic downturn. Like all other issues we've discussed in class, we can not assume that the only issues at play here are cultural. In fact, the article even mentions that the Indian CEO's didn't take pay cuts because they thought it was the nice thing to do, they saw it as a necessity. However, it says a lot about the American culture when CEO's are asking for government bailout but don't want to take a pay cut. I personally just had an experience at my company were the new President was promoted after 6 month's at the company. When he was made President he was given a pay increase. Shortly after employees received an email notifying us that there would be no pay increases this year except for those who were already promised them, which meant senior management. After meeting some resistance, the CEO announced that the new president was forfeiting his pay increase until the economy stabilizes. I guess that was supposed to make us feel better?!!

Anyway, I thought we could add other topics to this page. Since we're in an economic downturn, we might as well learn how global managers and managers from all over the world are dealing with the economy.

http://www.businessweek.com/globalbiz/content/feb2009/gb20090211_569463.htm =Indian CEOs Take Pay Cuts to Avoid Layoffs=

The move by Indian execs during the global economic downturn is in contrast to the West, where there is resistance to forego bonuses and perks
President Barack Obama had to throw his weight to get Wall Street bosses to cap their salaries, but across India Inc several CEOs and senior executives are taking voluntary salary cuts to stave off job losses and help their firms' stretched finances. As the economic slowdown bites into profits forcing companies to explore ways to cut costs, Indian executives are presenting a picture of contrast to their peers in the West, where there is resistance to forego bonuses and perks. For example, Bharat Forge MD Baba Kalyani has taken a 20% salary cut after his company reported a consolidated loss of Rs 36.56 crore in the third quarter which ended in December, compared with a profit of Rs 70.96 crore for the same period last year. He is not the only one. Jet Airways CEO Wolfgang Schauer has announced a 25% cut in his salary. The CEO of a prominent automotive company based in south India, who requested his name and his company not be identified, has taken a 20-30 % cut in his salary package. While for some executives, these moves demonstrate empathy and leadership by example, for others it's just simple business necessity. "We didn't do it because it looks nice, but it was essential for us to do it... People can't operate in their own space when the organisation is struggling," says NIIT CEO Vijay Thadani. The company, which saw its leadership team take a voluntary 25% cut in remuneration just two months ago, posted a 60% drop in net profit during the last quarter. Delhi-based Spice Group has created an 'owners club' of 18-20 people consisting of CEOs and promoters last November, and all members of this club took a voluntary pay cut, letting go 50-60% of the cash component of their salaries until the market rebounds. "At this time, businesses need cash, and we need to do our bit to ensure that," says Spice chairman B K Modi. Spice plans to reverse the cut once the BSE Sensex crosses 15,000 points. Industry watchers say such voluntary salary cuts by top management are more common among entrepreneurial companies. This is because when the promoters are the CEOs themselves, they take the onus of their business more sincerely than the outsider appointed to the position. While they are concerned about gains and losses, they care as much about their businesses. Some feel that the strength and character of an institution shows up when people come forward to initiate change. In times of difficulty, CEOs need to set precedent with their actions. Besides showcasing leadership, such actions could help restore confidence among employees. At Infosys, the abiding principle is that leaders need to show the way before a general salary cut. "We will lead by example in taking the initiative if it is required," says Infosys director (HR) TV Mohandas Pai. The company has already slashed the variable bonus for its board members by as much as 40% in the second quarter, and plans another 50% cut for the third quarter.

**Japan Airlines CEO**
I remember a few months back hearing about Japan Airlines CEO Haruka Nishimatsu who has done things that no US CEO would ever consider doing. Mr. Nishimatsu cut his salary to $90,000 a year and has no perks to help his company through turbulent times. He also takes public transportation to work and eats with your average employee in the cafeteria. His salary below what most of the airlines pilots make. What Mr. Nishamatsu has done in tough times is very extreme and not something other CEO's should do but at the same time it just shows you how much he values his people and what he will do try to cut costs in tough economic times. This is just another example of another culture doing something great in the face of tough economic times. While in the US you have white collar criminals like former Merrill Lynch CEO John Thain paying exorbinant bonuses for a company that was losing over $15 billion for their last quarter. Around 700 Merrill Lynch employees were given bonuses over $1 million dollars at the end of 2008.

No CEO should be required to do what Mr. Nishamatsu did to help his company but a little modesty out of CEO's in the US would be nice. I also am a big believer in a free market system so having a cap for executive pay is not something I believe in. However, pressure needed to be put on CEO's of the companies struggling to show some modesty and cut their pay at least to save some jobs in their company.

Great write up! We can see the econmic downturn is pretty much universal in nature. This mornings paper has an interesting article on India's oldest conglomerate, Tata. A year ago Tata was one of the most successful companies in the world, aquiring Jaguar and Land Rover to add to their Tata motor division. A short year later Tata is asking the British government for a financial bailaout to keep these former British auto divisions afloat. Tata had built the Taj Mahal hotel, a 100 year plus structure, into the premier luxury hotel as a testiment to their economic mite but the militant seige last Novemeber not only destroyed portions of the building but fortold the state of the company and the country. Tata's economic affect on India's economy is such that there is a saying "as Tata goes, India goes". With a total of 350,000 employees worldwide the decline of Tata will have far reaching implications. The company has been reducing expenses and staff in an effort to reduce operating expenses. This strategy is playing out across industries world wide and is evident at my place of employment as well. The situation at Tata coupled with the dire economic news from China does not bode well for a quick recovery. China has shuttered nearly 70,000 factories over the last year affecting upwards 20 million workers. We truely live in a global economy. The reduction in the U.S consumer spending market has affected factory workers in Fushon China. The reduction in Tata's stability will in turn affect employees throughout the world. All of us are living through hopefully a once in a life time event that will be remebered right behind the great depression in the history of the economy. Lets hope we all learn from these events and return a bit to a more conservative economic approach both individualy, nationally and globally.
 * Expansion on Economic Situation in India**

http://www.youtube.com/watch?v=fF6lxILnRuE

I thought it was interesting to read the article posted on myCourses. I then found an interview on NPR about the Lost Decade and how it relates to what is happening in the United States with the current economic state. While this is more to do with the ways to financial fix the problem than how people are saving and spending I think it shows that even though the cultures may be much different, many times the solutions are the same. The interview and a description can be found at: [|Putting Japan's 'Lost Decade' In Perspective]
 * Putting Japan's 'Lost Decade' In Perspective: NPR**