There is a focus on corporate social responsibility. This focus is to encourage corporates to recognize that they have to go beyond making profits for their shareholders and to take care of other stakeholders, such as their workers, customer, community and the environment.
Many corporates proudly embrace this concept, but pay only lip service to it. To be truly a responsible corporate citizen, they have to create a proper balance in the sharing of the profit among the various stakeholders.
The most important task is to provide goods and services at fair prices to their customers. They should not make excessive profits at the expense of their customers, by offering goods of inferior quality or provide misleading information about the value of the goods. They have to be honest.
The corporations have to provide fair wages to their workers. It is possible to use the market forces to suppress the wages and increase profits for their shareholders, but that would be against the concept of social responsibility. It is understandable for a corporation to reduce its wages, if this is necessary for the corporation to survive in a competitive market or where there is a drop in demand. However, if the corporation is able to make big profit, it should give a fair share to the workers.
A part of the profits should be set aside for the community and the environment.
The shareholders are entitled to the residual profits but there must be benchmarks on what is a reasonable rate of return. The corporation should not go beyond this reasonable rate, if it is done at the expense of the other stakeholders.
The concept of corporate social responsibility requires these benchmarks to be established. It will lead to a fairer society and ensure its long term sustainability.
Tan Kin Lian
Wednesday, September 30, 2009
Scam involving Australian property
A lawyer told me about this scam involving Australian property. A developer marketed the property in Singapore through a Singapore property agent. The property carried a rental guarantee which was provided by another company, having a similar name to the developer, but with no funds to back the guarantee.
On completion, the invetors did not get the guaranteed rental. The company that provided the guarantee declared insolvency.
The Australian banks that provided the 70% loan to the Singapore investors took over the property at a discount of 30%. The Singapore investors lost the 30% that they invested.
The Singapore investors went to see the property agent, who said they were only marketing the property to earn a commission, and was not responsible for the loss.
Lesson: Never invest in overseas properties, even with rental guarantee. The risk is too high.
On completion, the invetors did not get the guaranteed rental. The company that provided the guarantee declared insolvency.
The Australian banks that provided the 70% loan to the Singapore investors took over the property at a discount of 30%. The Singapore investors lost the 30% that they invested.
The Singapore investors went to see the property agent, who said they were only marketing the property to earn a commission, and was not responsible for the loss.
Lesson: Never invest in overseas properties, even with rental guarantee. The risk is too high.
Slot in cash card to enter and leave car park
Do you know why you still have to suffer the inconvenience and have to slot in your cash card to enter and leave some car parks in Singapore? Here is the likely reason.
Lower return expected in the future
QUOTE
Sept. 30 (Bloomberg) -- Pacific Investment Management Co.’s Bill Gross says investors should expect total returns on equities of about 5 percent annually as consumers curb spending and increase savings.
“Returns mimic nominal” gross domestic product, Gross, manager of the world’s biggest bond fund, said in an interview yesterday with Bloomberg Radio. “Nominal GDP is the growth rate of wealth on an annual basis. The new normal is 2 to 3 percent GDP and real growth of 1 to 2 percent.”
UNQUOTE
If total return on equity is 5% p.a., the return on a diversified fund will be lower, say 3% p.a. If the financial product gives a reduction in yield of 2%, the net return will only be 1%.
With low return, it is important for the financial product to have lower reduction in yield, i.e. lower the marketing and other charges.
Sept. 30 (Bloomberg) -- Pacific Investment Management Co.’s Bill Gross says investors should expect total returns on equities of about 5 percent annually as consumers curb spending and increase savings.
“Returns mimic nominal” gross domestic product, Gross, manager of the world’s biggest bond fund, said in an interview yesterday with Bloomberg Radio. “Nominal GDP is the growth rate of wealth on an annual basis. The new normal is 2 to 3 percent GDP and real growth of 1 to 2 percent.”
UNQUOTE
If total return on equity is 5% p.a., the return on a diversified fund will be lower, say 3% p.a. If the financial product gives a reduction in yield of 2%, the net return will only be 1%.
With low return, it is important for the financial product to have lower reduction in yield, i.e. lower the marketing and other charges.
High upfront charge
A consumer asked my views about a product introduced by an insurance company.
He showed me a benefit illustration:
a) A large single premium is paid into the account.
b) The sum insured is about 7 times of the single premium
c) The cash value on the first year is 73% of the single premium. The upfront charge is 27% of the single premium.
d) At the end of 20 years, there is a guaranteed cash value based on the guaranteed crediting rate of 3% and maximum charges) amounting to 79% of the single premium.
e) There are two other illustrations, which are not guaranteed, that shows a cash value that is higher than the single premium invested.
MY ANALYSIS
a) The charges are TOO HIGH. If the single premium is $100,000, a sum of $27,000 is taken away from your investment to allow for commission and profit.
b) It is unlikely, in my view, for the payout to meet the non-guaranteed illustration, as they are based on optimistic assumptions on future earnings
c) The consumer can invest the single premium separately and pay the on a term insurance out of the interest earned.
a) A large single premium is paid into the account.
b) The sum insured is about 7 times of the single premium
c) The cash value on the first year is 73% of the single premium. The upfront charge is 27% of the single premium.
d) At the end of 20 years, there is a guaranteed cash value based on the guaranteed crediting rate of 3% and maximum charges) amounting to 79% of the single premium.
e) There are two other illustrations, which are not guaranteed, that shows a cash value that is higher than the single premium invested.
MY ANALYSIS
a) The charges are TOO HIGH. If the single premium is $100,000, a sum of $27,000 is taken away from your investment to allow for commission and profit.
b) It is unlikely, in my view, for the payout to meet the non-guaranteed illustration, as they are based on optimistic assumptions on future earnings
c) The consumer can invest the single premium separately and pay the on a term insurance out of the interest earned.
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