Developing “Best Practices” for bankers’ pay in line with Basel III

This paper proposes hybrid capital securities as a significant part of senior bank executive incentive compensation in light of Basel III, a new global regulatory standard on bank capital adequacy and liquidity agreed by the members of the Basel Committee on Banking Supervision. The committee developed Basel III in a response to the deficiencies in financial regulation brought about by the global financial crisis. Basel III strengthens bank capital requirements and introduces new regulatory requirements on bank liquidity and bank leverage. The hybrid bank capital securities we propose for bank executives’ compensation are preferred shares and subordinated debt that the June 2004 Basel II regulatory framework recognised as other admissible forms of capital. The past two decades have witnessed dramatic increase in performance-related pay in the banking industry. Stakeholders such as shareholders, debtholders and regulators criticise traditional cash and equity-based compensation for encouraging bank executives’ excessive risk taking and short-termism, which has resulted in the failure of risk management in high profile banks during the global financial crisis. Paying compensation in the form of hybrid bank capital securities may align the interests of executives with those of stakeholders and help banks regain their reputation for prudence after years of aggressive risk-taking. Additionally, banks are desperately seeking to raise capital in order to bolster balance sheets damaged by the ongoing credit crisis. Tapping their own senior employees with large incentive compensation packages may be a viable additional source of capital that is politically acceptable in times of large-scale bailouts of the financial sector and economically wise as it aligns the interests of the executives with the need for a stable financial system.

Building dynamic capabilities of adaptation and innovation: a study of micro-foundations in a transition economy

What are the microfoundations of dynamic capabilities that sustain competitive advantage in a highly volatile environment, such as a transition economy? We explore the detailed nature of these dynamic capabilities along with their antecedents by tracing the sequence of their development based on a longitudinal case study of an organization subject to an external context of radical transition — the Russian oil company, Yukos. Our rich qualitative data indicate two distinct types of dynamic capabilities that are pivotal for organizational transformation. Adaptation dynamic capabilities relate to routines of resource exploitation and deployment, which are supported by acquisition, internalization and dissemination of extant knowledge, as well as resource reconfiguration, divestment and integration. Innovation dynamic capabilities relate to the creation of completely new capabilities via exploration and path-creation processes, which are supported by search, experimentation and risk taking, as well as project selection, funding and implementation. Second, we find that sequencing the two types of dynamic capabilities, helped the organization both to secure short-term competitive advantage, and to create the basis for long-term competitive advantage. These dynamic capability constructs advance theoretical understanding of what dynamic capabilities are, whilst their sequencing explains how firms create, leverage and enhance them over time.

The history of entrepreneurship: Medieval origins of a modern phenomenon

The origins of enterprise are often associated with the Industrial Revolution, but this article presents evidence of entrepreneurial activities from a much earlier date – the medieval period. Between 1250 and 1500 the church, merchants and members of the royal court all engaged in activities that demonstrated the entrepreneurial characteristics of innovation, risk-taking and judgement. The activities of the prior of Tynemouth and the career of the wool merchant William de la Pole illustrate these developments. By focusing on individuals rather than firms, it is possible to push back the study of entrepreneurship beyond the Industrial Revolution and early-modern trade to a period that witnessed the origins of the modern state.

Post-crisis regulatory reforms and bank performance: lessons from Asia

Based on a large dataset from eight Asian economies, we test the impact of post-crisis regulatory reforms on the performance of depository institutions in countries at different levels of financial development. We allow for technological heterogeneity and estimate a set of country-level stochastic cost frontiers followed by a deterministic bootstrapped meta-frontier to evaluate cost efficiency and cost technology. Our results support the view that liberalization policies have a positive impact on bank performance, while the reverse is true for prudential regulation policies. The removal of activities restrictions, bank privatization and foreign bank entry have a positive and significant impact on technological progress and cost efficiency. In contrast, prudential policies, which aim to protect the banking sector from excessive risk-taking, tend to adversely affect banks cost efficiency but not cost technology.

Newborn behavior and risk of postnatal depression in the mother

The aim of this study was to assess which behavioral characteristics of the newborn infant are associated with an increased risk of postnatal depression (PND) in the mother. A total of 497 mothers from a prospective cohort study were recruited during the last trimester of pregnancy. Infants were evaluated at 3 days with the Brazelton Neonatal Behavioral Scale. Maternal PND was assessed at 6 weeks postpartum with the Edinburgh Postnatal Depression Scale. Behavioral characteristics of the infant predicted the occurrence of PND, independent of other risk factors for PND: The lower the infants' orientation performance, the higher the risk that the mother would present with PND 6 weeks after delivery. As orientation capacities play a key role in the interactional skills developed between mothers and their infants, an infant who is difficult to engage in interaction may contribute to the risk of PND.

Official warnings on thromboembolism risk with oral contraceptives fail to inform users adequately

Following the 1995 “pill scare” relating to the risk of venous thrombosis from taking second- or third-generation oral contraceptives, the Committee on Safety of Medicines (CSM) withdrew their earlier recommended restrictions on the use of third-generation pills and published recommended wording to be used in patient information leaflets. However, the effectiveness of this wording has not been tested. An empirical study (with 186 pill users, past users, and non-users) was conducted to assess understanding, based on this wording, of the absolute and relative risk of thrombosis in pill users and in pregnancy. The results showed that less than 12% of women in the (higher education) group fully understood the absolute levels of risk from taking the pill and from being pregnant. Relative risk was also poorly understood, with less than 40% of participants showing full understanding, and 20% showing no understanding. We recommend that the CSM revisit the wording currently provided to millions of women in the UK.

Communicating information about medication side effects: effects on satisfaction, perceived risk to health, and intention to comply

Previous research has shown that people's evaluations of explanations about medication and their intention to comply with the prescription are detrimentally affected by the inclusion of information about adverse side effects of the medication. The present study (Experiment 1) examined which particular aspects of information about side effects (their number, likelihood of occurrence, or severity) are likely to have the greatest effect on people's satisfaction, perception of risk, and intention to comply, as well as how the information about side effects interacts with information about the severity of the illness for which the medication was prescribed. Across all measures, it was found that manipulations of side effect severity had the greatest impact on people's judgements, followed by manipulations of side effect likelihood and then number. Experiments 2 and 3 examined how the severity of the diagnosed illness and information about negative side effects interact with two other factors suggested by Social Cognition models of health behaviour to affect people's intention to comply: namely, perceived benefit of taking the prescribed drug, and the perceived level of control over preventing or alleviating the side effects. It was found that providing people with a statement about the positive benefit of taking the medication had relatively little effect on judgements, whereas informing them about how to reduce the chances of experiencing the side effects had an overall beneficial effect on ratings.

Uptake of a free coronary heart disease risk screening programme in community pharmacy: the Healthy Heart Assessment service

Introduction Health promotion (HP) aims to enhance good health while preventing ill-health at three levels of activity; primary (preventative), secondary (diagnostic) and tertiary (management).1 It can range from simple provision of health education to ongoing support, but the effectiveness of HP is ultimately dependent on its ability to influence change. HP as part of the Community Pharmacy Contract (CPC) aims to increase public knowledge and target ‘hard-to-reach’ individuals by focusing mainly on primary and tertiary HP. The CPC does not include screening programmes (secondary HP) as a service. Coronary heart disease (CHD) is a significant cause of morbidity and mortality in the UK. While there is evidence to support the effectiveness of some community pharmacy HP strategies in CHD, there is paucity of research in relation to screening services.2 Against this background, Alliance Pharmacy introduced a free CHD risk screening programme to provide tailored HP advice as part of a participant–pharmacist consultation. The aim of this study is to report on the CHD risk levels of participants and to provide a qualitative indication of consultation outcomes. Methods Case records for 12 733 people who accessed a free CHD risk screening service between August 2004 and April 2006 offered at 217 community pharmacies were obtained. The service involved initial self-completion of the Healthy Heart Assessment (HHA) form and measurement of height, weight, body mass index, blood pressure, total cholesterol and highdensity lipoprotein levels by pharmacists to calculate CHD risk.3 Action taken by pharmacists (lifestyle advice, statin recommendation or general practitioner (GP) referral) and qualitative statements of advice were recorded, and a copy provided to the participants. The service did not include follow-up of participants. All participants consented to taking part in evaluations of the service. Ethical committee scrutiny was not required for this service development evaluation. Results Case records for 10 035 participants (3658 male) were evaluable; 5730 (57%) were at low CHD risk (<15%); 3636 (36%) at moderate-to-high CHD risk (≥15%); and 669 (7%) had existing heart disease. A significantly higher proportion of male (48% versus 30% female) participants were at moderate- to-high risk of CHD (chi-square test; P < 0.005). A range of outcomes resulted from consultations. Lifestyle advice was provided irrespective of participants’ CHD risk or existing disease. In the moderate-to-high-risk group, of which 52% received prescribed medication, lifestyle advice was recorded for 62%, 16% were referred and 34% were advised to have a re-assessment. Statin recommendations were made in 1% of all cases. There was evidence of supportive and motivational statements in the advice recorded. Discussion Pharmacists were able to identify individuals’ level of CHD risk and provide them with bespoke advice. Identification of at-risk participants did not automatically result in referrals or statin recommendation. One-third of those accessing the screening service had moderate-to-high risk of CHD, a significantly higher proportion of whom were men. It is not known whether these individuals had been previously exposed to HP but presumably by accessing this service they may have contemplated change. As effectiveness of HP advice will depend among other factors on ability to influence change, future consultations may need to explore patients’ attitude towards change in relation to the Trans Theoretical Model4 to better tailor HP advice. The high uptake of the service by those at moderate-to-high CHD risk indicates a need for this type of screening programme in community pharmacy, perhaps specifically to reach men who access medical services less.

Determinants of intention to purchase chicken in Italy: the role of consumer risk perception and trust in different information sources

The article investigates how purchasing intentions among a sample of Italian consumers are influenced by different levels of risk perception and their trust in food-safety information provided by different sources such as the food industry, government agencies, or consumers' associations. The assessment of the determinants of intention to purchase was carried out by estimating a causal model for the chicken case in which attitudes, subjective norms, and perceived risk play a major role in determining buyer's behavior. In particular, the role of trust in influencing risk perception is highlighted either as a general construct or as specific constructs targeting food chain, policy actors, and the media. [EconLit citations: Q130, Q190, D120]. (C) 2008 Wiley Periodicals, Inc.

Categories of GM risk-benefit perceptions and their antecedents

The stated benefits and perceived risks of genetic modification (GM) cover very diverse issues, such as food safety, world food security, and the environment, that may differentially affect consumer acceptance. In this research, we hypothesize that consumers perceive up to eight dimensions: risks to business (farmers, agribusiness, etc.), benefits to business, risks and benefits to the environment, risks and benefits to the developing world, and risks and benefits to self and family. Moral concerns are also recognized. Using data collected in 2002 in the United States, France, and the UK, we investigate these different dimensions. Second, we analyze the extent to which the dimensions of risk-benefit perceptions can be explained by general attitudes widely used to explain food purchase behavior (such as general attitude to the environment, to technology, etc.), as well as by perceived knowledge of GM, level of education, and trust in various sources of information. In all locations, the majority of consumers only perceive a medium level of risk from GM products. Attitude to technology is the most important attitude variable—those with a positive attitude to technology in general also have a positive attitude to GM technology. More Americans than Europeans fall into this category. Those who trust government and the food industry tend to think GM technology is less risky, whereas those who trust activists believe the opposite. Americans are more trusting of the former, Europeans of the latter. Level of education is positively associated with benefit perceptions and negatively associated with moral concerns. Location continues to play a limited independent role in explaining perceptions even after these factors have been taken into account.

Action following the discovery of a global association between the whole genome and adverse event risk in a clinical drug-development programme

Observation of adverse drug reactions during drug development can cause closure of the whole programme. However, if association between the genotype and the risk of an adverse event is discovered, then it might suffice to exclude patients of certain genotypes from future recruitment. Various sequential and non-sequential procedures are available to identify an association between the whole genome, or at least a portion of it, and the incidence of adverse events. In this paper we start with a suspected association between the genotype and the risk of an adverse event and suppose that the genetic subgroups with elevated risk can be identified. Our focus is determination of whether the patients identified as being at risk should be excluded from further studies of the drug. We propose using a utility function to? determine the appropriate action, taking into account the relative costs of suffering an adverse reaction and of failing to alleviate the patient's disease. Two illustrative examples are presented, one comparing patients who suffer from an adverse event with contemporary patients who do not, and the other making use of a reference control group. We also illustrate two classification methods, LASSO and CART, for identifying patients at risk, but we stress that any appropriate classification method could be used in conjunction with the proposed utility function. Our emphasis is on determining the action to take rather than on providing definitive evidence of an association. Copyright (C) 2008 John Wiley & Sons, Ltd.

Daily consumption of an aqueous green tea extract supplement does not impair liver function or alter cardiovascular disease risk biomarkers in healthy men

Regular consumption of green tea polyphenols (GTP) is thought to reduce the risk of cardiovascular disease (CVD) but has also been associated with liver toxicity. The present trial aimed to assess the safety and potential CVD health beneficial effects of daily GTP consumption. We conducted a placebo-controlled parallel study to evaluate the chronic effects of GTP on liver function and CVD risk biomarkers in healthy men. Volunteers (treatment: n = 17, BMI 26.7 +/- 3.3 kg/m(2), age 41 +/- 9 y; placebo, n = 16, BMI 25.4 +/- 3.3 kg/m(2), age 40 +/- 10 y) consumed for 3 wk 6 capsules per day (2 before each principal meal) containing green tea extracts (equivalent to 714 mg/d GTP) or placebo. At the beginning and end of the intervention period, we collected blood samples from fasting subjects and measured vascular tone using Laser Doppler lontophoresis. Biomarkers of liver function and CVD risk (including blood pressure, plasma lipids, and asymmetric dimethylarginine) were unaffected by GTP consumption. After treatment, the ratio of total:HDL cholesterol was significantly reduced in participants taking GTP capsules compared with baseline. Endothelial-dependent and -independent vascular reactivity did not significantly differ between treatments. In conclusion, the present data suggests that the daily consumption of high doses of GTP by healthy men for 3 wk is safe but without effects on CVD risk biomarkers other than the total:HDL cholesterol ratio. J. Nutr. 139: 58-62, 2009.

Effects of active information processing on the understanding of risk information

Two experiments investigated effects of active processing of risk information on participants' understanding and judgments. It was hypothesized that more active processing would lead to better understanding and differences in affective judgments (e.g. increased satisfaction and reduced perceived risk to health). In both experiments participants were given a written scenario about their being prescribed a fictitious medication. This medication was said to cause side effects in 2% of people who took it. Before answering a series of written questions, participants in the active conditions of both experiments were asked to carry out a reflective task (portraying the size of risk on a bar chart in Experiment 1 and answering a reflective question in Experiment 2). The results showed that active participants rated the likelihood of experiencing possible side effects significantly lower than passive participants (Experiment 1), and that active participants were significantly more satisfied with the information and judged perceived risk to health from taking the medication significantly lower than passive participants (Experiment 2). In both experiments, active participants were significantly more correct in their probability and frequency estimates. The studies demonstrate that active processing of risk information leads to improved understanding of the information given. This has important implications for risk communication. In the context of health, better understanding should lead to improved decision-making and health outcomes. Copyright (C) 2004 John Wiley Sons, Ltd.