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The problem with today's newest generation of accounting/finance professionals isn't with their upbringing, it's with management's perception of them ("What's Wrong with the Kids?" February). Young professionals today embody the spirit of "only you can control your future"; they see that building connections will ultimately be rewarding later on in their careers. With twice the work, half the workers, and an incredibly broad skill set necessary to meet the challenging demands of the accounting/finance field, it's no wonder that when young professionals feel underappreciated and underpaid they find a new employer who promises increased responsibility and more-reasonable compensation for services rendered.
Health Care and the Marketplace
I believe the answer to the question you pose in "Rethinking Health Care" (February) — Can more employee choice actually lower costs? — is a resounding yes. I worked in a drugstore as a boy in 1963. I remember in 1965 when Medicare took over some of the drug payments. Prices tripled. My boss, a pharmacist, was shocked. Nobody seemed to care. Why should they? A third party was footing the bill. Drug companies could charge what they pleased. Direct competition was removed from the equation. There was nothing to induce a superior product or service at better prices.
As I understand it, employee health care was originally initiated to incent highly compensated executives. The company could take a deduction and an executive's lifestyle inched up without it either coming out of his pocket or his being taxed for the perk. The unions got hold of it, and it has been a negotiating chip ever since. The same principle still holds true: with a third party paying for prescriptions and doctor services, market accountability is virtually nonexistent.
If health insurance were to operate in the market — that is, to directly approach users and not their employers, as do car and homeowner's insurance — I believe we would see a miraculous drop in prices and a corresponding increase in services.
Home Equity Management LLC
Lockport, New York
A Fool's Errand?
I have no idea what the Financial Accounting Standards Board is thinking ("A New Vision for Accounting," February). It should give more direction on what should be in the lines, not totally change the statements.
What does FASB want as its legacy — that we change the look of the financial statements? The average person cannot read the guidelines now. If analysts want to get funky with their analysis on investing in a company, let the information be in the footnotes. I believe the accounting field will be looked at as a bunch of fools.
Having been laid off from my technology job in 2001 and having struggled for the past few years to find a replacement job that pays a living wage and makes use of my degrees in biology, physics, and finance, I have become somewhat doubtful that Corporate America has any intention of supporting the American system in which it currently enjoys doing business. "Offshoring Spreads Its Wings" (March) only reinforces my suspicions as to where the U.S. worker fits in. As far as I'm concerned, any company that is fixed on outsourcing every aspect of its business except the executive suite is a drag on this country, not an asset.
As more jobs go overseas, and more people are laid off here at home, I suspect there are going to be a large number of people who are going to set their sights on Washington to get the situation fixed. You may not pay attention to the anger building in the middle class, but I hear it every day. Backlash? You haven't seen anything yet.
Thanks for the article "Missing Pieces" (March), including all the ingredients of successful and less-successful recipes: capital-allocation principles, individual-compensation principles, regulations, structure and process of risk management, and culture. It is amazing that leading banks such as Citi and UBS are now revealing plans that capital should be allocated to businesses within the bank based on risk-return considerations. Back to the basics of first-semester economics?
Individual-compensation principles: nothing drives behavior and culture as much as compensation models.
Regulations: these mostly deal with the last crisis, not preventing the next one. More regulation and disclosure rarely help. Buying a house in the United States requires signing countless legal forms with risk disclosures, but that obviously doesn't prevent unsound property financing at the source.
Structure and process: the CRO should report directly to the CEO, and have direct access to the board. Managing risk is the flip side of managing business opportunities; both must be balanced at the highest level.
Culture is the key issue: all processes and structures will fail if the top guy doesn't set the right priorities. Is it a coincidence that the banks with the biggest losses were (and are) managed by the chairs least challenged by their boards? I don't think so!
Ensuring Honest Credit
"Carbon Trading" (January) rightly points out that no national system has previously existed for tracking renewable energy certificates (RECs), and that a national approach to tracking and registering of certificates would increase the integrity of U.S. environmental markets. To address these needs, APX is in the process of launching a nationally available registry for those states currently without tracking systems in place, working closely with the Center for Resource Solutions (the highly respected "Green-e" people mentioned in your story) as well as with Sterling Planet and others.
The trend toward greater transparency, tracking, and oversight in REC markets is also clear in the emerging U.S. carbon markets. The Gold Standard and the California Climate Action Registry protocols, for example, are putting in place registries with the same advanced technology. This will enable rapid substantiation of claims, with full transparency and auditability into the pedigree, protocol, documents, and verification for each environmental credit by serial number.
To be sure, technology and registries are not the full solution for those who question the fundamental concept of offsetting carbon emissions in the first place. But most nations do address carbon offsets in some way. If you accept that, then tracking systems and registries are emerging as the preferred tool for markets and industry to ensure that credits conform to the rules, are properly verified, are not double counted, and are permanently retired for a voluntary or compliance purpose.
Santa Clara, California