Author Archives: support

Trapping Fiscal Vermin: The Need for an Improved Mousetrap

Over the past quarter century, Enron, Lehman Brothers, General Electric, and Supermicro have all been notorious for financial mismanagement, especially the malpractice of “cooking the books.” Despite this, such deceptions often go undetected until they have cost investors billions. Analysts have thus been compelled to develop methods to detect companies employing dubious or outright illegal accounting strategies to obscure their underperformance.

Urooj Khan, an accounting professor and Deloitte & Touche Centennial Faculty Fellow at Texas McCombs, has introduced pioneering research offering a novel and more effective method for assessing what he terms “earnings quality”. His innovation, the earnings quality score (EQSCORE), has demonstrated remarkable success in surpassing the capabilities of existing models at pinpointing firms potentially engaged in accounting misconduct.

The strength of EQSCORE lies in its comprehensive approach. Khan highlights that, unlike other models, EQSCORE considers an extensive array of accounting red flags and integrates considerations such as governance issues—for instance, the potential bias of an insider board chair—along with other discrepancies identified by financial auditors.

Khan’s research genesis was aimed at closing the disconnect between the theoretical models of earnings quality discussed in academic circles and the practical applications used by Wall Street. This led to the creation of a more robust model that reflects a wider spectrum of factors influencing company performance and the accuracy of financial reports.

In developing EQSCORE, Khan collaborated with Venkat Peddireddy of the China Europe International Business School and Shiva Rajgopal of Columbia University. They meticulously analysed 613 detailed reports from a leading private research firm highlighting various companies involved in potentially illegal or questionable financial reporting. These reports revealed critical metrics and “signals” used to identify 230 companies, with the majority of indicators related to accounting practices like questionable revenue figures and profit margins, as well as concerns related to corporate governance and auditing.

The team identified 51 red flags from these analyses, which formed the basis of EQSCORE. These included 31 accounting variables, eight about board characteristics, and 11 related to audit issues. To validate EQSCORE, the researchers applied it to a different dataset—companies targeted by Securities and Exchange Commission (SEC) enforcement actions. While the SEC’s dataset does not encompass all instances of suspect corporate accounting, it does capture the most egregious cases, particularly given the SEC’s constrained budget, which necessitates selecting cases with substantial evidence of manipulation.

EQSCORE was developed using data from companies subjected to SEC enforcement actions between 2004 and 2009. Its efficacy was then tested against a sample of companies charged by the SEC from 2010 to 2016. The results were compelling; EQSCORE successfully predicted 71% of the accounting years investigated by the SEC, a significant improvement over the next best model, which only predicted 55%. Additionally, it missed only 29% of the years flagged by the SEC, compared to 45% for the competing model.

Khan is optimistic that EQSCORE could garner interest from the SEC, which has been developing its model since 2012 to detect fraud and accounting irregularities. The model could also be an invaluable tool for private investors, aiding them in identifying companies that tread close to, but do not necessarily cross, the legal boundaries of accounting practices.

To illustrate the potential benefits for investors, the researchers devised a stock market strategy based on EQSCORE. They simulated investment scenarios where they bought stocks of companies with low EQSCOREs and shorted those with high scores, betting that stocks with high scores would decline. Over seven years, this strategy yielded average annual returns 7.8% higher than expected.

In conclusion, Khan asserts that EQSCORE significantly enhances the ability to predict fraudulent activities and effectively identifies firms that resort to aggressive accounting tactics to misrepresent their proper financial health, mainly when they are in a state of decline.

More information: Urooj Khan et al, Earnings quality on the street, Contemporary Accounting Research. DOI: 10.1111/1911-3846.12975

Journal information: Contemporary Accounting Research Provided by University of Texas at Austin

Traversing the Opt-in Labyrinth: Achieving Equilibrium Between Transparency and Persuasion in Data Consent

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Personal data has become a commodity of immense value in the modern digital era. Companies are keen to gather such data, and although regulatory frameworks like the EU’s General Data Protection Regulation (GDPR) mandate explicit user consent, they do not define the methods through which consent should be sought. Companies, therefore, vary in their approach; some prioritise transparency, while others resort to persuasive strategies, such as offering discounts for personal information.

A significant contribution to this discourse is the research titled “The Race for Data: Utilising Informative or Persuasive Cues to Gain Opt-in?” conducted by Sara Valentini from Bocconi’s Marketing Department, alongside Caterina D’Assergio of Marazzi Group, Puneet Manchanda of the University of Michigan, and Elisa Montaguti of the University of Bologna. This study reveals that merely providing information, though compliant with GDPR, does not necessarily enhance opt-in rates. However, the strategic combination of informative content with persuasive elements, particularly monetary incentives, substantially increases the number of opt-ins.

The research, published in the Journal of Marketing, focused on an analysis of 1,506 re-permission emails from 1,396 firms following the enforcement of GDPR. The findings indicate that while the regulation emphasises transparency, many companies still deploy persuasive techniques, such as offering discounts or rewards, to encourage opt-ins. Specifically, the study found that 26% of firms rely exclusively on persuasive methods, 24% use a combination of both compelling and informative strategies, and the remaining firms depend entirely on informative content.

Further investigation through a field experiment showed that purely informative messages did not markedly improve opt-in rates despite being in line with GDPR’s transparency requirement. Conversely, using a mixed informative and persuasive messaging approach consistently led to better opt-in outcomes across various contexts. Notably, monetary incentives like discounts were particularly effective.

This pattern underscores a vital insight: although compliance with transparency is crucial, users are generally more engaged when companies address their desires or offer tangible rewards. This observation implies that many consumers are prepared to trade their data for immediate benefits despite increasing privacy concerns.

The nature of a company also influences its choice of strategy. Enterprises with a substantial physical presence, such as retailers or those offering tangible products, tend to favour a more persuasive strategy than those operating solely online. Additionally, industries that rely heavily on personal data, such as advertising, are more inclined to integrate persuasive elements into their strategies to maximise opt-ins.

This research has several implications for businesses, consumers, and regulators. Adopting a balanced approach that marries transparency with persuasive incentives is highly effective for companies. However, they must be wary of potential reputational damage if persuasive tactics are perceived as overly aggressive, which could lead to regulatory scrutiny.
Consumers, on the other hand, should remain vigilant and cautious when disclosing personal data. The allure of immediate incentives might cause some to overlook potential long-term risks associated with data sharing.

Finally, the findings suggest regulators may need to consider a more nuanced approach to enforcing GDPR compliance. While the regulation promotes transparency, the prevalent use of persuasive strategies indicates that firms are navigating through a regulatory grey area, adhering to the letter of the law while capitalising on its ambiguities. This situation calls for a refined monitoring strategy that ensures companies comply with the letter and the spirit of GDPR.

More information: Caterina D’Assergio et al, The Race for Data: Utilizing Informative or Persuasive Cues to Gain Opt-in? Journal of Marketing. DOI: 10.1177/00222429241288456

Journal information: Journal of Marketing Provided by Bocconi University

Working on Your Feet May Negatively Affect Blood Pressure

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A study conducted in Finland revealed that prolonged standing at work can adversely impact employees’ 24-hour blood pressure readings. Conversely, those who spent more time sitting during their workday exhibited better blood pressure levels. The findings underscore the significance of activity patterns during work hours influencing overall blood pressure more than recreational physical activities.

It is widely recognised that regular exercise plays a crucial role in managing blood pressure. Specifically, vigorous aerobic exercises have proven effective in reducing blood pressure levels. However, day-to-day physical activities also contribute positively to this effect. Historical data have demonstrated that leisure-time physical activities provide more cardiovascular benefits than physical exertions at work, which can sometimes be counterproductive to health.

Monitoring blood pressure over 24 hours is pivotal for assessing cardiovascular health. In the context of the Finnish Retirement and Aging study (FIREA), carried out at the University of Turku, the physical activity levels of municipal workers nearing retirement were meticulously monitored. This involved using thigh-worn accelerometers that recorded movements during work, leisure, and days off. Additionally, participants were equipped with portable blood pressure monitors that provided half-hourly updates over an entire day.

According to Doctoral Researcher Jooa Norha, the cumulative readings of 24-hour blood pressure offer a more accurate representation of the cardiovascular stress endured by the body throughout different times of the day and night. Elevated blood pressure that persists across the day and fails to decline adequately during nighttime could cause blood vessels to harden and compel the heart to pump more vigorously, potentially leading to cardiovascular diseases over time.

To mitigate these risks, it is advisable to alternate between standing and sitting during the workday. Although standing desks are beneficial for breaking the monotony of sitting for long periods, excessive standing can exacerbate blood pressure problems. Individuals should integrate walking or sitting breaks into their routine to alleviate the strain caused by continuous standing.

Furthermore, the study indicates that a sedentary job does not inherently pose a risk to blood pressure if it is counterbalanced with sufficient recreational physical activity. The importance of engaging in diverse physical exercises during leisure time is emphasised for all workers, regardless of their job nature. This helps maintain overall fitness and manage work-related physical demands more effectively. Employees, particularly those in passive roles, are encouraged to ensure they participate in adequate physical activities during their free time to enhance their health and mitigate occupational stresses.

More information: Jooa Norha et al, Associations between Leisure and Work Time Activity Behavior and 24 H Ambulatory Blood Pressure among Aging Workers, Medicine & Science in Sports & Exercise. DOI: 10.1249/mss.0000000000003594

Journal information: Medicine & Science in Sports & Exercise Provided by University of Turku

Study Shows Repealing Old Law That Lets Firms Pay Disabled Workers Less Has No Adverse Effects

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The national debate continues over a practice established by an 86-year-old federal statute that permits companies to pay workers with disabilities subminimum wages, defined as anything below the federal minimum wage of $7.25 an hour, with some receiving as little as 25 cents per hour. Advocates for repealing this statute argue that it is based on outdated assumptions about reduced productivity. It highlights the unfairness of this wage level, typically used to compensate food service workers who often earn additional income through tips. Opponents of the repeal, however, express concerns that eliminating subminimum wage laws could lead to fewer employment opportunities for workers with disabilities.

Recently, a study conducted by researchers at the University of Pennsylvania Perelman School of Medicine found that repealing these subminimum wage practices has not led to significant negative impacts in states that have abandoned them. Published today in JAMA Health Forum, the study offers critical insights for policymakers as a new Congress convenes.

The research focused on Maryland and New Hampshire, two states that have phased out the subminimum wage practice initially introduced in 1938 under the Fair Labor Standards Act (FLSA). The act was intended to encourage businesses to hire disabled soldiers, who were presumed to be less productive in the mainstream workforce. Employers who wish to pay subminimum wages to people with disabilities must obtain a 14c certificate from the Department of Labor (DOL). This often occurs within sheltered workshops, where employees with intellectual and psychiatric disabilities are frequently segregated from their non-disabled colleagues.

The study observed increased labour force participation among people with cognitive disabilities in these states following the law’s repeal, with the effects varying by state.

Atheendar Venkataramani, MD, PhD, an associate professor of Health Policy and Medicine and the study’s senior author, noted, “Employment and wages are significant determinants of health. This research builds upon previous studies which demonstrated that employment and financial stability are key factors in reducing health disparities among people with disabilities. Further, studies have shown that integrated employment is linked with improved psychological well-being, self-esteem, and job satisfaction for people with intellectual disabilities.”

The study found that labour force participation increased in both states after the repeal, highlighting the inclusive nature of this change. It suggests that individuals with cognitive disabilities, previously disconnected from employment resources, are now engaging in the workforce in equal-paying, fully integrated roles alongside their non-disabled peers, a scenario previously considered unfeasible when the law was first drafted. Mihir Kakara, MBBS, MSHP, the study’s lead author and a former Neurology fellow at Penn, now an assistant professor of Neurology at NYU Grossman School of Medicine, emphasized the importance of providing the right resources to facilitate this integration.

The research team also highlighted the need for tailored solutions at the state level should the use of 14c roles be repealed nationally, including the importance of funding for integrated employment in more typical workplace environments. These findings provide a preliminary glimpse into a future where workplace dignity is approached differently, ensuring a net economic benefit and more significant equity in employment.

The fate of this practice is expected to become more apparent soon, as a bipartisan bill to phase out subminimum wage roles and create more inclusive job opportunities was introduced in the previous Congress. Additionally, the Biden Administration is reviewing the 14c program comprehensively, with a decision expected soon.

More information: Mihir Kakara et al, Repeal of Subminimum Wages and Social Determinants of Health Among People With Disabilities, JAMA Health Forum. DOI: 10.1001/jamahealthforum.2024.4034

Journal information: JAMA Health Forum Provided by University of Pennsylvania School of Medicine

Beyond Resistance: How Perceived Threats from Diversity Can Foster Positive Transformation

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In recent times, numerous employers throughout North America have initiated or enhanced their equity, diversity, and inclusion (EDI) programmes, aiming to cultivate a workplace culture that is both diverse and inclusive.

Despite these good intentions, research has illustrated that promoting diversity might entail significant challenges. Employees from predominant societal groups often perceive these initiatives as threats, leading to a backlash against the very groups that such programmes endeavour to support. This scenario poses a question: Could these perceptions of threat also catalyse a process of learning and change, eventually culminating in allyship? According to a recent investigation conducted by the UBC Sauder School of Business, this is indeed possible, provided that companies maintain open lines of communication.

The research “Beyond Backlash: Advancing Dominant-Group Employees’ Learning, Allyship, and Growth through Social Identity Threat,” thoroughly examined numerous studies on how individuals and groups respond to perceived threats. Additionally, the researchers explored concepts like post-traumatic growth, which suggests that threatening experiences can lead to positive outcomes. They also analysed various studies on allyship, focusing specifically on which EDI strategies proved most effective and which were merely performative.

The findings highlighted the critical importance of fostering honest dialogue within organisations. When dominant group members feel uncertain or threatened, providing accurate information and practical strategies can transform potential resistance into understanding.

Dr Camellia Bryan, an Assistant Professor at UBC Sauder and co-author of the study with Dr Brent Lyons of York University, emphasised the importance of dialogue, mainly when new EDI initiatives are introduced or there is backlash. She noted that without such open dialogues, there is a risk of “closing” — a scenario where employees from dominant groups intensify their opposition to new initiatives, which they perceive as a threat to their established identity and position.

Dr. Bryan referred to the case of James Damore, the former Google employee who issued a memo criticising the company’s EDI practices and described the corporate culture as an “ideological echo chamber.” In his memo, Damore also accused Google of discriminating against conservatives, whites, Asians, and men. According to Dr. Bryan, Damore’s actions were a clear example of “closing,” as he continued educating himself yet remained unyielding.

Dr Bryan further explained that resistance to change is often strongest among those who endorse existing hierarchies and feel threatened by their disruption. Conversely, individuals who have personally experienced some form of disadvantage — even if they are white and cisgender but living with a disability — are generally more receptive to these changes.
She also shared a personal account of a professor whose spouse came out as transgender, which was initially perceived as a severe threat. However, through continuous learning and dialogue, they managed to navigate this challenging time.

Dr. Bryan cautioned that expecting all employees to overcome their feelings of threat and reach a place of understanding is unrealistic. Those who persist in opposing diversity, maintaining a belief in their group’s superiority, are unlikely to change their views quickly. This entrenched resistance presents a substantial challenge regarding re-education and behavioural change.

The study offers a positive perspective on how perceived threats from EDI initiatives can catalyse significant learning and allyship among dominant groups, thereby fostering organisational growth. Dr Bryan advises that employers should facilitate dialogue through various means, from meetings to anonymous surveys, to help alleviate fears and encourage the formation of new allies.

Dr. Bryan suggests that while the feelings of threat induced by diversity are often depicted negatively in business literature, they can be utilised constructively to promote learning and growth, mainly if addressed proactively.

More information: Camellia Bryan et al, Beyond Backlash: Advancing Dominant-Group Employees’ Learning, Allyship, and Growth Through Social Identity Threat, Academy of Management Review. DOI: 10.5465/amr.2021.0521

Journal information: Academy of Management Review Provided by University of British Columbia – Sauder School of Business

How Can Companies Tackle Increasing Consumer Distrust?

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Recent research shows that transparency and effective communication are paramount for brands seeking to gain and maintain consumer trust.

Dr Kate Sansome of the University of Adelaide’s Adelaide Business School has spearheaded a study that reveals consumers’ desire for brand transparency on issues that affect them. “As sociopolitical issues gain prominence in the news and on social media, there is an expectation for brands to be forthright about them. For instance, with rising cost-of-living pressures, consumers expect transparency on this matter,” Dr Sansome notes. She conducted this research alongside Professor Jodie Conduit and Dr Dean Wilkie, also from the Adelaide Business School.
The research indicates that transparency is not merely about providing voluminous information but involves openness, clarity, timeliness, and the provision of well-supported, evidence-based data. Facilitating open dialogue and addressing consumers’ inquiries promptly is crucial, especially on contentious or adverse matters, particularly for brands in sectors that traditionally carry a negative reputation.

According to Dr Sansome, true transparency involves straightforward and understandable communication, being proactive rather than reactive, and substantiating claims with statistical data, factual information, and visual evidence. The study highlights the effectiveness of using infographics or narrative techniques to elucidate decision-making processes, thereby enhancing consumers’ comprehension of the motives and justifications behind these decisions.

Dr Sansome points out that consumer trust in brand communication is waning due to misinformation, deepfakes, misleading assertions, and apparent hypocrisy. “There is a growing scepticism, particularly among the youth, who often suspect that a brand concealing certain topics has something to hide.”

She further explains that consumers’ perceptions of specific brands or product categories can affect their views on brand transparency. The research underscores that in industries like mining or fast fashion, which are often stigmatised, consumer scepticism can obstruct recognising a brand’s attempts at transparency, regardless of the underlying intentions.
This study challenges traditional views that confine transparency to a managerial or governance framework—primarily focusing on regulatory compliance or logistical and pricing data—and also considers the subjective nature of how consumers interpret brand communication and their areas of interest.

“For businesses, our findings shed light on the necessity for transparency on issues that extend beyond mere pricing and supply chain details, tailored in a manner that aligns with consumer expectations,” Dr Sansome elaborates. She argues that merely posting extensive information in PDF format on a website does not suffice; instead, transparency should be viewed as an ongoing, dynamic interaction with consumers, characterised by clear, prompt, evidence-based, and explanatory communication.

Dr Sansome emphasises the need for further research to devise strategies that enable brands to transparently share their advances in sustainability without jeopardising their brand equity or exposing themselves to substantial reputational risks. “With increasing regulations aimed at combating ‘greenwashing,’ brands are now practicing ‘greenhushing,’ choosing silence over risking scrutiny or backlash. As consumers grow more discerning, brands need to be prepared for this scrutiny and scepticism, which is especially challenging for brands in stigmatised industries when communicating their sustainability efforts.”

More information: Kate Sansome et al, Consumerbased conceptualisation of brand transparency: scope, characteristics and contextual determinants, European Journal of Marketing. DOI: 10.1108/EJM-12-2022-0885

Journal information: European Journal of Marketing Provided by University of Adelaide

Exploring Why Inclusive Product Ranges Might Not Receive Universal Approval from Consumers

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Researchers from Texas Christian University, Brooks Running, and the University of Washington conducted a recent study published in the Journal of Marketing. It delves into why underrepresented consumers might be sceptical about inclusivity-focused product line extensions and suggests ways companies can improve their outreach.

The research, soon to be featured in the Journal of Marketing, is titled “Is This for Me? Differential Responses to Skin Tone Inclusivity Initiatives by Underrepresented Consumers and Represented Consumers,” authored by Jennifer D’Angelo, Lea Dunn, and Francesca Valsesia. It highlights a growing trend among brands to develop or expand product lines catering to a diverse consumer demographic to represent better those traditionally marginalised in the marketplace. Despite the positive intentions behind these inclusivity initiatives, the study finds that not all consumer groups view these efforts equally favourably. While generally received positively, these initiatives can provoke a less enthusiastic response from the consumers they aim to support — those who feel underrepresented.

The research focuses on the underrepresentation in the marketplace, with D’Angelo pointing out that feeling underrepresented can heighten consumer scepticism about whether the products will adequately meet their specific needs. For many consumers, particularly from racial backgrounds that have historically been overlooked in product development, there is a palpable sense of their needs being misunderstood, ignored, or poorly interpreted by brands. This sentiment is underpinned by demographic shifts, as evidenced by the 2020 United States Census, where Black and Hispanic populations make up 30.8% of the populace yet have traditionally seen less focus compared to White consumers in product ranges such as skin tone-specific items. This lack of adequate representation often creates a mismatch between available products and consumer needs.

Dunn elaborates that past experiences of these consumer groups can lead to a preemptive expectation that new products will fail to meet their needs, regardless of the product category. This anticipation fosters scepticism about product suitability, particularly in matching skin tones, which can negatively affect their overall perception of the brand. Valsesia adds that this dampened enthusiasm is not a reflection of a general discontent with brand innovations but rather a specific response to inclusivity efforts that seem to underdeliver in terms of relevance and efficacy to their personal needs.

The study identifies several key areas where companies can improve to better connect with underrepresented consumers. For one, respecting and explicitly acknowledging the needs of these consumers during product development can significantly enhance their reception of new product lines. By integrating customisation options and strategically positioning the brand to align closely with these consumers’ expectations, companies can diminish scepticism and foster a more inclusive brand image. An exemplary case of this approach is Fenty Beauty’s “Beauty for All” campaign, utilising diverse celebrity endorsements, social media engagement, and inclusive product development practices to affirm its commitment to diversity.

In summary, while inclusivity initiatives in product lines are broadly favourable, the nuanced responses from underrepresented consumers highlight a need for more thoughtful and respectful engagement strategies. The research underscores the necessity for companies to launch inclusive products and maintain a consistent, authentic commitment to diversity beyond mere marketing. It’s crucial for businesses to continuously validate their inclusivity claims through genuine actions and long-term strategies that demonstrate a deep respect for and understanding of their diverse consumer base. When executed sincerely, this commitment can bridge the gap between company offerings and consumer expectations, fostering a more inclusive marketplace.

More information: Jennifer D’Angelo et al, Is This for Me? Differential Responses to Skin Tone Inclusivity Initiatives by Underrepresented Consumers and Represented Consumers, Journal of Marketing. DOI: 10.1177/00222429241268634

Journal information: Journal of Marketing Provided by American Marketing Association

The Fridge as a Symbol of Improved Living

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To appreciate the extent of a nation’s development, one must consider the items found in its households, argue economists Rutger Schilpzand and Jeroen Smits from Radboud University. While traditional research on low- and middle-income countries typically concentrates on metrics such as income, health, or education, more is needed to encapsulate a country’s circumstances fully. Schilpzand states, “For the first time, we are charting the progression of household material wealth,” a concept they refer to as the ‘domestic transition’. Their findings were recently published in the Journal of International Development.

In affluent nations today, the absence of essential appliances like refrigerators, televisions, or washing machines is almost inconceivable. Yet, before 1960, only a minority of households possessed these items. The landscape dramatically transformed within a mere decade and a half, with these appliances becoming ubiquitous in kitchens and living rooms across these countries. The researchers describe this shift from a reality where such items are rare to one where they are commonplace as ‘the domestic transition’. Their study elucidates what this transition entails for emerging nations and identifies factors that accelerate it.

These appliances symbolise the minimum for what might be considered a decent standard of living. “Nearly every household in the world that can afford such items does purchase them,” notes Smits, highlighting their profound impact on reducing the daily burdens, particularly of housewives, by saving time and energy. Schilpzand concludes that purchasing a refrigerator or washing machine lightens their workload and allows time to be spent on more productive activities. Thus, the domestic transition is seen as crucial for enhancing the status of women globally.

While affluent countries concluded their domestic transitions decades ago, many developing countries are either amid this transition or are just beginning. The researchers investigated whether the pattern of transition in these emerging nations mirrors that of Western countries in the past, which typically started slowly and then rapidly accelerated until saturation was reached. Their study included data on television and refrigerator ownership across 1,342 regions within 88 low—and middle-income countries.

The pattern of transition they discovered closely resembles that of the West. However, notable variations exist between and within countries regarding the phase and speed of this transition. “While nations like China and Mexico have nearly completed this transition, it has scarcely started in rural Sub-Saharan Africa,” explains Smits. In such regions, necessities such as food, clothing, and shelter must be prioritised before even considering appliance purchases.

The research also highlights that transitions commence sooner and proceed quicker in urban areas, and regions with more significant economic development and higher education levels tend to advance more rapidly. Additionally, a demographic balance favouring a higher proportion of the working-age population relative to children and the elderly is advantageous.

Through their research, Schilpzand and Smits have deepened our understanding of household situations in developing countries, what is required to achieve a reasonable standard of living, and the potential speed of reaching such a goal. Their analysis provides invaluable insights into the socio-economic dynamics influencing household material wealth in developing regions.

More information: Rutger Schilpzand et al, The Domestic Transition: Progress Towards Decent Living of Households in Low and Middle-Income Countries, Journal of International Development. DOI: 10.1002/jid.3965

Journal information: Journal of International Development Provided by Radboud University Nijmegen

Long Covid May Inflict Annual Billion-Dollar Losses on the Economy

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A recent study by University College London (UCL) researchers has highlighted the substantial economic toll that long Covid could exert on the UK economy, potentially amounting to billions of pounds annually due to lost working days. This research, funded by the National Institute for Health and Care Research (NIHR) and published in BMJ Open, focuses on the severe implications of long-term COVID-19 on patients’ ability to resume work and their day-to-day functionality.

The study scrutinised the effects of long Covid on a cohort of 4,087 patients who had been directed to a specialised long Covid clinic and were enrolled in the Living With Covid Recovery (LWCR) programme over two years from August 2020 to August 2022. To manage their condition, participants utilised a mobile application as part of their NHS treatment, allowing them to monitor and record their symptoms. They regularly filled out detailed questionnaires via this app, shedding light on how COVID-19 impacted their daily lives—from general activities and fatigue to cognitive functions like concentration (often referred to as ‘brain fog’) and their overall health-related quality of life.

Despite seeking medical help, most of those referred to long-term COVID clinics across the UK showed minimal recovery in their capacity to handle everyday activities, experience fatigue, and overall quality of life and work performance within the first six months post-referral. Disturbingly, 72% of participants who had reported losing workdays upon initially engaging with the app faced similar challenges six months later. Moreover, over a third (36%) of these individuals were utterly unable to work.

Economically, the repercussions are stark. The study estimated that the productivity losses associated with long Covid averaged around £931 per patient monthly, based on the national average hourly wage and typical working hours per week. Given the Office for National Statistics report that approximately two million individuals in the UK are suffering from long Covid, the aggregate cost to the economy is immense. Professor Manuel Gomes of UCL Epidemiology & Health Care suggested that these productivity losses could reach up to £20 billion annually. Even if only a tenth of all long Covid sufferers in the UK experienced significant impairment, the financial impact could still amount to around £2 billion annually.

The study further revealed that nearly half of the long Covid sufferers exhibited severe functional impairments six months after their initial diagnosis, underlining the prolonged and challenging nature of recovery from this condition. This protracted impairment significantly hampers the affected individuals’ work capacity, posing a personal and broader economic burden.

Professor William Henley from the University of Exeter emphasised the critical need for health interventions that address these ongoing challenges, particularly the fatigue and reduced work capacity that plague long Covid patients. These findings follow earlier research by the same team, which compared the impact of long-term COVID-19 on fatigue and quality of life to that experienced by some cancer patients, illustrating the severe and enduring nature of long-term COVID-19 symptoms.

This body of research underscores the pressing need for targeted healthcare strategies to support the recovery and reintegration into work of those affected by long Covid, not only for the well-being of the individuals but also for the broader economic health of society.

More information: Jiunn Wang et al, Trajectories of functional limitations, health-related quality of life and societal costs in individuals with long COVID: a population-based longitudinal cohort study, BMJ Open. DOI: 10.1136/bmjopen-2024-088538

Journal information: BMJ Open Provided by University College London

Leaders with ‘Jekyll and Hyde’ Traits Cause Lasting Harm, According to Recent Study

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There is a scenario worse than having an abusive boss, and that is a boss who believes they can compensate for their negative behaviour by being charming the next day. This observation forms the crux of a novel study by researchers at the Stevens Institute of Technology, which demonstrates a significant decline in employees’ morale and job performance when leaders oscillate unpredictably between commendable and reprehensible conduct.

The study, spearheaded by Dr. Haoying Xu, an assistant professor of management at the Stevens School of Business, underscores a critical insight: abusive leadership is profoundly detrimental to workers, but the damage is exacerbated when leaders alternate between abusive and ethical behaviour. Dr. Xu articulates that reverting to ethical leadership does not undo the adverse effects of previous misconduct. In some instances, it may even aggravate the situation.

Published in the Journal of Applied Psychology, the research employed surveys and field experiments to gauge the effects of “Jekyll-and-Hyde” leadership on over 650 full-time employees across the United States and Europe. It was observed that while employees struggled under abusive supervision, the impact was more severe when supervisors switched erratically between abusive and ethical leadership styles.

Dr. Xu explains the psychological toll on employees who contend with a supervisor’s unpredictable behaviour. The constant uncertainty of not knowing which version of their boss they will encounter—the supportive leader or the harsh critic—leads to emotional exhaustion, demoralisation, and a diminished capacity to perform optimally.

Furthermore, the study reveals that the detrimental effects of inconsistent leadership extend beyond direct interactions. When a supervisor’s superior exhibits fluctuating behaviour, it introduces an additional layer of uncertainty and diminishes the employees’ confidence in their supervisor’s abilities.

Dr. Xu notes that employees are heightenedly sensitive to the dynamics between their supervisors and higher management. An unstable relationship, characterised by alternating periods of positive and negative interactions, can severely disrupt team cohesion and performance.

These findings offer critical insights for organisations. They highlight the hidden dangers of leaders who intermittently display abusive behaviour, a scenario often overlooked by organisations that typically intervene only in cases of consistent abuse. Dr Xu points out that sporadic lousy behaviour can be even more detrimental, suggesting that organisations should be less tolerant of such patterns.

To mitigate the effects of “Jekyll-and-Hyde” leadership, Dr Xu recommends that organisations heed employees’ concerns and hold leaders accountable for erratic, abusive behaviour. He also suggests anger management coaching for leaders prone to such volatility, noting that impulsive leadership can often be mitigated through improved temper and impulse control.

Looking ahead, Dr. Xu intends to further explore employees’ responses to inconsistent leadership and how such behaviour influences individual and team dynamics. Preliminary indications suggest that a leader’s volatility might encourage similar behaviour among team members. Early evidence also suggests that employees may be more likely to mimic a leader’s negative actions over their positive ones, adding another layer of complexity to the issue.

If these trends are confirmed, it would underscore the necessity for organisations to address “Jekyll-and-Hyde” leadership with the seriousness it warrants, as it not only affects the individuals directly involved but could potentially influence the broader organisational culture. This study shines a light on the profound impact that leadership behaviour can have on employee well-being and the overall health of an organisation, urging a more proactive and comprehensive approach to leadership evaluation and development.

More information: Haoying Xu et al, Jekyll and Hyde leadership: Examining the direct and vicarious experiences of abusive and ethical leadership through a justice variability lens, Journal of Applied Psychology. DOI: 10.1037/apl0001251

Journal information: Journal of Applied Psychology Provided by Stevens Institute of Technology

Oil and Gas Windfalls Could Finance Climate Reparations

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A focal topic on the schedule of the UN Climate Change Conference (COP 29) involves deliberations over the financing mechanisms for climate objectives. Industrial nations had pledged to contribute $100 billion annually from 2020 to 2025 to assist less affluent countries in climate mitigation and adaptation efforts. As this period draws to a close, discussions are underway to enact the New Collective Quantified Goal (NCQG). Yet, the commitments made previously have not been fully honoured, nor have the talks about the NCQG resolved the issue of sourcing the additional funds required.

In this context, an international research team explored one potential funding solution: imposing a tax on the windfall profits of fossil fuel enterprises. This tax type targets earnings that exceed normal expectations under extraordinary circumstances, such as a crisis. The energy crisis after Russia’s invasion of Ukraine in early 2022 represents an unusual situation, which led to a dramatic spike in global energy prices.

The team’s research examined the 2022 profit reports from 93 of the world’s largest oil and gas corporations, comparing them against the forecasts made at the start of the year. Initially, profits were projected to be around $753 billion, but the actual figures reported by these companies amounted to approximately $1.243 trillion, indicating windfall profits in the vicinity of $490 billion. “These additional profits from just one year nearly match the total promised to poorer nations over five years,” stated Florian Egli, the study’s lead and Professor of Public Policy for the Green Transition at the Technical University of Munich (TUM).

Notably, 42 per cent of these windfall profits were generated by state-owned enterprises, particularly those based in Norway. “Governments have the means to directly harness these crisis-generated earnings to combat the climate crisis,” commented Dr Anna Stünzi from the University of St. Gallen, co-leader of the study.

The findings also revealed that 95 per cent of private firms accruing such profits are headquartered in nations committed to climate finance. Egli pointed out, “Through a tax on these windfall profits, several industrialized nations could feasibly raise funds to fulfil their financial obligations to developing countries.” Specifically, companies in the USA represented about half of these profits, while an additional 37 per cent were by companies in the UK, France, and Canada, with nearly all these firms situated in G20 countries.

Egli also proposed that the recent global agreement on a minimum corporate tax rate, endorsed by over 130 countries in 2023 through the efforts of the OECD and G20, could serve as a blueprint. “Such an agreement on taxing windfall profits could also pool funds for climate action, ensuring resources are available even in years without extraordinary profits,” he added. The European Union has already implemented a temporary tax on windfall profits from fossil fuels in 2022, and the UK plans to continue this tax until 2030.

However, the study underlines that the profits disclosed are only a fraction of the actual global earnings, as significant oil and gas companies in countries like Russia, Iran, South Africa, and Venezuela do not disclose their financials and are, therefore, excluded from the study.

“Implementing a tax on these superprofits could temper and eventually reduce investments in fossil fuels, paving the way for a robust and efficient market for clean energy and aligning financial flows with the objectives of the Paris Agreement,” noted Michael Grubb, a professor at University College London (UCL). “Reorienting fossil fuel revenues to support climate goals should be a priority on the global agenda.”

More information: Florian Egli et al, Harnessing oil and gas superprofits for climate action, Climate Policy. DOI: 10.1080/14693062.2024.2424516

Journal information: Climate Policy Provided by Technical University of Munich (TUM)

Does Occupational Stress Influence Cardiovascular Health?

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An extensive and rigorously conducted study involving a diverse cohort of adults across the United States, initially free from cardiovascular disease, discovered that work-related stress significantly correlates with poorer cardiovascular health metrics. This compelling evidence was recently detailed in the Journal of the American Heart Association, casting light on a significant public health concern from the workplace environment.

The study meticulously examined data collected from 2000 to 2002, involving 3,579 adults residing in communities aged between 45 and 84 years. These participants were integral to the Multi-Ethnic Study of Atherosclerosis, an ambitious endeavour to understand how cardiovascular health is influenced across different ethnic groups. To evaluate cardiovascular health, the researchers employed a composite score incorporating seven critical health indicators: smoking status, physical activity levels, body mass index (BMI), diet quality, total cholesterol, blood pressure, and blood glucose levels. Each indicator contributed to a score ranging from 0 to 14, with zero indicating poor health across the board, one for intermediate health, and two for ideal health for each metric.

Based on a comprehensive questionnaire, the results indicated that 20% of the participants reported experiencing occupational stress. After adjusting for confounders such as age, gender, ethnicity, and socio-economic status, it was clear that individuals under occupational stress had 25% and 27% lower chances of achieving average (9–10 points) and optimal (11–14 points) cardiovascular health scores, respectively, compared to their stress-free counterparts. This stark difference underscores a profound link between occupational stress and reduced cardiovascular health.

The ramifications of these findings are considerable, prompting the researchers, led by Dr Oluseye Ogunmoroti from Emory University and Dr Erin Michos from Johns Hopkins University, to advocate for more in-depth studies. They stressed the importance of longitudinal research to unravel the causal mechanisms between occupational stress and cardiovascular health over time. Such understanding is vital for crafting targeted interventions to mitigate workplace stress’s adverse effects.

Furthermore, the researchers called for implementing comprehensive intervention studies within the work environment. These studies are essential for developing, testing, and refining effective stress management strategies, potentially improving the well-being of employees and significantly enhancing their cardiovascular health profiles. The broader implications of such initiatives could lead to healthier work environments worldwide, serving as a blueprint for similar efforts elsewhere. This research highlights the need for an integrated approach to employee health, treating mental and physical well-being equally to cultivate a healthier overall society.

More information: Oluseye Ogunmoroti et al, Work‐Related Stress Is Associated With Unfavorable Cardiovascular Health: The Multi‐Ethnic Study of Atherosclerosis, Journal of the American Heart Association. DOI: 10.1161/JAHA.124.035824

Journal information: Journal of the American Heart Association Provided by Wiley