About Jared Wade

Jared Wade is a freelance writer and former editor of the Risk Management Monitor and senior editor of Risk Management magazine. You can find more of his writing at JaredWade.com.

Bailed Out Execs Now Have a Salary Cap

Now that we all have universal health care (wait? It doesn’t really kick in for four more years? Oh), the White House has given us another piece of progress from the “probably should have happened a long time ago” file.

Yes, now that only a handful companies are still benefitting greatly from public assistance, the administration has agreed to cap the pay for the top 25 executives of the five companies “still receiving extraordinary aid” via bailout. And really, it’s more like three companies since it comes down to only AIG, GM and its financing company GMAC, and Chrysler and its financing company Chrysler Financial.

Feinberg’s announcement was the administration’s latest effort to deal with public outrage over bonus payments provided to executives at companies receiving billions of dollars in taxpayer support.

Detailing the 2010 pay rules, Feinberg said cash salaries would be capped at $500,000 for 82 percent of the top 25 executives at the five firms. These executives would have to receive any further compensation in stock. Feinberg is seeking to link the executives’ decisions more closely to the success of their companies.

In addition, “pay czar” Kenneth Feinberg is also mandating that 419 companies that benefitted from bailout money before February 17, 2009, give detailed information on any salaries in excess of $500,000 paid to executives in late 2008 and early 2009. What exactly Feinberg plans to do with this information eludes me, but companies have 30 days to comply.

Under the law, Feinberg cannot require executives to return any compensation such as 2008 bonuses that he deems excessive. But Feinberg said he would review the compensation paid during that period to see if any of it could be deemed “inconsistent with the public interest.”

I think many interested members of the public could tell Kenneth their thoughts on that topic immediately, but it’s nice to know that he will have some more detailed info into the matter next month.

greedy executive businessman

Before the cap, he would have been carrying three bags.

No More Sandbagging It Along the Red River?

Red River Flood

Fortunately, this year’s flooding throughout the Red River Valley, while once again extensive, has not caused anywhere near the level of damage we saw last year — let alone the catastrophic destruction that occurred in 1997.

And although this is cause for jubilation throughout the region, the city of Fargo will remain cautious until the flood waters fully recede.

Officials in North Dakota and Minnesota are catching their breath Monday, if only briefly, after the Red River crested over the weekend.

Despite the river peaking at 36.99 feet — 19 feet above flood level — Sunday morning, the region will have to contend with high water for a while.

“It’ll be about a week, so we’re just going to continue to monitor things and kind of wait as that water very, very slowly goes down,” said Robyn Litke, spokeswoman for Fargo, North Dakota.

“We are just continuing to maintain our dikes and just continuing the dike patrols. It is expected that we will stay well above major the major flood stage of 30 feet for about the next week or maybe a little bit longer.”

Knock on wood, but hopefully this means the region has sidestepped another major disaster.

The perhaps-even-better news came later in the day, however, as the Washington Post has revealed that a long-term, permanent solution to protect the region may soon be realized.

The answer? A 36-mile channel that would cost $1.3 billion.

Local governments say the best option is a massive 36-mile-long channel but the project’s $1.3 billion cost and long construction timetable means that spring flooding is likely to remain a headache for another decade.

For projects like this (as well as proposed floodgates that could provide near-impenetrable protection for New Orleans), the pricetags always sound completely reasonable to me. For a project like this — which would protect hundreds of thousands of people, safeguard billions of dollars in assets and provide peace of mind to dozens of municipalities — even a figure like $1.3 billion seems like something that should just be immediately rubber-stamped, with construction beginning tomorrow.

Or, better yet, last year.

Admittedly, I have not yet looked into all the other potential barriers (no pun intended) to get this done other on top of cost, but especially when we’re in the midst of a recession featuring an unemployment rate hovering around 10%, a public works project that both creates (or at least guarantees) jobs and a provides meaningful benefit to the region seems like a no-brainer.

Of course, this isn’t a sensible world where logical and ambitious-yet-achievable endeavors always come to fruition.

This is a world of politics.

“I think we have been very cohesive,” Fargo city commissioner Brad Wimmer said of the various governments. “But we haven’t written any checks yet. It’s not a done deal.”

The U.S. Army Corps of Engineers, which will manage the final project, said the federal government would cover $565 million of the costs, leaving state and local governments to pay about $735 million. The spirit is there, especially since local governments are already dealing with the costs of flooding. The city of Fargo alone has spent nearly $31 million for flood fighting and cleanup since 1997, including an estimated $3 million this year, Fargo finance director Kent Costin said.

But with such an expensive project, the quibbling has already started. Supporters of the project will be asking for money from one state (Minnesota) that is broke and another state (North Dakota) that has a billion-dollar surplus.

The diversion has set off a debate in North Dakota because despite having extra money, a traditional divide between rural and urban lawmakers makes approving its funding not quite a done deal.

“We have to make it sellable to everybody across the state,” said North Dakota state Sen. Tim Flakoll, R-Fargo.

Many North Dakota lawmakers are thrifty and hesitant to spend the surplus for fears it will run out. Some are also resistant to spending so much money on a single project that benefits only Fargo, the state’s largest city.

Of course they are.

In the meantime, the Paleolithic Era-level technology of piling up sandbags and clay along the shore will continue to be used as a means to try to save lives and protect homes. But did you ever wonder what happens to all those sandbags after they aren’t needed anymore?

NPR did.

the bags are mostly destroyed — the wear and tear takes a lot out of them. But lots of sand gets spread on fields and used in road projects. Some, if it has been contaminated with sewage or chemicals, has to go to treatment facilities. And a substantial amount gets saved for use the next year.

Getting rid of it all isn’t always cheap. Last year, as InForum reported, about 2.5 million sandbags were filled and placed in Fargo alone to keep back the Red. One contract for removal cost the Army Corps of Engineers $1 million.

But often, as Moorhead city manager Micahel Redlinger explained to All Things Considered host Melissa Block this afternoon, residents themselves help take down the walls. And Moorhead saves as much of the sand as it can. About half of the 15,000 yards of sand the city used this year was material saved from last year’s flood control effort.

The folks in Moorhead filled about 350,000 bags this year, well below last year’s 2.5 million that were used to keep back the record high crest.

Hey … At least they’re recycling.

And be sure to head over to NPR to listen to an extended audio interview with Redlinger that aired today during All Things Considered.

Red River Flood Sandbag 2010

Beep. Beep. Make way for the Sandbag Express. Headed to the Red River Valley — yet again this year. (Both photos: Michael Rieger/FEMA)

Greater Global Risks of Water Pollution and Scarcity

In discussing the risks of water scarcity and quality over the past year (here, here and here), our attention has mostly focused on the developed world. By and large, we have talked about the risks that companies will have to deal with as these realities become more dire in the future.

The United Nations, however, naturally sees water risks through a different prism, particularly during its World Water Week, which started yesterday with a mission to increase awareness of a growing global water crisis affecting billions of people. Much of its advocacy and fundraising to provide better — and just more — water to children who lack access is being done by its UNICEF Tap Project.

In 2007, the UNICEF Tap Project was born in New York City based on a simple concept: restaurants would ask their patrons to donate $1 or more for the tap water they usually enjoy for free, and all funds raised would support UNICEF’s efforts to bring clean and accessible water to millions of children around the world.

Growing from just 300 New York City restaurants in 2007 to thousands across the country today, the UNICEF Tap Project has quickly become a powerful national movement.

During World Water Week, March 21-27, 2010, the UNICEF Tap Project will once again raise awareness of the world water crisis and vital funds to help the millions of children it impacts daily. All funds raised support UNICEF’s water, sanitation and hygiene programs, and the effort to bring clean and accessible water to millions of children around the world.

For more on the Tap Project, check out his video, which manages to be both very depressing and very uplifting all in the span of five minutes.

Another great video comes to us from National Geographic and details the trek that many Africans must make just to find water. Better still, this is just one small piece of Nat Geo’s new issue dedicated to water, which offers stories about the Jordan River, the Tibetan Plateau and desalination technology, among others.

The whole thing is a must read.

In other news, IRIN highlights the lowlights of a new UN report in an article called “Unsafe Water, the Silent Killer.”

Every 20 seconds a child dies from a water-related disease – 1.8 million children younger than five years each year. This alarming figure is from a new report by the UN Environment Programme (UNEP), which says millions of tonnes of solid waste are being flushed into water systems every day, spreading disease.

“More than two billion tonnes of wastewater are being flushed into our fresh water and oceans every day, every year,” Christian Nelleman, the lead author of the report, Sick Water?, told IRIN.

The wastewater, a cocktail of agricultural and industrial runoffs and sewage, was seeping into groundwater and polluting drinking sources, like wells, in low-lying areas where the bulk of the world’s population live.

Countries should not only invest in infrastructure to manage wastewater but also in ecosystems, for instance by replanting mangroves, which acted as natural filters in coastal areas, said Nelleman.

And IPS reports on another study showing that more people die from water-related issues than from war.

The devastating earthquake in Haiti last January claimed the lives of more than 200,000 people, making it one of the biggest single natural disasters this year.

But in contrast, some 3.6 million people — including 1.5 million children — are estimated to die each year from water-related diseases, including diarrhoea, typhoid, cholera and dysentery.

As the United Nations commemorates World Water Day next week, Secretary-General Ban Ki-moon says clean water has become scarce and will become even scarcer with the onset of climate change.

“More people die from unsafe water than all forms of violence, including war,” he said in a statement released Thursday.

Troubling stuff.

And something we all need to work to remedy — both for the sake of our economy and our humanity. (h/t to Ideas for Africa for the links. Follow them for more interesting water stories throughout the week.)

The Risk Management Angle on Time’s “10 Ideas for the Next 10 Years”

Each year, Time magazine does a story on “10 ideas that are changing the world.” This year, the editors have made it a more forward-thinking feature, labeling it “10 Ideas for the Next 10 Years.” And as is the case with most everything these days, I managed to see several risk management-related angles in some of the trends they expect to shape the coming decade.

Here is a run-down with some thoughts.

time 10 ideas for the next 10 years

Time’s Idea: Remapping the World
“Good borders make good neighbors. Bad ones make wars”

This idea basically says that physically redrawing some national borders — or at least minimizing their importance over logistical factors like multi-national infrastructure — will cause less international and intra-national conflict. Obviously, the risk management benefits here would come from less political risk across the globe.

If Sudan could be divided, the civil wars there may become less intractable and economic opportunities may open up to multinationals — which could help both companies otherwise too concerned about conflict to set up shop in-country and the people living there who desire jobs and better access to goods. A world full of “good neighbors” also clearly benefits any utilities or other companies trying to lay down the transnational pipelines or internet cables that will be increasingly necessary in our increasingly globalized future.

Particularly in the Middle East.

Time’s Idea: Bandwidth Is the New Black Gold
“And it’s a scarce resource”

An under-reported risk, the dependence on bandwidth for real-time information exchange is increasingly vital to all companies and organizations. Whenever this is interrupted, so is business. Today, aside from major disaster situations, this interruption is mostly an inconvenience. But in the future, as more and more of this bandwidth is taken up by video and other resource-intensive applications, there may be real problems.

In time, the mere slowdowns we see today may be eclipsed by full-scale information traffic jams. But beyond that, the deeper problems will be with high prices and possible profiteering. As demand for bandwidth goes up, suppliers will logically be able to charge more, as happens in energy markets.

Can we rely on private industry — the cable and telephone companies — to build its way out of these problems? In a word, maybe.

It will be difficult to manage this risk individually, but organizations need to be thinking about these “information jams” in years to come. Tim Wu of the New American Foundation explains it further in this video.

Time’s Idea: In Defense of Failure
“Making mistakes is a great American freedom”

This idea centers on the idea that the great innovation that marked the United States’ ascendence to the front of the global economy in the 20th century was greatly aided by the fact that its citizens were not afraid to fail. They took big chances knowing that even if they failed, they would have a chance “to try, try again” without being entirely wiped out.

The article worries that this courageousness is waning, mainly due to macroeconomic realities, and that “rather than launch a quixotic war on failure” as the author argues has been done against complex financial instruments on Wall Street, “we should be using what we’ve learned to build a system that fails better.”

This, of course, is the new tenant of risk management: We should never try to avoid all risks — we just need to make sure we are taking calculated risks with contingencies built in for failure.

Time’s Idea: TV Will Save the World
“In a lot of places, it’s the next best thing”

Globally, the biggest impediment to better disaster preparedness and building codes is poverty. Places like Haiti and rural China just don’t have the resources to mandate and enforce developed world standards for things like foundations and reinforced concrete.

Somewhere lower on the list of challenges — but no less worth striving to overcome — is the educational gap. More so than in the developing world, the United States and Europe have learned from their past disasters. A lot of this has come from in-depth, post-mortm investigations of disasters. And a lot of the demand for such investigations has always come from the proliferation of TV news and the fact that citizens are generally outraged that such calamities could happen. People want to know why people were allowed to die or houses were permitted to burn, and the impetus behind that outrage often comes from seeing the tragic images in moving picture form on TV.

Too much TV has been associated with violence, obesity and social isolation. But TV is having a positive impact on the lives of billions worldwide, and as the spread of mobile TV, video cameras and YouTube democratize both access and content, it will become an even greater force

Sure, a lot of TV is more candy than vegetables (think Jersey Shore, SportsCenter or American Idol), but if you are still among those who erroneously think that television will rot your brain, you obviously haven’t seen The Wire. Or Spike Lee’s When the Levees Broke, which premiered on HBO.

In related news, The Wire creator David Simon’s upcoming HBO show Treme will focus on the music scene in post-Katrina New Orleans. Expect something amazing that will speak on what was the worst “natural” disaster to hit this country.

And, yes, this was mostly just an excuse to make you watch the new trailer for Treme embedded below. (via Video Gum) (UPDATE: That trailer is no longer available … replacement video below. Don’t worry, it’s just as good. Probably even better.)

You can also view the other six “ideas for the next 10 years” over at Time.com. Let us know of any other major risk management-related concepts that stand out to you.