Caution for Small Business Owners Using a Home as Collateral

Friday, February 15th, 2013

Recent data from the Pepperdine Private Capital Market Project revealed that 88% of privately-held businesses with revenues less than $5 million want to execute growth strategies, but they typically have lower levels of necessary resources, such as the people or finances, to grow compared to privately-held businesses with higher revenues.

Eager to grow, but lacking the means, many small-businesses owners have turned to friends and family for funding. Pepperdine Private Capital Market Project research from Q1 2012, shows that 71% of businesses with less than $5 million in revenue were successful in securing funding from friends and family – the No. 1 source from among 17 lending categories.

Now some business owners may be tempted to use their homes as collateral. With the recent spike in home prices this option may seem even more appealing.

In mid-January, real estate firm DataQuick reported that home prices nationwide increased 7.4% year-over-year and in Southern California the median home price rose 19.6% in December over the same month last year to hit $323,000. San Bernardino and Riverside counties posted the strongest year-over-year increases, up 20.0% and 19.1%, respectively, indicating that the once hard-hit Inland Empire is now recovering.

Certainly, there will be some businesses that are able to take advantage of the increase in home prices to grow their operations. This should bode well for states like California where the concentration of small businesses is higher. However, before home owners get too optimistic here are a few things to consider:

• Many banks are still hesitant to fund via home equity lines. While there will be some increased access to funding, it will not nearly be in line with what we saw pre-financial crisis.

• Even as access to home equity loans increases it may not be the best decision to use home equity as collateral. Many entrepreneurs forego a job to start their venture and piling on additional financial risk in the way of home equity further increases their risk profile. But, entrepreneurs don’t see “risk” as clearly as those sitting on the sidelines. This optimism leads to many successes, but even more failures and disappointments.

• If you operate your business out of your residence, your home or personal assets may be considered collateral for a loan. However, in the event of inadequacy of collateral, the Small Business Administration will generally not decline a loan if it is the only unfavorable factor.[1]

Whether or not small business owners use their home equity as collateral is a personal decision and will vary from situation to situation. In order for business owners to increase their prospect of securing capital they should make sure they know about the different types of private capital (i.e. angel funding vs venture capital vs private equity) that are available. While these sources of capital are not for everyone, raising small business owner’s knowledge of capital classes will help them make informed and effective decisions.

Business owners should also have a well-written business plan as well as personal experience or solid mentorship in the industry they are entering. Part of this business plan should include understanding the criteria that are needed to attain financing from different sources. This will help streamline the process by eliminating the funding sources that are not attainable or not the best fit for business owners.


Topic: America's Financial Crisis, Investing, Real Estate, Small-Medium Businesses
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Implementing Intrapreneurship: A Structural and Cultural Approach

Monday, November 26th, 2012

Present age organizations face a very complex and uncertain environment. In order to remain innovative and viable in the long run, many organizations are turning to “intrapreneurship.” However, what is intrapreneurship? How different it is from entrepreneurship? What can an organization do to promote intrapreneurship?

In the Graziadio Business Review article “Implementing Intrapreneurship: A Structural and Cultural Approach” the difference between entrepreneurship and intrapreneurship is first illustrated by defining the two terms formally. Entrepreneurship refers to the process of creating innovative new business ventures[1] or just of creating new business ventures.[2] An entrepreneur is the owner of such a business venture.[3] [4] [5] Intrapreneurship refers to the process of new venture creation, strategic renewal, and innovation by employees within an organization.[6] Intrapreneurs, then, are the employees of an organization who realize a creative idea and turn it into an innovation or new business venture.[7] [8] [9]

Then, the GBR article devotes the majority of its main content to the discussion of what an organization can do to promote intrapreneurship. Research has shown that given the right environment and amount of support, many employees can become intrapreneurs. To encourage intrapreneurial activities, it is proposed in the article that organizations have to make sure that the top management creates a clear vision that promotes and encourages innovation and communicates it clearly to all employees. In addition, support from all managers in an organisation is also necessary.

Next, to encourage intrapreneurship, an organization has to adopt either an organic structure, or to set up an independent intrapreneurial team or department, depending on each organization’s context and needs. In addition, the organization must also take measures to achieve a culture that is characterised by high trust and psychological safety, high justice and fairness, and high error and failure tolerance. Together, these organizational features shall form a solid foundation for intrapreneurship, and a cornerstone for organizational competitiveness.

[1] Frederick, H. H., and D. F. Kuratko, Entrepreneurship: Theory, Process, Practice, Asia-Pacific ed., 2nd ed., (Australia: Cengage Learning, 2010).

[2] Gartner, W. B., “‘Who is an Entrepreneur?’ is the Wrong Question,” Entrepreneurship Theory and Practice, 12, no. 2 (1989): 47-68.

[3] Davidsson, P., Researching Entrepreneurship, (New York: Springer, 2004).

[4] Gartner, W. B., “What Are We Talking About When We’re Talking About Entrepreneurship?” Journal of Business Venturing, 5, no. 1 (1990): 15-28.

[5] Rauch, A., and M. Frese, “Let’s Put the Person Back into Entrepreneurship Research: A Meta-Analysis on the Relationship Between Business Owners’ Personality Traits, Business Creation, and Success,” European Journal of Work and Organizational Psychology, 16, no. 4 (2007): 353-385.

[6] Sharma, P. and J. J. Chrisman, “Toward a Reconciliation of the Definitional Issues in the Field of Corporate Entrepreneurship,” Entrepreneurship Theory Practice, 23, no. 3 (1999): 11-27.

[7] Anderson, N. R., and M. A. West, “Measuring Climate for Work Group Innovation: Development and Validation of the Team Climate Inventory” Journal of Organizational Behavior, 19, no. 3 (1998): 235-258.

[8] Frederick and Kuratko.

[9] Hulsheger, U. R., N. Anderson, and J. F. Salgado, “Team-Level Predictors of Innovation at Work: A Comprehensive Meta-Analysis Spanning Three Decades of Research” Journal of Applied Psychology, 94, no. 5 (2009): 1128-1145.

Topic: Entrepreneurship, Innovation, Management, Org Behavior, Strategy
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New Issue of GBR Online

Tuesday, November 13th, 2012

In the fall issue of the Graziadio Business Report we have published five great articles.

Facilitating the Inventor – Entrepreneur Interaction: Super-Charging the IP Commercialization Process

By Larry William Cox, PhD

According to leading economists, entrepreneurs are those individuals who both identify and exploitcommercial opportunities. This article proposes that more technologies could be commercialized and with greater economic value if a university-neutral foundation was established that allowed entrepreneurs to dialogue with inventors at an early stage and used principles of creative problem solving.

Bridging the Complexity Gap: Leading Effectively in a VUCA World

By Suzanne Lahl, MSOD, and Terri Egan, PhD

In the weeks before September 11, the U.S. Army War College coined the term VUCA to stand for volatile, uncertain, complex, and ambiguous environments. Globalization, information technology, economic and political instability, and climate change create a level of interconnection and interdependence that requires a new kind of leadership.

Be sure to check out the videos at the end of the article for additional information.

A No Fault Approach to Recouping Executive Compensation

By Gina Joan Kim, JD, MBA, and Gia Honnen Weisdorn, JD, LLM, MBA

Having improved financial performance justifies compensation, but what happens to the compensation after a restatement? The argument for a strict liability approach in reforming compensation practices is that the repercussions of risk-taking that results in erroneous gains should be the same.

Implementing Intrapreneurship: A Structural and Cultural Approach

By Jhony Choon Yeong Ng, DBA

Today, organizations operate in a very complex and uncertain landscape. In order to survive, they must learn to work creatively in hostile environments. To compete with more agile small entrepreneurial firms, large corporations in particular must explore ways to foster innovation. As a result, many organizations are turning to a process called “intrapreneurship.”

Facebook: Data Mining the World’s Largest Focus Group

By Brian M. Kwong, Sean M. McPherson, Jonathan F. A. Shibata, and Oliver T. Zee

With the seemingly indomitable amount of data at Facebook’s disposal, can the company accurately predict outcomes within the typically volatile financial markets? If Facebook is able to predict such outcomes, can it go a step further and manipulate or influence such predicted events?

Topic: America's Financial Crisis, Business Law, Corp Governance, Crisis Management, Entrepreneurship, Finance, Social Media
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Read How the Election Year Impacts the Stock Market and View a Finance Panel Discussing Election Economics

Wednesday, October 24th, 2012

The debates may be over, but the election economics are still a vital part of the news. A recent GBR article discusses how the presidential elections influence the stock market and a new video discusses the economic status and how the elections and political turmoil impacts investors.


Recently the Graziadio Business Review posted “The Four-Year U.S. Presidential Cycle and the Stock Market” by Marshall Nickles, EdD, and Nelson Granados, PhD. This article is a follow-up to Nickels popular article in 2004, “Presidential Elections and Stock Market Cycles.”

The newer article:

  1. Provides evidence of the relationship between economics, politics, and the four-year presidential cycle;
  2. 2. Includes an analysis of stock market performance during the 2008 period;
  3. 3. Introduces a risk measurement for the stock market and argues that the 2008 stock market crash should be considered an anomaly; and
  4. 4. Concludes that the four year presidential stock market cycle is likely still in tack.


2012 is shaping up to be the year of global political change with important changes in the government in Russia, France, Italy, and of course the upcoming presidential election here in the United States. How will financial markets be influenced by such political turmoil and how can investors prepare?

In a recently posted video, a Pepperdine finance panel discusses: “Wall of Worry: Elections and the Markets.” Panelists include: Davide Accomazzo, adjunct professor of finance; Edward Fredericks, practitioner faculty of finance; Clemens Kownatzki, adjunct professor of financial risk management; Michael Shires, PhD, associate professor of public policy.

The video is broken into 3 sections:

  • Video 1: “Wall of Worry: Elections and the Markets
  • Video 2: “The Fiscal Cliff”
  • Video 3: “Monetary Policy and Politics”

Click here for the article “The Four-Year U.S. Presidential Cycle and the Stock Market”
Click her for the video “Wall of Worry: Elections and the Markets”

Topic: America's Financial Crisis, Economics, European Union, Finance, Global Marketplace, In the News, Investing, Public Policy, Videos
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Information Technology Enables Transformation of Hollywood

Friday, May 11th, 2012

Mishra Devendra

Mishra Devendra

In “Information Technology Enables Transformation of Hollywood” (written after the 2012 Hollywood IT Summit or “HITS”), Devendra Mishra discusses the expanding roles of CIOs and the new partnerships between CIOs and CTOs. According to Mishra, one “game-changing role” for the CIO is the new relationship between the studios and their consumers. With the increased involvement of consumers through the Internet and social media, CIOs have better insight and greater access to consumers. For instance, CIOs use social media data to develop “consumer-centric content.”

In the article, Mishra also shares how some Hollywood studios are reconstructing their business in order to enhance their digital distribution, increase revenue, and reduce costs. Additionally, Mishra offers seven key initiatives that CIOs from Hollywood studios are addressing.

Devendra Mishra is Adjunct Professor of Decision Sciences and Marketing at the Graziadio School of Business and Management, Pepperdine University, and Chief Strategist at MESA.

Click here to read Mishra Devendra’s full article, “Information Technology Enables Transformation of Hollywood.”

Related Articles in the GBR:

“The Role of the CIO” with Harvey Koeppel

Related Videos in the GBR:

Eric Iverson (Sony Pictures), “From Information Systems to Innovation Systems”

Also check out additional videos from the conference, “From Information Systems to Innovation Systems: Establishing the Next Generation Information Systems Department,” hosted by Pepperdine University, which includes presentations from Harvey Koeppel (Center for CIO Leadership)Robert Fort (Guitar Center)Joel Manfredo (County of Orange), and a Panel of Financial Experts.

Topic: IT, Media Industry
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Mobile Billing: The New Frontier of Mobile Marketing

Thursday, April 19th, 2012


Cell phone

The mobile industry is growing rapidly both domestically and internationally. Many aggregators such as Mobile Messenger (MM) are concentrating on this industry as a new and thriving market.

Annual wireless data revenues are up by 20.8% and are expected to increase for the next 10 years before reaching a plateau. SMS advertising volumes are up 31.3% per year, while voice annual volumes are down 1.5% each year. This demonstrates the strength and potential of new markets for mobile content and billing. In this industry there are typically two client groups: large brands who simply want brand awareness and clients who pursue a quick but high return on their investments by lowering their cost per acquisition (CPA). In order to understand the needs, trends, and growth projections, one must first analyze the demographics and their behaviors.

Market Demographics

The content delivered in the mobile industry in the U.S. can be broken down into two categories: premium services and standard rated messages. Premium services are often used by advertisers and application service providers (ASP) who have a virtual product that they wish to sell using the mobile billing mechanism. The standard side of the industry is used by mobile marketers and broadcast brands to communicate information to their customers in avenues outside emails and phone calls.

Market Geographics

An aggregator’s direct connections and contracts give it the ability to deliver content and short code messages as well as processing virtual good payments for over 98% of North American mobile phone users. Since most cell phone service providers stopped charging long distance and many offer unlimited data plans, the physical location of the customer has now become irrelevant. For an aggregator it is crucial to create and maintain the direct relationship with the carriers that give them the ability to deliver the content both domestically and internationally.

Market Psychographics

Over 5 billion text messages also known as “short messaging system” (SMS) are sent each day by Americans. In the fourth quarter of 2007, the average number of texts by consumers surpassed the average number of calls and the disparity has grown significantly since then.  Of those who text message 26% said that they have opted in to receive text message marketing messages. This is a huge demographic to target. The typical individual in this demographic comes from a generation that is used to getting what they want when they want it. They also have disposable income, which allows them to buy virtual products on impulse.

Table 1: Average Number of Monthly Calls vs. Text Messages Among U.S. Wireless Subscribers

Mobile Billing

The introduction of the mobile phone has forever transformed communication. The device that was introduced only to make phone calls is now used for texting, calendars, clocks, cameras, social networking, calculators, email, and a whole array of additional applications. The utilization of one device for many separate functions is known as device singularity. The “one stop shop” has become a socio-cultural phenomenon in the U.S., whether it is at a mega-store like Wal-Mart or at a gas station with a car wash. With the introduction of the iCloud and comparable platforms which allow data, apps, and virtual goods bought on the phone to be accessed via the desktop and vice-versa, it would be a major shortcoming of the industry to miss the opportunity to capture that market via SMS marketing.

Market Forecast

Since 1995, there has been a significant yearly increase in mobile phone usage. Currently, 92% of the U.S. population has access to a mobile phone. From June 2005 to June 2010 there was a 20% gain in the number of households that replaced their landlines with mobile phones. With the increase of smartphone usage, annualized wireless data revenues have dramatically increased from the millions to billions with SMS increasing at the same rate. No other recent technological invention has been so quickly embraced by the population at large.

Within the premium and standard rated verticals there are five mobile content types that are expected to assist the continued growth of the mobile industry. The content types are mobile music, mobile games, mobile video, mobile graphics, and mobile information services. Combined revenue from these content types is expected to triple over the next three years.

The Cellular Telecommunications Industry Association (CTIA) annual wireless survey shows that wireless data revenue has been significantly increasing each year since 2002. This has been a strong indicator of the growth of the off deck mobile billing platform. Over the next year the annual volume of data is expected to grow by 31.3%. This has positive implications on aggregator’s premium and standard business.

The mobile phone is utilized widely across most US demographic classifications. With most Americans owning or using a mobile phone, the success of the mobile billing via SMS marketing is inevitable.


1.  “CellSigns – Mobile Statistics.” CellSigns – Mobile Marketing, Mobile Real Estate Search, Mobile Newspapers, Text Message and Mobile Marketing Platform. (accessed April 18, 2012).

2.  Defakto Group. “Text messaging and mobile statistics.” Upload & Share PowerPoint presentations and documents. (accessed April 18, 2012).

3.  “Mobile Payment – Advanced Technologies (NFC), Strategies And Future Of Remote & Proximity Payment In U.S.” ASDReports. (accessed April 18, 2012).

About the Author(s):

Erdolo Eromo moved to South Los Angeles from Addis Abbaba, Ethiopia at the age of eight. A natural athlete, he played football for powerhouses Crenshaw High School and UCLA. He went on to earn his Executive MBA from Pepperdine University in 2011. Climbing up the corporate ladder in 6 years, Eromo is one of the youngest senior executives in the mobile industry. He now serves as Senior Vice President of Sales and Client Services at Mobile Messenger (MM), the largest off deck mobile aggregator in the United States. He is responsible for identifying opportunities and designing strategies for sales growth. By many, Eromo is considered to be an expert in identifying trends in the mobile commerce space as well as finding new opportunities in which the mobile phone can be used as a billing platform.

Topic: Marketing
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Six Trends CIOs Must Track and Leverage

Wednesday, March 28th, 2012

Mark Chun, PhD

Mark Chun, PhD

On the IT industry website Smart Enterprise Exchange, Dr. Mark W.S. Chun, PhD, Director of the Center for Applied Research and Associate Professor of Information Systems wrote a guest article, “Six Trends CIOs Must Track and Leverage,” in which he discusses new research from Pepperdine University’s Graziadio Business School involving IT executives from both Asia and the United States. In this article, Dr. Chun explains how today’s successful CIOs must be “savvy in both technology and business.” For instance, CIOs must not only use technology as a tool to reduce costs, but also as a means to generate revenue for the business. Also in this article, Dr. Chun offers six key developments over the last decade that has impacted the role of the CIO.

Dr. Chun established the National Knowledge Management Conference hosted annually by Pepperdine University and sponsored by Pratt & Whitney, NASA Jet Propulsion Laboratories, Northrop Grumman, Hitachi Consulting, Open Text, and The Aerospace Corporation. His expertise and research focus falls within the domain of knowledge management, IS integration, and the use of IS to create value and to transform organizations. He has worked for Intel Corporation, Pepsi Co./Taco Bell, Coopers & Lybrand, and the Bank of Hawaii. He has conducted research at Qwest, Honda, Hilton Hotels, Kaiser Permanente, Mattel, U.S. Treasury Department, USDA, Internal Revenue Service, U.S. Department of Homeland Security, FDIC, Pratt-Whitney Rocketdyne, NASA-JPL, Northrop Grumman, and Raytheon. He has also researched the diffusion of information technology in less-developed Asian countries.

Click here to read Dr. Chun’s full article, “Six Trends CIOs Must Track and Leverage.”

Related Articles in the GBR:

“The Role of the CIO” with Harvey Koeppel

Related Videos in the GBR:

From Information Systems to Innovation Systems with a Panel of Experts

Also check out additional videos from the conference, “From Information Systems to Innovation Systems: Establishing the Next Generation Information Systems Department,” hosted by Pepperdine University, which includes presentations from Harvey Koeppel (Center for CIO Leadership), Robert Fort (Guitar Center), Eric Iverson (Sony Pictures), and Joel Manfredo (County of Orange).

Topic: IT, Leadership, Management, Technology
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GBR’s Most Popular Articles Updated

Thursday, March 15th, 2012

Nancy Dodd, MPW, MFA

Nancy Dodd, MPW, M

Several of the older Graziadio Business Review articles have a long shelf life and are often visited by our readership. We wondered what the authors would share if the article were printed today. In the latest GBR issue, authors went back to eight of our most popular and most timely articles to give us an update. The authors explore how the economy and world events have impacted the information from their original article.
Economics and Finance:
Business Law:
Graziadio faculty have reviewed four interesting books in The Book Corner. Check out the reviews to see which ones got five stars.
You will also notice some additional features added to the GBR.
  • First, we have included an ARCHIVE-VIDEO LIBRARY where you will find a number of lectures, conferences, panel discussions, and other Graziadio business-related videos and interviews available at no charge.
  • Second, we have added more information and links to videos and transcripts from the Dean’s Executive Leadership Series with talks given by and interviews with key business leaders in a variety of major corporations. Click here for more information.
We hope that you will find the latest issue of the GBR as stimulating as we did.

Topic: GBR News

VIDEO: From Information Systems to Innovation Systems with Harvey Koeppel

Tuesday, February 14th, 2012

Can’t see this video? Click here to view it in a separate page.

In this video, Harvey Koeppel, Executive Director of the Center for CIO Leadership, shares his vast knowledge of information systems at the conference, “From Information Systems to Innovation Systems: Establishing the Next Generation Information Systems Department,” hosted by Pepperdine University, the Graziadio School of Business and Management, and the Graziadio Center for Applied Research, Wednesday, October 12, 2011.

Drawing from his experiences as a CIO with Citigroup’s Global Consumer Group and as a consultant for CitiFinancial, Citibank, and other Citi affiliates, in his presentation, “The 21st Century CIO,” Koeppel discusses how the role of the CIO is evolving.

In this video excerpt, Koeppel discusses key business drivers such as global economic and competitive changes, the role of government, the demand for innovative business models, and collaborative business partnerships.

Be sure to check out the full-length video, “From Information Systems to Innovation Systems with Harvey Koeppel” as well as other video presentations from Robert Fort (Guitar Center), Eric Iverson (Sony Pictures), Joel Manfredo (County of Orange) and a Panel of Experts.

Topic: IT, Videos
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USERRA: Are You Ready for the Troops’ Return?

Friday, February 10th, 2012

See details below for an Upcoming Seminar

President Obama has announced that the U.S. will withdraw nearly all troops from Iraq by the end of this year, with thousands of additional troops from both Iraq and Afghanistan returning the first couple of months into the new year. Are you prepared to comply with the law and reinstate employees who may have been on military leave for months…if not years…?


The Uniformed Services Employment and Reemployment Rights Act (USERRA) applies to all civilian employers, protecting employees absent from work because of duty in any of the “uniformed services,” which includes not only full-time and reserve components of the Army, Navy, Air Force, and Marine Corps, but also Coast Guard and National Guard. USERRA also covers many types of uniformed services duty, including, but not limited to, active duty, active-duty training, initial active-duty training, inactive-duty training, and numerous other periods of absent. Further, it applies regardless of whether the duty is voluntary or involuntary.

Photo By: LilGoldWmn

Photo By: LilGoldWmn


One of the primary protections USERRA provides is entitlement to reemployment. To be eligible for reemployment, the employee must have left employment that was not for a brief, recurrent period and was reasonably expected to continue work. The job left need not be permanent or regular.


The employee must have provided proper notice before leaving to be eligible for reemployment. Notice can be oral or written and can be delivered by family members, military officers, or other individuals besides the service member. More importantly, the law specifies that the employee need not give notice if military necessity prevents it or if doing so is not possible. Employees returning from military service must have been honorably discharged.


USERRA provides that employees returning from military service receive the same reemployment and seniority protections regardless of the type of military service so long as the cumulative length of absence does not exceed five years, not counting military service performed during previous employment.


USERRA requires employees to report to work or seek reemployment by certain deadlines, depending on the length of service. Employees serving 30 days or fewer must report to work at the beginning of their next regular work shift, following release from service. Employees serving 31 to 180 days must submit their application for reemployment no later than 14 days after completion of service. Employees serving more than 180 days must submit their application for reemployment no later than 90 days following completion of service.


USERRA does not require that you reemploy individuals returning from military service if changed circumstances have made reemployment impossible or unreasonable, or if reemployment would cause an undue hardship. This depends on the size and type of your business operation, workforce composition, financial resources, or other similar factors. In this economy, many employers have had to reduce their workforce.


USERRA’s protections do not end once the employee is reinstated. Perhaps one of the most significant obligations the Act imposes is that employees returning from service of more than 30 days cannot be discharged without cause for a certain period of time following reemployment. Employees returning from service lasting more than 180 days cannot be discharged without cause for one year following the date of reemployment. Employees returning from uniformed service lasting 30 to 180 days cannot be discharged without cause for six months following the date of reemployment. The common “at-will” employment relationship is modified for this particular period of time, and the burden of proving cause for a discharge will be on employers. Having appropriate policies, training employees on them, and carefully documenting any violations or performance problems will be helpful in meeting the lawful standards.


This would be a prudent time for employers to review their military leave policies and procedures, review your processes for returning veterans, and make appropriate plans for how you will deal with the many contingencies that can occur when it comes to reinstating veterans’ employees who have been out of the workforce for any extended period of time.




USERRA Implications for Veterans and Employers

March 14 in Los Angeles and March 15 in Irvine, Pepperdine University and PIHRA (Professionals in Human Resources Assoc.) will be sponsoring a seminar to address issues regarding employers and returning veterans. For more information go to:

Topic: Business Law, Human Resources, In the News
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