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Tag Archives | financial crisis

Beyond Growth: Do Corporations Have Any Responsibility to Ensure Growth Helps the Majority?

, May 8, 2013 ,

Martin Hart-Landsberg

The following guest post is from Martin Hart-Landsberg, PhD who blogs at Reports from the Economic Front. I’m republishing his post (I added the subtitle to his Beyond Growth) because I believe those concerned with corporate governance need to look at corporations in context. Are corporations helping society or adding to its burdens?

Cross-posted at Reports from the Economic Front.

While newspapers give a lot of ink to arguments about whether reducing the budget deficit will boost or reduce growth, they seem to have little interest in the related issue of whether economic growth really benefits the great majority. Continue Reading →

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Breaking Up is Hard to Do

, November 14, 2012 ,

Trillium Asset Management LLC, on behalf of the Benedictine Sisters of Mount St. Scholastica, along with the AFSCME Employees Pension Plan recently filed a shareholder proposal with Citigroup Inc. (NYSE: C, $C) asking the company’s board of directors to explore a possible separation of one or more of its business units. Continue Reading →

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Book Review: Owning Our Future

, July 26, 2012 ,

Marjorie Kelly is the rarest of authors, discussing some of the most difficult problems we face but doing so through an easily understood narrative of her own search for answers that is bound to draw in readers from a wide variety of backgrounds. Her analysis is insightful and the recommendations contained in Owning Our Future: The Emerging Ownership Revolution should strike a chord with most, regardless of their political persuasion. We all want a better future for our children. Kelly is pointing in the right direction to make that happen. Continue Reading →

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United States of America v. Carollo, Goldberg and Grimm: Mafia Tactics on Wall Street

, July 7, 2012 ,

Someday, it will go down in history as the first trial of the modern American mafia. Of course, you won’t hear the recent financial corruption case, United States of America v. Carollo, Goldberg and Grimm, called anything like that. If you heard about it at all, you’re probably either in the municipal bond business or married to an antitrust lawyer. Even then, all you probably heard was that a threesome of bit players on Wall Street got convicted of obscure antitrust violations in one of the most inscrutable, jargon-packed legal snoozefests since the government’s massive case against Microsoft in the Nineties – not exactly the thrilling courtroom drama offered by the famed trials of old-school mobsters like Al Capone or Anthony “Tony Ducks” Corallo. Continue Reading →

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Guest Post: The High Cost of ERM Herd Mentality

, June 12, 2012 ,

Enterprise Risk Management (“ERM”) as a movement has been around for more than a decade.  Unfortunately, a 2010 COSO survey disclosed that only limited progress has been made convincing senior management and boards that ERM is key to maximizing and safeguarding long term enterprise value, allocating expensive human and financial resources,  or managing major risks to strategic and core business objectives. Continue Reading →

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Review: Corporate Governance and the Global Financial Crisis

, May 1, 2012 ,

Corporate Governance and the Global Financial Crisis: International Perspectives by William Sun, Jim Stewart, and David Pollard addresses the worldwide crisis that cost Americans an estimated average of $188,000 per household. We will be paying back that debt for decades… or perhaps more accurately, our children will be paying back that debt. Yes, we’ve passed the usual spate of laws after a financial crisis and regulations are still being written, but almost nobody I talk to, except perhaps those on Wall Street, thinks we have solved the issues. This book discusses some of the weaknesses, such as executive pay, risk management, board practices, regulation capture, the failure of shareowners to obtain and/or exercise rights, etc. Perhaps more importantly, many of the contributing scholars offer possible solutions. Continue Reading →

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Review: Economic Governance Matters

, January 3, 2012 ,

Does Economic Governance Matter?: Governance Institutions and Outcomes edited by Mehmet Ugur and David Sunderland. The answer is an unqualified yes! More questionable is if citizens can shape governance to be more efficient to society as a whole.

It does not require immense imagination to see that technically-feasible economic outcomes may remain socially-unfeasible if the existing definition of property rights is not credible due to the existence of a highly intrusive or excessively weak Continue Reading →

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Complexity Theory & Corporate Governance Failures

, December 28, 2011 ,

Catching up on a couple of noteworthy reviews from recent issues of Corporate Governance: an International Review.

Corporate Governance and Complexity Theory by Marc Goergen, Christine Mallin, Eve Mitleton-Kelly, Ahmed Al-Hawamde and Iris Hse-Yu Chiu.  Reviewer Diane Denis was hoping the application of complexity theory would lead to insights concerning how and where problems arise, allowing corporations to manage more effectively. Instead, according to Denis, the authors use complexity theory to advocate stakeholder governance. Like other such efforts, they fail to Continue Reading →

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Science of Stock Manipulation

, November 22, 2011 ,

Unless current shareowners suffer a penalty for having CEOs who engage in earnings manipulation and insider trading they are likely to encourage such unethical and damaging behavior, finds a study by Ramy Elitzur, since choosing less ethical managers may be in the best interests of current shareholders, but not future ones.

Many accountants believed that markets are efficient and as such, Continue Reading →

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“Then I realized that, ‘Wow! I didn’t get in trouble!’ So I played it again.”

, November 14, 2011 ,

Renowned Hawaiian musician and guitarist Makana was invited to play instrumental background music at the APEC Summit gala dinner Saturday night here in Honlulu. At the dinner, Makana opened his jacket to reveal a t-shirt which read, “Occupy with Aloha.”

Then, instead of performing the background instrumental he was scheduled to play, he started to sing a protest song he had released earlier that day. As world leaders, including Obama and Chinese Premier Hu Jintao, sat in the Continue Reading →

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Occupy Suburbia: 99% @ Rte 99

, October 17, 2011 ,

I live in Elk Grove, California, a suburban enclave of Sacramento… if not middle America, at least middle California. Its a town where most kids are driven to school and soccer in minivans or SUVs. Most are too busy with their daily lives and trying to hold on to underwater mortgages to join ‘occupy’ movements in Sacramento or San Francisco. That doesn’t mean the movement has been completely ignored.

There was a post on the Elk Grove Patch and another on Elk Grove News.net.  News.net didn’t get much traction but the Patch attracted a Continue Reading →

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Sacramento Kings: Dear & Ailman

, October 10, 2011 ,

Nice play on words by ai-cio.com on the title of their article, Sacramento’s Kings, interviewing two of the most influential chief investment officers in America: Chris Ailman of the California State Teachers’ Retirement System (CalSTRS) and Joe Dear of the California Public Employees’ Retirement System (CalPERS). Of course, Sacramento is also home (perhaps temporarily) to the Sacramento Kings NBA team. In the scheme of things, Dear & Ailman seem a lot more important to me.

Interviews are wide ranging. CalSTRS is interested in getting into commodities. It sounds as if both funds are being held back from managing even more of their funds internally than they currently do by pay limitations on government employees… politically infeasible to pay what market would demand. Good discussion of risk analysis. Article is worth a quick read if you deal with either fund.

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Occupy Wall Street

, September 30, 2011 ,

The NY Transit Workers Union (TWU) Local 100 voted to join the protestors in the financial District of New York City, and so have the Verizon union members. Other unions, including the Teamsters (yes, those Teamsters who once supported Ronald Reagan) have issued public statements of support for Occupy Wall Street (OWS) protests… includes video of Tony Bologna pepper spraying. (“Occupy Wall Street” Is Getting Huge — But Where Are the Democratic Politicians?, AlterNet)

The young heroes on Wall Street today baffle the world because they have issued no demands. The villains of Wall Street had their demands — insisting upon a massive bailout for themselves in 2008, while they pocketed million dollar bonuses. The Wall Street protesters are not seeking a bailout for themselves; they are working to bail out democracy. (Van Jones, Wall Street Protests: Which Side Are You On?, Huffington Post, 9/30/2011)

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L’Apel: Democratic Capitalism at Risk

, September 20, 2011 ,

Recently, ICGN held their annual conference in Paris. From the Twitter feed, it appears I missed a good one. (see ICGN Via Twitter) I’ve already mentioned Jon Lukomnik’s appeal to look again at the idea that shareowners’ interests and executives’ can be aligned through compensation strategies.

I think one origin of our errors was revising the tax code so that executive compensation above $1 million is only a tax deductible expense if performance based. The result has been, as Lukominik observes, that compensation plans have taken on the characteristics of “a slot machine: They pull a lever and three years later out comes a trickle of coins or a fountain of folding money.” This is a topic worthy of much discussion.

Another truthsayer at the conference was Robert A.G. Monks, whose L’Appel can be read as quickly as fast food but provides nutritional value of a much higher order. Bob lays out a number of observations. I’ll just list a few: Continue Reading →

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Labor Day: The Scariest Jobs Chart Ever

, September 5, 2011 ,

What the chart (made by Calculated Risk) shows is the trajectory of job losses and gains during the great recession, compared to previous recessions. So as you can see, the depth of the decline was much worse than any other recession, and what’s more, the pace of the recovery is much weaker than in previous ones. Over a year it was looking as though the recovery might be kind of V-Shaped (a really big, wide V), but now it’s clear that the comeback Continue Reading →

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Parasitic Capitalism

, August 3, 2011 ,

The US can print the same money it borrows in. It doesn’t ever have to default as long as it retains this privilege. But its creditors now know that the US can’t be trusted. This is why America’s trusted friend and car pool partner in space, Vladimir Putin, has said Americans, “Are living like parasites off the global economy and their monopoly of the dollar.”

Them used to be fightin’ words. But now they are just words that confirm that we have come the end of the dollar’s reign as the world’s reserve currency. This is pushing up yields on government bonds. And in the long run, it will push up the price of precious metals too, as a reserve monetary asset (money).

via Parasitic Capitalism, The Daily Reckoning, Australia, 8/2/2001.

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Reframing Corporate Social Responsibility

, July 19, 2011 ,

Reframing Corporate Social Responsibility: Lessons from the Global Financial Crisis, edited by William Sun, Jim Stewart, and David Pollard, is volume 1 in an important new series: Critical Studies on Corporate Responsibility, Governance and Sustainability. Disclosure: I’m on the Editorial Advisory and Review Board of the series at the request of William Sun, who I’ve already identified as an important voice in corporate governance. See my review of his How to Govern Corporations So They Serve the Public Good: A Theory of Corporate Governance Emergence.

This new volume reflects on corporate responsibility (CSR), focusing on what role, if any, it played in the financial crisis and, perhaps more importantly, how such events might be avoided in the future by more fully integrating CSR into mainstream corporate practices. The editors argue that business discourse and values are currently viewed as Continue Reading →

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Wall Street: From Mortgages to Taxes

, July 16, 2011 ,

The Street is tailoring government bonds to fit the winning mortgage market strategy, right down to selling shorts to investors who are gambling right now that governments won’t be able to meet both their budgets and pay their loans off, given the crippling economy that still hasn’t recovered from the subprime mortgage crash. The idea of course is not to repeat the mistakes and scams that plagued that other market.

Investment houses, some of which many people will recognize from the “Too Big to Fail” hearings on Capital Hill: Bank of America Merrill Lynch, Citigroup, Goldman Sachs Group, JP Morgan Chase and Morgan Stanley, are hard at work conforming muni bond contracts in order to trade them in groups called tranches. Sound familiar?

via Wall Street to trade tax dollars like it did your mortgage, Maureen Nevin Duffy, NewJerseyNewsroom.com. Old to some but new to me.

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How to Profit from the Coming Debt Default

, July 14, 2011 ,

As my stocks tumble amidst growing uncertainty over whether or not to raise the debt ceiling, I couldn’t help but wonder, how could I profit from those who seem bent on destroying the US economy?

House Democrats are circulating a resolution accusing House Majority Leader Eric Cantor (R-Va.) of having a conflict of interest in the debt ceiling debate, a move that could provide an awkward C-SPAN moment for one of the lead Republicans in the budget negotiations.

The resolution goes after Cantor’s investment in ProShares Trust Ultrashort 20+ Year Treasury ETF, a fund that “takes a short position in long-dated government bonds.”

The fund is essentially a bet against U.S. government bonds. If the debt ceiling is not raised and the United States defaults on its debts, the value of Cantor’s fund would likely increase. (Eric Cantor Hit By Democrats For Potentially Profiting From U.S. Default, Huffington Post, 7/8/2011)

Although interesting, the article goes on to note that “Cantor owns $3,327 in the ProShares trust. His congressional pension in the Thrift Savings Plan, on the other hand, is invested in the G Fund of government bonds and is valued at over $263,000.”

Republican Senator Lindsey Graham told ABC’s Jonathan Karl… he “bets” the debt ceiling will not be raised August 2nd and that the United States will very likely default on its debt. (Lindsey Graham On Odds Of Raising The Debt Ceiling: ‘If I Were A Betting Man, I’d Bet No’, Mediaite, 7/12/2011)

Gold anyone?

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Median CEO Pay Up Again: My Apologies

, July 13, 2011 ,

Do I need to apologize? I’ve been using USPX guidelines to vote down pay packages at large companies over the $9 million 2010 median reported by Equilar earlier this year. Now, they’ve revised their pay figures. Final data show median pay for top executives at 200 big companies last year was $10.8 million, up 23% from 2009. (We Knew They Got Raises. But This?, New York Times, 7/2/2011)

The average US worker earned $725 a week in late 2010, up 0.5% (less than inflation) from the year before. I’ve been voting down almost all pay packages where a named executive officer (NEO) earned more than what I thought was the median last year of $9 million. Now it looks like I’ve been too harsh and should have only been voting against those over $10.8 million. I suppose I could say I’m sorry for my vote at those companies where an NEO got more than $9 million but less than $10.8 million. On the other hand, only 1.5% of the companies in the Equilar study had they pay proposals rejected… so, no harm, no foul.

Do we really need to pay them that much? I think our attempt to link pay to performance has resulted in refocusing the corporation. Instead of serving some reasonable public purpose and paying profits to shareowners, many corporations now are moving off shore to avoid paying taxes and are focused on maximizing profits for named executive officers.

Meanwhile, a study from Capgemini and Bank of America Merrill Lynch estimates that financial wealth control by the high net worth individuals jumped 9.7% over the last year to $42.7  trillion. It is hard to see the economy really recovering while the middle class is being hollowed out… although I suppose we could pin our hopes on exports to the growing middle classes of China, India and Brazil.

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CalSTRS Advance Board Diversity

, July 12, 2011 ,

CalSTRS withdrew all eight of its board diversity shareholder proposals filed during the 2011 proxy season after successfully engaging companies to consider diversity in director searches.

In recent years, the issues of board of director leadership and oversight roles have taken on increased significance to long-term investors, such as CalSTRS. Today’s economic challenges highlight the importance that board diversity plays in enhancing value and providing companies with a full range of fresh talent and experience. According to Anne Sheehan, CalSTRS Director of Corporate Governance:

We’ve advanced the ball in the name of board diversity and are committed in our conviction that corporate boards and their nominating committees consider diversity in the larger context of improving shareholder value. One lesson from the financial crisis was the role corporate board group-think played in fostering management short-term priorities that proved detrimental to sustainable value creation. We think improved board diversity will address that problem.

To assist boards in the enhancement of diversity on corporate boards and of shareholder value, CalSTRS and CalPERS launched the Diverse Director DataSource, known as “3D,” by announcing the selection of corporate governance vendor Governance Metrics International to develop and operate the DataSource. 3D is expected to go live later in July and begin accepting nominations from board candidates. The database will offer shareholders, companies and other organizations a valuable resource for identifying candidates.

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Economics of Good and Evil: The Secret Foundations of a Science

, July 12, 2011 ,

The Economics of Good and Evil: The Quest for Economic Meaning from Gilgamesh to Wall Street, by Thomas Sedlacek, explores the path dependency of modern Western economics through mythology, religion and fables. I wish the book had been published and influential forty-five years ago when I was a freshman economics major. We started with the moral/political arguments of Adam Smith, Thomas Malthus, Karl Marx, David Ricardo, J.S. Mill, and Alfred Marshall. I was so delighted with my chosen major that after the first semester, I signed up for sophomore year economics classes, which for us meant Samuelson.

What a disappointment to learn the “truths” I would have to parrot back to be successful in mainstream economics… invisible hands, rational individuals seeking only to maximize their own benefits. The static, non-spontaneous predictable model of robotic behavior of homo economicus didn’t ring true to me. These assumptions, where service to others and the natural bonds between people were totally discounted didn’t appear scientific to me. Other social sciences sought to measure actual behavior, rather than make assumptions known to be Continue Reading →

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