Judith F. Samuelson
The following are cryptic notes and a few photos taken at the 2013 Millstein Forum held June 24 & 25 at Columbia Law School. Be sure to check out the Forum’s photo gallery. Moderator: Judith F. Samuelson, Executive Director, Aspen Business and Society Program, Aspen Institute.
- Lucian A. Bebchuk, Professor of Law, Economics, and Finance, and Director, Corporate Governance Program, Harvard Law School
Lucian A. Bebchuk
- Thomas Palley, Senior Economic Policy Adviser, AFL-CIO
- Richard N. Foster, Emeritus Director, McKinsey & Co. Lux capital
- Serdar Celik, Economist/Project Manager for Corporate Governance, Value Creation and Growth, Organisation for Economic Cooperation and Development
Supply chain compared to investment chain. Intermediaries have their own needs and desires. Large investing institutions control about 70% of the market. OECD revised principles.
Serdar Celik
IPO downtrend in OECD vs uptrend in non-OECD countries. Shift from advance markets to emerging doing IPOs in OECD markets, now doing IPOs in their own developing markets. Many non-financial companies are now cash rich. No problem finding capital for large companies. IPO size has doubled in last 10 years.
High frequency traders trade primarily large companies. Mid and small companies actually traded less in last 10 years. We are moving toward passive indexed-based investing. Function of efficient market is to allocate capital (no longer functioning smoothly?) but we can identify long-term corporate growth.
Thomas Palley
Value of company. 1/2 of economy is growing slower than the discount rate. 25% of the variance in stock price due to global effects (currently exchange, 25% local factors, 25% industry, 25% due to company itself. Are we measuring companies or investor expectations? Corporations have a much broader purpose than simply earning money for shareowners… to contribute to the delivery of shared prosperity. The structure of financial markets has been undermined. Pre-1980 wages led. Productivity grew wages. basic transaction services. savings for future needs. There was a strong link between productivity and rise in income.
Finance took control of American business based on the rationale of maximization of shareholder value. They abandoned their traditional commitment to country. We should be rebuilding the wage productivity link. We need to put finance back in the box. Take money out of politics. Change corporate behavior. Regain control of financial markets. Fed reserve should refocus on full employment. Limit speculation. We need a financial transactions tax. System-wide asset based reserve requirements. Shareholders need to have strong rights. It is a myth that insulating boards creates long-term value.
Need to believe that long-term players will buy from hedge funds two years from now. Cited Bebchuk, Lucian A., Brav, Alon and Jiang, Wei, The Long-Term Effects of Hedge Fund Activism (July 9, 2013), which examined the claim that hedge funds,have an adverse effect on the long-term interests and finds that it is not supported by the data.
Supplementary materials:
- Isaksson, Mats and Serdar Celik. Who Cares? Corporate Governance in Today’s Equity Markets OECD Corporate Governance Working Papers. April 2013. Click here to view.
- Palley, Thomas I. Financialization: What it Is and Why it Matters. Political Economy Research Institute. Nov. 2007. Click here to view.
- Roxburgh, Charles, Susan Lund et. al. The Emerging Equity Gap: Growth and Stability in the New Investor Landscape. McKinsey Global Institute. Dec. 2011. Click here to view.
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