CEO Incentives can boost short-term stock price but destroy long-term value, according to the two winning academic papers of the Investor Responsibility Research Center Institute (IRRCi) annual investor research competition. The winning academic research teams share a $10,000 award. Continue Reading →
Tag Archives | incentives
Despite the Apple Board’s best effort to obtain a “no-action” letter to exclude my proxy access proposal, it is included among the items to be voted on at or before the annual meeting to be held on February 28 at our Company’s principal executive offices in Cupertino, CA. See Apple’s proxy, Proxy Proposal 11, ‘Proxy Access for Shareholders’ on page 63. (A minor gripe – why doesn’t Apple provide a linked index to our proxy so that shareholders can easily flip to the subject they are looking for? Let’s hope part of their strategy isn’t making it too hard to analyze the issues and vote.)
Here’s the thrust of my argument. We need directors who can address the big money pile – not with short-term buyback strategies that facilitate extraction of value but with long-term strategies that create value. Investing $150B in Treasuries or money markets is not efficient use of our money. The returns of Google Ventures, for example, are far above the industry’s mean. There is no reason why Apple couldn’t also put our money to good use though an Apple Ventures type of vehicle or through a revamped and enhanced Blue Sky program. Continue Reading →
The Political Economy of Global Finance Capital by Richard Deeg and Mary O’Sullivan review 6 influential books on the topic in light of the recent financial crisis.
The most important developments highlighted:
- the move from a predominant focus on state-centered patterns of regulation to a more comprehensive understanding of the role of states and private actors in building a transnational governance regime that mixes public and private regulation;
- the intensified effort to understand the causal forces that shape the political economy of global finance based on more complex models that allow for an interaction among interests, institutions and ideas; and
- increased attention to new sources of systemic risk in the global financial system, as well as a greater consideration of the consequences for domestic politics of interactions with the global financial system.
They argue that we must do more to understand the behavior of actors who enact the rules of global finance, not just those who generate the rules. More must be done to assess the costs and benefits of financialization at the global and national levels.
Some interesting points highlighted:
- The financial crisis emanated not from the periphery but from the very core of the system.
- Facilitated flows from poor countries to rich countries, rather than the historically opposite direction.
- Coordinated market economies that rely on welfare production regimes for promoting and protecting the investment by firms in skill sets and specific assets may have a competitive advantage with financial globalization, the opposite of conventional thinking.
- These protections inhibit convergence in corporate governance.
- Financialization, where maximization of short-term shareowner value through dashboard metrics, has compromised the interests of other stakeholders and corrodes the coordinated system of capitalism.
- Extraordinary incentives contributed to willingness to pursue aggressive strategies without due attention to risks.
How is it that false illusions were conferred sufficient legitimacy to deafen alternative views and stymie reform? In our thinking, a lot may come down to the power held by CEOs and their organizations like the Business Roundtable and the Chamber of Commerce. They can spend shareowner money like there is no tomorrow in defending a system that still gives CEOs virtually dictatorial power. On the other side, institutional investors are held to fiduciary duties that limit such lobbying efforts, even by the few that don’t have direct conflicts of interests, such as in trying to attract those 401(k) accounts from CEOs.
Happy Holidays: More, More, More: Gifts For the CEO Who Has Everything (clip from Nightly Business Report via The Corporate Library Blog, 12/24/09)