Seen and Heard

  • The access of women to power has attracted much attention recently, in light of the non-election of Hillary Clinton. Two authors have penned powerful essays on power and women: Rebecca Solnit, in From Lying to Leering, and Mary Beard, in Women in Power.
  • Snap’s IPO involves nonvoting shares, which means that investors will get a 1-share-0-vote deal rather than the traditional 1-share-1-vote. Other firms sell nonvoting shares, especially if they belong to the tech sector (e.g., Facebook and Google) or the media industry (e.g., the New York Times). Many investors, in particular top fund managers, are having none of this nonvoting world, and send sharp criticism Snap’s way. The Financial Times asks whether index funds could adjust the weight given to firms depending on the voting power of their shares. Over at the Economist, Schumpeter sees dual class shares as a sign of a declining shareholder democracy. Dual class shares have also come in the spotlight in Canada, where dual-class Bombardier received a much critized $372 million loan from the federal government.
  • Proxy statements have substantially changed in the last five years. Companies now provide more information, especially about their relation with shareholders: they increasingly disclose programs through which they engage with shareholders, and changes they made because of shareholder engagement.
  • Expect a boost in shareholder activism, as rules for activism on #ESG issues are relaxed. In January 2017, the U.S. Department of Labor issued Interpretive Bulletin 2016-1, which empowers ERISA plan fiduciairies to consider voting on proxies related to non-financial measures of corporate performance, such as those related to the environmental, social and governance issues.
  • Private initiatives (e.g., proxy access, board diversity, social reponsibility), rather than government regulation, have traditionnally played a key role in U.S. corporate governance. The financial law firm Skadden argues that private initiatives likely will continue to do so in the future. The question though is whether private initiatives will be sufficient in the age of populism when long-term concerns (civil unrest, pay inequalities) are creeping back on the agenda.
  • The European Union plans to update shareholder rights, in its most recent revision of the EU Shareholder Rights Directive.
  • The 2010 film Inside Job illustrates the dangers of a too close relation between regulators, financiers and academics. It should be mandatory viewing in business schools.
  • Gross Domestic Product, or GDP, the number with which economic growth is usually measured, is unable to measure many key aspects of valuable activity, and underestimates economic growth, according to Martin Feldstein from Harvard University. Nobel laureate Paul Samuelson perhaps best illustrated this when he joked that GDP falls if a man marries his maid.
  • Political risk is important to consider when evaluating new projects, yet difficult to measure. A recent Journal of Corporate Finance article does precisely that and illustrates how to measure political risk.

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