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The Golden Era |
rffrydr
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Joined: 30 Oct 2005
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 Posted: Tue Feb 03, 2009 10:19 am Post subject: The Golden Era |
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Gone but not forgotten:
| Quote: | A defence of shareholder value
Published: February 3 2009 09:10 | Last updated: February 3 2009 14:52
The irony is inescapable. The golden era of the shareholder value movement – the idea that businesses should be run in the interests of equityholders – has delivered one of the worst stock market performances ever. Most major markets are now below where they were 10 years ago. But while the theory of shareholder value is down, it is not out. There is no intellectually coherent alternative, certainly not managerial capitalism or touchy-feely stakeholderism.
In fact, in this post debt-bubble world, it needs to be encouraged and reinforced. In Europe alone, equity issues are expected to reach €300bn this year. Investors who help companies rebuild their debt-strained balance sheets will, of course, do so prompted by the profit motive. Yet by ensuring a company’s survival, they will also better the lot of all stakeholders. To help them do that, two main areas need reform.
The first is the age-old problem of how to achieve a better alignment of the long term interests of owners with managers. Better paid and more powerful non-executive directors are required to keep a check on executives. Pay must also move towards longer-term incentives – such as restricted share grants or bonuses that vest over several years – rather than measures that focus on short term performance. Pay at present is all too often extravagantly inflated, layered with complexity, and ludicrously out of step with what is delivered.
The second is the preferential treatment that debt enjoys. While dividends are double-taxed, first at the corporate level and then as income, interest payments are tax deductible. This will not change any time soon, but at least the gap can be narrowed. One possibility is for taxes on dividends to be tapered according to how long investments are held. This would reward loyal shareholders and encourage a genuine union of investors and companies that looked beyond share ramping and towards genuine value creation. |
| Quote: | State capitalism
Published: February 3 2009 09:11 | Last updated: February 3 2009 12:41
As the frontiers of the state again roll forward, it’s worth remembering that the man in whose name all this is done would have a clothes-peg on his nose. Keynes was a reluctant Keynesian. His genius, as biographer Robert Skidelsky diagnosed, was to develop an analysis of economic disorder which justified forms of state intervention compatible with traditional liberal values. The last of the great English Liberals, Keynes brought in the state to redress the failings of society not because he loved it, but because he saw it, in the last resort, as the saviour of capitalism from the temptations of collectivism or worse.
Free-market fundamentalists hope that the incoming tide of government interventionism will rapidly ebb, leaving markets once again to enjoy the freedoms of light tough regulation. That is wishful thinking. Sure, no government in its right mind sees the crisis as a way of legitimising a return to an out-of-date form of planned socialism run by unaccountable bureaucrats. But it is equally implausible to believe, after three decades in which advocates of unbridled laissez-faire have ruled the ideological roost and amid the worst financial crisis in two generations, that prevailing intellectual fashions will not now swing far in the opposite direction.
Staunch defenders of free markets are on the back foot. Even Alan Greenspan, a disciple of conservative philosopher Ayn Rand, has offered a mea culpa, acknowledging he had made a ”mistake” in believing that banks, operating in their own self-interest, would do what was necessary to protect their shareholders and institutions. But regulating everything to death will be no panacea. Capitalism, to paraphrase Churchill, is the worst economic system, except for all the others. Systemic breakdowns occur, but they are surprisingly rare. Free trade and deregulated markets make for a wild ride and hideous concentrations of wealth, but they remain the best means of spreading prosperity around the world we have. |
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HenryTo
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Joined: 06 Aug 2004
Posts: 11743
Location: Los Angeles, California
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| Posted: Tue Feb 03, 2009 11:48 pm Post subject: |
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Nice - if one can't spend 10 hours a day at a job earning *only* $100,000 to $150,000, then maybe one should do something else. Doing something just for the money is a horrible way to live a life.
The quants are good for crunching credit card data, learning about consumer behaviors, finding arbitrage opportunities, and construct financial products, but that's about it. In today's society, they can best use for something else - such as solving scientific and great engineering problems. I would never place my money with a quant that utilizes leverage - at least not over the long-run. |
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rffrydr
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Location: Sunny California
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rffrydr
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Joined: 30 Oct 2005
Posts: 16939
Location: Sunny California
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