Back in 2008, I wrote up an “Economic Recovery Plan” for the U.S. that suggested, as part of a plan to achieve vibrant GDP growth, “corporate governance that relieves investors from worry that profits will be siphoned off by management”:
Right now the shareholders of a public company are at the mercy of management. Without an expensive proxy fight, the shareholders cannot nominate or vote for their own representatives on the Board of Directors. The CEO nominates a slate of golfing buddies to serve on the Board, while he or she will in turn serve on their boards. Lately it seems that the typical CEO’s golfing buddies have decided on very generous compensation for the CEO, often amounting to a substantial share of the company’s profits. The golfing buddies have also decided that the public shareholders should be diluted by stock options granted to executives and that the price on those options should be reset every time the company’s stock takes a dive.
If current trends continue, the CEO and the rest of the executive team will eventually have salaries that consume 100 percent of a public company’s profits and they will collect half ownership of the company via stock options every few years. Who would want to invest in that?
“State Street: corporate governance has grown up” (Financial Times), an interview with Rakhi Kumar, points out that things have gone in the opposite direction since 2008:
Top of the 43-year-old’s list of concerns is the move by many of the world’s biggest technology companies, including Snap, Facebook and Alphabet, to adopt controversial voting structures that limit the power of their shareholders. The issue came to the fore in February when Snap became the first US company to issue shares at its initial public offering that gave investors no voting powers.
With $2.6 trillion in assets under management, State Street has been able to achieve some of its goals:
State Street has also taken a tougher approach to companies that have failed to appoint women to their boards, vowing earlier this year to vote against company directors that do not commit to improving the gender balance in their boardrooms. … “[Our push against all-male boards] has been a great success,” she says. “Some companies have proactively called us and asked us not to take action against them. We will keep voting against those that don’t [improve], and we hope other investors will join us.”
A quota system for women on corporate boards will apparently make State Street happy, but what will it do for ordinary investors? If the CEO and pals on the Board are stealing from shareholders via fat salaries, stock options, etc., does an ordinary shareholder care about the gender IDs of the thieves?
You forgot to mention “Corporate Social Responsibility”, i.e. raising the CEO’s social capital by charitable donations paid for by the shareholders.
That said, in a purely Coasean sense this embezzlement should not have an impact on GDP growth. The CEO has an greater incentive to make more profits if he can skim them all to himself, and if investors have to put money in startups rather than large public corporations, that should foster innovation. Since pension funds are the bulk of investors, people will find their retirement savings inadequate and have to work past retirement, once again growing GDP.
P&G just cut $100M from their digital advertising budget. The result? Nothing. No slowdown in growth, no slowdown sales. There’s a larger issue: Retail spending has grown on average just 2.4% per year over the past 5yrs (not adjusted for inflation = 3-8% depending on including food+housing?). Over the same period, digital advertising nearly doubled to $72.5 billion. So $72.5B digital advertising yields nothing.
This should greatly concern investors in FAGs (oops, FANGs?), let alone the ad techs.
Women suck at big business: https://www.avoiceformen.com/feminism/women-hate-being-ceos-and-they-suck-at-it/
Forcing women on corporate boards will ensure that the economy tanks.
Ananda: The greatest minds that the Harvard Business Review could find disagree with this assertion. See https://hbr.org/2016/02/study-firms-with-more-women-in-the-c-suite-are-more-profitable for example. As with most American media, the content doesn’t agree with the headline: “we found that female CEOs neither systematically outperform nor underperform their male counterparts.”
[Potentially casting some doubt on the genius of the authors is their characterization of Yahoo’s Marissa Mayer as a “successful female leader.” I wonder how many Yahoo shareholders, other than those in Mayer’s own family, would agree with this characterization.]
Of course, firms with more women in their C suite are more profitable! Women are parasites. They seek out successful firms. The question is what happens after that. Just ask Yahoo.
Ananda: The parasitical theory is an interesting one. Somehow I don’t think exploring and evaluating it will be an editorial priority for mainstream U.S. media, including HBR! (nor will academics be able to advance their careers by looking into this!)
[I wonder how one could test the theory. Compare performance of a company relative to a peer group before and after female executives were put in place? But then would it make more sense to use a peer group of companies mostly led by men? If the parasite theory is correct, those companies are likely to be unsuccessful ones. I can’t think of a good way to design a study.]
I would also note that the study includes no *numbers* when comparing the purported improvement of female-led companies with that of male-led companies. My source does just that: https://www.avoiceformen.com/feminism/women-hate-being-ceos-and-they-suck-at-it/
This is how leftists lie. They hide behind vague words like “diversity” and “holistic,” while we truth seekers look at numbers.
Actual conversation I had with a female “friend” when Marissa Mayer became CEO of Yahoo (I was nave enough to believe that women were capable of friendship back then):
Me: Marissa Mayer’s plans for Yahoo make no sense. She’s going to wreck that company.
“Friend”: Well, at least it’ll be good for her career.
Women only think about titles and photo spreads, since they compete with other women on status markers, rather than actual value.
What do you call a woman who sells $50 worth of gee-gaws on Etsy, that cost $100 and several hours of her labor to make?
The CEO of her own company!
Let’s say the CEO is not even a person, but a Samoyed or allied breed, what difference does it make? do CEOs do anything that might actually make a company earn money? aren’t they there principally fulfilling a legal requirement (which they use to steal from the stock holders)? I can see management can make a difference if the manager is also the owner of the company, but in a publicly traded company?