The industrial and financial logic of the complex deal, effectively a takeover of Nobel by Akzo, is impeccable. The financial aspects of the deal are elegant. Securum, the state-owned Swedish investment vehicle, is paying Akzo SKr4.
Corporate Law Few topics are sexier among commentators on corporate governance now than whether activist hedge funds are good for, a danger to, or of no real consequence to public corporations and the people who depend upon them.
But, unless we consider the economic realities of these ordinary human investors and how those realities bear on what is best for them, we are not focused on what is most important in assessing the public policies shaping our corporate governance system.
Stated in a somewhat crude but generally accurate way, we started with sports underwriting afl tipping suggestions system that reflected some implicit assumptions, including sports underwriting afl tipping suggestions In recent decades, these assumptions have been undermined and often turned upside down: Indeed, as we shall see, these human investors are not so much citizens of the corporate governance republic as they are the voiceless and choiceless many whose economic prospects turn on power struggles among classes of haves who happen to control the capital—of all kinds—of typical American investors.
And for all the talk of creating an ownership society, close to half of Americans do not have any investments in equity securities, even in the form of k and individual retirement account IRA investments in mutual funds. As or even more important to the current topic, typical Americans who are investors in the equity markets remain primarily dependent on wage employment for their wealth, and the wealth they can deploy as owners of equity capital is not controlled directly by them.
Instead, the power of their capital is wielded by others. Most traditionally, of course, we focus on corporate managers as exemplifying that reality, the so-called separation of ownership from control.
The nature of this republic must be understood if we are to assess how to address the emergence of activist hedge funds as a powerful force acting upon public companies. Assuming or pretending that the proxy voting units of institutional investors will reliably identify what is in the best interest of human investors hardly instills peace of mind.
Now, the voice of equity capital is represented most loudly by those whose investment philosophy the efficient market hypothesis argues is most likely to fail—active speculators trying to outguess the market.
Many hedge funds themselves fly a reckless flight plan under the efficient market hypothesis and purport to be good at building long-term engines of economic growth, but are public-spirited enough to leave the resulting growth powerhouses after a few years, even though their influence on the corporation will last far beyond that.
Because ordinary Americans are stuck in the market for years and depend on its long-term, sustainable growth for jobs and portfolio gain, they are exposed to a corporate republic increasingly built on the law of unintended consequences.
If out of this debate among those with short-term perspectives comes optimal policy for human investors with far longer time horizons, that happy coincidence would be remarkable. To shed light on how hedge fund activism, including so-called wolf pack activism, affects human investors, Part I of this Feature highlights the flesh-and-blood attributes of typical American investors—the real people, which this Feature refers to as human investors, who use the capital markets to invest and save for important life events like retirement or college education for their children.
From there, Part III will describe the corporate republic upon which human investors are dependent but in which they are largely bystanders to a power struggle among two classes of agents, corporate managers and professional money managers.
Part IV then explains the two ways in which human investors are subjected to whatever benefits and risks activist hedge funds may cause to our corporate governance system, both as indirect investors in hedge funds and as workers dependent on pension funds, and, more importantly, as human beings who derive most of their wealth from the ability of our economy, including its public companies, to create good jobs and raise wages.
B will explore these subjects and highlight the critical issues raising doubts that hedge fund activism is likely to be materially beneficial to human investors.
C discusses how the current corporate governance debate imperfectly addresses these potential harms to human investors. The Feature finishes in Part V with some modest policy proposals to ameliorate the risks that hedge fund activism poses while still retaining its potential benefits. Notably, these proposals do not involve ascribing to the hedge fund industry itself any opprobrium; rather, as to the hedge fund industry itself, they mostly rest on the proposition that when economically powerful forces are acting on important societal institutions like public companies and taking funds upon which human investors and institutions like charities and universities depend, they should be required to disclose accurate and timely information about their operations and interests.
Most fundamentally, this Feature recognizes that it is not hedge funds themselves that pose the major risk to human investors, it is the failure of our overall corporate governance system to represent faithfully the rational, long-term perspective of ordinary American investors who can only gain if public corporations make money the old-fashioned way, by implementing sustainable strategies to sell products and services and not through edgy practices, accounting gimmickry, or never-ending cycles of spin-offs and mergers.
Rather, the term calls on a scarier lineage, in which wolves are seen as dangerous predators capable of ruthless and concerted action to bring down and devour their prey.
Visions of cowering children, vulnerable livestock, and half-eaten chickens come to mind, 3 or sailors forced to fight for survival in the great deep. Lost in the regressions 5 and the rote references to stockholder democracy 6 are the people most affected by our corporate governance system, in no small part because those people mostly have to live with the outcomes of a system of corporate governance in which they have almost no direct voice.
The real humans get lost in the shuffle. If we are to consider in a prudent fashion how our corporate governance system should regulate activist hedge funds or address other analogous matters, we must humanize our lens and remind ourselves of the realities of who living, breathing investors are, the ways in which they are allowed to participate in the system, and the effect these realities have on what corporate governance system would be best for them.
Most essential in this humanizing process is realizing that most Americans owe almost all of their wealth to their ability to hold a job and to secure gains in wages. Instead, they are given an option to invest in the funds of whatever mutual fund families with which their employer contracts.
Instead, it involves being able to move from one fund to another, often of the same fund family. Rather, for most Americans, once funds are invested in a k plan, the funds are out of their effective reach until they reach age fifty-nine and a half. I admit to focusing on k funds20 and I do so for good reason.
Most Americans are not wealthy enough to buy a lot of securities 21 outside of retirement and college savings accounts under 26 U. The equity and debt capital they acquire comes originally from sweat.
Rather, the trusting pensioners find themselves in the hands of their pension fund and dependent upon considerations such as whether the pension fund is annually funded in an actuarially sound manner and whether the pension fund is investing its assets in a prudent manner that will enable it to meet its promises to its beneficiaries.
Even more obviously than k investors, workers who have been promised a pension should rationally want a corporate governance system focused on sustainable wealth creation. Investments must grow durably and be there when it counts. Not only that, unless the approach to economic growth is one that benefits workers, by generating good jobs and wage growth, the prospective pensioner risks unattractive fates like non-vesting if a job is lost, or minimal growth in pension prospects if promotions and other wage growth options that will generate a higher pension are limited.
Precisely because human investors save for college and retirement, they are also likely to have substantial investments in debt securities and not just equities.
Because as college and retirement loom, it is prudent that more of your portfolio be in a form less vulnerable to losses in principal. These realities are buttressed by corporate finance theory itself. The mainstream of that theory teaches that the current value of an asset should be based on its expected future cash flows.Sports Underwriting Australia is offering armchair AFL punters a $10, prize kitty in its new footy tipping competition.
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