Tag: Approved

ONE thing right-wing populists and left-wing progressives can agree on is that society is too soft on white-collar crime. Conservatives abandon their admiration for business when it comes to “crooked bankers”. Left-wingers forget their qualms if locking up “corporate evil-doers”. Hillary Clinton’s line that “there should be no bank too big to fail but no individual too big to jail” would go down equally well at a Donald Trump rally.

But is society really soft on corporate wrongdoing? And would locking up bankers and businessmen and throwing away the key really solve any problems? Two new books try to inject reason and evidence into a discussion more commonly driven by emotion and hearsay: “Why They Do It: Inside the Mind of the White Collar Criminal” by Eugene Soltes, of Harvard Business School, and “Capital Offenses: Business Crime and Punishment in America’s Corporate Age” by Samuel Buell, the lead prosecutor in the Enron case, who now teaches at Duke University.

Messrs Soltes and Buell both demonstrate that America is getting tougher on business crime. Between 2002 and 2007 federal prosecutors convicted more than 200…Continue reading

JUST outside Stanford University’s campus sits the headquarters of Symphony, one of the myriad tech companies that sprout like weeds in Silicon Valley. After a lunch break exercising in a nearby park, a dozen fit-looking employees, still in workout clothes, help themselves from buckets of fruit, energy bars and the food of the day (Indian), before plopping themselves in front of monitors in an airy room bathed in natural light. For the sought-after engineers making up most of the company’s 200-strong workforce, this sort of environment is the norm. Work is supposed to be healthy and relaxed—a far cry from the terrors of a New York bank with its incessant pressure to sell and complex internal politics, not to mention often unappetising, pricey food.

Across the continent, in a newly opened tower within the World Trade Centre, Kensho, a three-year-old company, has a similar feel. Like Symphony but a bit smaller, it is stuffed with talented engineers. In a New York approximation of the West Coast, it boasts “vertical gardens”—rectangular patches of vegetation like framed paintings—and a pool table.

Symphony is a messaging platform,…Continue reading

TRADITION suggests that Wall Street should favour the Republican Party. America’s conservatives usually back low taxes, free trade and a reduction in regulation. But the 2016 election seems to be an exception. A Bank of America Merrill Lynch poll of fund managers in October found that a Republican victory was seen as one of the biggest risks facing financial markets, along with the disintegration of the EU.

A study* by Justin Wolfers of the University of Michigan and Eric Zitzewitz of Dartmouth College found that in the wake of the first debate, there was a six-percentage-point rise in the probability of a Hillary Clinton victory on betting markets. In reaction, stockmarkets rose, and gold and Treasury bonds (two assets that benefit when investors become risk-averse) fell. “Financial markets expect a generally healthier domestic and international economy under a President Clinton than under a President Trump,” the authors concluded.

What makes this election different for investors is the nature of the Republican candidate—Donald Trump is a long way from the party’s mainstream. A Trump victory would throw up all kinds of uncertainty…Continue reading

IN 2007 financial dangers, piled up like so much tinder, ignited at last and caused a swathe of destruction across the global economy. The blaze also engulfed governments, which faced intense public pressure to prevent such calamities from recurring. Much has happened on the regulatory front since then. Few believe, however, that the problem of financial instability has been solved. To regulators’ frustration, in a world of global financial flows, efforts to safeguard one country often endanger others.

This bothersome tendency has become harder to ignore as cross-border capital flows have swollen. Annual gross financial flows in rich countries soared from roughly 5% of GDP in 1980 to around 25% of GDP on the eve of the financial crisis. This worldwide torrent of money has its benefits. Investors can more easily diversify their portfolios. Investors in slow-growing rich countries gain access to higher-yielding investments in poorer, capital-starved economies, and those poorer economies gain access to desperately needed capital relatively cheaply.

Yet there are costs as well. Emerging economies with less sophisticated financial markets and…Continue reading

THERE have only been six chairmen of the Tata Group since it was founded in 1868. There will soon be a seventh after Cyrus Mistry, the first boss of the conglomerate not connected to the founding family, was ousted after less than four years in charge. Even though he undertook few of the reforms needed to bring vast swathes of the Tata empire to profitability, he will prove a difficult act to follow. That the ousted man has now embarked on an extraordinary rampage against his old employer will scarcely help.

Mr Mistry might reasonably have expected to serve for a couple of decades at the helm of India’s biggest group, with interests from IT to cars, hotels, salt, steel and much else besides. His departure on October 24th was a surprise. For a company with a culture of consensus, the abruptness of his sacking—the board did not even give him the option of stepping down, and the purging of many of the top executives he had hired—is about as brutal as it comes. Ratan Tata, his predecessor, will take over while a new boss is found.

The catalyst for the defenestration was the lack of performance at some of the group’s big companies….Continue reading

A DEAL worth $85.4bn is by any standards a blockbuster. The agreement by wireless and pay-television giant AT&T to buy Time Warner, owner of Warner Bros, HBO and a trove of hit films and TV shows, is the biggest bet yet that the future of media will be dictated by massive companies that best marry distribution with content.

The merger, announced by the two companies in the evening on October 22nd, does not ensure that AT&T, a traditional telecommunications company, will end up as one of those winners. But Randall Stephenson, who as AT&T’s chief executive will steer the combined company, is assembling the pieces he believes he needs to get there.

AT&T just last year completed the $48.5bn purchase of DirecTV, a satellite provider, making the company the largest pay-TV distributor in America with 25m subscribers. AT&T is also the country’s second-largest wireless carrier, behind Verizon Communications. The company now is set to add one of Hollywood’s most storied studios in the form of Warner Bros, a prestigious cable network in HBO, valuable cable channels like TNT, TBS and CNN, and a rich library of film and…Continue reading

TRILLIONS of dollars of consumer spending have, historically, depended on a few steps. A shopper learns about a product, considers whether to buy it, decides to do so, goes to a shop. If he likes it, he may buy it again. Marketers have long obsessed over each step, and consultants have written treatises on how to nudge people along. E-commerce is already changing the process, but now retailing gurus are imagining a future in which shopping becomes fully automatic.

The idea is that a combination of smart gadgets and predictive data analytics could decide exactly what goods are delivered when, to which household. The most advanced version might resemble Spotify, a music-streaming service, but for stuff. This future is inching closer, thanks to initiatives from Amazon, lots of startup firms and also from big consumer companies such as Procter & Gamble (P&G).

Buying experiments so far fall into two categories. The first is exploratory. A service helps a shopper try new things, choosing products on his or her behalf. Birchbox, founded in 2010, sends beauty samples to subscribers for $10 each month. Imitators have proliferated, offering everything from dog…Continue reading

TO MOST investors, Venezuela looks less like a market than a mess. The IMF expects output to shrink by 10% this year and inflation to exceed 700%. As the bolívar’s value has plunged, multinational firms have announced billions of dollars of write-downs. For much of this year, however, some strong-stomached investors have scented an opportunity. They rushed to buy bonds issued by the government and by the state-owned oil company, PDVSA.

They have been rewarded handsomely. Venezuelan government bonds have outperformed other emerging-market sovereign bonds tracked by JPMorgan (see chart). The government, led by Nicolás Maduro, boasts it has never missed a debt payment. Indeed he has given priority to debt service over other urgent needs, such as importing food. Mr Maduro is keen not to scare off the foreign creditors sorely needed by PDVSA.

However, Venezuela looks increasingly stretched. Two big PDVSA payments, of $1 billion and $2 billion, are due on October 28th and November 2nd. Last month the company proposed a bond swap to ease a looming payments crunch: investors holding PDVSA bonds maturing in 2017 (which are not…Continue reading

LIKE most technology tycoons, Elon Musk exudes disdain for finance. Convertible bonds and lease accounting are problems for Wall Street, while the visionaries in California focus on driverless cars and space travel. Yet while he might be loth to admit it, Mr Musk has become America’s most audacious corporate financier as well as its best-known entrepreneur. In just over a decade he has created an empire valued at a cool $44 billion despite its heavy losses (see chart). A blend of financial laboratory, corporate labyrinth and buttock-clenching thrill ride, Musk Inc has pushed the boundary of what was thought possible.

As has been the case for a decade, Mr Musk’s businesses face a difficult struggle to sustain their market valuations over the next 18 months, and to bolster confidence he is expected to unveil new financial measures and also new products over the next few weeks. Mr Musk has repeatedly defied the odds. But…Continue reading

INSIDE the atrium of a gleaming new building on the outskirts of Addis Ababa, trainee air stewards flit between the classrooms and aeroplane simulators that surround a large indoor swimming pool. The expensive aviation academy belongs to Ethiopian Airlines, and seems a world away from the unrest that on October 9th prompted the government to declare a national state of emergency. The firm’s CEO, Tewolde Gebremariam, brushes off the idea that the airline will be affected. “We are not concerned,” he shrugs.

He has reason to be confident about the business. Ethiopian is Africa’s largest and most profitable airline, earning more than its rivals on the continent combined. Its expansion has been rapid: by 2015 it served 82 international destinations, with 13 more added this year. According to unaudited figures, it nearly doubled its profits in the last financial year (see chart). And that is amid national turmoil.

It helps that its regional rivals are competing only feebly on routes in Africa. According to the International Air Transport Association, African carriers are likely collectively to record a net loss of $500m this year….Continue reading