Reuters blog archive
from Alison Frankel:
I'm going to confess right here that I don't possess the requisite statistical skills to hazard an opinion on whether shareholders benefit when their corporation engages in lobbying and campaign expenditures. If you have a more powerful appetite for numbers than I do, John Coates of Harvard Law School offers a bibliography of academic studies that conclude corporate political spending is bad for shareholders at the Harvard Forum on Corporate Governance (including his own influential 2012 paper for the Journal of Empirical Legal Studies). Want a different view? A pair of economics consultants from Sonecon disputed Coates and those who think likewise in a 2012 paper for the Manhattan Institute that found corporate political spending has "a generally positive effect" on a company's value, in terms of market returns. You can pick whichever analysis suits you because I'm not going to argue the merits of either. I do believe, however, that regardless of the benefits of lobbying and campaign contributions, shareholders have a right to know when and how their money is being spent on politics.
Coates does too, which prompted his post Friday at the Harvard corporate governance forum. Coates was reacting to the Securities and Exchange Commission's decision in November to table consideration of rules that would require disclosure of corporate political spending; the Harvard prof called the SEC's move "a policy and political mistake" that permits large corporations to lobby secretly against Dodd-Frank regulations, using other people's money. As you probably know, corporate disclosure of political spending has been kicking around in shareholder proposals for about a decade, but the SEC was pushed into the debate in 2011, when a group of 10 law professors with varying views on the impact of such spending joined together to petition the SEC to develop disclosure rules.
The professors, led by co-chairs Lucian Bebchuk of Harvard and Robert Jackson of Columbia, argued that the U.S. Supreme Court assumed when it expanded the First Amendment rights of corporations to engage in political speech in Citizens United v. Federal Election Commission that shareholders could monitor corporate expenditures to assure themselves that such spending was in their interests. But the Supreme Court's assumption doesn't work without mandatory disclosures, the professors said. Thanks to nudging from public interest groups, about 600,000 shareholders asked the SEC to take up the issue, which made it as far as the agency's rulemaking agenda in November 2012 before falling off the SEC's priority list for the upcoming year. SEC chair Mary Jo White told reporters earlier this month not to infer that the disclosure proposal is dead and buried forever. But SEC rulemaking is shelved for at least a year.
Nevertheless, as Zachary Parks of Covington & Burling discusses at his very useful blog Inside Political Law, shareholders continue to push for disclosure of corporate political spending by other means. Parks cites shareholder proposals - which are increasingly common, as you can see from the Manhattan Institute's Proxy s Monitor study, but rarely attract anything approaching majority support - and novel shareholder litigation, such as the New York State pension fund's successful suit to force Qualcomm to disclose its expenditures and a newly filed suit accusing Aetna of misleading shareholders about its political spending.
The Federal Reserve’s decision to keep printing dollars at an unchanged rate, mirrored by the Bank of Japan sticking with its massive stimulus programme, should have surprised nobody.
But markets seem marginally discomfited, interpreting the Fed’s statement as sounding a little less alarmed about the state of the U.S. recovery than some had expected and maybe hastening Taper Day. European stocks are expected to pull back from a five-year high but this is really the financial equivalent of “How many angels can dance on the head of a pin”. The Fed’s message was little changed bar removing a reference to tighter financing conditions.
The spectacular failure of "expansionary austerity" policies has set Greece on a path worse than the Great Depression, according to a study from the Levy Economics Institute of Bard College.
Using their newly-constructed macroeconomic model for Greece, the Levy scholars recommend a recovery strategy similar to the Marshall Plan to increase public consumption and investment.
As Federal Reserve Chairman Ben Bernanke delivered what may have been his last testimony on monetary policy before Congress, most of the world’s attention was focused on what hints he might give about the timing of an eventual reduction in the pace of asset purchases.
Tucked in the actual semi-annual monetary policy report Bernanke delivered to lawmakers on Capitol Hill was a little-noticed reference to growing worries about the potential for an extended period of low savings, associated in part with long-stagnant wages, to thwart long-run economic progress.
from Global Investing:
Emerging markets may not have all the technological know-how in civil aerospace, but from China across the world to Brazil, they do have the cash.
The civil aerospace sector performed well in 2013, according to Societe Generale data, trading at a 4 percent premium over the MSCI world index, while the defence sector has steadied, and in the medium to long term civil aerospace should be supported by strong orderbooks from emerging economies.
from Global Investing:
The world's leading ad agencies are positioning themselves in Brazil, Russia and China -- countries that are expected to provide almost a third of the growth in global advertising over the next three years. That's according to a report by S&P Capital IQ Equity Research, a unit of publishing giant McGraw Hill.
Most major advertisers already have a foothold in these BRIC economies, where the advertising market is projected to grow by an average 10.7 percent a year over the next three years -- more than three times the growth rate in the developed world. Over the next 15 years, big emerging markets will add $200 billion to the global ad spend, S&P Capital IQ reckons.
from Global Investing:
Sberbank's hypothetical Russian middle-class family metric - the 'Ivanovs'- shows the average Russian family is concerned about high inflation, though that is still barely denting some peoples' aspirations of getting behind the steering wheel of a new car.
April's Ivanov index, a survey of more than 2,300 adults across 164 cities in Russia with a population of more than 100,000, notes people are still concerned about persistently high inflation, which in Russia is at around 7 percent.
from Expert Zone:
It’s budget time in India once again, the annual month of anxiety and expectations that everyone awaits with bated breath.
Budget 2013 will be especially important on two counts. Coming as it does ahead of crucial state elections, the Feb. 28 budget could be outrageously populist. But with the government not really following through on its policy reforms in recent months, the question is how intent can translate to concrete action. Tough decisions are needed with a greater focus on growth.
It doesn’t sound sustainable but, at least in coming months, businesses look set to keep booming even as consumers come under pressure - in line with the recent trend. That’s because the economic hit from the partial deal on the fiscal cliff will hurt salaried workers disproportionately, says Steven Ricchiuto, chief economist at Mizuho.
Although the worst of the fiscal cliff has been avoided, the compromise is not macroeconomic neutral. Our calculations, in fact, suggest that the drag created by the reversal of the payroll tax cut and the various tax hikes on upper income households will cut real GDP by upwards of 0.5% to 1% from our preliminary 1.5% to 2% forecast.
President Obama’s proposal for cuts to the federal budget, which Congress directed him to detail as part of the sequestration process, was released last week. The cuts must come from the annual $1.2 trillion in discretionary (non-entitlement) federal spending. Reuters reports:
The White House presented a detailed breakdown Friday of $109 billion in across-the-board spending cuts scheduled for January, setting off a fresh blame game between the Obama administration and Republicans over responsibility for what both say is a preventable budgetary calamity.