Lecture 9 corruption 2013

Big banks hedge funds if we win we keep billions if we

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Unformatted text preview: 0ons •  Doesn’t work. Share prices are based on expecta0ons of future earnings, not current value of firm. CEOs learn to manage expecta0ons instead of increasing firm value. Policies to protect against control fraud •  Accountants and auditors –  Corrupted by consul0ng contracts •  Boards of directors –  Can be controlled and captured by CEOs –  Possible solu0on: two ­0er boards •  Large shareholders such as investment banks; pension funds (and their analysts) –  Corrupted by high fees, bonuses and “too big to fail” •  Credit ra0ng agencies –  Corrupted by conflict of interest 5 11/10/13 D. Systemically unproduc0ve and extrac0ve corporate system •  Financial Industry systemic drain on economy •  Too big to fail •  Big bets by traders: if win, fabulous wealth in form of bonuses; if lose, no losses but just live on salary. •  Big banks, hedge funds: “If we win we kee...
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