William Lazonick, emeritus Professor of Economics and founder of the Academic Industry Research Network, dives deep into the perils of shareholder value ideology. He reveals how deregulation in the 1980s sparked corporate greed and inequality. Lazonick discusses the rise of hedge funds and the consequences of harmful practices like stock buybacks, highlighting their role in 'encrapification' and economic decline. He advocates for reforms prioritizing worker welfare over Wall Street profits, offering insights into innovative and sustainable economic strategies.
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Carl Icahn and TWA
Carl Icahn, a multibillionaire, targeted TWA, significantly cutting flight attendant pay and attempting to reduce pilot salaries.
This aggressive approach to maximizing shareholder value resulted in financial distress for the company and its employees.
insights INSIGHT
Icahn's Tactics
Carl Icahn's strategy involved buying shares, pressuring executives, and leveraging proxy votes from institutional shareholders.
This tactic allowed him to influence company decisions and gain control, even with a relatively small initial stake.
insights INSIGHT
SEC Ruling and Hedge Fund Power
The 2003 SEC ruling requiring institutional shareholders to vote or explain abstentions empowered hedge fund activists.
This facilitated influencing corporate boards and pushing for actions like buybacks, even with small shareholdings.
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The Bonfire of the Vanities is a drama that centers on three main characters: Sherman McCoy, a WASP bond trader; Larry Kramer, a Jewish assistant district attorney; and Peter Fallow, a British expatriate journalist. The novel explores the complexities of New York City in the 1980s, delving into themes of ambition, racism, social class, politics, and greed. It was originally conceived as a serial in the style of Charles Dickens and ran in 27 installments in Rolling Stone before being published in book form. The story follows the characters through their interactions and conflicts, highlighting the superficial values and hypocrisies of the city's elite and the underlying social tensions of the time.
Professor William Lazonick, emeritus Professor of Economics and founding director of the Academic Industry Research Network, is one of the world’s foremost experts on Shareholder Value Ideology and its impact on society. In our first conversation, we uncovered the fundamentals of shareholder value ideology and the harmful effects of stock buybacks on the working class and economic inequality. This discussion goes deeper into how financial institutions capitalized on the deregulation of the financial industry in the 1980s, leading to a wave of corporate greed and wealth concentration. Topics include the rise of hedge funds, the devastation caused by corporate raiders, how private equity contributes to the decline in quality of goods and services (termed "encrapification"), and policy strategies to rebuild an economy that prioritizes American workers over Wall Street profits.
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(00:00) Go!
(00:09:45) Carl Icahn's Influence and Tactics
(00:15:02) Regulatory Changes and Hedge Fund Empowerment
(00:21:18) Institutional Shareholder Services and Proxy Voting
(00:27:24) Proxy Advisory Services Market
(00:31:19) Hedge Funds and Power Dynamics in Corporations
(00:34:03) General Electric Case Study
(00:45:28) Hedge Fund Activism and Industry Impact
(01:03:20) Impact of Private Equity and Financial Practices
(01:09:07) Asset Distribution Disparities
(01:15:29) Shareholder Value and Economy Dynamics
(01:22:26) Employee Investment and Stock Market
(01:30:48) Tesla and Corporate Governance
(01:36:56) Apple's Board and Stock Buybacks
(01:42:08) Biopharmaceutical Sector Dynamics
(02:00:59) US Competitiveness and Stock Buybacks
(02:06:09) Soft Landing Approach to Financial Reforms
(02:17:26) Economic Literacy and Public Perception
(02:22:11) Globalization and Economic Mobility
#Economics, #ShareholderValue, #FinancialCrisis, #StockBuybacks, #HedgeFunds, #Finance, #CorporateGovernance, #WallStreet, #FinancialMarkets, #EconomicGrowth, #PrivateEquity, #Innovation, #BusinessStrategy, #philosophypodcast, #sciencepodcast, #longformpodcast
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