MIT Sloan Senior Lecturer Robert Pozen
From Real Clear Markets
The resignation under duress of the CEO of Wells Fargo, after being pummeled in a Congressional hearing, raises a fundamental question: how can corporate boards hold management accountable for performance problems? One trendy answer from several governance mavens — limit the terms of independent directors so they do not become unduly deferential to the CEO.
The most typical limit on independent directors is mandatory retirement at age 72. This is the tenure limit for the Wells Fargo board. It is a significant limit because most directors do not join large company boards until age 60.
MIT Sloan Professor Simon Johnson
Wall Street’s gambles and risky borrowing directly led to the financial crisis, causing the collapse and near-collapse of megabanks and greatly harming millions of Americans. But thanks to government bailouts, those megabanks recovered quickly and top executives lost little.
In response, Congress passed the Dodd-Frank regulatory law to ensure thatno failing bank ever receive such special treatment again. But legislation that favors very large banks
Professor Bruce Grohsgal
and undermines those reforms is in the works again. The bill is called the Financial Institution Bankruptcy Act, or FIBA. The measure already has been passed by the House, and the Senate may take it up soon.
In theory, the bill attempts to solve a major issue in the Bankruptcy Code that prevents failing megabanks from restructuring through traditional Chapter 11 bankruptcy protection. In effect, though, FIBA offers banks an escape route, creating a subchapter in the Bankruptcy Code through which the Wall Street players who enter into these risky transactions will get paid in full while ordinary investors are on the hook for billions of losses. Not only is that deeply unfair, but it will encourage Wall Street to gamble on the very same risky financial instruments that caused the recent crisis.
Under Chapter 11, a failing company can get a reorganization plan approved to keep its business operating while paying its creditors over time. It then can emerge from bankruptcy as a viable business. During Chapter 11 bankruptcy protection, creditors are prohibited from suing the debtor to collect on their debt, a key provision that ensures all creditors are treated fairly and enables the business to reorganize. This is known as an “automatic stay.”
MIT Sloan Asst. Prof. Jean-Noël Barrot
From The Conversation
Operating a small business, the backbone of the U.S. economy, has always been tough.
But they’ve also been disproportionately hurt by the Great Recession, losing 40 percent more jobs than the rest of the private sector combined.
Interestingly, as my research with Harvard’s Ramana Nanda shows there’s a fairly straightforward way to support small businesses, make them more profitable and hire more: pay them faster.
MIT Sloan Sr. Lecturer Otto Scharmer
From The Huffington Post
After a year of disheartening setbacks, many activists and change-makers may feel that the critical goal of transforming capitalism is slipping out of reach. Yet, having just returned from a four-week trip to many sites and gatherings working on social, economic, and spiritual renewal, I feel that the opposite is true. There are more fascinating and eye-opening examples of this transformation emerging worldwide than ever before. But something is missing, something that contributes significantly to the sense that we’re heading in the wrong direction. Simply put, what’s missing is a systemic connection between all these initiatives—an enabling mechanism that allows us to not only connect the dots, but also to see ourselves, and the significance of our work, from the whole. Below, I take you on a tour through the landscape of some current initiatives, and at the end of this journey I propose how we might link up and support the larger landscape of economic transformation.
In previous columns I have described our current moment of crisis—specifically the rise of Trump, the far right, and populist strongmen—as the result of two factors: (1) the increasing rate of disruption and (2) the lack of a capacity to lean into these moments by letting go of the old and letting come new patterns and possibilities (a capacity I call presencing).
MIT Sloan Senior Lecturer Robert Pozen
It’s true for everyone: despite our best intentions, we often fail to accomplish what we set out to do. When it comes to retirement investing, millions of Americans do not meet their own declared saving goals for retirement.
As a result, almost one-third of the U.S. population has no retirement savings at all,while many others will fall well short of what they will need for their Golden Years.
A solution can be found in the field of behavioral economics, which suggests ways tohelp Americans start saving. It seems that saving is a lot like dieting — small changes can help you reach your goal.
For example, many studies have shown that being automatically placed in a savings plan dramatically boosts participation by employees — even if they can opt out.
These studies show that when an automatic savings plan is introduced with an opt-out, 60% to 70% of employees remain in the plan. This may seem like a technical nuance, but there is a big difference between opting in by completing an application versus choosing not to opt out.
A plan designed to take advantage of this behavior is called an automatic IRA. In the same way that many people fail to start saving, those placed in an automatic IRA simply fail to stop saving by withdrawing from the plan. Automatic IRAs help people build their savings using the power of inertia.