Create a finance committee at every public company – Robert Pozen

MIT Sloan Senior Lecturer Robert Pozen

MIT Sloan Senior Lecturer Robert Pozen

From CFO

Almost all boards of U.S. public companies now have three committees that meet immediately before every board meeting and report to the full board — audit, compensation, and nominating-governance. Committees have become the workhorses of the governance process: with their small size and expert support, they can do more in-depth analysis of complex topics than the full board of directors.

However, since the passage of the 2002 Sarbanes-Oxley Act, the duties of the audit committee, especially, have become so large and complex that it cannot seriously assess broader financial issues.

Audit committees continue to perform the traditional functions of appointing the company’s independent auditor and reviewing its financial statements. But audit committees now have a long list of other obligations — including oversight of complaints by whistle blowers and violations of ethics codes; approval of non-audit functions by auditors; and review of the management report and auditor attestation on internal controls. The audit committee also holds private sessions with both external and internal auditors as well as the chief financial officer and the head of compliance/risk.

In other words,  audit committees are overburdened by their increased obligations to oversee the details of the reporting and compliance processes. As a result, the audit committee no longer has enough time to seriously consider broader financial topics. If directors are going to have meaningful input into the broad financial issues faced by any public company, they need to form a finance committee with the time and expertise to address the issues.

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ICYMI: The #MITSloanExperts “Future of Financial Regulation” Twitter chat

MIT Sloan Prof. Deborah Lucas

Pensions & Investments Editor Amy Resnick

“Are new regulations creating new problems for the housing market?”

“Has the federal government now become the subprime market?”

“Could the financial crisis happen again any time soon?”

These were just a few of the questions tackled by Deborah Lucas, the Distinguished Professor of Finance at MIT’s Sloan School of Management and the Director of the MIT Golub Center for Finance and Policy, during the #MITSloanExperts Twitter chat on October 30.

Joined by host Amy Resnick, editor of Pensions & Investments, she asked Lucas questions about the future of financial regulation and housing market finance reform, as well as ideas for fostering stronger ties between the regulatory and the academic communities.

Did you miss the chat? That’s OK, but we’ve encapsulated everything in the Storify below.

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Six key issues millennials should consider before diving into a family business–Peter Kurzina

MIT Sloan Senior Lecturer Peter Kurzina

From Forbes

Joining a family business isn’t for everyone. It’s a risky decision that needs a lot of careful consideration. You might build a successful dynasty that grows into a Fortune 500 company, with generations of family continuing to lead the business. Or, like the vast majority of family businesses in the U.S., your business might not make it to the second or third generation. Even worse, your family dynamics could break down, leaving a legacy of dysfunction that long outlasts the business.

So how do you decide whether to join a family business? The next generation should consider six key issues before diving in:

1. There can only be one CEO
Think about where you currently stand in the family and where you can potentially go in the business. If you’re in the second or third generation, there may be siblings and cousins all hoping to take over as CEO. Stop and think about whether your goal is senior leadership. If it is, ask yourself if this is realistic. Who is competing for those positions? Is your cousin the “golden child” of the family? Are you the most qualified? Are there family politics involved?

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Has China’s coal use peaked? Hear’s how to read the tea leaves – Valerie J. Karplus

Assistant Professor Valerie Karplus

Assistant Professor Valerie Karplus

From The Conversation

As the largest emitter of carbon dioxide in the world, how much coal China is burning is of global interest.

In March, the country’s National Bureau of Statistics said the tonnage of coal has fallen for the second year in the row. Indeed, there are reports that China will stop construction of new plants, as the country grapples with overcapacity, and efforts to phase out inefficient and outdated coal plants are expected to continue.

A sustained reduction in coal, the main fuel used to generate electricity in China, will be good news for the local environment and global climate. But it also raises questions: what is driving the drop? And can we expect this nascent trend to continue?

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Opinion: your future financial adviser could be a robot – Vasant Dhar & Roger M. Stein

MIT Sloan Researcher Roger Stein

MIT Sloan Researcher Roger Stein

From MarketWatch

President Donald Trump has vowed to bring manufacturing jobs back to the U.S. through new policies and regulatory reform. But this effort faces a strong headwind: In all walks of life, human employment is being challenged.

Many manufacturing jobs have been replaced by robots. Meanwhile, drivers are on their way to being displaced by driverless cars, tax professionals by software, and much more.

Recently Trump turned his attention to the financial services industry, signing two directives aimed at repealing portions

NYU Professor Vasant Dhar

of the Dodd-Frank and Consumer Protection acts, citing onerous restrictions that hamper legitimate investing and financial activity.

But regulatory change isn’t likely to repel the march of the robots that is transforming the financial services business. FinTech — the finance industry equivalent of robots in manufacturing — is too far along for that. If future investors and consumers of financial services begin to trust FinTech platforms as they have done in retail and travel, then fewer humans will be working in finance.

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