The Finance Professionals' Post

Investors Step Up Pressure for Integrated Reporting

We live in a world of rapid human population growth and consumption,  heightened resource scarcity, and the attendant stresses placed by all these factors, not to mention our "business as usual" economy on the earth's ecosystem.   Corporations must acknowledge this and can no longer afford to operate without closely monitoring, managing, and disclosing their environmental, social, and [corporate] governance (ESG) risks—any one of which can explode into a crisis with very material financial consequences. Asset managers who fail to require the companies in which they invest to step up to the plate and take on this responsibility are rightfully being viewed as shirking their own fiduciary duty. 

The Value of Women on Boards—What Statistics and Common Sense Tell Us

This year’s GovernanceMetrics International’s “2011 Women on Boards” report offers a number of insights into the progress, or lack thereof, being made to bring more women onto corporate boards around the world. The biggest and most depressing news is that “40 percent of the world’s largest publicly listed companies have not appointed even one woman to their boards.” The report also describes a discernable European trend to legislate quotas (undoubtedly in response to the lack of voluntary action on the part of most corporate boards). For example, Norway has established a quota requiring 40% of boards be composed of women), Spain has a quota requirement in the pipeline, and France’s National Assembly has recently passed a quota law. Laws are also under consideration in the Netherlands, Belgium, and Italy.

2011 P&C Industry Outlook: Mixed

Dodging a bullet in the form of a relatively uneventful hurricane season in the Atlantic and Gulf of Mexico, the property and casualty insurance agency enjoyed decent profits amid declining investment yields. Going forward, analysts such as Fitch Ratings and Morningstar predict industry profits will soften in 2011, but overall industry conditions will remain stable barring some type of natural disaster or other catastrophe.

Teasing Out the Effects of QE2 on the Real Economy

While Fed officials are satisfied with the results from the second round of quantitative easing (QE2), critics are predicting hyperinflation, a loss to the Fed's credibility, and increasing economic instability. Both sides continue to argue whether recent upticks in the real economy are the result of quantitative easing. 

Speaking at NYSSA, James Bullard discussed the effects of QE2 and acknowledged the difficulty of teasing out the consequences of monetary policy on the real economy—even in the best of times. 

If you want to watch the webcast of this entire event or any other NYSSA program, visit NYSSA's On-Demand website.

2011 Brings Financial Statement Changes

Although the US Securities and Exchange Commission has yet to make up its mind on whether the US will abandon US Generally Accepted Accounting Principles (GAAP) in favor of the International Financial Reporting Standards (IFRS), that doesn’t mean financial statement accounting is standing still. Rule changes and clarifications by various US based accounting standards boards affect a number of areas in US financial statements.

Team of Rivals: Corporate America and Academia

The university model of education emphasizes theory over practice, the opposite of what the corporate model favors. This creates discordance between approaches that alternately emphasize the why and the how. The university model shares clear similarities with the corporate model, but the differences, especially in the compensation structures, deeply divide the two. Rather than attempting to make one domain more like the other, a bridge should be built that allows everyone to benefit from the conceptual approach of academia and the practical know-how corporations earn in the trenches.

James Bullard's Five Easy Pieces of Quantitative Easing

The Fed has drawn intense criticism for its decision to purchase $600 billion in long-term Treasuries over the next eight months. This approach, so-called quantitative easing, is aimed at keeping long-term interest rates suppressed. Speaking at NYSSA, James Bullard, the president and chief executive officer at the Federal Reserve Bank of St. Louis, explained the rationale behind the Fed's decision. 

 

Financial Reporting Issues Crowd Agenda

To say that vital financial reporting issues are clamoring for attention is a major understatement. Not only are huge accounting convergence projects underway with the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB), but controversies surrounding such issues as bank window dressing and underfunding of public pension are also hitting the business pages.

EU Banks Sovereign Debt Mystery Deepens

Just when you thought it was safe to trust European banks again, the Wall Street Journal analyzed recent EU bank stress tests and found that a number of banks underreported their sovereign debt liabilities. Many investors, and EU regulators, were hoping to put the Greek debt crisis in firmly in the rear view mirror, but given the spotty nature of the bank’s disclosures, this may heighten concerns, rather than put them to rest.

James Bullard Discusses the Future of the Fed on Squawk Box

St. Louis Fed President James Bullard apppeared on CNBC's Squawk Box, speaking from the Kansas City Economic Symposium in Jackson Hole, Wyoming. He discussed the outlook for the US economy and potential Fed strategies.

Bullard will speak live at NYSSA on November 8, 2010, for the High Profile Speaker Series: Monetary Policy and Inflation Outcomes in the United States.

CFA Considered the Gold Standard, According to the Financial Times

According to a recent article in the Financial Times, the CFA designation is now considered the gold standard among financial professionals worldwide. When established 50 years ago, the CFA was envisioned as a means of transforming equity analysis into “a more ethical, respectful craft, akin to law or medicine,” according to the article’s authors, Rachel Sanderson and Gillian Tett. In the past decade the CFA has undergone exponential growth; it has almost 100,000 members worldwide, and this year twice that number registered to take the exam. Sanderson and Tett report that much of the growth has been fueled by increased interest among finance professionals in the Asia Pacific and the relative cost of earning a CFA to an MBA—approximately $3,600 versus $15,000.

Click here to see how the CFA compares to other professional designations for finance professionals.

Clawbacks in Play with SEC, Dodd-Frank

Act 4, Scene 1—that’s where we are in the drama over corporate clawbacks. Put on stage by SOX (Sarbanes-Oxley), the clawback drama took its latest turn with the passage of the recent financial reform legislation, which goes farther than either SOX or the SEC have moved to date.

Revisiting StoneRidge: Congress Could Restore Aiders' and Abettors' Liability

A bill introduced to Congress this past summer, and subsequently handed over to a Senate subcommittee for further consideration and/or revisions, could reverse a hotly debated January 2008 US Supreme Court decision. That decision, Stone-Ridge Investment Partners LLC v. Scientific-Atlanta Inc., upheld a lower appeals court’s April 2006 decision that secondary participants in a corporate fraud cannot be held legally liable for their behind-the-scenes participation in the scheme. Their actions, the high court reasoned, were simply too far removed from and could not have been known by investors.

Outlook for Healthcare Reform and Healthcare Stocks

U.S. Healthcare Spending Appears Unsustainable 

The U.S. spends twice the average of most other developed nations on health care for only comparable care, which has led many to question the efficiency of the U.S. health-care system. Further, the high health-care spending represents approximately 17% of U.S. GDP and has grown faster than GDP over several decades. These high costs--along with the desire for universal health-care coverage and the U.S. government's dwindling resources for funding health-care programs--are driving the calls for major health-care reform. 

Impact Investing—The Next Big Wave in Socially Responsible Investing

Impact investing, an emerging subset of socially responsible investing, offers a channel outside of formal public equity markets for investors seeking not only financial returns but social and environmental value. Impact investors are not necessarily targeting companies that engage in the best sustainable business practices in any given sector. Instead they seek out ventures in developing countries or inner city neighborhoods that provide solutions to urgent environmental and social challenges ranging from water and food scarcity to education, clean energy, affordable housing, resource depletion, and health care. IGNIA Partners, a new impact investment venture capital firm co-founded by Michael Chu, a former Kohlberg Kravis Roberts and Pegasus Capital partner, calls it “investing in the base of the pyramid.”

Disparities Seen in Federal Securities Fraud Sentences

In every criminal case, the defendant must make a critical decision: go to trial or plead guilty. A slew of factors go into that decision. Three questions loom largest: how likely will the defense prevail at trial, what sentence do we anticipate if the defendant pleads guilty, and what is the likely sentence if the defendant is found guilty after trial? Here, we will concentrate on the latter two questions, which touch on the vagaries of sentences in securities fraud cases in the post-guidelines world.

UK Poll Shows Despised Business Jargon

The Daily Telegraph’s online article called “‘Thinking Outside the box’ is most despised business jargon” discusses results from a survey of 2,035 adults in the UK on what business language they found to be pointless. This is called “buffling”—using language that “does not say anything important or useful.”