考克斯圆桌会议moderncapitalismandfinancialcrisi.ppt

1 ModernCapitalismastheSolutiontotheFinancialCrisis TheCauxRoundTableApproach StephenB YoungGlobalExecutiveDirectorTheCauxRoundTableBelgrade December2008 2 3 FinancialmeltdownsareasystematicDysfunctionofcapitalismTulipmania 1620MississippicompanyFrance1719 1720SouthSeaCompanyLondon1711 1720WallStreet1929Junkbonds1980sDs telecom1990sSub primemortgages CDOs 4 Men ithasbeenwellsaid thinkinherds itwillbeseenthattheygomadinherds whiletheyonlyrecovertheirsensesslowly andonebyone CharlesMackay IrrationalExuberance AlanGreenspan 5 CharlesMacKay ExtraordinaryPopularDelusionsandtheMadnessofCrowds withaforewordbyAndrewTobias 1841 NewYork HarmonyBooks 1980 MikeDash Tulipomania TheStoryoftheWorld sMostCovetedFlowerandtheExtraordinaryPassionsItAroused 1999 PeterM Garber FamousFirstBubbles TheFundamentalsofEarlyManias Cambridge MA MITPress 2000 CharlesKindleberger Manias Panics andCrashes AHistoryofFinancialCrises Wiley 2005 5thedition 6 WhatCausesaFinancialCrisis Mis pricingofriskIncreasesinrealriskarenotcapturedinnominalmarketpricesAssetpricesbecomeirrationalValuationbecomesunrealistic 7 PresentvaluereflectstheriskofactuallyreceivingfutureincomeCapitalvalueisafunctionofincome Misjudgmentsaboutfutureincomedistortpresentcapitalvalues 8 Infinancialbubbles mis pricingissustainedbyinfusionsofdebtHigherandhigherassetvaluesaresupportedbyborrowedfundsExcessliquidity basedonfuturepromisestopay transformsinvestmentintospeculation atradingmentalitytakesoverthemarkets prudencelosesouttogreed illusiontrumpsreality foratime 9 OfalltheoffspringofTime Erroristhemostancient andissooldandfamiliaranacquaintance thatTruth whendiscovered comesuponmostofuslikeanintruder andmeetstheintruder swelcome 10 DynamicsoftheCurrentCrisis Sub primemortgageloansmade moreandmoreagainstfutureresalevalueofthehome notagainstrealincomeMortgageloanspackagedandsoldtoglobalcapitalmarketsCollateralDebtObligations CDOs issuedtofinancepurchasesofpackagesofsub primemortgagesandtoinvestinhedgefundsCreditDefaultSwapsinventedtogiveaddedvaluetoCDOsDebtupondebtupondebtLowinterestrateenvironmentIncentivestructuredrivenbyfeesnotinvestmentinlongtermreturns 11 CurrentCrisisisGlobal AIGFortisIcelandEUguaranteesbankdepositsUKtakesovertwobanksEquitymarketsinAsiatankPriceofOildropsby50 Realeconomiesloseemploymentandconsumerdemand 12 Whenfinancialmarketsimplode capitalismlosesliquidity exchangesofgoodsandservicesfall outputisreduced employmentiscutDebtmustbetakenoutofthefinancialsystemAssetvalueshavetoberesetatlowerlevelsAssetownersloosewealth 13 WorldEconomicOrderhasinadequatemechanismstopreventfinancialcrisesWTOIMFWorldBankG8OECDBankforInternationalSettlements 14 CentralBanksmuststepupandinjectliquidityintotheglobalsystemoffinancialintermediationGovernmentbudgetsmustinjectnewcapitalinfinancialinstitutionsBankruptciesmusteliminateamountsofliquidity bothequityanddebtBearSterns 80to 2 LehmanBrothers liquidated 15 Whatisthefairvalueofaninvestmentinbusiness QualityIncomeStreamHighnetpresentdiscountedvalueGoodcapitalizationmultiplierGoodCorporateValue WarrenBuffetwouldbuyit 16 Todaywheredoesmostcorporatevaluecomefrom IntangibleAssets 17 50BestPerformersof2005BusinessWeek BurlingtonNorthernSantaFe Marketvalue 29 2billionBalancesheetassets 103 ofmarketvalue 30 3billion Goodwill NoneCaterpillar Marketvalue 49billionBalancesheetassets 95 9 Goodwill 4 1 UnitedHealthGroup Marketvalue 79billionBalancesheetassets 52 Goodwill 48 Apple Marketvalue 58billionBalancesheetassets 19 8 Goodwill 80 2 18 50BestPerformersof2005BusinessWeek Microsoft Marketvalue 279billionBalancesheetassets 33 7 Goodwill 66 3 BestBuy Marketvalue 26 3billionBalancesheetassets 39 Goodwill 61 Starbucks Marketvalue 27 8billionBalancesheetassets 12 Goodwill 88 GoldmanSachs Marketvalue 61 7billionBalancesheetassets 1 1 Goodwill 98 9 19 WhatistheMostCommonFormofIntangibleWealth GovernmentIssuedFiatMoneyItsvalueistobeusedaslegaltenderWhatisaDollarworthtoday Adollarbillhasnotangibleworth whatisthevalueofinkonpaper Itsvalueliesinthemindofwhoeverwilltakeit 20 WhatisAnotherVeryDesirableCommonFormofIntangibleWealth StocksandBondsWhoDeterminestheirValues 21 FinancialMeltdownof2008 BearStearns onFriday 80persharebookvalue onSundaysoldfor 2pershareLehmanBrothers Billionsinbalancesheetassets liquidatedasnoonewantedtobuythemonagoingconcernbasis 22 Whatisacompanyworth Howtowemeasureitsvalue Mostsimplecalculation DiscountednetpresentvalueoffutureincomeXcapitalizationmultiplier 23 FirstFundamentalConclusion YoucannotestablishvaluewithoutputtingriskintothecalculationWhatistheriskofnotachievingpredictedfuturerevenue Howcertainareestimatesoffutureincome Whataretheriskfactorsthatdeterminethecapitalizationmultiplier AhigherriskdemandsalowermultiplierHigherrisk moreuncertainty lowerpresentvalue 24 Note Eachsourceofriskdrivesbusinessvalueupordown 25 SecondFundamentalConclusion ManagementofRiskEnhancesEnterpriseValueRiskmanagementleadstomorecertainincomeRiskreductionleadstohighervaluation 26 Howdoyoumanagerisk Eachriskhidesinarelationship customers investors governmentregulation employees Eachrelationshipisanintangibleassetofthebusiness AssetscanAppreciateorDepreciate Loweringriskforeachrelationshipenhancesthequalityofintangibleassetsandincreasesbusinessvaluation 27 CSR Valuation IntangibleAssets CSRStakeholderRelationshipsCustomersEmployeesOwners InvestorsSuppliersCompetitionStrategiesCommunitySupport 28 TangibleValues IntangibleValues GenerallyAuditedFinancialInformation GenerallyNon audited Non financialInformation 29 GrowingImportanceofIntangibleWealth ChangeinUSEmployment Dec2007 Nov2008tangiblesector manufacturing construction naturalresources realestate wholesaleandretail transportationandwarehousing 1 791 000jobsintangiblesector education healthcare computersystemdesign financeandinsurance scientificresearch etc 515 000jobsallotherservices 635 000jobs 30 Toimprovecompanyvaluation ImproveCSRrelationships GoodCSRRelationshipsLeadtoTheSustainableCorporation 31 HowtomeasureCSRRelationships UseCRTArcturusRiskAssessmentInstrumentNewmetricsforenhancedprofitability 32 HowtoManageforSustainableValue CRTTheoryoftheFirmArcturus 33 TheoryoftheMoralFirm selfinterestconsidereduponthewhole 34 CapitalAccounts CapitalAccountsareyourdefenseagainstriskandyourresourcebaseforcompetitiveinitiativesFinanceCapitalPhysicalCapitalHumanCapitalReputationCapitalSocialCapital 35 FINANCECAPITALTraditionalcapitalaccount stockofreadymoneyandamountofsunkcashinvestments 36 PHYSICALCAPITALTraditionalcapitalaccountPlantandequipmentToolsofthetradeSubaccountreallyoffinancialcapitalaspurchasedwithmoniesraisedinthepast 37 HUMANCAPITALNon traditionalcapitalaccount intangibleasset vitalforsuccessinservicesandhightechbusinesses takescareofcustomerneedsanddemands 38 REPUTATIONCAPITAL brandequity goodwill neededforqualityincome neededtogetlowcostofcapitalandthebestemployees getsyouthroughroughtimes avoidscommoditypricing buildsvalueadded 39 SOCIALCAPITALInternal culture leadership strategyExternal ruleoflaw nocorruption education publichealth publicgoods marketregulation transportation etc 40 Inter relationshipsamongcapitalaccounts SocialCapital ReputationCapital HumanCapital FinanceCapital PhysicalCapital 41 Stakeholders Customers moralcompassforcapitalismEmployees moralagents notpartsforamachineOwnersandInvestors fiduciarydutiesofloyaltyandduecareSuppliers friends notfoesCompetitors competewithqualityandinnovation notpriceCommunities enhancesocialcapitaltoenhancefutureprofitability 42 StakeholdersandCapitalAccounts InternalSocialCapital owners employees suppliers competitivestrategyExternalSocialCapital CommunityReputationCapital customers employees owners suppliers communityHumanCapital employees 43 TakingDueCareofStakeholdersEnhancesCapitalAccounts UnderminingStakeholdersPutsCapitalAccountsatRisk 44 HowCanyouMeasureand therefore ManageStakeholderRelationshipsAndallacompany sCapitalAccounts 45 ASKQUESTIONS AssesstheQualityofyourrelationships 46 ArcturusRiskAssessmentInstrument CriteriaMatrix 47 AssessmentFramework Criterion BenchmarkExampleCUSTOMERS SectionB 1B BeyondShareholderstowardsStakeholders CustomersDoesthecompanyprovideitscustomerswithqualityproductsandservicesatreasonableprices andonfairterms whileprotectingtheirhealthandsafetyandtheirphysicalenvironment andrespectingtheircultureandindividualdignity POINTSTOCONSIDER Thecompanyseekscustomerfeedbackonitspractices monitorsimpacts andispreparedtomodifyproductionorserviceasaresult plusprovidesrelevanttrainingofstaff Point s Pleasecircle1234567Pleasewritedownanyconcerns explanationsoradditionalcommentsonhoworhownot thecompanyisperforming 2B Economicproducts servicespositivelyimpactlivingstandards Point s Pleasecircle1234567Pleasewritedownanyconcerns explanationsoradditionalcommentsonhoworhownot thecompanyisperforming 48 TheCorporateImprovementCycle PerformanceImprovement PerformanceFeedbacktoManagement ManagementAction CRTAssessment 49 WhoParticipates BoardofdirectorsCEOSeniormanagementDivisionheadsandgroupmanagersUnitmanagersEmployees 50 SampleGapAnalysisbetweenManagementsandEmployees Provided