考克斯圆桌会议moderncapitalismandfinancialcrisippt课件

1、Modern Capitalism as the Solution to the Financial Crisis:The Caux Round Table ApproachStephen B. YoungGlobal Executive DirectorThe Caux Round TableBelgrade, December 2021.Financial meltdowns are a systematicDysfunction of capitalismTulip mania 1620Mississippi company France1719/1720South Sea Compan

2、y London 1711/1720Wall Street 1929Junk bonds 1980sDots/telecom 1990sSub-prime mortgages/CDOs.Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one! Charles Mackay “Irrational Exuberance Alan Greenspan.Charle

3、s MacKay, Extraordinary Popular Delusions and the Madness of Crowds, with a foreword by Andrew Tobias (1841; New York: Harmony Books, 1980). Mike Dash, Tulipomania: The Story of the Worlds Most Coveted Flower and the Extraordinary Passions It Aroused (1999) Peter M. Garber, Famous First Bubbles: The

4、 Fundamentals of Early Manias (Cambridge, MA: MIT Press, 2000). Charles Kindleberger, Manias, Panics, and Crashes: A History of Financial Crises (Wiley, 2005, 5th edition) .What Causes a Financial Crisis?Mis-pricing of riskIncreases in real risk are not captured in nominal market pricesAsset prices

5、become irrationalValuation becomes unrealistic.Present value reflects the risk of actually receiving future incomeCapital value is a function of income!Misjudgments about future income distort present capital values.In financial bubbles, mis-pricing is sustained by infusions of debtHigher and higher

6、 asset values are supported by borrowed fundsExcess liquidity based on future promises to pay transforms investment into speculation; a trading mentality takes over the markets; prudence loses out to greed; illusion trumps reality for a time.Of all the offspring of Time, Error is the most ancient, a

7、nd is so old and familiar an acquaintance, that Truth, when discovered, comes upon most of us like an intruder, and meets the intruders welcome. .Dynamics of the Current CrisisSub-prime mortgage loans made, more and more against future resale value of the home, not against real incomeMortgage loans

8、packaged and sold to global capital marketsCollateral Debt Obligations (CDOs) issued to finance purchases of packages of sub-prime mortgages and to invest in hedge fundsCredit Default Swaps invented to give added value to CDOsDebt upon debt upon debtLow interest rate environmentIncentive structure d

9、riven by fees not investment in long term returns.Current Crisis is GlobalAIGFortisIcelandEU guarantees bank depositsUK takes over two banksEquity markets in Asia tankPrice of Oil drops by 50%Real economies lose employment and consumer demand.When financial markets implode, capitalism loses liquidit

10、y, exchanges of goods and services fall, output is reduced, employment is cutDebt must be taken out of the financial systemAsset values have to be reset at lower levelsAsset owners loose wealth.World Economic Order has inadequate mechanisms to prevent financial crisesWTOIMFWorld BankG8OECDBank for I

11、nternational Settlements.Central Banks must step up and inject liquidity into the global system of financial intermediationGovernment budgets must inject new capital in financial institutionsBankruptcies must eliminate amounts of liquidity both equity and debtBear Sterns - $80 to $2- Lehman Brothers

12、 - liquidated.What is the fair value of an investment in business?Quality Income StreamHigh net present discounted valueGood capitalization multiplier Good Corporate Value (Warren Buffet would buy it).Today where does most corporate value come from?Intangible Assets!.50 Best Performers of 2005Busine

13、ss WeekBurlington Northern Santa Fe:Market value: $29.2 billionBalance sheet assets: 103% of market value ($30.3 billion)Goodwill: NoneCaterpillar:Market value: $49 billionBalance sheet assets: 95.9%Goodwill: 4.1% United Health Group:Market value: $79 billionBalance sheet assets: 52%Goodwill: 48% Ap

14、ple:Market value: $58 billionBalance sheet assets: 19.8%Goodwill: 80.2%.50 Best Performers of 2005Business WeekMicrosoft:Market value: $279 billionBalance sheet assets: 33.7%Goodwill: 66.3%Best Buy:Market value: $26.3 billionBalance sheet assets: 39%Goodwill: 61% Starbucks:Market value: $27.8 billio

15、nBalance sheet assets: 12%Goodwill: 88% Goldman Sachs:Market value: $61.7 billionBalance sheet assets: 1.1%Goodwill: 98.9% .What is the Most Common Form of Intangible Wealth?Government Issued Fiat MoneyIts value is to be used as legal tenderWhat is a Dollar worth today?A dollar bill has no tangible

16、worth; what is the value of ink on paper?Its value lies in the mind of whoever will take it.What is Another Very Desirable Common Form of Intangible Wealth?Stocks and BondsWho Determines their Values?.Financial Meltdown of 2021Bear Stearns: on Friday, $80 per share book value; on Sunday sold for $2

17、per shareLehman Brothers:Billions in balance sheet assets;liquidated as no one wanted to buy them on a going concern basis.What is a company worth?How to we measure its value?Most simple calculation:Discounted net present value of future income X capitalization multiplier.First Fundamental Conclusio

18、nYou cannot establish value withoutputting risk into the calculationWhat is the risk of not achieving predicted future revenue? How certain are estimates of future income?What are the risk factors that determine the capitalization multiplier? A higher risk demands a lower multiplierHigher risk more

19、uncertainty lower present value.Note: Each source of risk drives business value up or down.Second Fundamental ConclusionManagement of Risk Enhances Enterprise ValueRisk management leads to more certain incomeRisk reduction leads to higher valuation.How do you manage risk?-Each risk hides in a relati

20、onship - customers - investors - government regulation - employees-Each relationship is an intangible asset of the business (Assets can Appreciate or Depreciate).-Lowering risk for each relationship enhances the quality of intangible assets and increases business valuation.CSR & ValuationIntangible

21、Assets = CSR Stakeholder RelationshipsCustomersEmployeesOwners/InvestorsSuppliersCompetition StrategiesCommunity Support.Tangible ValuesIntangible ValuesFinancial CapitalTangible Assets(Generally Audited Financial Information)(Generally Non-audited, Non-financial Information)Intellectual propertyUna

22、llocated goodwillLabor environmentBrand loyaltySustainabilityQuality of employeesCommunity support.Growing Importance of Intangible WealthChange in US Employment: Dec 2007 - Nov 2021tangible sector (manufacturing, construction, natural resources, real estate, wholesale and retail, transportation and

23、 warehousing)- 1,791,000 jobsintangible sector (education, health care, computer system design, finance and insurance, scientific research, etc.)+ 515,000 jobsall other services- 635,000 jobs .To improve company valuation,Improve CSR relationships!Good CSR Relationships Lead to The Sustainable Corpo

24、ration.How to measure CSR RelationshipsUse CRT ArcturusRisk Assessment Instrument New metrics for enhanced profitability.How to Manage for Sustainable Value?CRT Theory of the FirmArcturus.Theory of the Moral Firm(self interest considered upon the whole).Capital AccountsCapital Accounts are your defe

25、nse against risk and your resource base for competitive initiativesFinance CapitalPhysical CapitalHuman CapitalReputation CapitalSocial Capital.FINANCE CAPITALTraditional capital account stock of ready money and amount of sunk cash investments.PHYSICAL CAPITALTraditional capital accountPlant and equ

26、ipmentTools of the tradeSub account really of financial capital as purchased with monies raised in the past.HUMAN CAPITALNon-traditional capital account- intangible asset- vital for success in services and high tech businesses- takes care of customer needs and demands.REPUTATION CAPITAL(brand equity

27、; goodwill)- needed for quality income- needed to get low cost of capital and the best employees- gets you through rough times- avoids commodity pricing/builds value added.SOCIAL CAPITALInternal:- culture- leadership- strategyExternal:- rule of law/no corruption- education-public health- public good

28、s: market regulation, transportation, etc. Inter-relationships among capital accountsSocial Capital + Reputation Capital + Human Capital Finance Capital + Physical Capital.Stakeholders:Customers moral compass for capitalismEmployees moral agents, not parts for a machineOwners and Investors fiduciary

29、 duties of loyalty and due careSuppliers friends, not foesCompetitors compete with quality and innovation, not priceCommunities enhance social capital to enhance future profitability .Stakeholders and Capital AccountsInternal Social Capital = owners/employees/suppliers/competitive strategyExternal S

30、ocial Capital = CommunityReputation Capital = customers/employees/owners/suppliers/communityHuman Capital = employees.Taking Due Care of StakeholdersEnhances Capital Accounts;Undermining Stakeholders Puts Capital Accounts at Risk.How Can you Measure and, therefore, Manage Stakeholder RelationshipsAn

31、d all a companysCapital Accounts? .ASK QUESTIONS!Assess the Quality of yourrelationships.Category1. Fundamental Duties2.Customers3.Employees4.Owners/Investors5.Suppliers/Partners6. Competitors7. Communities1. Responsi-bilities of BusinessCriterion1.1Criterion1.2Criterion1.3Criterion1.4Criterion1.5Cr

32、iterion1.6Criterion1.72. Economic and Social Impact of BusinessCriterion2.1Criterion2.2Criterion2.3Criterion2.4Criterion2.5Criterion2.6Criterion2.73. Business BehaviorCriterion3.1Criterion3.2Criterion3.3Criterion3.4Criterion3.5Criterion3.6Criterion3.74. Respect for RulesCriterion4.1Criterion4.2Crite

33、rion4.3Criterion4.4Criterion4.5Criterion4.6Criterion4.75. Support for Multi- lateral TradeCriterion5.1Criterion5.2Criterion5.3Criterion5.4Criterion5.5Criterion5.6Criterion5.76. Respect for the EnvironmentCriterion6.1Criterion6.2Criterion6.3Criterion6.4Criterion6.5Criterion6.6Criterion6.77. Avoidance

34、 of Illicit OperationsCriterion7.1Criterion7.2Criterion7.3Criterion7.4Criterion7.5Criterion7.6Criterion7.7 Arcturus Risk Assessment Instrument Criteria Matrix.Assessment Framework Criterion/Benchmark ExampleCUSTOMERS (Section B)1B - Beyond Shareholders towards Stakeholders - CustomersDoes the compan

35、y provide its customers with quality products and services at reasonable prices, and on fair terms, while protecting their health and safety and their physical environment, and respecting their culture and individual dignity? POINTS TO CONSIDER The company seeks customer feedback on its practices, m

36、onitors impacts, and is prepared to modify production or service as a result, plus provides relevant training of staff.Point(s): Please circle1234567Please write down any concerns, explanations or additional comments on how or how not, the company is performing. _2B - Economic & Social Impact of Bus

37、iness - CustomersDo the companys products and services contribute to the economic and social advancement of its customers and to the well-being of their communities? POINTS TO CONSIDER Quality of product/service development; product quality and safety; adherence to relevant customer, safety and envi

38、ronmental codes; products / services positively impact living standards?Point(s): Please circle1234567Please write down any concerns, explanations or additional comments on how or how not, the company is performing. _.The Corporate Improvement CyclePerformance ImprovementPerformance Feedback to Mana

39、gementManagement ActionCRT Assessment.Who Participates? Board of directors CEO Senior management Division heads and group managers Unit managers Employees.Sample Gap Analysis between Managements and Employees(Provided by CRT-Japan)A. Fundamental Duties B. CustomersC.Employees D. Owners/ Investors E.

40、 Suppliers/ Partners F. Competitors G. Community Performance by Principle1.Responsibilities of Businesses 6.5/5.26.3/5.16.0/4.86.8/5.25.9/4.96.1/4.86.4/5.444.0/35.42.Economic/ Social Impact of Business6.0/5.35.6/4.76.7/4.54.9/4.44.9/4.46.6/4.65.1/5.239.8/33.13.Business Behavior 6.4/5.05.8/5.05.8/4.26.2/5.05.0/4.55.5/4.65.2/4.539.9/32.84.Respect for Rules 5.9/5.36.8/5.96.5/5.66.5/5.76.1/5.66.2/5.66.9/5.244.9/38.95.Support for Multilateral Trade6.9/5.26.3/5.06.5/5.26.2/5.26.0/4.86.4/4.47.2/5.045.5/34.86.Respect for Environment