The Threat of Hedge Fund Activism Disciplines Managers and Benefits Shareholders. But What Happens to Creditors?

Hedge fund activism is the latest rave in corporate governance. Activist hedge funds build stakes in target firms in order to press management for various changes. When managers are uncooperative, they may just be forced to step down. Lest you think only managers of small, not well-established firms have reason to fear, some of the most powerful managers in corporate America, for example the CEOs of Bob Evans, Hertz, Sotheby’s, Yahoo, etc., have all failed to avoid such fate. It appears that no firm is immune to the threat of HFA.

Managers, needless to say, have great incentive to avoid … Read more

Why Paying Bonuses During a Financial Crisis Might Strengthen the Economy

The following comes to us from Felix Zhiyu Feng, a PhD candidate from the department of economics at Duke University

The lucrative compensation of Wall Street bankers and executives has always been an issue of media interest and public concern. It is also at the center of studies on corporate governance, which tend to question its legitimacy, especially when firm performance is poor. When it was revealed that during the recent financial crises, despite huge profit losses, Wall Street bankers and executives still took away over a billion dollars of cash bonuses, not surprisingly there was immediate outrage from the … Read more

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Editor's Tweet: Duke's Felix Feng on Paying Bonuses During a Crises