How SPACs Disable Indirect Investor Protection

Special Purpose Acquisition Companies (SPACs) are a trap for unwary investors. In standard public equity securities, even the most naïve investor is protected, first, by the market price – you pay only for what you get – and, second, by the comfort that nothing else is required of an individual investor to realize the full value of the security. SPACs disable both protections. Because of SPACs’ redemption option, SPAC shareholders need to do something – decide whether to redeem – and cannot rely on the market price to ensure they are getting value for their money. Predictably, sophisticated repeat players … Read more

A Critique of the Sustainable Corporate Governance Report from the European Commission

In July 2020, the European Commission published the “Study on directors’ duties and sustainable corporate governance” by EY. The report purports to find evidence of debilitating short-termism in EU corporate governance and recommends many changes to support sustainable corporate governance. In a recent paper, we point out deep flaws in the report’s evidence and analysis.

Here’s a brief summary of those flaws. First, the report defines the corporate governance problem as pernicious short-termism that damages the environment, the climate, and stakeholders. But the report mistakenly conflates time-horizon problems with externalities and distributional concerns. Cures for one are not … Read more