In a recently published paper entitled, “The Long-Run Performance of Sponsored and Conventional Spin-Offs,” James Rosenfeld, associate professor of finance at Emory University’s Goizueta Business School, and a coauthor detail the recent history of “sponsored spin-offs,” in which parent companies arrange for a private equity investor to “sponsor” a spin-off deal by taking a significant stake in the new company just before it goes public. Given that sophisticated investors from Warren Buffett and the Gabelli Funds to Morgan Stanley and Forstmann Little have cemented such deals, Rosenfeld figured his research and results would document that adding a sponsor to a spin-off increases the likelihood the new company will experience superior performance. But in the end, he says, “I came to the exact opposite conclusion.” Former Michelin Tire Exec Herve Coyco on Tough Choices and Ethics
In 2005, Hervé Coyco, then president of Michelin Tire, faced the ultimate dilemma. A few days earlier, Ralf Schumacher was practicing for the U.S. Grand Prix when he crashed badly in the 13th turn, the result of what appeared to be a left-rear tire failure. Michelin engineers could not explain the failure of the tires, which they deemed structurally safe. A decision to err on the side of safety and pull the plug on the race would mean a potential field of 20 cars would be reduced to six, angering legions of fans. Ultimately, Coyco told the seven teams using Michelin tires not to race. “Our technical credibility took a hit, but [our company] credibility went up,” recalled Coyco, who detailed the accounts surrounding his decision as part of the Dean's Leadership Speaker Series at Emory University's Goizueta Business School. The Ethics of Playing Favorites with Customers
Most companies have little problem offering perks to loyal customers. Airlines award frequent flier miles and many retail stores may offer valued customers special discounts or a first chance at new products through a closed sale. So when the U.S. Securities and Exchange Commission filed a civil fraud lawsuit against Goldman Sachs Group Inc. in April, it raised questions regarding a company's right to hedge its bets against even its most favored clients. According to faculty at Emory University and its Goizueta Business School, when it comes to stock-related transactions and money, “special offers” and the dissemination of information—either selectively released or withheld—can trigger ethical questions that invite increased regulation. Can an Ethical Approach Boost a Business’s Bottom Line
The scandal resulting from Toyota Motor Corp.’s failure to adequately address life-threatening malfunctions in several of its car models has once more underscored the importance of ethics in corporate decision making. Though the market often rewards quick performance, Paul Root Wolpe, chaired professor of bioethics and director of the Emory Center for Ethics, says that “in the long term, it tends to punish companies that achieve those results improperly.” In a recent Q&A with Knowledge@Emory, Wolpe discusses the effect of ethics on a company’s bottom line, especially in an Internet-saturated culture where the fallout from unethical decisions can be uncontainable. Free Lunch Author Discusses Regulation, Corporate Subsidies
As California struggles with another budget shortfall, consumer advocacy and union groups have argued for a rollback of the billions in state subsidies to area businesses. But do these subsidies actually encourage economic growth and increase job activity, as originally intended? In a recent conversation with Knowledge@Emory, author David Cay Johnston builds a strong case against these subsidies, and he discusses his bestseller Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill). The Good, the Bad and the Exaggerated in Michael Moore's New Film, 'Capitalism: A Love Story'
Michael Moore's movie, Capitalism: A Love Story, doesn't pull any punches in its depiction of capitalism as the monster that is destroying America. Moore's villains range from Wall Street bankers to Wal-Mart to Treasury Secretary Timothy Geithner, while capitalism's victims include those who are losing their jobs, their houses and, in some cases, their faith in a system that is supposed to reward hard work and playing by the rules. Knowledge@Wharton asked Kent Smetters, a professor of insurance and risk management at Wharton who describes himself as "generally right of center," to review Capitalism: A Love Story. The Real Story Behind Corporate Social Responsibility
No matter the economic environment, corporate social responsibility (CSR) remains a factor for many companies. Whether a voluntary strategy to help benefit a firm's bottom line or a tool to placate regulators, CSR is here to stay. In a recent interview with Knowledge@Emory, Jagdish Sheth, a corporate strategist and chaired professor of marketing at Emory University's Goizueta Business School, discusses the motivation and benefits for companies to engage in CSR and says, "a genuine commitment to corporate social responsibility can be an enormously cost-effective way to market a company." Exploring the 'Amazing Story' of Hank Greenberg and AIG
The July 7 court victory for 84-year-old Maurice "Hank" Greenberg, former chairman and CEO of AIG, might be the highlight of what has been a tough four years. Forced out in 2005 for alleged accounting irregularities, Greenberg has watched from the sidelines as the company he spent nearly four decades building has buckled in the wake of the subprime mortgage crisis. It's a history that former AIG executive and author Ron Shelp chronicles in his book Fallen Giant: The Amazing Story of Hank Greenberg and the History of AIG. Shelp recently paid a visit to Emory University's Goizueta Business School and regaled students and faculty not with tales of insurance but "the story of dynamic, eccentric people from all different walks of life.” The Other Banking Drama: Those Secret Swiss Accounts
Tax authorities in the United States have challenged long-standing Swiss banking secrecy laws, demanding that UBS AG release the names of 52,000 Americans suspected of opening secret accounts to evade taxes. The bank agreed to release client information on 250 U.S. citizens and pay a $780 million fine as part of a settlement, but according to Wharton faculty, that decision has put the entire Swiss banking system in jeopardy. The Bitter Truth About Chocolate
In Bitter Chocolate: The Dark Side of the World’s Most Seductive Sweet, author Carol Off gives new meaning to the expression "death by chocolate." Off, a Canadian investigative reporter and co-host of CBC Radio’s current affairs program “As It Happens,” weaves a tale of an industry's egregious use of child and slave labor, environmental degradation, bribery, and even murder. Her blunt portrayal also reveals just how difficult it can be to fight or effectively legislate against organized misery.