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American firms reveal the gulf between bosses’ and workers’ pay

3 days ago  
Business / The Economist/ Business and Finance  
HOW much should company bosses be paid relative to their employees? It depends who you ask. Plato argued that the richest members of society should earn no more than four times the pay of the poorest. John Pierpont Morgan, a banker from America’s gilded age, reckoned that bosses should earn at most 20 times the pay of their underlings. Investors today hold chief executives in vastly higher esteem. According to new filings submitted to the Securities and Exchange Commission (SEC), America’s largest publicly listed firms (those worth at least $1bn) on average paid their chief executives 130 times more than their typical workers in 2017. The figures are being disclosed by firms in their financial filings for the first time this year.The SEC’s new requirement to quantify the gap has its origins in the financial crisis. Facing populist outrage over the pay packages of Wall Street executives held responsible for triggering the crash, Congress added a provision to the Dodd-Frank act, a financ..
                 

As Tesla’s share price falls, it becomes an inviting takeover target

3 days ago  
Business / The Economist/ Business and Finance  
A RECENT tweet from Elon Musk, the boss of Tesla, an electric-car firm, shows footage of a Model X undergoing rollover testing. The SUV is propelled rapidly sideways on a trolley before encountering a sand trap that stops it suddenly, tipping the car. The Tesla teeters between ending up on its roof or settling back on its wheels. It is an apt metaphor for a firm hovering between fulfilling its promise and succumbing to financial woes.In April Adam Jonas of Morgan Stanley, a bank, said the next three months would be the “most critical time in Tesla’s history” since launching its upmarket Model S six years ago. The move from a niche in expensive electric cars to bringing battery power to the masses has been troublesome, to say the least. The firm had once hoped to be making 10,000 of its cheaper Model 3s a week by the end of 2018. But difficulties with a highly automated production line mean that just over 2,000 are rolling out of the factory each week. Even a revised goal of 5,000...Con..
                 

Labour laws in 104 countries reserve some jobs for men only

3 days ago  
Business / The Economist/ Business and Finance  
EVEN as rich countries seek to rid workplaces of subtle gender bias, in many developing ones discrimination remains overt. According to the World Bank, women are barred from certain jobs in 104 countries (see map).“Gender equality in labour law is associated with more women working and earning more relative to men,” says Sarah Iqbal of the Bank. Yet some countries publish lists of jobs deemed too dangerous for women (Russia’s 456 include driving a train or steering a ship). Others stop women from working in entire sectors, at night or in “morally inappropriate” jobs (in Kazakhstan women cannot bleed or stun cattle, pigs or small ruminants). In four countries women cannot register a business. In 18 a husband can stop his wife working.The aim is often to protect the “weaker sex”. Some laws put women in the same category as children; they concern jobs seen as physically tough, such as mining, construction and manufacturing. Others relate to broader safety fears. In Mumbai, for...Continue ..
                 

How kidnapping insurance keeps a lid on ransom inflation

3 days ago  
Business / The Economist/ Business and Finance  
IN THE early 1970s, leftist guerrillas in Argentina discovered a lucrative new way to make money: kidnap millionaires. Panicking firms would agree to huge ransoms, more concerned with freeing their executives than driving down the fee. That was not just bad for businesses. It also became a textbook case of how poor negotiating can send future ransoms rocketing and attract new entrants to the kidnapping trade. In Argentina, this culminated in the payment of an undisclosed ransom in 1975 for the release of Juan Born, followed by a $60m ransom for his brother, Jorge. The latter figure, $275m in today’s money, is the highest ransom known in modern times.One reason it marked a high point is the spread of kidnapping-and-ransom (K&R) insurance. This is involved in a minority of the $0.5bn-1.5bn thought to be paid out in ransoms each year, but the share is growing. Around three-quarters of Fortune 500 companies pay to cover some employees. Insurers reimburse the ransom and, at least as...C..
                 

Dear oil helps some emerging economies and harms others

3 days ago  
Business / The Economist/ Business and Finance  
When they are not fretting about the American dollar or Chinese debt, policymakers in emerging economies keep a close eye on the oil market. The price of Brent crude has risen by nearly 50% in the past year to around $80 a barrel. It ranks as the 11th-biggest spike in the past 70 years (adjusted for inflation), according to UBS, a bank. So should emerging markets now worry that oil prices will carry on rising above $100, or that they will tumble below $50? The answer is yes.Many emerging economies import oil; others export it. As a rule, higher prices hurt the first group and lower ones hurt the second. But it can be more complicated than that. Indonesia, for example, is a net importer of oil, but a net exporter of “energy”, more broadly defined, including coal and palm oil. Since coal, palm and oil prices tend to rise roughly in tandem, Indonesia would benefit overall from $100 oil, according to UBS. Mexico, like America, is also a net importer of crude. But in both countries a higher..
                 

What is an audit for?

3 days ago  
Business / The Economist/ Business and Finance  
AUDITS get noticed only when things go wrong. Last week British MPs issued a scathing attack on KPMG, an auditor, for failing to avert the collapse of Carillion, a contracting company. South African authorities are looking into Deloitte’s audit of Steinhoff, a retailer. PwC, another auditor, could face a court-damages verdict for hundreds of millions of dollars for not spotting fraud at Colonial Bank, a failed American lender. It is also fighting a $3bn lawsuit in Ukraine and a two-year ban in India.Investors are also waking up to audits. They almost never vote against management’s choice of auditor. But last month over a third of shareholders at General Electric, an industrial conglomerate, voted against the reappointment of KPMG. Investors in Steinhoff are suing the company and Deloitte for $5bn for their losses.These actions challenge an industry dominated by four big firms: Deloitte, EY, KPMG and PwC. Between them they earned $47bn from auditing most of the world’s largest...Contin..
                 

Why it makes sense to invest in Treasury bonds

3 days ago  
Business / The Economist/ Business and Finance  
JOHN KENNETH GALBRAITH, a quotable economist, observed that one of the deeper mysteries is why, in a falling market, there is still a buyer for every seller. It is a conundrum that bond investors must now contemplate. Since January the yield on a ten-year Treasury bond has risen (and thus bond prices have fallen) with scarcely a backward step. It is above 3% for the first time in years.In part, the fall in bond prices reflects a growing acceptance that the Federal Reserve will raise short-term interest rates to 2.75-3% by the end of 2019, as its median rate-setter expects. In part it reflects worries that tax cuts and rising oil prices will fuel higher inflation. And there is anxiety that the supply of Treasuries is about to increase (in order to pay for tax cuts) just as buyers may become scarcer. The Fed itself is running down its holdings. The higher cost of hedging currency risk in dollars is putting off some foreign buyers.If sellers outgun buyers, prices will continue to fall. Wh..
                 

Central banks should consider offering accounts to everyone

3 days ago  
Business / The Economist/ Business and Finance  
A RECESSION strikes. Central banks leap into action, cutting interest rates to perk up investment. But what if, as now, there is not much cutting to do, with rates already at or close to zero? In such cases the manual calls for purchases of government bonds with newly printed cash—quantitative easing, or QE—swelling the reserves each bank keeps at the central bank. Imagine instead that people also kept accounts at the central bank. New money could be added to their accounts, providing a direct, equitable boost to spending. That is one of several potential benefits of individual central-bank accounts, which are among the more intriguing of the radical policy ideas in circulation.Central banks deal in two sorts of currency: cash, which anyone can hold, and digital money, accessible only to financial institutions through their accounts at the central bank. Individuals hoping to spend digital money must use a bank card or transfer (or a service, like Apple Pay, linked to a bank account), o..
                 

Markets may be underpricing climate-related risk

4 days ago  
Business / The Economist/ Business and Finance  
AS A citizen, Dave Jones worries that climate change may imperil his two children, and theirs in turn. What exercises him, as California’s insurance commissioner, is the way in which a transition to a low-carbon economy might affect the financial health of his other charges—the state’s 1,300-odd insurers. On May 8th Mr Jones unveiled an examination of how well the investment portfolios of the 672 insurers with $100m or more in annual premiums align with the Paris climate agreement of 2015, in which world leaders vowed to keep global warming below 2°C relative to pre-industrial times.The answer is, not very. In the next five years carbon-intensive firms in the insurers’ portfolios plan to produce more internal combustion engines and coal-fired electricity than the maximum the International Energy Agency (IEA) reckons is compatible with meeting the 2°C goal (see chart). Meanwhile, investment plans in renewable energy and electric vehicles lag behind the IEA’s projections of what is neede..
                 

Toyota takes a winding road to autonomous vehicles

10 days ago  
Business / The Economist/ Business and Finance  
Intrepid data gatherersUBER’s fleet of autonomous vehicles has been parked up since one of its self-driving cars struck and killed a woman in Tempe, Arizona in March. That death highlighted once again the industry’s rush to develop self-driving cars. Waymo, a sister company of Google, plans to launch a robotaxi service in Arizona this year. General Motors says it will launch a fully autonomous taxi service, using cars with no steering wheel or pedals, in an American city in 2019. Volkswagen will make autonomous vehicles available through its new ride-hailing service, Moia, in 2021. Ford says it will be mass-producing fully autonomous cars by then, too.But not every carmaker is going at the same speed. Toyota, one of only three car companies that sells over 10m vehicles a year, has made no equivalent commitments. The Japanese firm is instead concentrating on using artificial intelligence (AI) and automation to make conventional cars safer and more enjoyable to...Continue reading..
                 

How a few companies are bitcoining it

10 days ago  
Business / The Economist/ Business and Finance  
IN A recent video Jeremy Sciarappa, a YouTuber, flips the lid off a red box in his living room to reveal a silver machine the size of a shoebox, whining noisily. The contraption is an Antminer S9, sold by Bitmain, a Chinese firm. Its job is to help validate transactions conducted in bitcoin, the world’s best-known crypto-currency. Because bitcoin has no central authority, it relies on its users to keep things humming along. Those who help out are granted bitcoins, in a process called mining. The Antminer s9 is beloved of hobbyist miners worldwide. Nestled inside are 189 application-specific integrated-circuit (ASIC) chips, designed by Bitmain to solve bitcoin’s cryptographic puzzles as quickly as possible. They were made by TSMC, a giant Taiwanese semiconductor firm.Mr Sciarappa and his fellow enthusiasts are a 21st-century version of the “49ers”, the young men who rushed to California in 1849 to try their luck digging and panning for gold. Few hit it rich, but the businesses that help..
                 

A Samsung executive is accused of union-busting

10 days ago  
Business / The Economist/ Business and Finance  
ON THE face of it Samsung, South Korea’s biggest chaebol, as the country’s family-controlled groups are known, has had a good couple of months. In April it was name-checked in a report by the country’s antitrust body for good progress on corporate reform. It also posted record profits for the fourth quarter in a row, thanks mainly to its booming memory-chip business as well as its Galaxy range of smartphones. But on May 15th prosecutors spoiled the mood. They raided Samsung’s offices outside Seoul and arrested Choi Pyeong-seok, head of human resources at the after-sales subsidiary of Samsung Electronics, the group’s main earner, on allegations that he had been involved in sabotaging labour-union activities and might destroy evidence unless he was jailed (he has not responded to the allegations).Mr Choi’s arrest is part of an attempt by prosecutors to prove systematic breaches of labour law at the company’s highest levels. (Samsung says it is unable to...Continue reading..
                 

For European firms, resisting American sanctions may be futile

10 days ago  
Business / The Economist/ Business and Finance  
“DONALD TRUMP is the sort of guy who punches you in the face and if you punch him back, he says ‘Let’s be friends’. China punched back and he retreated. The Europeans told him how beautiful he was, but they got nothing.” This is how an American official-turned-executive describes the latest twists in the Trump administration’s sanctions policy, which this year has roiled business from America to Europe, Russia, China and Iran. What business leaders see, analysts say, is a punitive approach that is capricious, aggressive and at times ill-prepared. But unless companies or their governments take the fight all the way to the White House, they have little choice but to abide by the long—and sometimes wrong—arm of American law.The capriciousness was evident on May 13th when President Trump executed a handbrake turn on ZTE, the world’s fourth-biggest telecoms-equipment maker, which is strongly supported by the Chinese government. It had been brought to the brink of bankruptcy after the...Cont..
                 

Another allegation of passenger mistreatment on a United Airlines flight

11 days ago  
Business / The Economist/ Business and Finance  
ON MAY 11TH a Nigerian woman filed a lawsuit against United Airlines for removing her and her two children from a flight after a fellow passenger complained of her smell. Queen Obioma accuses the airline of singling her out “because of her black race and Nigerian citizenship”.The incident took place two years ago on a flight from Houston to San Francisco. This was the second leg of Ms Obioma’s trip with her children from Nigeria to Canada, where the youngsters were scheduled to begin school. Ms Obioma’s business-class seat was occupied by a white man, according to the suit. She asked him to move but he refused, she claims, and a flight attendant persuaded her to sit elsewhere. Shortly afterwards, she says, the other passenger went to the cockpit—presumably to complain about her—and then blocked her as she tried to get from the toilet to her new seat. When she finally took her seat, she recounts, a crew member asked her to step...Continue reading..
                 

Xiaomi eyes a giant Chinese IPO

17 days ago  
Business / The Economist/ Business and Finance  
IN CHINA no company achieved $1bn in annual revenue as quickly as Xiaomi did, in the year following the launch of its first smartphone in 2011. Chinese media initially nicknamed Xiaomi the “Apple of the East” (its literal translation is “little rice”). That was a stretch, even in good times. But within another two years the affordable-handset-maker became the world’s most valuable startup, worth $46bn.Analysts reckon that it now wants to raise up to $10bn in an initial public offering (IPO) on Hong Kong’s stock exchange which was announced on May 3rd. (Its filing documents disclose neither the valuation that it is seeking, nor a fundraising target.) That could afford it a very generous valuation of as much as $80bn—not far off the $91bn market capitalisation of Baidu, China’s biggest search engine and one of the country’s three “BAT” tech titans alongside Alibaba and Tencent.Yet only 18 months ago such talk would have seemed outlandish. In 2016 Xiaomi’s sales...Continue reading..
                 

Tailor shops are a thriving pocket of enterprise in Pyongyang

3 days ago  
Business / The Economist/ Business and Finance  
No ordinary fashion statementWALK down the streets of Pyongyang, North Korea’s capital, and at first sight the passers-by look rather uniform. The women are in tidy skirt suits and medium-high heels. The men sport variations on the theme of the jacket and wide trousers preferred by Kim Jong Un, the country’s leader. Government-mandated lapel pins with portraits of one or both of Mr Kim’s predecessors continue to be ubiquitous. But look closer and a wealth of individual variations can be seen, particularly among the women: some bright-coloured lace stitched onto a jacket here, a daringly cut skirt in a sparkling satin material there.Although fashion from China and even from—Kim forbid—South Korea is increasingly making its way to the markets of Pyongyang, many of these flourishes are the work of the city’s own tailors. They may be only a small subset of North Korea’s textile industry—which accounted for around 30% of exports before being hit by sanctions...Continue reading..
                 

Bad loans remain a concern in Italy and across southern Europe

3 days ago  
Business / The Economist/ Business and Finance  
ITALY’S next government, a coalition between the populist Five Star Movement and the far-right Northern League, is giving investors plenty to worry about. Leaked plans, hastily abandoned, suggested it might want to leave the euro or ask the European Central Bank to forgive €250bn ($292bn) of Italian debt. But less attention has been paid to what it might mean for Italian banks, and in particular for their biggest burden: non-performing loans (NPLs). Over €185bn of NPLs were outstanding at the end of 2017, the most for any country in the European Union (see chart).By comparison with Greece, where NPLs are 45% of loans, Italy looks manageable, with just 11.1%. And it has made progress: in late 2015 NPLs were 16.8% of loans. But any wild policy lurches would put that progress in question. The clean-up of banks’ books has relied on openness to foreign investors. Huge volumes of NPLs (€37bn in 2016 and over €47bn in 2017, according to Deloitte, a consultancy) have been sold by banks, often ..
                 

A rare bipartisan moment allows a timid rollback of banking regulation

3 days ago  
Business / The Economist/ Business and Finance  
REPUBLICANS in the House of Representatives had hoped to cut a swathe through the Dodd-Frank act, a titanic set of financial regulations passed in 2010 in the wake of the 2007-09 crisis. The “Financial Choice Act”, drafted last year, would have lessened bureaucratic oversight and relied more on stiff capital requirements. Responsibilities and penalties would have been made clearer and regulators’ discretionary powers would have been reined in. President Donald Trump, who had promised on the campaign trail to “do a number on Dodd-Frank”, was effusive when the House endorsed the Choice Act last year.But the bill approved by the House on May 22nd, and expected soon to be signed into law by Mr Trump, is a distinctly tamer affair. It moves the line between big, systemically risky banks and the rest, set in Dodd-Frank at $50bn in assets, to $250bn. That cuts the number of institutions subjected to stress tests and stricter supervision from 38 to 12. It also eases some restrictions on...Conti..
                 

The sexual harassment of flight attendants is a massive problem

5 days ago  
Business / The Economist/ Business and Finance  
OVER the past year, there have been myriad stories in the press about airlines mistreating passengers. Last April David Dao, a passenger on a domestic United Airlines flight from Chicago to Louisville, was violently dragged off the plane to accommodate crew for another flight. This month United hit the headlines again when a Nigerian passenger accused it of racial discrimination after she was thrown off a flight. But among the sea of shocking headlines about how flight crews abuse passengers, it is easy to forget that the reverse occurs far more frequently.A new study published earlier this month shows just how common the harassment of flight attendants by flyers is. The Association of Flight Attendants, the union representing American cabin crew, asked more than 3,500 flight attendants from 29 airlines about their experiences. In the past year alone, one-third of flight attendants said that they have experienced verbal sexual harassment by passengers and one-fifth said that they have ..
                 

The life-insurance industry is in need of new vigour

10 days ago  
Business / The Economist/ Business and Finance  
LIFE insurance is among the oldest financial products. The Amicable Society, founded in London in 1706, charged members a set contribution and paid out annually to widows and children of those who had died in the previous 12 months. Today it is a vast industry: life and health insurers employ over 800,000 people in America alone. It protects hundreds of millions against the risk of dying early, through death benefits, or the risk of living longer than expected, for example through annuities. According to Allianz, a German insurer, total life-insurance premiums are above 5% of GDP in many rich countries, including Britain, France, Italy and Japan. In America, the world’s biggest market, annual premiums total more than $550bn.But life insurers are struggling as never before. Those parts of the industry that have not evolved fast enough, says Clive Bannister, the head of Phoenix Group, a “closed” life insurer that buys and manages old policies but issues no new ones, have experienced a.....
                 

Portugal’s energy giant may sell to a Chinese state-owned utility

10 days ago  
Business / The Economist/ Business and Finance  
SHOULD Europeans worry that China Three Gorges (CTG), a state-owned firm, wants to buy EDP, a utility that is Portugal’s biggest company? It is three years since one local banker, Fernando Ulrich, called Portugal “a Chinese aircraft-carrier in Europe”—back then, Chinese buyers were already snapping up stakes in “strategic” local companies as quickly as the government could privatise them. CTG’s offer of €9.1bn ($10.8bn) for EDP, which was made on May 11th, will further unsettle those suspicious of China’s desire to snap up European assets.The country is unusually welcoming to investors from the east. Its national airline, TAP Air Portugal, and Redes Energéticas Nacionais, the monopoly power transmitter, both have Chinese investors. CTG is already EDP’s largest owner, with a stake of 23%, after a €2.7bn investment in 2012. Now the Chinese want outright control.To get that, CTG will probably have to raise its offer; EDP’s board rejected the price...Continue reading..
                 

World economic growth is slowing. Don’t worry—yet

10 days ago  
Business / The Economist/ Business and Finance  
                 

Pension bonds are an ingenious idea for providing retirement income

10 days ago  
Business / The Economist/ Business and Finance  
WHEN people stop working, they need a retirement income. Some are lucky enough to have an employer-provided pension linked to their salary. Everyone else faces a difficult choice.Some keep their pension pot in cash and watch as it is eroded by inflation. Others use savings products with high fees and risk being hurt by a stockmarket downturn. A third option is an annuity, which guarantees a lifelong income but vanishes at death, even if that is a week after retirement.Lionel Martellini of EDHEC, a French business school, and Robert Merton of the Massachusetts Institute of Technology (a Nobel laureate in economics) have come up with an alternative. Workers would buy government-issued bonds while in employment; these would pay no interest until retirement. Over the next 20 years (the typical life expectancy on retirement) bondholders would receive payments comprising interest plus the return of the capital. These would be linked to inflation, or another measure such as average...Continue..
                 

A storm breaks around AirAsia’s boss

11 days ago  
Business / The Economist/ Business and Finance  
“YOU only have one vote so use it wisely,” advised the captain of a lunchtime AirAsia flight from Singapore to Kuala Lumpur on May 9th. It was the third time he had reminded passengers of Malaysia’s election that day. Travellers delighted by the personal touch shook his hand as they disembarked.The pilot was not freelancing. AirAsia had planned to provide 120 flights with reduced fares to help Malaysians get home to vote (in the end, half of the extra flights were approved by the airlines regulator). And the low-cost carrier’s political play went much further than encouraging people to vote. Tony Fernandes, the firm’s British-Malaysian boss, arranged for an AirAsia plane to be painted with the slogan of the ruling coalition of Najib Razak, the country’s prime minister at the time. Mr Najib duly posted pictures of it. Mr Fernandes also appeared in a video attributing the success of his business to the Malaysian government.Then came the most astonishing political result...Continue readin..
                 

Lessons to a columnist’s previous self

17 days ago  
Business / The Economist/ Business and Finance  
IN A British television show, “Doctor Who”, the titular character is able to travel anywhere in time and space in his Tardis police box. Given access to that technology, what useful message would this columnist impart to his previous self, nearly 12 years and 550 columns ago?The first lesson would be to avoid confusing the economy with the financial markets. If you looked at share prices alone, you might assume the intervening period had been calm; the S&P 500 index is around double its level when this column began in September 2006. But though the markets have long since recovered their sangfroid after the crisis of 2008-09, the trend growth rate of developed economies has never regained its strength. That is a bitter irony given that the crisis originated within the financial sector, bringing to mind a teenager who crashes their parents’ car and leaves them with the bill.In part, the market’s resilience was owing to the remarkable strength of corporate profits, something else tha..
                 

Who will be the main loser from Europe’s new data-privacy law?

3 days ago  
Business / The Economist/ Business and Finance  
“PLEASE don’t leave us.” From the dozens of e-mails in people’s inboxes, begging them to give their consent to be sent further messages, you could deduce that the senders of newsletters and the like are hardest hit by the European Union’s tough new privacy law, the General Data Protection Regulation (GDPR), which goes into effect on May 25th. But the main loser may well be an industry that few have ever heard of but most have dealings with every day: advertising technology, or ad tech. In fact, the GDPR would probably not exist at all were it not for this collection of companies, which have an insatiable hunger for personal data.Ad tech emerged because advertising is the internet’s default business model. Since targeted ads tend to be more efficient and targeting requires personal data (sites previously visited, searches in online stores and the like), these data became the fuel of a new industry to automate online advertising. It is so complex that even experts often resort to what is..
                 

How psychotherapy improves poor mothers’ finances

3 days ago  
Business / The Economist/ Business and Finance  
IN 2005 and 2006, in northern Pakistan, some 900 pregnant women took part in an unusual experiment. All were in their third trimester and suffering from depression. Most families in the area rely on subsistence farming. Almost none of the women worked outside the home. This kind of life is hard. Perinatal depression (depression around the time of giving birth) is more common in poor countries than in rich ones.As part of one of the largest psychotherapy trials ever run, the women were split randomly into two groups. Those in one received weekly visits from a health worker for the month before the birth, and less frequent visits during the ten months after. The rest received the same number of visits, but from health workers who had been trained to deliver cognitive behavioural therapy (CBT) during the visits, too.CBT is a talking therapy that aims to break the cycle of self-reinforcing negative thoughts. It focuses on the present, rather than trying to uncover the causes of...Continue ..
                 

Gazprom is enjoying a sales boom in Europe

3 days ago  
Business / The Economist/ Business and Finance  
                 

McKinsey manages to get itself sued for racketeering

10 days ago  
Business / The Economist/ Business and Finance  
MOBSTERS, gangsters and bent cops have all been tried under America’s Racketeer Influenced and Corrupt Organisations (RICO) Act. Might consultants be next? McKinsey, a management consultancy, is being sued under the law by Jay Alix, the founder of AlixPartners, a competitor in the field of bankruptcy advice. Mr Alix alleges that McKinsey knowingly misled courts in order to land clients. The firm denies any wrongdoing.Bankruptcy is lucrative, for those doling out the advice. According to Debtwire, a data provider, corporate bankruptcies generated $1.3bn in fees in 2016, with lawyers taking home over half, and the rest going to consultants, accountants and financiers. McKinsey is a relative newcomer: it set up its restructuring arm, which turns around companies in financial distress, in 2010. Though its share of the market is smaller than those of the top players, AlixPartners and Alvarez & Marsal, its entry has stiffened competition. Its clients have included American Airlines,...Co..
                 

Lawmakers are trying to curb contracts that make it harder to change jobs

10 days ago  
Business / The Economist/ Business and Finance  
IN 2011 Kathleen started work at an insurance-and-benefits consultancy in Boston. A couple of years later the firm gave her an ultimatum: sign a “non-compete” agreement within 30 days or wave goodbye. She signed, which meant that, if she left, she would be barred for three years from working for a rival or any firm that had been contacted as a potential client, and from starting a competing business. In 2015, when she accepted a new job in a different industry at an unrelated company, her former bosses threatened to sue. The job offer was withdrawn, and reinstated only when she offered to pay any legal costs that resulted. The matter never came to court, but the fear of legal action has kept her out of her old industry ever since.Non-compete agreements are widely used to stop ex-employees walking out of the door with valuable know-how, or poaching suppliers and customers when they move jobs. Sometimes a great deal of money and intellectual property is at stake. When Paul English, an en..
                 

How Turkey fell from investment darling to junk-rated emerging market

10 days ago  
Business / The Economist/ Business and Finance  
MANY of the most famous hedge-fund trades have been bets that things were about to go wrong. Think of Enron’s bankruptcy or the souring of subprime mortgage bonds in America. The best trade made by “the Professor” was very different. It was a bet that something was starting to go right.A visit almost 20 years ago convinced him that Turkey was serious about fixing its economy. The yield on its one-year Treasury bills was then above 100%. “It was a serious mispricing,” he tells Steven Drobny in “The Invisible Hands”, a book of interviews with pseudonymous hedge-fund managers. The IMF gave its approval to Turkey’s reforms soon afterwards. The price of T-bills surged. The one-year interest rate fell to 40%.The wheel has since turned almost full circle for Turkey, which now seems to attract more sellers than buyers. The lira is sinking. S&P has cut the country’s credit rating from junk to junkier, partly because of concerns about its reliance on foreign capital. The...Continue reading..
                 

The long arm of the dollar

10 days ago  
Business / The Economist/ Business and Finance  
FEW banks can match the quaint serenity of Banco Delta Asia’s headquarters in Macau. Housed in a pastel-yellow colonial building opposite a 16th-century church, its entrance is flanked by tall vases, depicting sampan gliding between karst hills. In the tiled square outside, men laze under a banyan tree and an elderly woman peels a boiled egg for lunch.But in 2005 this backwater bank incurred the wrath and might of the world’s financial hegemon. America’s Treasury accused it of laundering money for North Korea, prompting depositors to panic, other banks to keep their distance and the Macau government to step in. The Treasury subsequently barred American financial institutions from holding a correspondent account for the bank, excluding it from the American financial system.Macau is over 8,000 miles from Washington, DC. But it is hard to escape the long arm of the dollar. Its dominance reflects what economists call network externalities: the more people use it, the more useful it...Conti..
                 

Airlines in America fail in their campaign against the Gulf carriers

12 days ago  
Business / The Economist/ Business and Finance  
ON MAY 14th, the United States and United Arab Emirates (UAE) announced a deal that should, at least in theory, put an end to their long-simmering dispute over what airlines in America allege are unfair subsidies provided by the Gulf state to its two major airlines. When news of the agreement emerged on three days earlier, both sides quickly claimed victory. American representatives claimed that the UAE had admitted that it had unfairly subsidised its flag carriers and had agreed not to add further so-called fifth-freedom flights, which are routes to the United States that do not originate in the UAE. (Breitbart News ran a triumphant story under the headline “Trump’s America First Agenda Wins Trade Dispute With United Arab Emirates.”) Meanwhile, the UAE ambassador to the United States argued essentially the opposite, stating that he was...Continue reading..