Predatory Value Extraction Turns the World - Dr. Bill Lazonick, UMass Economics/AIRnet, #314

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Jan 23, 2025

William Lazonick, emeritus Professor of Economics and founder of the Academic Industry Research Network, dives deep into the perils of shareholder value ideology. He reveals how deregulation in the 1980s sparked corporate greed and inequality. Lazonick discusses the rise of hedge funds and the consequences of harmful practices like stock buybacks, highlighting their role in 'encrapification' and economic decline. He advocates for reforms prioritizing worker welfare over Wall Street profits, offering insights into innovative and sustainable economic strategies.

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INSIGHT

SEC Ruling and Hedge Fund Power

The 2003 SEC ruling requiring institutional shareholders to vote or explain abstentions empowered hedge fund activists.
This facilitated influencing corporate boards and pushing for actions like buybacks, even with small shareholdings.

INSIGHT

Proxy Advisors and CEO Fear

Proxy advisory services like ISS and Glass Lewis emerged, advising institutional investors on how to vote.
Their influence made CEOs fear hedge funds, leading to actions like buybacks to appease them and maintain stock prices.

INSIGHT

Proactive Buybacks

Companies often engage in buybacks to appease activists and prevent attacks, even without direct pressure.
This proactive approach to maximizing shareholder value prioritizes short-term stock gains over long-term investments.

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Professor William Lazonick, emeritus Professor of Economics and founding director of the Academic Industry Research Network, is one of the world’s foremost experts on Shareholder Value Ideology and its impact on society. In our first conversation, we uncovered the fundamentals of shareholder value ideology and the harmful effects of stock buybacks on the working class and economic inequality. This discussion goes deeper into how financial institutions capitalized on the deregulation of the financial industry in the 1980s, leading to a wave of corporate greed and wealth concentration. Topics include the rise of hedge funds, the devastation caused by corporate raiders, how private equity contributes to the decline in quality of goods and services (termed "encrapification"), and policy strategies to rebuild an economy that prioritizes American workers over Wall Street profits. DEMYSTICON 2025 ANNUAL MEETING IN PORTUGAL!!! June 12-16: https://demystifysci.com/demysticon-2025 PATREON: get episodes early + join our weekly Patron Chat https://bit.ly/3lcAasB MERCH: Rock some DemystifySci gear : https://demystifysci.myspreadshop.com/ AMAZON: Do your shopping through this link: https://amzn.to/3YyoT98 SUBSTACK: https://substack.com/@UCqV4_7i9h1_V7hY48eZZSLw@demystifysci (00:00) Go! (00:09:45) Carl Icahn's Influence and Tactics (00:15:02) Regulatory Changes and Hedge Fund Empowerment (00:21:18) Institutional Shareholder Services and Proxy Voting (00:27:24) Proxy Advisory Services Market (00:31:19) Hedge Funds and Power Dynamics in Corporations (00:34:03) General Electric Case Study (00:45:28) Hedge Fund Activism and Industry Impact (01:03:20) Impact of Private Equity and Financial Practices (01:09:07) Asset Distribution Disparities (01:15:29) Shareholder Value and Economy Dynamics (01:22:26) Employee Investment and Stock Market (01:30:48) Tesla and Corporate Governance (01:36:56) Apple's Board and Stock Buybacks (01:42:08) Biopharmaceutical Sector Dynamics (02:00:59) US Competitiveness and Stock Buybacks (02:06:09) Soft Landing Approach to Financial Reforms (02:17:26) Economic Literacy and Public Perception (02:22:11) Globalization and Economic Mobility #Economics, #ShareholderValue, #FinancialCrisis, #StockBuybacks, #HedgeFunds, #Finance, #CorporateGovernance, #WallStreet, #FinancialMarkets, #EconomicGrowth, #PrivateEquity, #Innovation, #BusinessStrategy, #philosophypodcast, #sciencepodcast, #longformpodcast Check our short-films channel, @DemystifySci: https://www.youtube.com/c/DemystifyingScience AND our material science investigations of atomics, @MaterialAtomics https://www.youtube.com/@MaterialAtomics Join our mailing list https://bit.ly/3v3kz2S PODCAST INFO: Anastasia completed her PhD studying bioelectricity at Columbia University. When not talking to brilliant people or making movies, she spends her time painting, reading, and guiding backcountry excursions. Shilo also did his PhD at Columbia studying the elastic properties of molecular water. When he's not in the film studio, he's exploring sound in music. They are both freelance professors at various universities. - Blog: http://DemystifySci.com/blog - RSS: https://anchor.fm/s/2be66934/podcast/rss - Donate: https://bit.ly/3wkPqaD - Swag: https://bit.ly/2PXdC2y SOCIAL: - Discord: https://discord.gg/MJzKT8CQub - Facebook: https://www.facebook.com/groups/DemystifySci - Instagram: https://www.instagram.com/DemystifySci/ - Twitter: https://twitter.com/DemystifySci MUSIC: -Shilo Delay: https://g.co/kgs/oty671