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Can CEO Pay Be Reined In?

The SEC’s new rule requiring companies to disclose the ratio of CEO pay to that of the median employee unleashed a flood of praise and criticism. The New York Times highlights some reasons it might reduce outsized executive pay. The Atlantic points to an alternative: Lynn Stout’s recommendation that limiting corporations’ ability to deduct executive pay from their taxes would have a far larger impact. Yale Insights talked with Stout about executive compensation and the role of shareholder value in setting direction in corporations. 

In Global Network Perspectives, Clemens Otto of HEC Paris reports that optimistic CEOs get paid less than their pessimistic peers. 

A Financial Singularity?

Professor Robert Shiller recently took on the idea that algorithmic trading is driving the investing universe toward a "financial singularity" where all alpha—a measurement of risk-adjusted returns—will go to zero. He writes, “Human judgment, good and bad, will drive investment decisions and financial-market outcomes for the rest of our lives and beyond.”

In a conversation with Yale Insights, Robert Litterman, a pioneer of quantitative investing, said that algorithm-driven investing has become more and more sophisticated as once-successful approaches are disseminated and lose their edge. But he also highlights the human part of the investing equation: “You can bring statistical evidence to bear but you also have to bring judgment to bear as well.”

Can Iran be trusted?

After a preliminary deal with Iran was announced earlier this month, Jessica T. Mathews, the former president of the Carnegie Endowment for International Peace, wrote in the New York Review of Books that any final agreement should be seen as only the beginning of a process for achieving a nonnuclear Iran.

“Those who worry that a deal with Iran will entail some risk should remember that preventing nuclear proliferation almost never happens in a single leap,” she wrote. “Countries change direction slowly. International rules and norms are built up brick by brick over years. Technical capacities to monitor and political expectations are gradually but steadily strengthened.”

A few weeks before the agreement was announced, Prof. Edieal Pinker examined the negotiations through a game theory lens.

What bias and discrimination do women still face as leaders?

Do activist investors target women CEOs? The New York Times’ Dealbook points out that only 23 companies in the S&P 500 are led by women, but a quarter of those are being targeted by activist investors. The investors deny any gender bias, and most of the CEOs refused any comment, but one said, “You’re onto something.”

The Times cites research by Yale SOM’s Victoria Brescoll showing that female leaders are perceived negatively, by both male and female listeners, when they talk as much as male peers. 

Last year, Brescoll and Prof. Jeffrey Sonnenfeld wrote an op-ed about the bias and discrimination that persist for powerful women in corporate America.

What were the environmental keys to 2014?

Mark Tercek, CEO of the Nature Conservancy, presented a list of 10 reasons to be encouraged about progress on environmental issues in 2014, starting with the climate accord between the U.S. and China.

In a conversation with Yale Insights, Yale professor Karen Seto discussed sustainability and urbanization in China.  At the opening of the Yale Center Beijing, a panel discussion focused on challenges of economic growth in China in the face of environmental limits.

Tercek spoke to Yale Insights in 2009, soon after leaving Goldman Sachs for the Nature Conservancy, about his approach. 


What's next for luxury brands?

Luxury products often seek to evoke feelings of timelessness, but luxury brands must adapt to an ever-changing and increasingly global market. At the New York Times’ luxury conference, François-Henri Pinault, CEO and chairman of Kering, the parent company of Gucci and other luxury brands, described how sustainability efforts and new technology shape the business.

Maureen Chiquet YC ’85, CEO of Chanel, talked with Yale Insights about bringing French design to global markets. And Chris Cabot ’97, who leads Value Retail’s luxury fashion outlets in China, discussed entering new markets. 

Where is the media business headed?

As the New York Times goes through another round of buyouts—which may turn into layoffs—startups Vox Media and Buzzfeed have received substantial new venture investments. Where is the industry headed? Many media outlets (including the Times) are shifting resources into video, but do the views justify the investment? Mediashift offers sobering data.

In conversation with Yale Insights, Tribune Publishing CEO Jack Griffin ’88 explains why he sees newspapers as a growth platform.



Where should a company’s responsibilities end?

Where should a company’s responsibilities end? Are platform companies like Uber and Airbnb spurring innovation or profiting by offloading accountability? Stanford’s Jeffrey Pfeffer raises challenging questions in a scathing op-ed in Fortune.  
Yale Insights talked with Pfeffer about power and the shifting relationship between employers and employees.
In another conversation with Yale Insights, Lynn Stout highlighted corporations’ responsibilities to a range of stakeholders.

Capping carbon?

China and the U.S. announced a major deal to limit carbon emissions. The two countries account for 45% of global greenhouse gas emissions, so the agreement could affect policies worldwide, according to the Washington Post.

What’s the role for the private sector? The director of the UN Global Compact, in an interview with Deutsche Welle, explains why businesses are backing a price on carbon.

And Yale Insights talked with Yale professor William Nordhaus about his work modeling the economic effects of climate change, which informs the discussion on how to price carbon.

What’s the future of innovation?

What’s the future of innovation? Strategy + Business magazine’s 10th annual survey on R&D spending found that leaders plan to shift asset allocations and goals from incremental to breakthroughs innovations.  

Meanwhile, a historical look at the subject shows that powerful innovations have wide-ranging effects, far beyond what their creators could have imagined.  

Yale Insights looked at design thinking, one means of encouraging innovation within organizations.