Boardroom Governance with Evan Epstein

Anat Admati: "I Don't Want CEOs to Solve Society's Problems, I Want the Government to Solve Them"

Episode Summary

In this episode, I talk with Anat Admati, the George G.C. Parker Professor of Finance and Economics at the Stanford Graduate School of Business, and the Faculty Director of the Corporations and Society Initiative at the GSB. Anat is an economist with broad cross-disciplinary interests in the interactions between business, law and policy, and an advocate for better governance and accountability in the private sector and in government. Since 2010, Anat has been active in the policy debate on financial regulations. She is the co-author, with Martin Hellwig, of the award-winning and highly acclaimed book "The Bankers’ New Clothes: What’s Wrong with Banking and What to Do about It". In 2014, she was named by Time Magazine as one of the 100 most influential people in the world and by Foreign Policy Magazine as among 100 global thinkers.

Episode Notes

  1. Start of Interview [1:30]
  2. How Anat's research evolved from corporate finance to corporate governance [3:40]
  3. How the Financial Crisis ignited her research interest in the banking sector [4:25]
  4. What's "special" about the finance and banking industries? [8:31]
  5. Why the lack of equity funding in banking? [10:12]
  6. The premise of her book "The Bankers' New Clothes" [11:28]
  7. "In banking you can be insolvent forever if you don't default" [13:27]
  8. "JPM's assets on balance sheet: ~$2.5T, plus off balance sheet: $4T! "that is unfathomable." [14:08]
  9. "The regulators are failing so miserably, and they are so used to failing that they perpetuate their failures"  [16:02]
  10. Over a decade after the financial crisis, "the financial system is a disaster" [16:54]
  11. "We are going to have zombies everywhere" [19:06]
  12. "Deutsche Bank is the classic zombie" [22:08]
  13. How to understand the decoupling of the stock markets from the "real economy": [23:45]
    1. Rise of private market financing. Sliding to opacity.
    2. Rise of big tech
    3. "Saving glut of the rich": the money of the world is going into the US stock market.
    4. Fed support is propping up the corporate debt market, helping the stock market.
  14. Anat's take on the BRT Statement on the Purpose of the Corporation: "I am skeptical" [29:00]
  15. Anat's take on B-corps [32:04]
  16. "I don't want CEOs to solve society's problems, I want the Government to solve them." Premise of the Corporations and Society Initiative at the GSB [33:47]
  17. Anat's take on ESG: "It's all nice and well, but it has its limits" [36:24]
  18. "If men were angels, no Government would be necessary" (James Madison) [40:05]
  19. Paul Polman's search for "Heroic CEOs" [41:09]
  20. Why cross-disciplinary research matters "I was in a bubble of finance" [41:58]
  21. Senator Sherrod Brown's book recommendation for Banking Committee: "The Color of Law" [43:18]
  22. Anat's article "A Skeptical View of Financialized Corporate Governance" (2017) [44:31]
  23. Katharina Pistor's "The Code of Capital" book [46:58]
  24. Anat's take on the current push-back against stock buybacks and dividends. Her article: "The Leverage Ratchet Effect." [48:03]
  25. "Where you see financialized corporate governance at its worst is paying shareholders in a crisis." "Bank regulators have to put a complete and utter ban on payouts for all the banks." [51:15]
  26. "We must abolish the corporate tax interest deductibility" ("we shouldn't prefer debt over equity for funding for tax reasons") [54:17]
  27. How to find Anat online:
    1. https://admati.people.stanford.edu/
    2. Corporations and Society Initiative at the Stanford Graduate School of Business.

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Music/Soundtrack (found via Free Music Archive): Seeing The Future by Dexter Britain is licensed under a Attribution-Noncommercial-Share Alike 3.0 United States License