Welcome to the Boardroom Governance Podcast. I’m your host, Evan Epstein. In this episode, I talk with Joe Grundfest, the William A. Franke Professor of Law and Business Emeritus at Stanford Law School and Senior Faculty of the Rock Center for Corporate Governance. Joe was my inaugural guest for this podcast in 2020 and he was my first-year anniversary guest in 2021 (E35). This time, I bring him back to wrap up 2022 and provide an outlook as we start 2023. In this podcast, we address the state of capital markets, the tech layoff trend and the rise of AI and ChatGPT. We also discussed five big topics: 1) Crypto and its regulatory framework; 2) the SEC’s proposed climate change regulation, 3) The politicization of ESG, 4) Asset managers passing-through voting power to beneficial owners, and 5) The impact of universal proxy cards on shareholder activism. We also get a take on the business winners and losers of 2022, the best and worst corporate governance trends of 2022, and the biggest corporate governance trends to watch out for in 2023. If you like this show, please consider subscribing, leaving a review or sharing this podcast on social media. You can find all the show notes on the website boardroom-governance.com and please feel free to subscribe to the Boardroom Governance Newsletter at evanepstein.substack.com
0:00 -- Intro.
1:50 -- Start of interview.
4:09 -- His take on the state of capital markets. From the highs of 2021 to the lows of 2022: the impact of interest rates in asset valuations.
6:59 -- On tech layoffs. "The effects on the labor market are not as large as the numbers suggest."
8:34 -- The impact of downturn on public and private investors.
10:07 -- On AI, ChatGPT and the emergence of this new technology.
12:45 -- On the crypto industry and its regulation challenges. "There is going to be more carnage, more blood on the streets." "The number of people in this industry that are willing to show you their code but refuse to show their financials should make your head spin."
20:01 -- On the SEC’s proposed climate change regulation, and his take that "The SEC Is Heading Toward a Climate Train Wreck." "I am profoundly concerned." "Investors need these climate disclosures but I'm extraordinary skeptical that the courts as currently constituted will uphold the rules that the SEC will adopt. In other words, the rules will get adopted, but they will get staid, vacated and we are going to get nothing (and I don't think that's the best result for investors, that's just wrong)."
24:36 -- Joe's climate change proposal. Instead of the SEC requiring its own climate change rules, it should require investors to disclose the data that is already in the public domain.
28:04 -- On the ESG / anti-ESG trend and the politicization of corporation governance. "I think it is simultaneously disastrous and hilarious." "The important thing to recognize is that it is all political."
30:52 -- On institutional Investors passing-through voting power to beneficial owners. "It's politically a very smart thing to do from some of these intermediaries."
32:37-- On the impact of the new SEC universal proxy rules for director elections on shareholder activism. "It will have a meaningful effect, but it will take some time to manifest itself" "It shifts power to the investor community."
33:30 -- The best corporate governance trend of 2022: boardroom diversity.
34:13 -- The worst corporate governance trend of 2022: the political whiplash.
34:54 -- The biggest corporate governance trend to watch out for in 2023 and going forward: "a combination of universal proxy and the politicization of the boardroom."
36:57 -- His take on how to deal with the politicization of the boardroom: "The short answer is that you can't generalize. Every corporation's situation is unique."
38:58 - The biggest winner in business in 2022: Prince Harry (monetizing family dysfunction!)
40:34 - The biggest looser in business in 2022: Elon Musk. "If it wasn't perfectly obvious that of all the people in the world that should not be running Twitter, he shouldn't be running it." He gives it a 43.96% chance of being in bankruptcy by this time next year.
Joseph A. Grundfest is an expert on capital markets, corporate governance, and securities litigation. Professor Grundfest founded the Stanford Securities Class Action Clearinghouse, which provides detailed, online information about the prosecution, defense, and settlement of federal class action securities fraud litigation. He launched Stanford Law School’s executive education programs and continues to co-direct Directors’ College, the nation’s leading venue for the continuing professional education of directors of publicly traded corporations. He is also a senior faculty member with the Arthur and Toni Rembe Rock Center for Corporate Governance. Additionally, he is co-founder and director of Financial Engines and a director of Kohlberg, Kravis, Roberts & Co. Before joining the Stanford Law School faculty in 1990, Professor Grundfest was a commissioner of the Securities and Exchange Commission, served on the staff of the President’s Council of Economic Advisors as counsel and senior economist for legal and regulatory matters, and was an associate at Wilmer, Cutler & Pickering. Early in his career he was a research associate at the Brookings Institution and an economist and consultant with the RAND Corporation.
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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