September 6, 2017 nº 1,902 - Vol. 14
"Everything is funny, as long as it's happening to somebody else."
Will Rogers
Read Migalhas LatinoAmérica in Spanish every Tuesday and Thursday. Visit the website at la.migalhas.com
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The case for nonvoting stock
S&P Dow Jones Indices will no longer include companies that go public with multiple classes of shares on its major US stock indexes, it announced in July. A few days earlier, FTSE Russell said it would bar dual-class companies from its indexes unless public shareholders hold at least 5% of the voting rights. These policy changes were made in response to a recent surge in dual-class initial public offerings, in which company insiders raise cash by selling nonvoting or low-voting stock to the public while retaining voting control over the company. Such structures were historically favored by family-owned companies seeking to preserve control but have recently gained popularity among successful technology companies, including Google, Facebook and, more recently, Snap Inc. The conventional view is that dual-class structures insulate company insiders from investor influence and accountability. When a problem arises at a company, the shareholders most affected have few tools to take action. Separating control from ownership therefore weakens the insiders' incentives to maximize shareholder welfare. When the insiders slack or skim off the top, they reap all of the benefits but bear only a fraction of the costs. Dual-class issuers do not deny that low-vote stock shields insiders from influence. They view it as the key benefit. That is because the dual-class structure can allow insiders to operate without interference from outside shareholders who seek short-term gains at the expense of the company's long-term vision. Both sides of the debate overlook an important and unrecognized benefit of dual-class structures: A corporation that offers two classes of stock to the public is able to allocate voting power between shareholders who are informed about the company and its performance and those who are not. Put differently, there may be companies that are made worse off when all shareholders vote. Some shareholders, including many retail investors, have no interest in learning about the company and prefer to free-ride off informed investors. Other passive shareholders, such as index funds, may lack financial incentives to vote intelligently because of their investment strategy. Index funds seek to match the performance of the market, not beat it, so any investment in informed voting would drive up the fund's costs with little to no benefit.
1 - Top EU court rules eastern states must take refugees. (Click here)
2 - Federal judge blocks Texas abortion law. (Click here)
3 - Nintendo loses court case over Wii motion controllers. (Click here)
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China bans initial coin offerings calling them 'illegal fundraising'
Chinese regulators have launched a crackdown on individuals and firms raising funds by offering their own digital currencies. The People's Bank of China has declared initial coin offerings illegal and wants them to "cease immediately". A growing number of tech companies are opting to sell digital "tokens" because they are quick, easy and unregulated. The ban saw sharp falls in the two leading crypto-currencies, with bitcoin tumbling $200 on Monday.
VW recalls 1.8 million cars in China
More than 1.8 million Volkswagen cars are being recalled in China because of a faulty fuel pump. China's consumer watchdog said the recall affected vehicles made by VW and its two Chinese joint ventures with SAIC and FAW. The defect can cause the engine to stall due to an electronics failure in the fuel pump.
Chinese firm with big stake in Lenovo to buy control of Luxembourg bank
Legend Holdings would acquire a controlling stake in the Banque Internationale à Luxembourg from an investment vehicle of the Qatar royal family.
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OMC - Brasil
Brasil dará a conocer nuevos reglamentos sobre los subsidios para empresas automotrices el 3/10. La medida se da tras los reparos observados por la OMC. El nuevo programa de subsidios, conocido como Rota 2030, dará beneficios impositivos de acuerdo a estándares de eficiencia energética y desempeño de motores, sin reglamentos de contenido local que transgredieron las normas de la OMC y plantearon perspectivas de represalias comerciales, según adelantó la prensa local.
Impuesto
Productores hortofrutícolas de Estados Unidos, México y Canadá alertaron que existe el riesgo de imponer en la mesa de negociación del TLCAN aranceles e impuestos por temporadas a productos como tomate, pimientos y algunos frutos procedente del campo mexicano, lo que provocaría una regresión al proteccionismo y dañaría al consumidor. Empresas de los tres países, entre ellas Coo Red and Sun Farms; Mission Produce; United Fresh Association; Driscoll's y Aneberries, hicieron un llamado a los negociadores a defender y mejorar los beneficios del TLCAN para consumidores y productores, y por tanto rechazar el proteccionismo.
Shell
La multinacional Shell invertirá US$ 1,000 mlls. en los próximos 10 años para nuevas gasolineras en México, además de soporte a algunos proyectos de infraestructura de transporte.
Law firm mergers continue at record pace
As law firms feel continued pressure to expand or risk perishing, more law firm tie-ups are coming together. In the face of stagnant demand for legal services, many firms have turned to mergers to boost market share and stay competitive. There were 52 combinations announced in the US in the first half of the year, according to legal consultancy Altman Weil, topping previous midyear highs. Many of the deals this year have included one international firm, and the majority involves acquisitions of firms with 20 or fewer attorneys.
Trump administration to eliminate DACA program
Obama has attacked the Trump administration for scrapping his scheme to protect young undocumented migrants from deportation. The Deferred Action for Childhood Arrivals (Daca) program was rescinded on Tuesday, in a move that could affect some 800,000 beneficiaries. While existing recipients will see no impact for at least six months, no new applications can now be made. Appealing to Congress, Obama said the decision was "cruel" and "wrong". The so-called "Dreamers", mostly Latin Americans, were able to apply for work and study permits under the policy he introduced five years ago.
Leaked document suggests UK plan to curb EU migration
Proposals aimed at cutting the numbers of low-skilled migrants from Europe following Brexit have been disclosed in a leaked Home Office paper. The document, obtained by The Guardian, suggests free movement will end upon exit in March 2019 and the UK will adopt a "more selective approach" based on the UK's economic and social needs. Access to labor in industries without shortages may be curbed, it suggests. The document has not been signed off by ministers.
Europe Human Rights Court restricts employer ability to monitor employee communication
The European Court of Human Rights on Wednesday ruled 11-6 that unrestricted monitoring of an employee's communication by his or her employer constitutes a violation of Article 8 of the European Convention on Human Rights, concerning the "right to respect for private and family life." A Romanian man should not have been fired for sending private messages at work via the Yahoo messaging system in 2007, Europe's top human rights court has ruled. Some of the communications he had sent were "intimate in nature" and were sent to his brother and his fiancée, the court heard. However, his right to privacy had not been "adequately protected", the apex body of the ECHR has now ruled. The ECHR also said it was not clear whether Bogdan Mihai Barbulescu had been warned that his communications would be monitored, and that the original court had not established specifically why the monitoring had taken place. As it is the highest court there can be no further appeal. (Click here)
Brazil police raids amid 2016 Olympics corruption probe
Brazilian police have searched the country's Olympic committee and the home of its chief, who headed Rio's successful bid to host the 2016 Games. The raids are part of investigations into what police say is "strong evidence" of vote-buying to secure Rio's bid. The inquiry is being conducted in conjunction with French and US police. The head of the Brazilian Olympic Committee, Carlos Nuzman, has been questioned and had his passport seized. Nuzman stands accused of acting as an intermediary in a cash-for-votes scheme to ensure the support of influential IOC member Lamine Diack, was also serving as International Association of Athletic Federations chief at the time.
Wells Fargo should focus on its actual misbehavior, not on perceptions
After multiple scandals, the bank appears to be hyper-sensitive and wary of potential actions by regulators and members of Congress.
37 historic dictionaries disagree with Trump's definition of 'Emolument'
The word — at the heart of a suit about the Trump D.C. hotel — now seems obscure and technical. It was more common, and had a more general meaning, when the Constitution was drafted, a scholar said.
Putin calls North Korea sanctions useless
Putin has said pursuing further sanctions against North Korea is "useless", saying "they'd rather eat grass than give up their nuclear program". The US said on Monday it would table a new UN resolution on tougher sanctions in the wake of the latest test of a nuclear bomb by the North on Sunday. Putin also said that the ramping up of "military hysteria" could lead to global catastrophe. He said diplomacy was the only answer. China, the North's main ally, has also called for a return to negotiations.
UTC and Rockwell Collins in $30bn aviation deal
The maker of Pratt & Whitney jet engines, UTC, has agreed to buy airline parts maker Rockwell Collins for $30bn. The tie-up is one of the biggest deals in aviation history and is expected to be completed next year. It has the potential to shake up the market for aerospace parts and could give UTC greater negotiating power over plane makers Boeing and Airbus. Both plane makers have been pushing suppliers to lower their prices. By making more aircraft components, analysts say, UTC will be in a better position to resist such pressures. The $30bn price tag includes Rockwell Collins' debt. Before the deal can go ahead, it will have to gain regulatory approval. (Click here)
'Too Big to Fail' label may shrink for some firms under Trump
The Trump administration is examining the use of the designation for large non-bank financial institutions, with a closely anticipated Treasury report on the matter expected next month.
GE's take on the state of compliance and ethics in India
Tejal Patil, general counsel in South Asia for General Electric Co., discusses the state of compliance in India and a new effort between corporations and ethics advocacy group Ethisphere Institute to promote business ethics in India and South Asia.
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