(1) “INSIDER-TRADING prosecutions have netted plenty of small fry. But many grumble that the big fish swim off unharmed. That nagging fear has some new academic backing, from three studies. One argues that well-connected insiders profited even from the financial crisis. The others go further still, suggesting the entire share-trading system is rigged.”
Insider trading has been rife on Wall Street, academics conclude–The Economist, February 10, 2018, The Economist, UK.
(2) Does CEO Pay Structure Incentivize Actions that Destroy Long-Term Value? “The research finds that a high amount of equity vesting will increase the likelihood that a company will revise guidance upward; reduce research and development and capital expenditures; buy-back shares or increase the amount of its share buy-back; and even enter into merger and acquisition activity. It paints a clear and bold portrait of short-termism with concern for long-term value creation faded into the background.”
Does CEO Pay Structure Incentivize Actions that Destroy Long-Term Value? Press release, February 12, 2018, IRRC Institute, USA. (They’re offering a webinar on this subject on February 14. Sign up on the web page.)
[COMMENTARY]The above studies should alarm most investors. Why haven′t the regulators — including the US SEC and numerous other watchdog agencies — conducted their own research on these issues as they pertain to their activities? Are they told to look the other way? I believe we’re heading for a mammoth crisis of confidence if such issues aren’t properly addressed.