THE ECONOMIST

Monarch Airlines goes into administration

Mon, 10/02/2017 - 20:18

JUST before dawn on October 2nd, passengers booked to fly on Monarch Airlines began to receive texts informing them that their flights had been cancelled. This was the first news that Britain’s fifth-biggest airline had ceased trading and is now in administration.

It is the country’s biggest airline ever to collapse. Monarch had been in last-ditch talks with the Civil Aviation Authority, a regulator, to renew its licence to sell package holidays, but failed to reach a deal. About 110,000 passengers have been left stranded, although the government has hired over 30 planes, in effect creating another airline, to bring holiday-makers back over the next two weeks. Chris Grayling, the transport secretary, is calling it the “biggest ever peacetime repatriation”. A further 860,000 have lost future bookings, and with it weddings, vacations and more, although many should be able to reclaim some of their costs. Monarch also employs about 2,100 people, all now...Continue reading

Categories: FINANCIAL NEWS

Facebook and the meaning of share ownership

Thu, 09/28/2017 - 12:18

ONE group of Facebook friends that Mark Zuckerberg recently decided were not worth hanging out with were its public shareholders, who expected to cross-examine him (via a lawyer) on September 26th in a Delaware court. At issue would have been Mr Zuckerberg’s plans to refashion the social-media firm’s share-ownership structure more in his favour.

There is not a scintilla of doubt over who controls Facebook. Not only does Mr Zuckerberg, its founder, serve as its CEO and chairman; owning 16% of its shares, he controls 60% of the voting authority through a special class of stock with ten times normal voting rights. A year ago, Mr Zuckerberg decided he would like to sell a large slug of his holdings (worth $74bn) without diluting control. The firm made a plan to distribute non-voting shares enabling him to reduce his economic interest to 3% without affecting control.

That prompted litigation. Shareholder votes can be directly meaningful on many issues, including management pay...Continue reading

Categories: FINANCIAL NEWS

Rivigo is helping the Indian truck-driving industry out of a jam

Thu, 09/28/2017 - 12:18

Time to freshen up the model

THERE are 36 gradations in India’s archaic caste system, from the priestly to the supposedly untouchable. And then, somewhere below that, are the long-haul truck-drivers. Plying the subcontinent’s potholed highways for weeks at a time, few can settle into anything like a home life. Their marriage prospects are grim; venereal diseases and sore backs from sleeping in cramped cabs are but two occupational hazards. Despite an oversupplied national job market, the industry has struggled to attract the roughly 1m new drivers it needs each year to keep everything from Amazon packages to car parts moving. Can technology help?

To fend off shortages, most truck owners have done precisely what economists suggest, which is to increase pay. Drivers can now command nearly 40,000 rupees ($610) a month, a decent white-collar wage—and not far from double the level of trucker pay just three years ago. Rivigo, a startup based in Gurgaon, an...Continue reading

Categories: FINANCIAL NEWS

A shareholder pact is rocked by Liliane Bettencourt’s death

Thu, 09/28/2017 - 12:03

A face of the firm

DEATH does not end all uncertainties. News that Liliane Bettencourt, a glamorous 94-year-old Parisian heiress, died on September 20th has provoked a flurry of investor speculation over L’Oréal, the world’s biggest cosmetics company. She had held a controlling stake in the firm her father, an inventor of hair dyes, founded in 1909. Its market value has since grown to be a whisker short of €100bn ($117bn).

Her death brings few immediate consequences. An Alzheimer’s sufferer, she had been declared legally unfit to manage her concerns. That followed a scandal, made public in 2010 after her butler secretly recorded politicians, lawyers and friends as they bilked her for millions of euros. The case still haunts Nicolas Sarkozy, an ex-president. He seethed in October that opponents had stymied his return to politics by repeating allegations he profited from the “sordid Bettencourt affair” (he was cleared of charges over it in...Continue reading

Categories: FINANCIAL NEWS

Venture capitalists with daughters are more successful

Thu, 09/28/2017 - 12:03

RICHARD NESBITT, a former chief operating officer at the Canadian Imperial Bank of Commerce, has long been an evangelist for women in business. In “Results at the Top”, a book he wrote with Barbara Annis, he describes his efforts to convince men to promote women. When speaking to bosses, he stresses data showing that companies with more senior women are more successful. But he has noticed that men with daughters tend to be more receptive to his message. At least for venture-capital (VC) firms, recent research confirms this observation, as well as the assertion that gender diversity boosts performance.

Paul Gompers and Sophie Wang at Harvard University wanted to determine whether VC firms with more women managers do better. Answering this question is tricky—firms that hire more women may have other characteristics that lead to success. VC-investing remains a predominantly male activity. In the authors’ sample of 988 VC funds in 301 firms, around 8% of new hires were women. Very few firms...Continue reading

Categories: FINANCIAL NEWS

The Bank of Japan sticks to its guns

Thu, 09/28/2017 - 12:03

SEVENTH time lucky? Minutes of the Bank of Japan’s (BoJ) policy meeting in July, published on September 26th, showed that the central bank had, for the sixth time since 2013, pushed back the date at which it expected prices to meet its 2% inflation target—to the fiscal year ending in March 2020.

Four-and-a-half years since Haruhiko Kuroda took office as governor and embarked on an unprecedented experiment in quantitative easing (QE), the bank is still far from its goal. It has swept up 40% of Japanese government bonds and a whopping 71% of exchange-traded funds. The bank’s balance-sheet has tripled. It is now roughly the size of the American Federal Reserve’s.

Yet, despite his apparent failure, and despite a snap general election, Mr Kuroda may yet stay for another five years when his term runs out next April. If not, most of his likely successors are signed up to the same reflationary policy. At least one member of the bank’s board gave warning at its...Continue reading

Categories: FINANCIAL NEWS

Three trade cases facing the Trump administration spell trouble

Thu, 09/28/2017 - 11:48

Ruinously competitive

IN 1845 Frédéric Bastiat, a French economist, wrote an open letter to his national parliament, pleading for help on behalf of makers of candles and other forms of lighting. The French market was being flooded with cheap light, he complained. Action was necessary: a law closing all windows, shutters and curtains. Only that would offer protection against the source of this “ruinous competition”, the sun.

Three similar pleas are facing the administration of President Donald Trump. But these are not parodies. On September 22nd the United States International Trade Commission paved the way for import restrictions on solar panels, ruling that imports had injured American cell manufacturers. On September 26th the Department of Commerce pencilled in tariffs of 220% on airliners made by Bombardier, a Canadian manufacturer. A third decision on washing machines is due by October 5th.

This cluster of cases represents around $15bn of...Continue reading

Categories: FINANCIAL NEWS

Once a leader in virtual currencies, China turns against them

Thu, 09/28/2017 - 11:48

BITCOIN and China always made odd bedfellows. Devotees of bitcoin love its independence from central authorities; in China the central authorities love their power. That they would accept a cryptocurrency that weakened their control over something as fundamental as the management of money seemed unlikely. Yet China had become the world’s biggest bitcoin market, dominating both its trading and computer-powered “mining”.

It was not meant to be. Bitcoin’s surprising success in China appears to be nearing its end. A series of bans announced over the past month have made clear that bitcoin and all fellow travellers, from ethereum to litecoin, have little place within its borders. Some hope that the bans are temporary. The government has, after all, declared an ambition to make China a leader in the blockchain technology that is integral to bitcoin. But its seems more likely that officials will tighten their grip on China’s remaining crypto-coin...Continue reading

Categories: FINANCIAL NEWS

Nordic payments firms have become acquisition targets

Thu, 09/28/2017 - 11:48

THE Vikings were slow to adopt coins. They preferred to pay by cutting pieces off silver bars, at least until contact with the rest of Europe convinced them of the benefits of standardised coins. Today their Nordic descendants are abandoning coins and notes in favour of electronic payments. Two Nordic e-payments firms have recently announced that they will be acquired by foreign companies. The rest of the world, too, is using less cash. And they want the financial backing to enter new markets.

On September 25th Nets, a payments firm based in Denmark, announced that Hellman & Friedman, an American private-equity firm, had offered to acquire it for DKr33.1bn ($5.3bn). Nets is following Bambora, a Swedish-based payments firm, for which Ingenico, a French electronic-payments firm, offered €1.5bn ($1.7bn) in July.

Nets was created in 2010 from the merger of payments companies in Denmark and Norway. It has a strong presence in both countries. Dankort, Denmark’s national...Continue reading

Categories: FINANCIAL NEWS

McDonald’s wages a food fight in India

Thu, 09/28/2017 - 11:33

Bakshi gives McDonald’s the shakes

IN MOST ways the McDonald’s outlet in Jangpura, a gentrifying neighbourhood in south Delhi, looks like one anywhere else, with bright displays, plastic seating and a familiar menu. But this week a disconcerting sign warns that “unpredictable” conditions have affected tomato supplies; none are available. Not bad though for a store that McDonald’s has been trying to close since September 6th. Over a third of its 400 or so outlets in India were supposed to shut their doors then—yet nearly all are still slinging McSpicy Paneers to customers.

War rages between McDonald’s India and Vikram Bakshi of Connaught Place Restaurants Limited (CPRL), who first brought the American chain to India in 1996 as a local partner in a 50-50 joint venture, starting in Delhi (along with another franchisee, Hardcastle Restaurants, which went into the southern and western states). Over the next two decades, Mr Bakshi expanded in the north...Continue reading

Categories: FINANCIAL NEWS

American entrepreneurship is flourishing, if you know where to look

Thu, 09/28/2017 - 11:33

It’s hard to keep them down for long

AT FIRST glance, it seems that America’s economy is losing its mojo. Many economists, most notably Robert Gordon of Northwestern University, have lamented that productivity growth seems to be anaemic when compared with earlier golden eras (see Free exchange). A gloomy chorus of business leaders has echoed what media outlets have by now turned into a mantra, that American entrepreneurship is in steady decline. Surely America’s overall competitiveness, then, is plummeting?

The answer from one influential think-tank, the World Economic Forum (WEF), is no. In its latest update to its long-running annual ranking of global economic competitiveness, published on September 27th, America rose from third place to second, ranking below only Switzerland.

This is partly...Continue reading

Categories: FINANCIAL NEWS

Yandex, Russia’s biggest technology company, celebrates 20 years

Thu, 09/28/2017 - 11:33

ARKADY VOLOZH, the bearded co-founder of Yandex, Russia’s largest search engine, bristles at his company being branded the “Google of Russia”. Far from emulating the American firm, Yandex launched in 1997, a full year before Google, he points out. More crucially, the moniker poorly describes what Yandex offers today, which is a group of products and services that includes taxis, shopping, payments, music and education. “Really we’re the Silicon Valley of Russia,” says Mikhail Parakhin, Yandex’s chief technology officer.

That may only be a slight overstatement. Yandex’s Russian presence is immense; it accounts for just over half of the search market and 61% of online advertising, and its sites attract over 60m visitors each month. Like American tech giants, it is also expanding its offline logistical capabilities, signing recent deals with Uber, a ride-hailing firm, and with Sberbank, Russia’s largest bank, to build out its transportation and e-commerce...Continue reading

Categories: FINANCIAL NEWS

Who’s afraid of disruption?

Thu, 09/28/2017 - 11:18

LAST week Schumpeter met two tech tycoons who control businesses in total worth $600bn. In both cases the mayhem around them was what you would expect if Beyoncé hit town, minus the musical talent and looks. Hotel floors were locked down by the official secret service; the corridors were crammed with lines of petitioners and in one case a Wall Street boss gatecrashed the room in order to hug his idol.

The message from both titans—you ain’t seen nothing yet—was imperious. Over the next decade, they say, conventional industries will face an onslaught from tech competitors wielding vast financial resources, new technologies and massive reserves of data. It is a view that has swept through traditional firms’ boardrooms, too, where enthusing about virtual reality and singing the praises of Jeff Bezos, Amazon’s boss, is almost obligatory. The notion of disruption, with its promise to destroy the status quo and then renew it, is the most fashionable idea in global business since the...Continue reading

Categories: FINANCIAL NEWS

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