Naubauer,Robert G. Packaging,the Contemporary Media. New York: Van Nostrand Reinhold, 1973

Abstract

Additional advertising regulation is being proposed for both tobacco and alcoholic beverage products. The possible outcome of these proposed regulations is examined based on the effect that advertising regulation has had on tobacco consumption in the past.     

How do investors react under uncertainty?

It has long been accepted that risk plays an important role in determining valuation where risk reflects that investors are unsure of future returns but are able to express their prior expectations by a probability distribution of these returns. Knight (1921) introduced the concept of uncertainty where investors possess incomplete knowledge about this distribution and so are unable to formulate priors over all possible outcomes. One common approach for making uncertainty tractable is to assume that investors faced with uncertainty will base their decisions on the worst case scenario (i.e. follow maxmin expected utility). As a consequence it is postulated that investors will become more pessimistic as uncertainty increases, upgrading bad news and downgrading good news. Using Australian data, we find evidence that investors react to bad news at times of high market uncertainty but largely ignore good news which is consistent with them taking on a pessimistic bias. However, we also find evidence of the reverse when market uncertainty is low with investors taking on an optimistic stance by ignoring bad news but reacting to good news. We also find that the impact that market uncertainty has on the reaction of investors to new information is modified by the prevailing market sentiment at the time of the announcement. Besides throwing light on the question of how uncertainty impacts on investor behaviour, our findings seriously challenge the common assumption made that investors consistently deal with uncertainty by applying maxmin expected utility.     

Are Incentives the Bricks or the Building?

The efforts of economists to emphasize the importance of incentives as determinants of organizational performance, while successful to some degree, may have left the mistaken impression that "getting the incentives right" is the only task requiring the attention of senior executives when designing corporate organizations. The author identifies the incentive-intensive companies envisioned by economists as "mercenary organizations" (or MOs), or companies whose distinguishing feature is near-complete reliance on financial rewards and controls. Citing the difficulties of devising an effective incentive system that cannot be gamed (which he calls the organizational equivalent of "an anti-gravity machine"), the article questions whether such organizations are likely to yield superior performance.
As an alternative to paying more attention to incentive design, the author suggests devoting more corporate resources to seeking and attracting individuals with low "monitoring costs." After holding up examples of top executives who appear committed to that search, the author posits a "character-rich" organization (CRO) as an alternative to the MO of the economists.
Then, viewing all companies as occupying points on a continuum with the MO and CRO as its poles, the author argues that all companies combine elements of both kinds of organizations. And perhaps most important, the CEOs of many of the most successful large organizations, without minimizing the importance of incentives, pay even greater attention to the search for trustworthy individuals and the creation of a culture of teamwork and accountability.     

Demographic Factors and Price Distortions in Insurance

Few papers have analyzed the potential linkages between price distortions and the specific demographic and political traits of customers. The existence of price distortions may have adverse and potentially unintended impacts on certain demographic groups, leading to significant public policy concerns. The current study uses census tract data and rating factors to examine age, income, and race demographics in an effort to determine if any subgroups of the population are adversely impacted by the price distortions of property insurance. The results suggest that Hispanics, lower income households, and specific age groups pay relatively more for insurance coverage than comparison groups.     

Board 3.0: What the Private‐Equity Governance Model Can Offer Public Companies∗

The authors view board structures as an adaptive institution that responds to the key challenges faced by public companies: helping management solve the problems of production and organization of large‐scale enterprise; limiting managerial agency costs; serving as a delegated monitor of the firm's compliance obligations; and responding to the governance environment of changing shareholder ownership patterns. U.S. company board structures are shown to have evolved over time, often through discontinuous lurches, as particular functions have waxed and waned in importance. This article is part of a larger project that traces two iterations of the public company board, what the authors call Board 1.0 (the “advisory board”) and Board 2.0 (the “monitoring board”). The authors argue in particular that Board 2.0, as embedded in both current practice and regulation, now fails the functional fit test for many companies. First, it does not scale to match the dramatic increase in the size and complexity of many modern public corporations. Second, at a time of reconcentrated ownership achieved through institutional investors and increased activism, it does not have the expertise and commitment needed to resolve the tension between managerial or market myopia, or “short‐termism,” and managerial “hyperopia.” This article holds out an optional alternative, Board 3.0, which would bring to the public company board some strategies used by private equity firms for their portfolio company boards. Such “Portco” boards consist of directors who are “thickly informed,” “heavily resourced,” and “intensely interested.” Bringing such “empowered directors” to public company boards could facilitate evolution of the public company board model in response to dramatic changes in the corporate business environment. The authors also suggest possible routes for implementing Board 3.0, including the enlisting of PE firms as “relational investors” that would have both capacity and incentives to engineer changes in board structure.