Sales recruiting—A major area of underinvestment

How does a firm decide whether the amount now being spent to generate sales force applicants is too much, not enough, or about right? This question can be answered by using information routinely generated by corporate activities and a relatively straight forward decision theory technique. To illustrate that technique, an analysis was conducted for a hypothetical but by no means atypical firm. The results suggest that many corporations could appreciably increase their overall profitability by spending more on sales force recruitment and selection.     

THE PRIVATE COMPANY DISCOUNT

When appraisers or investment bankers value privately held companies by making comparisons to otherwise similar public companies, they typically apply a discount. Most practitioners attribute this discount mainly to the relative illiquidity of private companies; and, for this reason, they value private companies based on empirical studies designed to measure illiquidity discounts. But this assumption and the valuations based upon it are likely to be unreliable because private companies are valued differently than public companies owing to a variety of other, more "fundamental" factors that have caused the firm to stay private rather than choosing to list on an exchange.
This article presents an alternative framework to estimate the discount for private companies that computes four separate valuation multiples for a set of private transactions and a comparable set of public transactions. After comparing these four sets of multiples for both domestic and foreign firms, the authors reach the following conclusions:

• ▪

   Domestic private companies are acquired at an average 20–30% discount relative to similar public companies when using earnings (more precisely, EBIT and EBITDA) multiples as the basis for valuing the transactions. The average discount measured using price- to-book value multiples are somewhat lower, and there are no significant differences between the revenue multiples of acquired private and public companies.

       

Freeport-McMoRan Copper &; Gold,Inc.: An Innovative Voluntary Code of Conduct to Protect Human Rights,Create Employment Opportunities,and Economic Development of the Indigenous People

Environmental degradation and extractive industry are inextricably linked, and the industry’s adverse impact on air, water, and ground resources has been exacerbated with increased demand for raw materials and their location in some of the more environmentally fragile areas of the world. Historically, companies have managed to control calls for regulation and improved, i.e., more expensive, mining technologies by (a) their importance in economic growth and job creation or (b) through adroit use of their economic power and bargaining leverage against weak national governments, regional and international regulatory bodies. More recently, the industry has had to contend with another set of challenges that involved treatment of indigenous people and their traditional land rights, fair treatment of workers, human rights abuses, and bribery and corruption involving local officials and political leaders. These challenges currently fall outside the traditional areas of regulation and control. Nevertheless, they pose serious threat to the industry’s business practices because of their global scope, threat to company’s reputation, and long-term risks of political instability leading to increasing cost of capital. Industry has responded to these challenges by creating voluntary codes of conduct that would signify their intent to comply with higher standards of conduct, and assuage public opinion that no further action is called for. These codes, however, lack any monitoring mechanism and reporting integrity to assure the public that the industry members are indeed meeting their commitments. Consequently, pressure on the industry continues unabated and with ever increasing calls for mandatory regulation and oversight. This article examines the activities of one mining company, Freeport-McMoRan Copper & Gold, Inc., which has taken a radically different approach in responding to these challenges at its mining operations in West Papua, Indonesia. While cooperating with industry-based efforts of voluntary codes of conduct, Freeport also initiated a radically different response through its own voluntary code that would directly focus on issues of human rights, treatment of indigenous people on whose traditional land its mine was located; economic development and job creation and, improvements in health, education, and housing facilities, to name a few. Additionally, the company earmarked large sums of money and involved representatives of the indigenous people in their management and disbursement. The company took an even more radical action when it committed itself to independent external audits of the company’s compliance with the code, and that these findings and company’s responses would be made public without prior censorship by the company. We analyze the nature of corporate culture, vision and risk-taking propensities of its management that would impel the company to embark on a high risk strategy whose outcomes could not be predicted with any degree of certainty before the fact. The parent company also had to confront discontent among the management ranks at the mine site because of cultural differences and management styles of expatriates and local (Indonesian) managers. Finally, we discuss in some detail the extensive and intensive character of a two phase audit conducted by the outside monitors, their findings, and the process by which they were implemented and reported to general public. We also evaluate the strengths and challenges posed by such audits, their importance to the company’s future, and how such projects might be undertaken by other companies.     

Conflicts of interest,information provision,and competition in the financial services industry

In some markets sellers have better information than buyers over which products best serve a buyer's needs. Depending on the market structure, this may lead to conflicts of interest in the provision of information by sellers. This paper studies this issue in the market for financial services. The analysis presents a new model of competition between banks, where price competition influences the ensuing incentives for truthful information revelation. We also compare conflicts of interest in two different firm structures, specialized banking and one-stop banking.     

The Incidence of Taxes on Casino Gambling: Exploiting the Tired and Poor

A bstract . The equity of taxes on casino gambling in Las Vegas and Atlantic City using recent survey data is examined. Daniel B. Suits (1977) study of the tax on casino gambling concluded that the tax was progressive when he used a national sample to estimate tax incidence. This result is challenged. Tax incidence is estimated using survey data obtained from people who either live in or have traveled to Las Vegas or Atlantic City. On the basis of the sample of people who have given themselves access to casino gambling , the tax is regressive; in fact, it is extremely regressive in Las Vegas. Therefore, in this time of easier access to casino gambling, policy-makers should be aware that the taxes on casino gambling place a proportionately heavier burden on low income groups.     

Invariance of covariance structures under groups of transformations

Summary The invariance of covariance structures under Lie groups of transformations is discussed. Implications for minimum discrepancy estimates of parameters are considered.     

The permanent income hypothesis and the real interest rate: Some evidence from panel data

A test of the permanent income hypothesis in panel data is formulated taking into account both the time-series and cross-section variation in the rate of return. The over-identifying restrictions of the theory rejected.     

An investigation of managerial interventions in employee disputes

Seventy four university managers described up to six recent conflicts and reported on their intervention strategies. Findings show that managers use a range of strategies, including overlooking, as interventions for employees’ disputes, instead of favoring the use of any particular one. Choices of intervention strategies were influenced by the type of issue being disputed, the seriousness of the dispute, and managers’ self-efficacy with mediation. Specifically, managers most frequently used mediation to resolve task-related disputes, and tended to use a variety of different strategies to intervene in personality conflicts. When managers perceived conflicts to be highly serious, they most frequently used mediation, followed by arbitration, offering incentives, and lastly, overlooking. Managers with a high degree of mediation self-efficacy more frequently mediated employees’ disputes, whereas managers with a low degree of mediation self-efficacy more frequently overlooked employees’ disputes. Theoretical and practical implications of these findings are discussed.