The ongoing revelations about UK domestic spying on political activists, continued in some case for decades, and which included an incident in which an undercover police officer fathered a child with the woman he was spying on, illustrate an important point: once you decide someone is suspicious enough to follow around, there's no evidence that you can gather to dispel that suspicion.
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Performance for Pay? The Relation Between CEO Incentive Compensation and Future Stock Price Performance
, a paper from U of Utah business-school professors, the relationship between executive performance and executive pay is intensively investigated. The authors carefully document that the highest-paid executives in the 1,500 companies with the biggest market cops from 1994-2013 perform the worst, and that the higher a CEO's pay, the more likely it is that he'll perform worse than his low-paid colleagues. The effect was most pronounced in the 150 highest-paid CEOs.
The authors propose that sky-high pay leads CEOs to be overconfident -- after all, if they're getting $37M for a year's work, they must be pretty damned smart, so anyone who disagrees with them is clearly an idiot, after all, look at how little that critic is paid! The longer a CEO is in office, the worse his performance becomes, because he is able to pack the board with friendly cronies who keep hiking his pay and overlooking his underperformance. And CEOs suck at figuring out when to exercise their stock options, generally getting less money than they would by following conventional financial advice.
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A California lawsuit brought by elections watchdog the Fair Political Practices Commission has unraveled a network of nonprofits that the Koch Brothers used to launder millions in illegal campaign contributions. These were made to campaigns over two ballot measures: one that would have raised taxes on the wealthiest Californians; the other crippled unions' fundraising. The Kochs funneled $15m into these campaigns, using a series of front-organizations that were also apparently employed by other billionaires including Charles Schwab, Gene Haas, Bob Fisher, and Eli Broad.
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A statue of Josef Stalin in his hometown of Gori, Georgia, pulled down in 2010, will be re-erected, thanks to prime-minister Bidzina Ivanishvili, a billionaire who is friendly to Russia.
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Back in June, the Independent broke a huge story about a scandal whereby the UK Serious Organised Crime Agency sat on evidence of widespread use of phone-hacking and other dirty tricks by rich people, top-flight law-firms, telecoms companies and blue-chip firms.
Today, they've published an update: the list of companies that routinely engaged in criminal behavior is longer than earlier thought -- including pharma companies and many others -- and what's more, SOCA hid this information from the Metropolitan Police force, effectively insulating these top firms and toffs from any consequence for their criminality.
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Rolling Stone's Matt Taibbi is brilliantly incandescent in his column about the HSBC drug-money-laundering settlement with the US government. HSBC was an active, knowing participant in laundering billions in drug money, and was fined a small percentage of its net worth (five weeks' income). Meanwhile, private individuals who are suspected of being incidentally involved in the drug trade routinely have all of their property confiscated, down to their houses and cars, under America's insane forfeiture laws. Then they often go to jail.
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It doesn't take a genius to see that the reasoning here is beyond flawed. When you decide not to prosecute bankers for billion-dollar crimes connected to drug-dealing and terrorism (some of HSBC's Saudi and Bangladeshi clients had terrorist ties, according to a Senate investigation), it doesn't protect the banking system, it does exactly the opposite. It terrifies investors and depositors everywhere, leaving them with the clear impression that even the most "reputable" banks may in fact be captured institutions whose senior executives are in the employ of (this can't be repeated often enough) murderers and terrorists. Even more shocking, the Justice Department's response to learning about all of this was to do exactly the same thing that the HSBC executives did in the first place to get themselves in trouble – they took money to look the other way...
... So the executives who spent a decade laundering billions of dollars will have to partially defer their bonuses during the five-year deferred prosecution agreement? Are you fucking kidding me?
The Tax Justice Network's Estimating the Price of Offshore Revisted report says that over $21 trillion has been squirrelled away in offshore tax-havens by 90,000 super-rich tax-cheats (0.001% of the world's population). The crime was abetted by a network of "enablers" from banks like UBS, Credit Suisse and Goldman Sachs.
Much of the money has been looted from the world's poorest countries, whose populations live in conditions of crushing poverty exacerbated by even more crushing international debt. The report estimates that if those countries' oligarchs and crime bosses were to pay their fair share of taxes that these debts could be settled. For example, Nigeria has lost £196b to tax havens -- while the country's national debt was about $37b as of 2011.
Heather Stewart has more in The Observer:
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James Henry, former chief economist at consultancy McKinsey and an expert on tax havens, has compiled the most detailed estimates yet of the size of the offshore economy in a new report, The Price of Offshore Revisited, released exclusively to the Observer.
He shows that at least £13tn – perhaps up to £20tn – has leaked out of scores of countries into secretive jurisdictions such as Switzerland and the Cayman Islands with the help of private banks, which vie to attract the assets of so-called high net-worth individuals. Their wealth is, as Henry puts it, "protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy".
Jonah Lehrer takes to The New Yorker to discuss Thinking, Fast and Slow, the latest book from Daniel Kahneman, a psychologist who's won the Nobel prize in economics. Lehrer discusses Kahneman's contention that smart people are no less prone to cognitive bias than anyone else, but are prone to believing that they are immune to error. Kahneman himself admits that he makes systematic cognitive errors all the time, even though he's devoted his career to studying them.
This has particularly grim implications for a society that thinks it is a meritocracy but is really an oligarchy, because the competitively educated people at the top believe (incorrectly) that they don't need to have their intuitions reviewed by lesser mortals.
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And here’s the upsetting punch line: intelligence seems to make things worse. The scientists gave the students four measures of “cognitive sophistication.” As they report in the paper, all four of the measures showed positive correlations, “indicating that more cognitively sophisticated participants showed larger bias blind spots.” This trend held for many of the specific biases, indicating that smarter people (at least as measured by S.A.T. scores) and those more likely to engage in deliberation were slightly more vulnerable to common mental mistakes. Education also isn’t a savior; as Kahneman and Shane Frederick first noted many years ago, more than fifty per cent of students at Harvard, Princeton, and M.I.T. gave the incorrect answer to the bat-and-ball question.
What explains this result? One provocative hypothesis is that the bias blind spot arises because of a mismatch between how we evaluate others and how we evaluate ourselves.
Following up on the contentious NewsCorp shareholder meeting where the independent shareholders were to express their displeasure with the crimes committed on the Murdoch family's watch: the majority of the independent shareholders voted against continuing James and Lachlan Murdoch (Rupert's sons) continuing employment as senior execs in the company. Due to NewsCorp's odd structure the Murdochs get to overrule their shareholders, but if the upcoming shareholder meeting for BSkyB goes the same way, it will see some serious Murdoch tail-kickage.
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Michael Wolff, Murdoch biographer and author of The Man Who Owns the News, said it was now inevitable that James Murdoch would leave.
"James will probably go by himself, that's what everybody will be waiting for. I wonder too if Lachlan will step off the board. But could this drag on for another year? Yes."
Wolff said the size of the vote against Murdoch's son had created "a very difficult family moment..."
Tanner said the votes against the Murdoch sons and Bancroft showed shareholders were serious about wanting more independence at News Corp. "The overwhelming influence of the Murdoch family is not acceptable anymore," she said.
Charlie Stross goes on a tear with "A cultural thought experiment," looking at what the wealth of the 1 percent means, what it can't buy them, and how it might be viewed from a future society.
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The diminishing marginal utility law dictates that the more money we have, the less utility we get from any additional incremental gain. And this bites the top 1% very hard indeed.
Examine the world around us from the point of view of someone with a net income of $5M/year ...
Food is essentially free; you can afford to spend $1000 per meal, three meals a day, in the most expensive restaurants in London or Tokyo or Manhattan, and not make a dent in your income. (Oddly, even the hyper-rich don't typically spend $1000 on lunch every day: a more realistic expectation might be to dine out expensively twice a week, for $100K/year, and have the best of everything in-house the rest of the time, with a live-in chef, for another $100K/year.)
Clothing is essentially free; want a different $5000 suit for every day of the week? That's going to set you back only $35K! Spouse wants a dozen designer evening gowns a year? That's still going to be on the low side of $200K.
Housing is essentially free; $1000/day will rent you a penthouse suite in a five star hotel in Manhattan, while your mortgageable income will let you buy a palace in the $5-20M range. (There are places where you may need to spend more than $20M to buy a house; but not many of them.)
You don't have to do housework, interior decorating, cooking, driving, DIY home improvements, flight booking, or shopping (unless you want to).
The network of global corporate control (PDF), a study published in PLOS One, analyzes the ownership structures of the world's corporations and finds a tightly-knit cluster of 147 entities control 40 percent of the world's wealth. Not only is this creepy inasmuch as it puts a lot of power into a small number of hands, but it also suggests that the governance of much of the world's wealth is closely correlated, so one disaster could sweep like wildfire across them all:
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The work, to be published in PloS One, revealed a core of 1318 companies with interlocking ownerships (see image). Each of the 1318 had ties to two or more other companies, and on average they were connected to 20. What's more, although they represented 20 per cent of global operating revenues, the 1318 appeared to collectively own through their shares the majority of the world's large blue chip and manufacturing firms - the "real" economy - representing a further 60 per cent of global revenues.
When the team further untangled the web of ownership, it found much of it tracked back to a "super-entity" of 147 even more tightly knit companies - all of their ownership was held by other members of the super-entity - that controlled 40 per cent of the total wealth in the network. "In effect, less than 1 per cent of the companies were able to control 40 per cent of the entire network," says Glattfelder. Most were financial institutions. The top 20 included Barclays Bank, JPMorgan Chase & Co, and The Goldman Sachs Group.
From CNN, an article about the growing anger in China at "taizidang" ("princelings"), the spoiled children of the rich and powerful who make the news for driving luxury cars into innocent bystanders, demanding special treatment from law enforcement, and receiving light sentences in the end. The latest princeling in the public eye is 15 year old Li Tianyi, who drove his BMW into a family's car, then leapt out and berated the family for stopping suddenly, while their child cried in the back seat. Li was driving without a license, and had previously been sanctioned for 36 other moving violations while driving without a license.
The teenager grew up in an elite family, his parents both singers who frequently appear on stage and on television. His father, Li Shuangjiang, has long been a household name in China, best known for his renditions of patriotic military songs.
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After the incident, Li issued a public apology for spoiling his son and asked that he be given another chance, CCTV reported.
However, this failed to stop the tide of public anger. Many voiced their anger on Sina Weibo, China's popular micro-blogging site.
"We will give him another chance, but the law can't." posted @ Gujingyema. "For kids with family and social connections, the only way to deal with this kind of kid is to go by laws."