What’s media assistance about anyway? Actually, there’s not really a straightforward answer to this question. I realized that when I listened to Daniel Kaufmann of the Brookings Institute earlier this week at an event hosted by the Center for International Media Assistance (CIMA) and Internews. Kaufmann’s answer was that media assistance is about media freedom. A free media is a necessary, although not a sufficient condition for successful media development.
The Climate Data Meeting yesterday was a big success. About 30 people attended the World Bank event in person, with a fairly equal mix of backgrounds in climate and application development. Another 21+ people attended via the online video conference.
Food prices are finally coming down after a year of spikes and high volatility. But we must remain vigilant. Prices of certain foods remain very high, and millions of people around the world are still at risk of suffering from malnutrition and hunger.
Let’s get to the numbers first.
Ten years ago when I was a graduate student piloting questionnaires in rural Indonesia, I sat with a translator and an elderly farmer in his front yard. Mid-way through the interview I asked this farmer the first of several standard questions related to general well-being and life satisfaction: “Thinking about your own life and personal circumstances, how satisfied are you with your life as a whole?” The farmer stared at us with a look of bewilderment on his face. So we asked a second time in a slow sympathetic tone.
In recent chats with officials from [an un-named country], I learned of the desire of educational policymakers there to leap frog e-learning through m-learning. This made an impression on me -- and not only because it succinctly was able to encapsulate four educational technology buzzwords within a five-word "vision statement". In many ways, this encounter helped confirm my belief that a long-anticipated new era of hype is now upon us, taking firm root in the place where the educational technology and international donor communities meet, with "m-" replacing "e-" at the start of discussions of the use of educational technologies.
Every country in the world has probably benefited in some way from the unprecedented access to knowledge and services brought about by the digital revolution. But producing knowledge banks and services has so far been a predominately rich-country business. The world’s poorest countries have generally not been able to participate in the production side of the digital economy and share in its rewards. This is changing, however, and an infoDev-led online challenge called m2Work is helping to drive the change. Job creation continues to be a priority of the World Bank and the m2Work competition shows an innovative approach to addressing this challenge.
Polling is now closed! In total, the debate received 189 votes, with 151 readers voting "yes" and 38 voting "no".
Yes, there is a good basis for concern that executive pay arrangements have contributed to excessive risk-taking during the run-up to the financial crisis. To be sure, other factors were clearly at work: the environment within which firms operated grew riskier due to asset bubbles generated by macro policies and global factors, and regulatory constraints on risk-taking and capital requirements were too lax. As financial economists generally recognize, however, for any given environment and outside constraints, the performance and risk choices of firms depend substantially on the incentives of firms’ executives. Unfortunately, rather than provide incentives to avoid excessive risk-taking, the design of pay arrangements in financial firms encouraged such risk-taking.
Of course, despite incentives to take excessive risks, some executives might have avoided doing so due to professional integrity, reputational concerns, or fiduciary duty norms. And some executives taking excessive risks might have done so due to their under-estimation of the risks taken. But economics and finance teach us that incentives often matter. Thus, to the extent that pay arrangements provided significant incentives to take excessive risks, the possibility that such incentives in fact contributed materially to the excessive risks taken in the run-up to the crisis should be seriously considered.
Conventional wisdom has it that compensation in the financial industry is responsible for much of the credit crisis. For instance, Paul Krugman states that “reforming bankers’ compensation is the single best thing we can do to prevent another financial crisis a few years down the road.” Unfortunately, the facts are stubborn and they do not fit this conventional wisdom.
Rüdiger Fahlenbrach and I study the incentives of bank CEOs before the start of the crisis and how the performance of banks is related to these incentives in a paper published in the Journal of Financial Economics. Our sample includes 95 large banks for which we have detailed information on CEO compensation, option holdings, and equity holdings. The paper shows that the value of the shares held by CEOs in the companies they managed in 2006 was roughly ten times the value of their total annual compensation. Such large holdings dwarfed annual bonuses (see Table 1). Experts in governance would have argued before the crisis that the interests of these CEOs were well aligned with the interests of the shareholders because they had so much skin in the game. The CEOs of Lehman Brothers and Bear Stearns had equity holdings in their firms worth approximately one billion dollars in 2006. With such holdings, it would have made little sense for CEOs to take actions that knowingly decreased shareholder wealth.
Today, or so the conventional wisdom goes, if you have a compelling issue and a laptop, you can influence people and win hearts and minds in the process. Hence the rise of online advocates, such as Change.org, who run campaigns for groups like Amnesty International for a fee. See the related article in the Washington Post. In Change.org’s case, the general public can create online petitions for free and get help and visibility for their campaigns.
Change.org was originally conceived as a nonprofit, but now it and other companies with a social purpose, e.g., Patagonia Inc., are part of a new and emerging group of “benefit corporations.” What are these corporations and how will they affect us in the future?