Management and the Financial Crisis (We have met the enemy and he is us …)

The financial crisis of 2008-9 has revealed that our broad model of corporate governance is broken, independent of the shortcomings in the regulatory system. Managers and boards of directors in scores of systemically important firms failed to protect employees, customers, or shareholders, and placed the global financial system at risk. I assert that the root cause of the crisis can be found in five related systems: incentives; risk management and control; accounting; human capital; and culture. The worst firms had lethal combinations of strong incentives, weak control and risk management, flawed internal and external accounting, low skill and/or low integrity people, and corrosive cultures. Piecemeal attempts to fix elements of corporate governance will fail. The problem, to illustrate, is not just the structure of compensation. Nor will increasing required capital prevent problems at companies with strong incentives and weak controls. I believe that we may need a new kind of external agency for systemically risky firms that would take a holistic look at the five systems to identify weaknesses, make recommendations to managers and boards, and set regulatory policies, including assessing charges for insuring against losses. Without such a comprehensive assessment and improvement plan, boards cannot do their jobs, and the system will remain as subject to calamitous events as it was before the crisis.

The Entrepreneurial Venture -2/E.

Newly updated, this comprehensive text covers basic concepts and emerging issues on entrepreneurship. Emphasizing that new venture creation requires planning and skill as well as inspiration, these readings portray the entrepreneur as the ultimate general manager, responsible for orchestrating the relationships among all parts of the organization. Profiles and examples from variety of companies and fields illustrate the diverse, imaginative ways in which entrepreneurs think and act. These readings provide a practical-oriented grounding that can function alone or be interwoven with case studies and other material. The accompanying questions will provoke new ideas and fuel discussion. For entrepreneur, this book can be used as both a handbook and an authoritative source of reference. The readings cover every phase of entrepreneur’s experience: generating and assessing ideas, preparing a business plan and enlisting stakeholder support, raising capital, and managing the operations and finances of the growing venture

A Soft Budget Constraint Explanation for the Venture Capital Cycle

We explore why venture capital funds limit the amount of capital they raise and do not reinvest the proceeds. This structure is puzzling because it leads to a succession of several funds financing each new venture which multiplies the well known agency problems. We argue that an inside investor cannot provide a hard budget constraint while a less well informed outsider can. Therefore, the venture capitalist delegates the continuation decision to the outsider by ex ante restricting the amount of capital he has under management. The soft budget constraint problem becomes the more important the higher the entrepreneur’s private benefits are and the higher the probability of failure of a project is

Business fundamentals. : V. 1. : Financing entrepreneurial ventures.

V. 1.; v, 101 p.; 28 cm