Increasingly powerful and influential, activist hedge funds are forces to be reckoned with. With their controversial tactics aimed at maximizing shareholder profit, they undermine sustainability practices, which they consider wasteful. Indeed, not only do they tend to suppress the corporate social responsibility (CSR) activities of the companies they target, they also target companies with stronger CSR records in the first place, as a new study reveals. But its authors Mark DesJardine, Rodolphe Durand, and Emilio Marti also show that these companies can divert the attention of activist hedge funds, and that policymakers and socially minded investors can intervene, too.
By Mark Desjardine , Rodolphe Durand
What do companies gain when they make political contributions? HEC Paris professor of finance Alexei Ovtchinnikov and his co-authors sought to pinpoint one benefit for firms—increased innovation—and to understand the mechanisms behind it.
By Alexei Ovtchinnikov
Uncertainty is an invisible trap, set to blind our capacity to avoid nonsense and create actual intelligence. Why invisible? Because uncertainty is powered by what we do not know, which is particularly difficult to become aware of. Anne-Sophie Chaxel, HEC Paris Associate Professor of Marketing and expert in cognitive biases, gives three objectives to keep in mind to embrace uncertainty, along with practice tool boxes to create intelligence.
What we are experiencing is similar to an earthquake of strong magnitude. Everyone agrees that there will be a before and after Covid-19. Whilst this earthquake assails us all, we do have control of the choices and decisions to be made. These will determine how crippled or strengthened we will be by the end... As always in times of crisis there are losers and winners, the cards are redealt.
Today's coronavirus crisis has driven down our economy. Such a pause has a negative impact on world trade and economic growth; its social implications (loss of income and employment, increased inequality…) will have explosive consequences. In this context, there are many calls for a model change: let's not just press the "pause" button to restart the existing model, let's use this opportunity to reinvent it!
Do activist hedge funds help or harm the companies they target? Mark DesJardine of Pennsylvania State University’s Smeal College of Business and Rodolphe Durand of HEC Paris (members of the HEC’s Society & Organizations Institute) investigated the long-term effects of hedge fund activism on companies that get targeted by these activists. In their extensive research, they found the value of targeted companies spikes the first year after targeting but drops in later years relative to similar non-targeted companies. In addition, the authors found that being targeted by activist hedge funds put a halt to the broader investment portfolios and socially responsible efforts of companies.
In an article published this month in the journal Business & Society1, Aurélien Feix, research fellow at HEC, and Déborah Philippe, HEC alumna and professor at the University of Lausanne, analyze narratives that promote voluntary Corporate Social Responsibility (CSR) practices as a privileged means to combat social inequality and environmental degradation. In view of the similarities that exist between these narratives, the authors argue that they must be conceived of as variants of one and the same “metanarrative of CSR”. They show that this metanarrative stays ambivalent about crucially important questions, including that of the results that can realistically be expected from activities performed voluntarily by business firms that are bound by profitability constraints, and subjected to the capitalist growth imperative. Therefore, they call for challenging the comforting, but largely inconsequential, rhetoric of the metanarrative of CSR.
In a context of tightening of public purse strings, governments increasingly rely on public-private partnerships (PPP) to design, build, finance, maintain and operate infrastructures and services, were once purely state managed. This includes traditional infrastructures, such as bridges and roads, and services, such as schools and hospitals. Researchers have found that the key factor in attracting strong private partners to build efficient PPPs is the quality of national institutions.
By Bertrand Quélin
Could scandals actually be good for society? Often brushed aside as simply media hype or gossip, new research shows that scandals can be potent opportunities for regulatory authorities to challenge individuals or corporations that are otherwise untouchable because of their high status.
By Yasir Dewan
Disney is going live in the US. Time Warner, one of the biggest Hollywood studios, is launching HBO Max. Netflix faces a new competition with other video streaming platforms such as YouTube, Amazon, Apple... Can Netflix survive to this? If so, how? We interviewed Ankur Chavda, Assistant Professor freshly arrived at the Strategy and Business Policy Department of HEC Paris, to comment Netflix’s strategy to ensure its success in the face of this new competition. Ankur Chavda’s recent research uses Netflix’s success to explain how incentives can trigger innovation within firms.
