Stephen M. Davis, Ph.D., is president of Davis Global Advisors, Inc. Since 1988, he has advised institutional investors, stock exchanges, and organisations such as the OECD and the World Bank. He is also a Pulitzer Prize-nominated author. He is a regular speaker at conferences in Africa, Asia, Europe, Latin America and North America

Jon Lukomnik is founder and managing partner of Sinclair Capital LLC. Prior to this, Lukomnik served as deputy comptroller for the City of New York. He was a founder of GovernanceMetrics International, a global corporate ratings service and invented a patent-pending ratings algorithm

David Pitt-Watson is chair of Hermes Equity Ownership Services. His team of over 50 is responsible for shareholder engagement, corporate governance and voting in all the 3,000 companies in which Hermes’ clients invest. He gained 17 years of experience in boardroom decision-taking and corporate transformation as a former managing director of Braxton Associates Corporate governance is no longer hip. Resurgent financial markets and corporate profits seem to have dulled the memories of investors’ losses and the massive scams from the early 2000s. Still, there is definitely a timelessness to the subject of the public investor’s role in corporate governance.

The authors cite the need for a ‘civil economy’ — institutions representing people outside government and business ownership, such as trade unions, NGOs, advocacy groups, etc. They advocate sustainable enterprises that maximise shareholders’ returns not just immediately, but over long periods. Today, citizen investors and funds own more than half the shares of all listed companies in the US, compared to less than 20 per cent in 1970. Outside ‘activist’ investors are pushing for a civil agenda in corporate management, and they, according to the authors, are the New Capitalists.

The New Capitalists, they say, will discipline the old capitalists. Greed is good, albeit for sustainable economic, environmental and social gains. They argue that the real spirit of capitalism is to generate profit for the entrepreneur through catering to people’s needs and desires, and to add capital through saved profits for future needs. Capitalism is exploitative, they say, when ownership of enterprises is concentrated in the hands of a few, as it divides the world between us and them.

Corporate capitalism has had a chequered reputation throughout history. One US Supreme Court judge described the corporation as a Frankenstein’s monster that was now controlling the same lawmakers who originally created it. Even Adam Smith, the father of capitalism, was wary of companies. Management, he said, could not be expected to behave in an entirely responsible way as they were looking after other people’s money, not their own.

Corporations also cannot now claim that they are merely tools of making profit and not a moral being. Ralph Nader launched his campaign for more inclusive decision making and socially responsible behaviour by the management of General Motors, arguing that public shareholders not only owned a part of the company’s assets and profits but also part of the moral responsibility for its actions.

STEPHEN M. DAVIS, Ph.D., is president of Davis Global Advisors, Inc. Since 1988, he has advised institutional investors, stock exchanges, and organisations such as the OECD and the World Bank. He is also a Pulitzer Prize-nominated author. He is a regular speaker at conferences in Africa, Asia, Europe, Latin America and North America

JON LUKOMNIK is founder and managing partner of Sinclair Capital LLC. Prior to this, Lukomnik served as deputy comptroller for the City of New York. He was a founder of GovernanceMetrics International, a global corporate ratings service and invented a patent-pending ratings algorithm

DAVID PITT-WATSON is chair of Hermes Equity Ownership Services. His team of over 50 is responsible for shareholder engagement, corporate governance and voting in all the 3,000 companies in which Hermes’ clients invest. He gained 17 years of experience in boardroom decision-taking and corporate transformation as a former managing director of Braxton Associates

Though the new capitalist trend may be a recent one, the authors point out that shareholders and citizens taking on promoters and managements is as old as the world’s very first company, Vereenigde Oost-Indische Compagnie or the Dutch East India Company.

It was formed in 1602 by raising 6.45 million guilders from around 1,000 people. Its purpose was to establish trade with South-East Asia. Pacifist citizens protested against the aggressive charter of the company that allowed it to wage war on competitors from other countries. A few years later, shareholders clashed when the promoters pocketed all the cash and gave them sacks of nutmeg as a dividend. The Dutch government intervened and granted the right of free exit and entry into the company for outside investors, thus creating the first permanently traded stocks.

Davis, Lukomnik and Pitt-Watson put up a sort of Ten Commandments for the new capitalists. Of these, the paramount commandment is to maximise money for the shareholders because without profits there would be no future incomes or pensions. However, they focus on regulating executives by linking their payments to long-term profits and not quarterly performances, preventing the chief executives from indulging in wasteful investments to pursue personal glory. They say that this also leads to greater transparency on decisions made on investments.

They stress on resolving the conflict of interest that exists between mutual fund managers, analysts and rating agencies.
Although this group is supposed to protect the interests of outside investors, they are often patronised by company management. They say that such conflict can be avoided by remodelling payment of fund managers based on absolute capital enhancement rather than on relative returns. Additionally, they say that new capitalists should hire their own research and rating agents.

Ultimately, citizen owners are the final regulators of companies since they are the true owners.

I am currently reading Winning by Jack and Suzy Welch. Of late, most of my reading has been oriented towards management books; Good To Great, Built To Last, etc.

When you read Winning, you realise that the same rules work for both a multi-billion dollar company and a start-up. The chapters on people management and strategy are refreshing and written in Jack Welch’s typical no-nonsense style. His views on vision, strategy and how to appraise employees are different, even counter-intuitive in some cases.

I buy books based on recommendations from friends and by browsing bookstores or the Internet.

If not used properly, the advice on the pages of this book may prove deadly to your career. Ferriss provides scores of tips that promise to cut the time you spend in an office and increase the time you spend doing the other things you love. The author spent five years studying the rich and famous and, after carefully studying their work habits, claims to have applied them successfully to his own life. Nothing better than lessons from someone who lives what he preaches.

Mukul Kesavan is one of the few readable sports writers in India. So, this Penguin Viking compendium of his assorted cricket pieces written for Wisden Asia, Cricinfo, Telegraph, et al, is a treat for old-world cricket fans — the sort who still get goose-bumps from a well-contested but drawn test match.

Kesavan relishes the longer form of the game. His title ‘Men In White’ is a rejoinder to the now common moniker of the Indian cricket team as the ‘Men In Blue’. For him, limited-overs games are short stories compared to ‘epic’ test matches. Test cricket has possibilities of several sub-plots and even tragic heroism. One exemplified by Sunil Gavaskar’s 91 runs on a minefield of a pitch, against Pakistan in a losing cause in 1987.

Kesavan’s writing is remarkably fan-like unlike that of a seasoned hack whose tendency is to spout knowledge of the game. But he does not shy away from writing about cricket’s dark side.

The book’s highlight, however, is Kesavan’s recollection of galli cricket and of the vivid and colourful radio commentary that preceded TV broadcasts.

Thankfully, it is not merely sugary nostalgia. The book is an authentic re-creation of the good-old days. Those who have played the game by using terms such as ‘Over Up’ instead of the official expression ‘Over’ will thoroughly appreciate Kesavan’s effort. Although the articles are second-hand — a patch-up job of already published pieces — it is definitely not second-rate.