On May 7, 1998, the U.S. Commodity Futures Trading Commission, chaired by Brooksley Born, issued a "Concept Release," inviting public comment on the relevance and appropriateness of existing regulation of the over-the-counter (OTC) derivatives market, a market with a notional value of $29 trillion dollars. The CFTC Concept Release, often a precursor to regulatory proposals, sought analysis of "the benefits and burdens of any potential regulatory modifications in light of current market realities." The Release was not welcomed by other regulators or by the Clinton administration. Just hours after it was published, U.S. Treasury Secretary Robert Rubin, Federal Reserve Board Chairman Alan Greenspan, and Securities and Exchange Commission Chairman Arthur Levitt announced their "grave concerns" about it in an unusual joint press release that minced no words. This case explores the battle between Born, on the one hand, and a large number of policymakers, regulators, legislators and industry representatives, on the other, over whether and how greater regulatory oversight should be applied to the OTC derivative market. Born was defeated in her efforts; OTC derivatives played a central role in the 2008-09 financial crisis.
This (B) case provides the 2009 reflections of former SEC Chairman Arthur Levitt on CFTC Chairman Brooksley Born's 1998 efforts to consider regulating the OTC derivative market. It also provides a summary of the aspects of the 2010 Dodd-Frank Act that regulate these derivatives.
Russian and German energy firms initiated the Nord Stream natural gas pipeline project with strong political support from their home governments but encountered resistance from other states. Although the pipeline would connect Russia with Germany directly, the project was not simply a bilateral matter. First, a need to secure construction permits in multiple jurisdictions around the Baltic Sea involved other countries. And second, Germany's membership in the European Union entailed compliance with goals and values of the entire union, which stressed the imperative of collective action in energy matters and dangers of succumbing to "national reflexes." Thus the implications of the project became a matter of concern to the entire European Union but Europeans struggled to articulate the meaning of Nord Stream: was it a "separate peace" between Russia and Germany to the detriment of the rest, or was it a pan-European deal to the benefit of all? As the case chronicles, the success of Nord Stream depended on the ability of its creators to ensure that latter view prevailed over the former.
Nabucco natural gas pipeline, initiated by a group of European energy companies, was intended to connect the broad gas-rich region of the Middle East and Central Asia to Europe for the first time, which would diversify supply sources. At the same time, an Italian-Russian consortium announced South Stream natural gas pipeline, which would diversify transport routes for the delivery of Russian gas to Europe. To win support, backers of Nabucco and South Stream insisted that their projects were aimed at fulfilling goals of the energy policy of the EU (reduction of use of fossil fuels to combat climate change and guaranteed physical availability and affordability of imported fossil fuels). But, as the case demonstrates, both projects progressed slowly, encountering many technological and commercial challenges, which, however, were eclipsed by the extreme politicization of Nabucco and South Stream: pipelines became a factor in domestic politics of several European nations and figured prominently in relations between the EU, EU states, Russia, Turkey, former Soviet republics in Caucasus and Central Asia, and the United States. Although they would comprise only a small part in the overall architecture of Europe's energy security, the case of Nabucco and South Stream reveals the limits of the ambitious energy policy of the EU.
Fu Chengyu is the fifth CEO to lead China National Offshore Oil Company - an SOE founded in 1982 to exploit Chinese offshore deposits. In 2010 he is trying to decide how to drive further growth in a company that has grown 556 times in less than 30 years, with profits grown 2600 times. He believes that the way CNOOC has been managed, a blend of market orientation and concern for employees and the nation has contributed importantly to the success. His challenge is to allocate resources among new areas to explore for petroleum and new sources of energy, and to develop managers with the capability of leading those businesses in the face of world class competitors. Both technical talent and the ability to integrate the efforts of non-Chinese leaders are involved.
This note seeks to provide an overview of farmland investing; the investment thesis behind investing in agriculture, how and why investors would choose farmland, and the general risks and return characteristics of this asset class. In recent years, a growing number of individual and institutional investors have allocated a portion of their capital into agricultural farmland. Private investors, public companies, and sovereign wealth funds are now all currently purchasing and selling large amounts of farmland for profit.
Alejandro EIsztain, CEO of Cresud S.A., is faced with the difficult choice of whether to sell, develop or continue to hold the 151,000 hectares of remaining undeveloped farmland at the company's Los Pozos farm in Argentina. Developing the land will further expose Cresud to a variety of risks related to owning and operating farmland, but the potential financial rewards are potentially significant. As competition has increased and farmland values have skyrocketed in the last eight years, Cresud's overall corporate strategy has been to increasingly focus on development opportunities outside of the country - in areas such as Brazil, Paraguay and Bolivia. Alejandro's looming decision on Los Pozos is in many ways, reflective of choices facing his company, in general.
In 2005, the vice-president of Lundbeck, a Danish based pharmaceutical firm, needed to decide what to do with one of his most promising subsidiaries, Lundbeck Korea. Over its short lifetime, under the leadership of the country manager and the Asia regional manager, the subsidiary had grown well beyond the original goals set for it. The vice-president wanted to create a reporting structure and management mix that would balance the local demands that Lundbeck Korea required for growth with Lundbeck's overall strategy of specialization, speed, integration and results. The case also traces Lundbeck's internationalization efforts in Asia over the past 20 years. The company had grown from pure licensing arrangements to establishing its own country level subsidiaries. This case introduces the dynamic tensions between taking advantage of local management expertise and executing a corporate strategy developed for an entire global group. In addition, it illustrates the importance, but difficulties, of being sensitive to local management goals, while promoting a global corporate culture.
Pfizer Inc., the largest research-based drug company in the world, was faced with multiple challenges, including fierce court battles with generic drug companies over the patents of Lipitor, reduced productivity from research and development, and a changing external health care environment globally, with growing importance of emerging markets. These challenges were set within a business environment characterized by multi-level change and uncertainty.<br><br>The case dwells on the newly appointed chief executive officer’s strategy in transforming a giant pharmaceutical organization by changing its business model, strategy, and structure to foster organic growth and explore external opportunities. Did Pfizer need more change or was it merely a matter of time before the new strategy generated results?
The case presents the situation faced by the board of directors at Hydro One, a government-owned Canadian electric utility, as they discuss updating the current executive compensation packages because of the pending privatization of Hydro One. As a government owned enterprise, compensation was moderated by the job security and prospects of career advancement in the public sector, but the imminent privatization required the compensation system to be revisited. The case presents details of the current compensation system for Hydro One's key officers and the comparative data for their counterparts at similar firms. The case allows for discussion of the interplay between corporate governance processes, the corresponding responsibilities of directors and the decisions they make, in particular chief executive officer and executive compensation. The postscript to the case allows for a lively class room discussion of corporate governance, fiduciary responsibility and communication among major stakeholders.
In June 2008, the Kimpton Hotels' area director of revenue management (director) for Washington, D.C. was trying to process the most recent customer information report from Priceline.com (Priceline). In an attempt to improve revenues during periods of low occupancy at the hotel, the director had recently been using Priceline's name your own price bidding format. While using this sales channel had limited success, the director was wondering the best way to maximize the revenue coming from Priceline without cannibalizing existing sales or tarnishing the Kimpton brand. His challenge was to create a pricing strategy that would determine the optimal posted price for rooms in the Washington, D. C. hotel as well as the number of rooms that should be provided to Priceline.
In June 2008, the Kimpton Hotels' area director of revenue management (director) for Washington, D.C. finished creating a pricing strategy that would determine the optimal posted price for rooms in the Washington, D. C. hotel as well as the number of rooms that should be provided to Priceline.com. He realized there was even more potential to gain revenue by posting more than one price; however, this would add further complexity into the strategy and he was unsure of the potential impact of having multiple posted prices.
The Kimpton Hotels' area director of revenue management (director) for Washington, D.C. was excited about using Priceline.com to help fill rooms on some of Kimpton's low-demand weekends. He estimated the coming weeks' demand across three rate classes and across three lengths of stay (LOS), and he wanted to make sure he did not use Priceline.com too aggressively by releasing too many rooms onto the site.
Apple Inc. is one of the world's most successful and most recognizable companies. Over its 30 year existence, the company had seen a lot of changes in the computer industry. What would the future hold for the computer giant in a rapidly changing world? How should the company allocate resources between its more traditional offerings (computers) and its newer products (iPods, iPhones, Apple TV, etc.) in order to maintain and improve its market position. Also, how should Apple's unique retail strategy be used to support the company's product decisions, and by capitalizing on new and emerging trends thus further maintaining its competitive advantage.
MME is a farmer-owned cooperative that produces ethanol from corn. The cooperative has performed well in comparison to other producers but margins in the industry had declined as industry production levels neared market demand limits. MME farmers needed to decide whether to take advantage of their success and expand through acquisitions, whether they should sell the plant, or whether they should continue current operations. MME must consider ongoing regulatory changes that impacted the industry, the possible impact of imported ethanol, the power of the petroleum industry which bought its product, and ongoing uncertainty about corn and ethanol price swings.
Raj Gupta had led the specialty chemical company Rohm and Haas without drama for years when some of its most important shareholders asked him to orchestrate its sale. Surprised but determined to do his best for the company, in July 2008 he arranged an $18 billion deal with competitor Dow Chemical, which the industry press called "the deal of the century." But Dow was relying on cash from a planned joint venture of its own with Kuwait Petroleum, and when the stock market plummeted, the joint venture-and Dow's financing-fell through. Then things got really interesting. Would Dow try to walk away from the deal? Could Rohm and Haas insist that it go through in spite of the unforeseen global meltdown? How airtight was that agreement? Gupta, who learned he had cancer in the midst of all this, had to find a way through the complicated financial and economic issues. In this first-person account he talks about the most difficult deliverable ever asked of him-seeing through the sale of his company as the world economy was collapsing.
For decades, computer scientists have tried to teach computers to think like human experts. Until recently, most of those efforts have failed to come close to generating the creative insights and solutions that seem to come naturally to the best researchers, doctors, and engineers. But now, Tony Hey, a VP of Microsoft Research, says we're witnessing the dawn of a new generation of powerful computer tools that can "mash up" vast quantities of data from many sources, analyze them, and help produce revolutionary scientific discoveries. Hey and his colleagues call this new method of scientific exploration "machine learning." At Microsoft, a team has already used it to innovate a method of predicting with impressive accuracy whether a patient with congestive heart failure who is released from the hospital will be readmitted within 30 days. It was developed by directing a computer program to pore through hundreds of thousands of data points on 300,000 patients and "learn" the profiles of patients most likely to be rehospitalized. The economic impact of this prediction tool could be huge: If a hospital understands the likelihood that a patient will "bounce back," it can design programs to keep him stable and save thousands of dollars in health care costs. Similar efforts to uncover important correlations that could lead to scientific breakthroughs are under way in oceanography, conservation, and AIDS research. And in business, deep data exploration has the potential to unearth critical insights about customers, supply chains, advertising effectiveness, and more.
CEOs and other senior executives these days must manage countless complex, high-stakes conversations across functional areas and divisions, with alliance partners and critical suppliers, and with customers and regulators. The pressure of such negotiations make them a lot like U.S. military officers in an Afghan village, fending off enemy fire while trying to win trust and intelligence from the local populace. Both kinds of leaders face what the authors call "dangerous negotiations," in which the traps are many and good advice is scarce. Although the sources of danger are quite different for executives and officers, they resort to the same kinds of behaviors. Both feel pressure to make quick progress, project strength and control (particularly when they have neither), rely on force rather than collaboration, trade resources for cooperation rather than build trust, and make unwanted compromises to minimize potential damage. The authors outline five core strategies that "in extremis" military negotiators use to resolve conflicts and influence others: maintaining a big-picture perspective; uncovering hidden agendas to encourage collaboration; using facts and fairness to get buy-in rather than grudging support; building trust; and focusing on process as well as outcomes. These strategies provide an effective framework with which business negotiators can change their thinking ahead of the deal as well as their actions at the bargaining table.
When responding to a complex, fast-moving crisis, leaders must constantly adapt their mental models and create a "unity of effort," argues Allen, a retired U.S. Coast Guard admiral and the national incident commander for the Deepwater Horizon oil spill. That's a much bigger management challenge than approaching the job as a military operation and drawing on unity of command, and it can require nuanced and creative strategies, such as deciding to go "off book" when standard protocol simply won't work. In this edited interview, Allen-who also brought post-Katrina New Orleans back from the brink of anarchy and headed the Coast Guard's response to the September 11 attacks along the eastern seaboard-stresses the need to lead both from headquarters and on the ground. He discusses how the phenomenon of publicly available, real-time information has affected crisis management in recent years, addresses the challenges of managing multiple public and private stakeholders, and shares his thoughts on how to lead when an anxious public is counting on success.