D Murali

For social change

D. MURALI | Updated on April 21, 2012


Social investing is ‘an excellent model of positive social change.' It is ‘a viable democratic idea in action for the betterment of humankind.' Thus declares ‘ For-Profit Social Investing: A Literature Review of Two Emerging Models' by David G. Prazak of Walden University ( www.ssrn.com).

The two models discussed in the paper are social impact bonds (SIB), and human capital performance bonds (HUCAP). A key difference between the two models is the level of risk/reward, the author explains.

Continuing the SWOT analysis, he points out that the ‘opportunities' are that social investing is a new tool for investors and foundations to obtain both social and financial returns, for states to obtain augmented funding for social programming, for non-profits to obtain more stabilised and predictable funding, for taxpayers to reduce or stabilise tax increases for more effective government, and for those who seek social services to access better programmes for better outcomes.

And, finally, the ‘threats or challenges' are that social investing may not be able to realise the ‘strengths' and ‘opportunities' because pilots that produce poor results could hamper efforts to foster this type of social improvement, cautions Prazak.

For the conscientious investor.

Board insights

Though the 128-page long, ‘ The 2011 U.S. Director Compensation and Board Practices Report' from The Conference Board is a must-read ( www.conferenceboard.org). Brought out in collaboration with NASDAQ OMX (‘the world's largest exchange company') and NYSE Euronext (‘a leading global operator of financial markets and provider of innovative trading strategies'), the research report authored by Matteo Tonello and Judit Torok analyses findings from a survey of 334 companies issuing equity securities registered with the US Securities and Exchange Commission (SEC).

A key finding of the report is that the growth in director compensation, observed for years across industries and revenue groups, may be the outcome of the expanding time commitment expected today from board members, as well as the potential exposure to liability resulting from more rigorous compliance requirements. “Raised bars on independence and expertise have further reduced the pool of qualified candidates, increased competition in the search for new directors, and, ultimately, may be related to increases in compensation.”

Among manufacturing companies, 14 per cent of the directors are women, the lowest of ‘the three industry categories,' even as academics make up 9 per cent of financial services boards, more than in manufacturing and non-financial services, one learns. Importantly, “More than 80 per cent of board members across industries are independent under major securities exchange listing standards and the percentage of independent directors is correlated with the size of the company.”

Worth a detailed study.

Published on April 21, 2012

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