As a result, executives were not exposed to the potential negative consequences that large losses could bring about for preferred shareholders, bondholders, and the government as a guarantor of deposits.

Equity owners in banks should not get a free ride.

Executives interests were tied to the value of their firms common shares or even to the value of options on such shares.

Unlike common stock, bonds, and real estate, the value of gold does not reflect underlying earnings.

Some of that money will be paid out in dividends. Some will be used to buy back stock thus concentrating the equity and raising the value of the stock that is not bought back.

Thus, rather than tying executive pay to a specified percentage of the value of the bank s common shares, compensation could be tied to a specified percentage of the aggregate value of the bank s common shares, preferred shares, and all the outstanding bonds issued by the bank.

In their view, the big banks should be funded much more with equity perhaps as much as 30 of their capitalization.

To the extent that executive compensation is tied to the value of specified securities, such pay could be tied to a broader basket of securities, not only common shares.

Substantial net worth is often required of investors by the law, since private equity funds are generally less regulated than ordinary mutual funds.

First, capital requirements should be set as a straightforward ratio of common equity to total assets, thereby abandoning all reference to banks own risk management models.

Equity holdings are somewhat more concentrated, but many middle class Americans have still benefited indirectly through their pension funds.

BEIJING China s stock market has been a hot topic since the summer, when a rapid rise gave way to a major plunge, triggering a global equities sell off. The question now is what can be done to prevent further volatility.

The logic behind that decision was that, previously in the crisis, equity shareholders had been severely punished when their firms were judged too big to fail.

It is recommended that this disclosure include the concentration of shareholdings, for example the holdings of the top 20 largest shareholders.

In the past, bank executives bonuses were often based on accounting measures that are of interest primarily to common shareholders, such as return on equity or earnings per common share.

Protection of shareholders

Translating policies, legislation, plans and budgets into large scale accelerated action

The more thinly capitalized banks are, the more severe these distortions and the larger the expected costs rising from insulating executives from potential losses to non shareholder stakeholders.

In most governance systems, it is generally considered good practice to submit questions of extraordinary transactions (including mergers, acquisitions and takeovers) to a general meeting for shareholder approval.

The group discussed the fact that disclosure should be made of the process for holding and voting at annual general meetings and extraordinary general meetings, as well as all other information necessary for shareholders to participate effectively in such meetings.

Taming the Stock Option Game

The Dead Cat Bounce

Possible models

Potential options

The US government has been particularly aggressive in supporting the stock market since the peak of the equities price bubble in 2000, most notably cutting interest rates repeatedly.

Issuing the stock to the public at an inflated price a year ago, the shares initially traded even higher.

China s Abnormal Stock Market

The Stock Bond Disconnect

The Uptick s Downside

The stock market is very active.

Five possible topics include

Several outcomes are possible.

The possible conclusions are stark.

VI Possible ways forward

Potential funding sources

Potential beneficiaries

The Federal Republic of Germany acted as trustee for the owners and eventually took ownership of unclaimed stocks.

Are Equities Overvalued?

Direct injury to shareholders

The same is true with stock prices.

The stock market has dropped today.

Ownership and shareholder rights

Draft article 11 Protection of shareholders

In a financial restructuring, shareholders typically get wiped out, and bondholders become the new shareholders.

As the stock markets tumbled in September 2008, the fund was able to buy more shares at low prices.