It is with no little trepidation that I wade into this potentially explosive subject during the early innings of Trump II. TL;DR:  It remains in the long-run interest of companies to foster a talented and diverse workforce.

I have long believed that there are two principal reasons to support a diverse workforce. First, it is the the right ethical thing to do in the societal context in which most companies operate.  Second, it makes fundamental business sense.

Since many may disagree with my belief in what business ethics require, and individual attitudes vary over time and place, for the rest of this post I will limit my arguments in favor of diversity to the core business case.

Let’s start by considering the case of a typical Fortune 500 publicly traded corporation. In his oft-cited 1970 article on the role of the corporation, the Nobel laureate, free-market champion,   Milton Friedman, argued:  “[T]here is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits…”  See  Milton Friedman on the Social Responsibilities of the Corporation.

Even Friedman explicitly recognized in this article that there could be business contexts in which it makes sense to take into account community or similar factors (“…that may make it easier to attract desirable employees, it may reduce the wage bill or lessen losses from pilferage and sabotage or have other worthwhile effects”).  Friedman was adamant that these were in fact profit motives and not some socialist “subversive doctrine.” 

I agree with Friedman that there is often a strong,  purely profit-advancing reason for company leaders to advance seemingly social responsibility goals, including diversity.  Where I may differ is in the length of the relevant profit measuring period. This often arises in the activist context where a given investor argues in favor of drastic cost cuts or restructuring moves that may boost the short-term profitability of the corporation at the cost of long-term shareholder value.  Thus, supporting local community charities, investing to reduce polluting discharges and, as I argue below, attracting and retaining a diverse workforce are core “Friedman-friendly” profit goals for companies that are “built to last.”  (See Collins, J. C., & Porras, J. I. (1994) Built to Last)

Now I turn to the economic case for diversity.  If I as the leader of a public company want to increase my share price I need to care about increasing the profits of my enterprise.  In the short-run, I could probably do this by reducing costs, but the market is smart and understands that cost cuts are not infinitely repeatable (“you can’t cut your way to greatness”).  This is why revenue growth, and repeatable organic revenue growth, attracts a higher multiple. This in turn requires delighting customers, anticipating their needs and developing and scaling innovative products and services.

As much as I would like to believe that a company full of white, balding 65-year old men like me will deliver the required innovation, I know first hand that a motivated staff who come from and represent different communities, exhibit different skin colors, pray to different gods (or none at all), identify as different genders and respect the difference of others, produce the best business results.

At this critical moment in US history, it is understandable that many companies will want to lower their social responsibility profile and not “lead with their chins.” Nonetheless, just quietly continue to go about your business of maximizing long-term profits by attracting the best, diverse talent to your company.

Originally posted on Substack at https://open.substack.com/pub/tomglocer/p/diversity-is-not-dead

There is a fierce debate in Washington policy circles and on Wall Street these days as to whether the tariffs President Trump is so eager to impose on foes and allies alike will be inflationary. There is also an ongoing question as to what Trump seeks to achieve: Bargaining leverage for some unrelated goal (eg reducing Canada’s negligible Fentanyl exports to the US); revenue raising for the US Treasury; or a more equitable balance of trade with other countries.

When questioned by journalists as to who will ultimately pay for these surcharges, Trump always insists it will be our foreign counterparties. This is obviously untrue and Trump should understand this about as well as he understands that Biden won the 2020 election. But what if the President has an ulterior political motive?

It has long been debated whether the US should raise part of its revenues through a Value Added (VAT) or consumption tax. Policymakers have resisted this because it is so demonstrably regressive in its application. I.e., as shown in the chart below, lower-earning Americans would pay a much higher proportion of their incomes on necessary goods than higher earners.

Thus, it would not be good populist politics to cut healthcare and other social services, reduce taxes on corporations and high earners, and pay for this with a regressive consumption tax on those least able to afford it.

Like so much of the MAGA cultural agenda, VAT-cum-tariffs are another magician’s slight of hand to distract the mark.

 

Originally posted on Substack at https://open.substack.com/pub/tomglocer/p/tariffs-are-a-vat

 

Axios reports that the White House is barring the Associated Press from the Oval Office and Air Force One over the AP’s refusal to obey President Trump’s executive order renaming the Gulf of Mexico as the Gulf of America. See https://www.axios.com/2025/02/17/trump-ap-gulf-america-mexico.
I’m proud to report that my former colleagues at Reuters have maintained a similar naming convention. Perhaps they will be the next news organization banned from access and we will be left with only NewsMax, Breitbart and Steve Bannon’s War Room to cover the Presidency.

The White House Press Corresponds Association has protested the AP’s expulsion, but more is required: All responsible news organizations (Fox and WSJ included) should boycott White House press conferences, gaggles and Air Force One flights until the AP is reinstated. Failing to band together now will only embolden this administration to flex its censorial muscles more aggressively. When Trump declares that all news groups must hereafter refer to Greenland as “Trumpland” or Mars as “Elonworld” will they bend the knee?

I understand more than most the competitive demands of the news business and the threat that lack of access to the world’s number one newsmaker entails. All the more reason to stand up and be counted today. The Gulf of Trump today is but an early test similar to the inauguration crowd size at the beginning of Trump I. It is also a distraction and diversion from more serious threats to the republic.
As Thomas Jefferson wrote in his famous 1787 letter to Edward Carrington:

“… were it left to me to decide whether we should have a government without newspapers, or newspapers without a government, I should not hesitate a moment to prefer the latter.”

 

Originally published on Substack at https://open.substack.com/pub/tomglocer/p/the-gulf-of-trump

If I needed any reminder of the stakes in this upcoming presidential election, this weekend’s 40th anniversary reunion of my law school class provided the wake up call.  It also provided a not so gentle reminder that I am getting older.

Predictably, the 2024 election was a topic of significant discussion.  It will come as no surprise to readers of this blog or my Twitter feed that I have not suddenly been converted to the view that Donald Trump is a wise and thoughtful leader who can make our already great nation, even greater. Nonetheless, my reasons for voting against Trump again have evolved and perhaps become more nuanced.

Being economically conservative and socially liberal means there is much I find objectionable with both parties’ platforms.  My conservative leaning friends (yes there are many – at least when the label used to mean something) are quick to point out that the Donald’s bark is worse than his bite and that once in office, he will likely be constrained by sensible Cabinet appointees and our overall system of checks and balances.

The problem is that I’ve seen this movie before and the self-obsessed lead actor has learned some lessons on how he can let “Trump be Trump”.  Our constitutional democracy is 235 years old and and it has survived some severe threats, most prominently the US Civil War.  I do not suffer from Trump derangement syndrome to the point where I believe his election will lead to the immediate downfall of our democracy or that he will be able to completely abolish the rule of law.  However, why take the risk?

Even if  you think that Kamala Harris is an awful person (I do not) or wrong on every policy issue (I don’t support them all), nonetheless why risk this noble 200+ year-old experiment?  Even if there’s only a 10% chance that Trump would push the US to resemble Victor Orban‘s Hungary or worse, why not kick the can down the road another four years and allow a less dangerous conservative leader to emerge from the ashes of the Republican party?

Is the situation in the United States really so dire when you compare us to other nations that it’s worth taking such a chance?  Perhaps you believe that there is a non-zero risk that Harris will turn the US towards communism, but do you really believe that she would follow Trump’s lead and become only the second president to refuse a peaceful transition?

I am an unapologetic institutionalist; I believe in the rule of law, not men.  I am also a risk manager and I think it’s foolhardy to gamble with our imperfect yet peacefully perfectible system.   In law school I read John Rawls’ A Theory of Justice and was taken by his adoption of the  “maximin” principle from decision theory.  In short, it provides that under conditions of limited information on outcomes, prudence requires eliminating the worst possible outcome.

So let’s not throw the “Hail Mary Pass” (for my UK friends, the “Hospital Pass”).  Go out and vote under the banner: “Four more years for America.”

 

 

 

I write just past the mid-point of 2024 — an important election year in several of the world’s major democracies. We know the results of the Indian and British elections; we half-know the results in France; and we may not know for some time the eventual candidates in the US.

Politics is a nasty business in most nations and the tendency towards partisan extremes we have witnessed since at least the Great Financial Crisis has only sharpened the rancor.  However, I am moved to write by the opposite: the decency and respect shown over the last two days by the leaders of the two great British parties.

In magnanimous victory, Keir Starmer, the new Labour Prime Minister saluted his opponent, the Conservative Leader and outgoing Prime Minister Rishi Sunak, for his “dedication and hard work” and for the historic first he represented as a British Asian PM.  Likewise, Sunak lauded Starmer as a “decent public-spirited man I respect.”

It is hard to imagine Donald Trump even acknowledging his opponent, let alone conceding loss in an orderly and peaceful transition of power.  And perhaps that was the distinction these two British public servants were making in a typically English, understated manner.  We can and, in fact, should disagree on policy issues but we must retain respect for our democratic institutions and conduct ourselves decently.

In pursuit of decency and even a measure of kindness, I was happy to vote for Joe Biden in 2020.  He has restored respect for the institutions of government,  generally appointed adults to key positions, and navigated a highly partisan Congress to deliver some substantive legislative achievements.  As Tom Friedman has suggested, Joe can declare “mission accomplished.”  The decent thing for him to do now is to bow out gracefully and leave the field to a Democratic candidate who can keep the unqualified, deranged and dangerous Donald Trump out of office.

The great American poet Walt Whitman captured the spirit of this moment although he was writing about an earlier threat to the nation and its principal defender,  President Lincoln.

 

O Captain! my Captain! our fearful trip is done,

The ship has weather’d every rack, the prize we sought is won

 

Decency and the nation demand no less.

 

I am regularly asked to speak on various corporate governance topics.  Perhaps this is not surprising since I have sat on public company boards in the US, Canada, France and England and multiple private company and charitable boards.  Add to this three years of law school, 10+ years practice as a corporate lawyer, and a decidedly nerdy approach to lifelong learning, and no one is awaiting my thoughts on the Taylor Swift/Travis Kelsey romance.

Typically, I get asked to speak about relatively narrow issues such as how a public company board should organize cyber defense oversight, how to run an effective CEO succession, or how to manage board refreshment, diversity and experience.

Today, I want to write about two important principles that should not be incompatible, but all too often are: Governance and Investing.  I firmly believe that robust corporate governance, including exacting board oversight, is a core component of long-term value creation.  However, at many large asset managers, evaluation of board governance and proxy voting are separated from portfolio management and performance measurement.  I, of course, understand the attraction of job specialization as well as the already heavy workload on portfolio managers and analysts, but the best investors understand that governance is not a separate function focused on achieving political goals but rather an intrinsic and vital aspect of investing itself.

Sometimes it is hard to see the economics of the forrest for the governance of the trees. An episode from my years as CEO of Thomson Reuters can serve to illustrate this point.  Thomson Reuters is a Canadian corporation, majority owned by Woodbridge Company, which serves as the holding company for the Thomson family.  In the lead-up to our 2010 Annual Meeting of Shareholders, I received a letter from the head of Corporate Governance at a mid-sized UK asset manager, regretfully informing me that the firm could not vote in favor of our compensation proposals because the firm had a policy of voting against any proposal adopted by a compensation committee that included a non-independent director.

Now, on its face, this policy not only accords with generally accepted governance principles but makes good sense.  However, in the case of Thomson Reuters, the non-independent director in question happened to be the President of Woodbridge, our majority owner. So, think about this for a moment on a purely rational economic basis.  For every $1.00 of compensation the committee agreed to pay management, Woodbridge would (in economic substance) be paying 55 cents.  While it is true that the Woodbridge director was not independent given their large ownership position, this was not an example of a conflict necessitating the exclusion of this non-independent director.

My conclusion would be different if, for example, the Woodbridge director were included on a special committee considering a going-private transaction.  There the conflict would be obvious. The reason I belabor this example is that in my experience there is a huge amount of non-economic, fuzzy thinking on governance matters, and it is too important an aspect of investing to ignore.  Shareholders should be delighted that the majority owner was involved in setting executive pay; their interests are aligned and none of the classic agency problems associated with fragmented ownership are present.

I was so confused by the letter from the UK investor that I called him to politely explain why he should not worry about the Woodbridge director voting on compensation plans, because he, above all other directors, was motivated to limit executive pay to the minimum needed to retain and motivate management — i.e. he had real skin in the game. We proceeded to have a very pleasant conversation about agent vs. principal conflicts and how these translated to the public company context.  All to no avail.  As I have so often heard in my professional life he simply demurred, stating he had enjoyed our exploration of governance principles and their economic bases, but they had a policy against non-independent directors serving on compensation committees.

As Ralph Waldo Emerson wrote, “A foolish consistency is the hobgoblin of little minds.”  Voting policies should be rules of thumb, not strait jackets for the evaluation of proposals that may or may not be in the long-term best interest of the corporation and its shareholders. The separation of proxy voting from portfolio management at large investors should permit the division of labor and greater specialization, not the separation of governance from long-term investment objectives.

I started to write a post about AI that I have been ruminating upon for months, but came to realize that after the heinous attack on October 7, I could not write about something as relatively light-hearted as the dangers of AI without first setting down my thoughts on this slaughter of the innocents.

First, I am already on record in this blog and elsewhere with my opposition to this right-wing Netanyahu government and its judicial “reforms”, West Bank settlements policy and appeasement of the ultra orthodox.  I continue to believe in a two-state solution and also that Bibi has done his utmost to thwart this outcome while pretending that military strength and signals intelligence alone can keep the nation safe indefinitely.  We now know better.

I also believe that Hamas is pure evil and that Israel has every right to defend itself and seek to eradicate these ruthless murderers.  Hamas does not equal Palestine or the long-suffering Palestinian people, and the sooner Hamas can be eliminated from Gaza the better for the longer-term survival and welfare of the Palestinian people.  This will not come without a horrible price to be paid by ordinary Gazans.  During my Reuters years I came to know personally several of our outstanding journalists in Gaza and I am troubled that they and their families are already suffering in this war that they did not ask Hamas to commence.  Unfortunately, like a cancer that has wrapped itself around healthy tissue and redirects the latter’s blood flow to grow more malignant cells, so too Hamas has metastasized throughout schools, mosques, hospitals, and tunnels in Gaza.  This cancer cannot be removed with surgical precision.

Because there will be a continuing heavy price to pay among innocent civilians — on top of the slaughter of 1400+ Israelis as of this writing — there must be a greater goal than pure revenge.  Deterrence of future attacks through an awesome military response is not enough and, in any case, will not provide long-term safety.  A new government could be formed in Gaza, perhaps led with renewed vigor by Abu Mazen and the Palestinian Authority, perhaps in conjunction with the UN and Arab neighbors.  But this too will fail, if Israel does not take concrete steps to support the PA and move towards an eventual two-state solution. The new unity government with Benny Ganz can begin by freezing all new settlement activity in the West Bank and restraining vigilante settlers.  Longer-term, I would like to see a new coalition government that excludes right-wing extremists like Itamar Ben-Gvir and Bezalel Smotrich, abandons the devious judicial reforms, and draws upon the searing war experience Israel is now enduring to further unite the nation. Beyond this I believe Israelis can rely on their properly functioning democracy to convene an independent inquiry to address the shocking intelligence failures, root out corruption in government (including in the Netanyahu family), and ensure that the ultra-orthodox serve as much time in a tank as in temple.

We must never allow Hamas, Hezbollah or the IRGC itself to make us liars when we declare Never Again.

I have many reasons to visit Israel.  Fleeing Nazi persecution a large part of my family found security and prosperity in the land that would become the modern State of Israel. More recently, I am the co-founder of two tech start-ups with major R&D centers in Tel Aviv.  Both personally and through my venture capital fund I have made many investments in Israeli companies.  I have many wonderful friends in the country.  And across the last quarter century of frequent visits, I have met prime ministers, finance ministers, bank governors, military leaders, and a collection of brilliant scientists, educators, bankers, founders and investors too numerous to count.

Covid interrupted my regular visits to Israel; this Netanyahu government has, for now, ended them.

What is at stake is a battle for the soul of the country. Will Israel, despite its shortcomings, continue to be the beacon of liberal democracy and the rule of law in the fractious Middle East or will it enter the long slide toward authoritarianism and corruption?  This existential struggle is being played out against a more global choosing-of-sides between the axis of totalitarianism (Russia, China, Iran, North Korea) and  democracy (fortunately, still too numerous to list). In between lie the strongman states towards which Israel is veering (Hungary, Turkey, Venezuela, Nicaragua).

For those who don’t follow news from Israel closely, the increasingly right-wing Netanyahu coalition government has introduced legislation in the Knesset that would, among other things, give this legislative body the power to overturn decisions of the Israeli Supreme Court by simple majority vote (61 of 120 members).  It bears mention that Israel does not have a constitution and that as a practical matter the prime minister can expect Knesset support of his cabinet’s proposals (since he depends on a Knesset majority to govern).  Historically, the Israeli judiciary has functioned as the only institutional check and balance on a powerful prime minister.  This is why the proposed reforms go to the heart of the democratic system in Israel and effectively eliminate any judicial review of legislative or administrative action.

Other pernicious provisions of the proposed judicial reforms would give the ruling coalition control over the committee responsible for the appointment of judges at all levels of the judiciary and the power to hire or fire the legal counsel formerly free to monitor and institute legal proceedings to oppose administrative and legislative action.  It is no wonder that the Israeli Shekel has fallen to a three-year low against the US Dollar — the rule of law being vital to a strong and stable economy. Major Israeli companies and institutional investors have also begun off-shoring their assets.

There are plenty of other reasons to abhor and oppose the policies of this, the most extremist religious and right-wing cabinet Bibi has organized across his multiple terms as prime minister.  An express policy of limiting the rights of women and the LGBTQ community, a concomitant expansion of the influence of the Haredim (ultra Orthodox) in education and daily life, and a desire to deploy police and security forces without legal review — to name but a few.  However, none set the country on as irreversible path to religious totalitarianism as the proposed judicial “reforms.”

In short, Israel is headed on a course towards becoming Iran.  One day I hope to visit Teheran once the Mullahs and Revolutionary Guards are gone.  Were I religious, I would pray that this Netanyahu government changes course before it turns Israel into its worst existential enemy.  I shall return on that day.

There is a colloquial English expression that if you “pay peanuts you get monkeys.”  While In the United States it is more common to imagine that monkeys prefer bananas, the meaning is not lost over the Atlantic.  Namely, you get what you pay for.

I was reminded of this aphorism this past week in Singapore — a nation I have always admired for both its commitment to government service and its willingness to pay for it.  The Prime Minister of Singapore, Lee Hsien Loong, is paid an annual salary of $2.2 million Singapore Dollars or approximately $1.6m USD. Undoubtedly, a talented and experienced man such as Mr. Lee could earn substantially more in the private world, but his salary combined with the perks of office appear not too far off market to me. Contrast the case of Singapore with the UK, where the new PM, Liz Truss, will be paid £164,080 GBP per year or approximately $180k USD. For comparison, the US President is paid an annual salary of $400k.

I am perfectly aware that even the UK Prime Minister’s salary is far more than the average worker makes over several years and that it is elitist, non-woke and politically treacherous to suggest that these public servants should be paid more; however, my grasp of economics and human motivation drive me to this unpopular position.

While there are many cases of corporate boards and others showering senior executives with greater riches than may necessarily be required to attract and motivate the right talent and while the market for leadership talent is neither efficient nor transparent, nonetheless I firmly believe that if we seek to be governed by high quality leaders we should pay them something closer to market rates.

In economics as in hydraulics, water seeks its level.  If hypothetically we determine that the job of leading a given nation merits a salary of $1m but that there are applicants willing to do the job for $200k or less, there are several possible explanations. First,  and most optimistically, we have found a truly selfless soul willing to make a significant personal sacrifice for the benefit of her fellow citizens.  Second, and, unfortunately, more likely is that we have either hired (elected) an unqualified candidate or attracted a politician who will make up the missing $800k per year through other means.

How does a leader go about recouping his discount to market rates?  At worst, through direct corruption (Hint: think Trump via his hotel in Washington or Baby Doc in Haiti); at best by an implicit investment during his term in office to be recouped in later years through book deals, speeches, etc. (think Clinton, Obama, or Blair).  Alternatively, there is the model of the independently wealthy candidate (think FDR, Bush Sr. and Jr., or Bloomberg); in fact, members of Parliament were unpaid until 1911 in the belief they enjoyedindependent means. There is also the non-financial variant in which the candidate derives equivalent compensation by consuming fame to satisfy his narcissism or access to additional mating opportunities (think Trump, JFK or Clinton again).

The 2009 “expenses scandal” in the UK provides a good example of water seeking its level.  In addition to their then annual salary of £64,766 members of Parliament were entitled to claim the reimbursement of expenses “wholly, exclusively and necessarily incurred for the performance of a member’s parliamentary duties.” Needless to say, the creativity of parliamentarians knew no bounds: Second homes claimed as primary residences, nanny expenses, no-show family-member employees, etc.

I single out the UK experience not because I think it is the worst; to the contrary it is fortunately a country that still can muster appropriate public censure for such corruption.  Rather, I think it is an example that proves my point that Singapore has the better model.

There are differences among people — not their gender or color or religion, but their aptitude,  experience, qualifications for a given job, and commitment.

Better to pay our government leaders transparently something closer to what they could earn in the private markets than to pretend that money doesn’t matter and then be perennially surprised when water finds its level.

I have not posted in many months to this blog that I have been writing for over 15 years. This is for two reasons: First, I have been busy helping to grow two start-ups and a venture fund among other pursuits; and second, I have felt less of a need to add my voice to most of the debates of the day. The US Supreme Court’s decision in Dobbs v. Jackson (overturning the reproductive health protections enjoyed by American women for the last 50 years under the Roe precedent) has rocked me out of my lethargy.

To begin, let me make very clear that I regard a woman’s right to choose whether or not to seek an abortion (or to make other health decisions concerning her own body) to be a fundamental human right that should be the law of the land in the US as it is in most advanced nations across the world. As a matter of US law, I would not have overturned Roe although its constitutional foundation is not the strongest. My basis for support is twofold: First, the deference prior decisions of the Supreme Court are entitled under the doctrine of stare decisis; and second, the argument that a woman’s right to choose is one of the fundamental liberties of all Americans protected under the 14th Amendment to the Constitution.

This is not the place to revisit in depth the legal debate over whether the Constitution protects the rights of American women to choose what happens to their bodies — this endeavor took the Dobbs court 203 pages. However, I have a hard time reading the plain words of the 14th Amendment without concluding that a state that tells a woman she must carry an unwanted pregnancy to term has deprived her of her liberty.  The notion that the word abortion does not occur in the text of the Constitution nor was the procedure available to the founders generation carries little weight with me. I note in this regard that the Second Amendment similarly does not mention AR-15 attack rifles while these same originalist Justices have no trouble striking down state bans on semiautomatic weapons. Some commitment to the sanctity of life!

As much as I believe this Supreme Court did not need to overreach and reverse 50 years of established precedent, I also believe that the entire US judiciary has been put in the unfair position of being asked to decide the most fractious controversies of our day because members of Congress refuse to stand up and be counted. While not as durable as a constitutionally enshrined right, a simple act of Congress signed by the President could guarantee all American women the right to choose, subject to whatever limits these legislators elected to impose (e.g, no abortions during last trimester, etc.). Legislators regularly balance such interests in adopting new laws; courts struggle to reach political compromises in the guise of interpreting the intent of the framers of the Constitution (including the always contentious issue as to whether they intended it to be a living document or a reflection of 18th Century norms).

There is little doubt that the US Supreme Court has been overly politicized by Trump’s selection of three conservative Federalist Society judges. The opportunity to name the latest Justice, Amy Coney Barrett, only arose thanks to the hardball political treachery of the former Senate Majority leader (denying President Obama’s effort to appoint Merrick Garland early during his last year in office and confirming Trump’s appointment of Justice Barrett in the final days of the 2020 campaign). However, the solution to this lies not in further politicizing the Court by packing it with another three liberal Justices while President Biden holds office. Rather the solution is for Congress to do its job and adopt laws favored by those who elected them.

It would be naive to imagine that in this divided nation we can go back to Justices being confirmed by 80%+ majorities. However, it is not naive but merely hopeful to expect that our elected representatives adopt non-misogynist reproductive health laws that are favored by 60 to 70% of Americans.

Section 1 of the 14th Amendment to the US Constitution

“No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”