May 16, 2005
Germans and Hedge Funds
German executives are forming up to attack hedge funds. Hedge funds forced the Chief Executive Officer of the Deutsche Borse, Werner Seifert, out of office after he led two doomed efforts to purchase the London Stock Exchange.
The ouster stunned German executives and German Chancellor Gerhard Schroder.
Chancellor Schroder is rallying for the regulation of hedge funds. And German executives are now mumbling in back rooms about basing voting rights on the time stock is held. The Chairman of the Borse suggested that German companies may want to introduce a two-tiered system of voting rights that gives more votes to investors who hold stock for a longer period.
The irony of the counterattack is that European companies now routinely violate the one share, one vote structure that dominates practice in the United States. A study of Europe’s largest 300 companies found two-tier time based voting, caps on investors’ voting rights, and golden shares (government owned options for super voting rights) are common practice. The French, of course, are the most persistent violaters.
Chancellor Schroder’s attacks mirror those of Prime Minister Mahathir of Malaysia in 1998. After the Asian currency crisis broke in 1997, Mahathir blamed the hedge funds, then trading predominately in currency, and Soros in particular for the crisis. He passed laws that slowed down currency trading in the Malaysian currency to thwart hedge funds.
Schroder, Mahathir, and the German executives claim to worry about the economic effect of fast money. What they really worry about is the hedge funds ability to demand accountability – from the outside, free of the traditional social restraints that create controllable “old boys” networks.
May 16, 2005 | Permalink
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