20180627-NATIXIS-The_possible_extent_of_change_in_capitalism_in_OECD_countries_4页_554kb

Flash Economics Summary

Core Content

This document from Natixis outlines three possible scenarios for the evolution of capitalism in OECD countries, based on current economic trends and structural imbalances. It emphasizes the need for reform in income distribution and decision-making processes within corporations.

Main Points

1. Three Possible Levels of Change in Capitalism

• No Change: The current system persists, with high return on equity (ROE) for shareholders and employees bearing an increasing share of risks.
• Income Sharing Reform: A shift towards fairer compensation for employees, aligning real wages with marginal labour productivity.
• Co-Management: Employees gain a more significant role in corporate decision-making, potentially through greater representation on boards of directors.

2. Current Situation in OECD Capitalism

• Income Distribution Distortion: Employees are increasingly disadvantaged in income sharing compared to shareholders.
• Risk Allocation: Employees are exposed to more cyclical and corporate risks, as evidenced by the strong reaction of employment to business cycles.
• Shareholder Prioritization: Corporate decisions are primarily driven by shareholder interests, which is reflected in the link between investment and share prices (Tobin's q).
• Market Capitalization Influence: Companies tend to invest more when market capitalization is high, reinforcing the dominance of shareholder value maximization.

Key Information

• The document uses charts (Chart 1 to Chart 4) to illustrate the trends in income distribution, risk exposure, ROE, and investment behavior.
• It highlights that the current system is not sustainable due to the growing imbalance between shareholder and employee interests.
• There is a call for a return to a more balanced market economy where income sharing is equitable and employees are appropriately rewarded for their risk-taking.
• The involvement of employees in decision-making is proposed as a potential reform to improve corporate governance and align interests.

Conclusion

The report concludes that changes in OECD capitalism are not only possible but necessary to ensure long-term stability and fairness. These changes include:

• Adjusting real wages to reflect marginal productivity.
• Introducing mechanisms for employees to share in corporate profits.
• Enhancing employee participation in corporate strategy and decision-making.

Disclaimer

• The document is intended for professional and qualified investors only.
• It is strictly confidential and must not be disclosed to third parties without prior consent.
• No liability is accepted for any use or interpretation of the information.
• The content does not constitute personalized investment advice or a recommendation.
• The views expressed are those of the authors and do not necessarily reflect those of Natixis or its affiliates.
• The document is subject to regulatory restrictions in various jurisdictions, and its distribution is limited accordingly.
• Natixis is supervised and regulated in multiple countries, including France, the UK, Germany, Spain, Italy, and the UAE, and operates under specific legal frameworks in other regions such as Australia and Hong Kong.

Regulatory Information

• France: Supervised by ACPR.
• UK: Regulated by FCA and Prudential Regulation Authority.
• Germany: Supervised by ACPR, with limited regulation by BaFin.
• Spain: Authorized by ACPR, rated by Bank of Spain and CNMV.
• Italy: Authorized by ACPR, regulated by Bank of Italy and CONSOB.
• UAE: Authorized by ACPR, regulated by DFSA.
• Australia: Operates through NAPL, a wholesale client-focused entity.
• Hong Kong: For professional investors only.
• Canada: Not registered as a dealer, operates with permitted clients only.
• United States: Limited to major institutional investors, distributed by Natixis Securities Americas LLC.

This summary encapsulates the main findings and recommendations of the document, while also highlighting the important legal and regulatory disclaimers.