More from the Author

• Case | HBS Case Collection | 2013 (Revised from original 2013 version)

  AIG and the American Taxpayers (A)

  Karthik Ramanna and Matthew Shaffer

  Explores the decision faced by AIG's board on whether to join shareholder and ex-CEO Maurice Greenberg's lawsuit against the U.S. government. The suit, argued by super-lawyer David Boies (of Bush v. Gore and California Gay Marriage fame), claims that in September 2008 the U.S. arbitrarily set aside the rights of AIG's shareholders—violating the Fifth Amendment by taking private property without just compensation—while preserving shareholder rights in other troubled financial institutions, including Goldman Sachs whose ex-CEO was the then Treasury Secretary. The U.S. government moved to dismiss the case arguing that it has wide discretion in times of crisis, but a federal judge allowed the suit to proceed. The case raises two issues central to understanding capitalism: (1) the importance of and limits to property rights; and (2) the role of the state in choosing between varieties of capitalism, here between oligarchic and entrepreneurial capitalism.

  Keywords: financial institutions; Financial Markets; financial crisis; property rights; Financial Institutions; Financial Markets; Financial Crisis; Property; Insurance Industry; United States;

  Citation:

  Ramanna, Karthik, and Matthew Shaffer. "AIG and the American Taxpayers (A)." Harvard Business School Case 113-124, June 2013. (Revised from original April 2013 version.)

  CiteView DetailsPurchase

  Related

• Teaching Note | HBS Case Collection | 2013

  A Politician in a Leather Suit and the Paradox of Japanese Capitalism

  Karthik Ramanna

  Two lost decades later, capitalism in Japan embodies peculiar contradictions—preserving wealth and social stability in the face of declining economic power. Scant transparency in Japanese corporate practices plays an important role in this phenomenon. Sometimes justified as an embodiment of Japanese culture, the opacity of Japanese corporations is credited with empowering managers to make long-term business decisions that preserve employment and business relationships and maintain social harmony. But opacity also facilitates fraud and corruption, which erode investor confidence and stifle risk-taking. A flamboyant politician Kotaro Tamura attempts to raise public awareness around these tensions, but his provocative style earns him few friends in Japan's conservative political establishment.

  Keywords: Crime and Corruption; Economic Systems; Economic Slowdown and Stagnation; fairness; Values and Beliefs; corporate accountability; corporate governance; Civil Society or Community; Japan; Tokyo; Japan;

  Citation:

  Ramanna, Karthik. "A Politician in a Leather Suit and the Paradox of Japanese Capitalism." Harvard Business School Teaching Note 113-139, June 2013.

  CiteView DetailsPurchase

  Related

• Article | Accounting Horizons | June 2013

  A Framework for Research on Corporate Accountability Reporting

  Karthik Ramanna

  This paper provides an accounting-based conceptual framing of the phenomenon of corporate accountability reporting. Such reporting is seen as arising from a delegator's (e.g., a citizenry) demand to hold a delegate (e.g., shareholders) to account. When effective, corporate accountability reporting can internalize certain externalities into firms' resource-allocation decisions, although doing so will not always serve shareholders' interests. I leverage the positive accounting literature's current understanding of properties of financial reports to develop three hypotheses on corporate accountability reporting. I argue that an accountability reporting system is likely to be more useful to a delegator if it (1) mitigates information advantages across delegates and delegators, (2) reports both stocks and flows in the measures of account, and (3) has a mutually agreeable due process to match across periods the actions of delegates and the outcomes of those actions. I show how the successive incidence of these properties in observed corporate accountability reports can be used to determine whether and how those reports create or destroy value for shareholders and other constituencies.

  Citation:

  Ramanna, Karthik. "A Framework for Research on Corporate Accountability Reporting." Accounting Horizons 26, no. 2 (June 2013).

  CiteView DetailsSSRNRead Now

  Related