The Social Insurance Crisis And The Problem Of Collective Saving: A Commentary On Shaviro\u27s Reckless Disregard

Long-range Social Security and Medicare spending projections vastly exceed projected program revenues. If left unchecked, the resulting fiscal imbalance (estimated at $40 to$70 trillion in present value terms) would fall primarily on future generations. To avoid generational inequity, and perhaps fiscal meltdown, Professor Daniel N. Shaviro and others propose immediate fiscal austerity. This reply Commentary argues that near-term austerity is unlikely to play a significant role in overcoming the fiscal imbalance, which can be thought of as a balloon payment due in the mid-twenty-first century. Significant near-term fiscal austerity would eliminate the public debt and replace it with a public surplus. Political economy theory and U.S. public debt history suggest that this path is infeasible. This Commentary also stresses the importance of clisaggregating the Social Security and Medicare problems. Contrary to popular belief, Medicare is by far the larger problem, and the Medicare imbalance is driven by projected spending increases, outpacing overall economic growth indefinitely. These observations suggest that a focus on Medicare cost control, rather than revenue enhancement, is called for

Financial Accounting and Corporate Behavior

The power of financial accounting to shape corporate behavior is underappreciated. Positive accounting theory teaches that even cosmetic changes in reported earnings can affect share value, not because market participants are unable to see through such changes to the underlying fundamentals, but because of implicit or explicit contracts that are based on reported earnings and transaction costs. However, agency theory suggests that accounting choices and corporate responses to accounting standard changes will not necessarily be those that maximize share value. For a number of reasons, including the fact that executive compensation often is tied to reported earnings, managerial preferences for high earnings generally will exceed shareholder preferences, leading to share value reducing tradeoffs between reported earnings and net cash flows. The empirical literature on the details of positive accounting theory is mixed, but the evidence firmly establishes the power of accounting to shape corporate behavior. The power of accounting and the divergence of interests have many implications for courts and policy makers. For example, consideration of proposals to increase conformity between tax and financial accounting rules as a means of combating tax sheltering and/or artificial earnings inflation must take into account the incentive properties of accounting standards and recognize that narrowing the gap between tax and book income will have economic consequences, however the gap is narrowed. This Article considers this and other implications of the behavioral effects of accounting standards, including the possibility of setting accounting standards instrumentally as a means of regulating corporate behavior, an alternative to tax incentives, mandates, or direct subsidies

Managerial Power and Rent Extraction in the Design of Executive Compensation

This paper develops an account of the role and significance of managerial power and rent extraction in executive compensation. Under the optimal contracting approach to executive compensation, which has dominated academic re-search on the subject, pay arrangements are set by a board of directors that aims to maximize shareholder value. In contrast, the managerial power approach suggests that boards do not operate at arm's length in devising executive compensation arrangements; rather, executives have power to influence their own pay, and they use that power to extract rents. Furthermore, the desire to camouflage rent extraction might lead to the use of inefficient pay arrangements that provide suboptimal incentives and thereby hurt shareholder value. The authors show that the processes that produce compensation arrangements, and the various market forces and constraints that act on these processes, leave managers with considerable power to shape their own pay arrangements. Examining the large body of empirical work on executive compensation, the authors show that managerial power and the desire to camouflage rents can explain significant features of the executive compensation landscape, including ones that have long been viewed as puzzling or problematic from the optimal contracting perspective. The authors conclude that the role managerial power plays in the design of executive compensation is significant and should be taken into account in any examination of executive pay arrangements or of corporate governance generally.

The Challenge of Improving the Long-Term Focus of Executive Pay

A consensus is developing that executive compensation in the United States is inadequately linked to long-term company performance, resulting in reckless, short-term decision making. Congress, the Obama administration, and academic commentators have recently embraced dramatic restrictions on the form and holding period of senior executive pay, at least for some companies. A common view is that although regulation of the amount of executive pay would do more harm than good, regulation of form and term is desirable. This Article questions that view. It highlights the challenges of fruitfully regulating the form and term of pay arising from the complexity and diversity of executive pay arrangements, uncertainty as to the underlying reasons and hence appropriate remedies for short-termism, and the conflict between deterring reckless short-term behavior and encouraging sufficient risk-taking to maximize share value over the long term. It analyzes and critiques existing regulatory proposals, and, although not endorsing a regulatory solution, offers two ideas that policy makers should consider if faced with crafting a regulatory response to short-termism: first, focusing regulation solely on the term of pay, leaving form to company discretion, and second, adopting a comprehensive disclosure-based response

Executive Compensation in America: Optimal Contracting or Extraction of Rents?

This paper develops an account of the role and significance of rent extraction in executive compensation. Under the optimal contracting view of executive compensation, which has dominated academic research on the subject, pay arrangements are set by a board of directors that aims to maximize shareholder value by designing an optimal principal-agent contract. Under the alternative rent extraction view that we examine, the board does not operate at arm's length; rather, executives have power to influence their own compensation, and they use their power to extract rents. As a result, executives are paid more than is optimal for shareholders and, to camouflage the extraction of rents, executive compensation might be structured sub-optimally. The presence of rent extraction, we argue, is consistent both with the processes that produce compensation schemes and with the market forces and constraints that companies face. Examining the large body of empirical work on executive compensation, we show that the picture emerging from it is largely compatible with the rent extraction view. Indeed, rent extraction, and the desire to camouflage it, can better explain many puzzling features of compensation patterns and practices. We conclude that extraction of rents might well play a significant role in U.S. executive compensation; and that the significant presence of rent extraction should be taken into account in any examination of the practice and regulation of corporate governance.

Respiration of aged soil carbon during fall in permafrost peatlands enhanced by active layer deepening following wildfire but limited following thermokarst

Permafrost peatlands store globally significant amounts of soil organic carbon (SOC) that may be vulnerable to climate change. Permafrost thaw exposes deeper, older SOC to microbial activity, but SOC vulnerability to mineralization and release as carbon dioxide is likely influenced by the soil environmental conditions that follow thaw. Permafrost thaw in peat plateaus, the dominant type of permafrost peatlands in North America, occurs both through deepening of the active layer and through thermokarst. Active layer deepening exposes aged SOC to predominately oxic conditions, while thermokarst is associated with complete permafrost thaw which leads to ground subsidence, inundation and soil anoxic conditions. Thermokarst often follows active layer deepening, and wildfire is an important trigger of this sequence. We compared the mineralization rate of aged SOC at an intact peat plateau (∼70 cm oxic active layer), a burned peat plateau (∼120 cm oxic active layer), and a thermokarst bog (∼550 cm anoxic peat profile) by measuring respired 14C-CO2. Measurements were done in fall when surface temperatures were near-freezing while deeper soil temperatures were still close to their seasonal maxima. Aged SOC (1600 yrs BP) contributed 22.1 ± 11.3% and 3.5 ± 3.1% to soil respiration in the burned and intact peat plateau, respectively, indicating a fivefold higher rate of aged SOC mineralization in the burned than intact peat plateau (0.15 ± 0.07 versus 0.03 ± 0.03 g CO2-C m−2 d−1). None or minimal contribution of aged SOC to soil respiration was detected within the thermokarst bog, regardless of whether thaw had occurred decades or centuries ago. While more data from other sites and seasons are required, our study provides strong evidence of substantially increased respiration of aged SOC from burned peat plateaus with deepened active layer, while also suggesting inhibition of aged SOC respiration under anoxic conditions in thermokarst bogs

The Problem of Nonprofit Executive Pay?: Evidence from U.S. Colleges and Universities

Nonprofit organizations suffer from agency problems that are similar to or perhaps even more severe than those observed at for-profit companies. As a result, one might expect the executive pay setting process in the two sectors to reflect similar deficiencies. This Article explains why the managerial power theory that was developed to help explain for-profit executive pay is plausibly applicable to nonprofits. More importantly, this Article offers new evidence based on data from a large panel of colleges and universities collected across a nine year period that supports the idea that potential stakeholder outrage plays a role in limiting nonprofit executive pay. For example, we find for the first time evidence of an otherwise counter-intuitive negative association between the fraction of university revenue provided by current donations and president compensation. We also are the first to find that excess executive pay reduces donations. These findings support the hypothesis that donors with less leverage suffer from significant agency costs in setting president pay. We discuss the implications of these findings for the regulation of nonprofits and for a broader understanding of the pay-setting process at for-profit as well as nonprofit organizations. For example, we note that our results are consistent with the view that, absent reforms, presidents may have self-interested incentives to increase tuition

Individual-specific changes in the human gut microbiota after challenge with enterotoxigenic Escherichia coli and subsequent ciprofloxacin treatment

Acknowledgements The authors wish to thank Mark Stares, Richard Rance, and other members of the Wellcome Trust Sanger Institute’s 454 sequencing team for generating the 16S rRNA gene data. Lili Fox Vélez provided editorial support. Funding IA, JNP, and MP were partly supported by the NIH, grants R01-AI-100947 to MP, and R21-GM-107683 to Matthias Chung, subcontract to MP. JNP was partly supported by an NSF graduate fellowship number DGE750616. IA, JNP, BRL, OCS and MP were supported in part by the Bill and Melinda Gates Foundation, award number 42917 to OCS. JP and AWW received core funding support from The Wellcome Trust (grant number 098051). AWW, and the Rowett Institute of Nutrition and Health, University of Aberdeen, receive core funding support from the Scottish Government Rural and Environmental Science and Analysis Service (RESAS).Peer reviewedPublisher PD

A highly specific Escherichia coli qPCR and its comparison with existing methods for environmental waters

The presence of Escherichia coli in environmental waters is considered as evidence of faecal contamination and is therefore commonly used as an indicator in both water quality and food safety analysis. The long period of time between sample collection and obtaining results from existing culture based methods means that contamination events may already impact public health by the time they are detected. The adoption of molecular based methods for E. coli could significantly reduce the time to detection. A new quantitative real-time PCR (qPCR) assay was developed to detect the ybbW gene sequence, which was found to be 100% exclusive and inclusive (specific and sensitive) for E. coli and directly compared for its ability to quantify E. coli in environmental waters against colony counts, quantitative real-time NASBA (qNASBA) targeting clpB and qPCR targeting uidA. Of the 87 E. coli strains tested, 100% were found to be ybbW positive, 94.2% were culture positive, 100% were clpB positive and 98.9% were uidA positive. The qPCR assays had a linear range of quantification over several orders of magnitude, and had high amplification efficiencies when using single isolates as a template. This compared favourably with qNASBA which showed poor linearity and amplification efficiency. When the assays were applied to environmental water samples, qNASBA was unable to reliably quantify E. coli while both qPCR assays were capable of predicting E. coli concentrations in environmental waters. This study highlights the inability of qNASBA targeting mRNA to quantify E. coli in environmental waters, and presents the first E. coli qPCR assay with 100% target exclusivity. The application of a highly exclusive and inclusive qPCR assay has the potential to allow water quality managers to reliably and rapidly detect and quantify E. coli and therefore take appropriate measures to reduce the risk to public health posed by faecal contamination