Knowledge at Wharton

Globalization is pulling tens of millions of people out of poverty annually and creating worldwide wealth unimaginable a generation ago. But its benefits are being shared unequally resulting in widespread public dissatisfaction that business leaders ignore at their peril two top executives told participants at the 2007 Wharton Economic Summit. Stan O’Neal chairman and chief executive of Merrill Lynch and Rajat Gupta a senior worldwide partner with McKinsey both called on their colleagues to pay attention to their social responsibilities as assiduously as they watch their bottom lines.

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In Venezuela President Hugo Chavez is threatening to take control of several major projects from American and European firms. In Russia the government recently strong-armed Royal Dutch Shell into relinquishing control of a large oil field. Across the oil-producing world governments are responding to higher petroleum prices by imposing new taxes on oil companies and forcing the renegotiation of contracts. According to speakers at the 2007 Wharton Economic Summit such developments augur a new age for oil producers where both the style and substance of doing business have changed.

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Blockbuster deals -- like YouTube’s recent sale to Google for $1.65 billion and Skype’s sale last year to eBay for $2.6 billion -- are giving venture investors new confidence in their ability to cash out said a group of venture capitalists who spoke on a panel at the 2007 Wharton Economic Summit. In addition new sectors like ”clean tech ” an umbrella term for environmentally friendly technologies and trends like the aging of populations in the developed world are creating promising investment opportunities. Even so times remain challenging for many venture capitalists the panelists warned. According to one participant ”15% of the firms have provided [about] 90% of the returns.”

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The U.S. population is getting older as the ”age wave” of baby boomers nears retirement. Will their 60s 70s and 80s be happy years marked by prosperity good health and fulfilling activities? There’s every chance of that according to two keynote speakers at Wharton’s 2007 Economic Summit: Wharton finance professor Jeremy Siegel and Michael Milken head of The Milken Institute a non-partisan think tank. But both men cautioned that their optimism relies on taking steps to ensure among other things open markets and an educated healthy workforce.

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Martin Varsavsky’s fans see him as a rebel who has often disrupted the telecommunications industry. An Argentine/Spanish entrepreneur who has launched seven companies in the past 20 years Varsavsky’s current venture is FON which he describes as a ”community-empowered company dedicated to building the world’s largest global WiFi network.” He has a few partners helping him get there -- Skype eBay and Google. In a podcast interview with Kevin Werbach a professor of legal studies and ethics at Wharton Varsavsky discusses how he invented the ”call back” (a cheap way of making international phone calls) the differences between American and European technology companies and several other issues. Varsavsky will speak at the Supernova conference that will be held in San Francisco on June 20-22.

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When the Sarbanes-Oxley (SOX) Act was signed into law in 2002 its goal was to protect investors through increased disclosure and tougher internal controls in the wake of accounting frauds at Enron WorldCom and other U.S. companies. But on April 4 2007 the Securities and Exchange Commission announced it will revisit some of SOX’s rules. The primary focus will be the financial costs of Section 404 which requires auditors of most publicly listed companies to verify the effectiveness of internal procedures for financial reporting. Knowledge at Wharton asked accounting experts for their opinions on possible SOX revisions.

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You know the type: coworkers who never have anything positive to say whether at the weekly staff meeting or in the cafeteria line. They can suck the energy from a brainstorming session with a few choice comments. Their negativity can contaminate even good news. ”We engage in emotional contagion ” says Wharton management professor Sigal Barsade. ”Emotions travel from person to person like a virus.” Barsade is the co-author of a new paper that looks at the impact of employees’ moods emotions and overall dispositions on job performance.

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The similarities between Poland and Argentina were striking. By the time the Soviet Union collapsed the two countries were beacons of reform in their regions. Each had a largely Roman Catholic population of about 36 million. Both were introducing free-market reforms. And after decades of authoritarian rule both were establishing democracies. But since then countries in Eastern Europe have been pulling ahead of their counterparts in Latin America mainly because of the different international economic integration schemes that are in place in each region: The European Union and NAFTA. In a new research paper Wharton management professor Gerald McDermott and two co-authors look at the impact of these trade agreements on developing nations.

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Some technology companies have been founded in a garage. Local Internet search company Natpal was hatched in a Connecticut car dealership. That’s where Wharton undergraduate student and future Natpal CEO Nate Stevens first realized that Internet search wasn’t exactly friendly to small businesses looking for sales leads. The discovery led Stevens along with Penn alumnus Ben Rubenstein and Wharton professor Kartik Hosanagar to found Natpal which brings local businesses online and helps them find sales leads via web searches. The goal is not just clicks but phone calls says Stevens.

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Experts at Wharton and Harvard University have unveiled a proposal that they say addresses both global security and the future of energy markets. In a new study Erwann O. Michel-Kerjan and Debra Decker argue that interest in nuclear power has escalated as countries become increasingly concerned about climate change and energy security. To avoid dangerous uncontrolled nuclear proliferation they say the international community must ensure reliable supplies of uranium-based fuel for nuclear reactors to all nations even unstable ones. The way to accomplish this is to involve the private sector specifically those who deal with risk on a daily basis: insurers and financial experts.

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