Australian Institute of Company Directors needs some directions. The Australian Institute of Company Directors has been scrutinised in recent months for its strident yet nonsensical defense of directors’ personal liability. However, the AICD took the absurdity one step further last week, defending the use of margin loans, and claiming that “regulation of margin loans must not be made so onerous that directors will, in effect, be precluded from certain share purchases. That outcome will be detrimental to the overall market capitalisation and ultimately shareholder value.”

It is somewhat concerning that the body representing company directors (that is, the people who are paid to protect shareholders’ rights), itself has such a poor understanding of how the share market works. A company’s market capitalisation will reflect how the market (that is, every investor) values a company’s future cash flows, albeit often in an inefficient manner.

To apply the AIDC’s views, it is a good thing for company directors to borrow heavily (against their own shareholding) so as to prop up the market capitalisation of their company. According to the AIDC, it would therefore have been good for shareholders that ABC Learning Centre directors, like Eddie Groves and Martin Kemp, were buying shares for $7 each using borrowed money, when in actual fact the intrinsic value of those shares was far less. There isn’t anything wrong with margin loans per se. So long as the value of the loan remains relatively low, margin loans are a handy way to align directors with shareholders without the need for dilatory options. But to claim that such loans benefit a company market capitalisation represents a complete and abject failure to understand how the share market works. — Adam Schwab

It’s a short way to the bottom after you’ve batted and bowled. The downfall of former cricketer, Craig McDermott, appears to be hastening, with the Australian Test cricket champion putting his $10 million Runaway Bay mansion on the market. The Financial Review reported today that the former BRW Young Rich List member owes more than $33 million but allegedly has assets of only $500 — barely enough to buy a new cricket bat.

Like any good white-shoe developer, McDermott spread his debts around, with the fast bowler racking up a $66,000 Amex debt, $43,000 for a Westpac credit card and a slightly more considerable $20 million liability to South African merchant bank, Investec. According to a Statement of Affairs obtained by the AFR, the failed property mogul “incorporated a new entity for all projects [and] appeared to guarantee all loans to entities on the basis of substantial personal wealth, however, that is not reflected in the statement of affairs.” — Adam Schwab

China’s war on nature. China’s is not the first undemocratic regime to seek to use the Olympics to reinforce its own international prestige and domestic legitimacy. But seldom have sport and propaganda been yoked together on this vast scale. China’s communist rulers make no secret of the fact that they see Olympic success as the perfect symbol of their country’s “peaceful rise”. Even if their athletes do not succeed in beating their American counterparts to the top spot for medals (they came second in Athens four years ago, with 40 fewer than the US) the Chinese government can still win if the entire extravaganza is an acknowledged organisational success.

At first sight, it can hardly fail to be. The feats of construction necessary to host the Olympic Games are precisely what this regime does best … This, after all, is the country that now accounts for three out of the world’s six largest companies in the FT Global 500 (PetroChina, China Mobile and Industrial and Commercial Bank of China). This is the economy that, according to the Carnegie Endowment for International Peace, will overtake the US in gross domestic product as early as 2035. — Niall Fergusson, Financial Times

A chink in capitalism’s armour? Is the American government’s support for Fannie Mae and Freddie Mac a retreat from the ideal of laissez-faire capitalism, the very ideal that the United States was supposed to represent, as Peter Goodman suggests? Well, it does show that the government – even a Republican government – is willing to stick its oar in. But I don’t think it signifies such a big change.

The fact is that the United States long ago lost its mantle as the guiding light of that kind of capitalism. This year the Heritage Foundation, a right-wing think tank in Washington, ranked its home country way down in fifth place on its Index of Economic Freedom. Hong Kong, Singapore, Ireland and Australia led the list. Over at the World Bank, the Doing Business index put the United States in third, behind Singapore and New Zealand. — Daniel Altman, International Herald Tribune