ABSTRACT
Financialisation is taken to occur when speculative capital grows at a faster rate than productive capital. This chapter looks at financialisation at the corporate level through the lens of 4S comprehensive income. In 4S comprehensive income the four slices of equity, two representing speculative capital and two representing productive capital, are treated as four separate funds and the analysis provides an explanation of value changes in each fund including fund transfers and distributions. 4S therefore can provide both a measure of financialisation and an understanding of its origination. The chapter starts with a pedagogic example of the ability of 4S to highligh t and analyse financialisation in a non-financial company. The chapter proceeds to a discussion of the relevance of the analysis to the financial sector, in particular banking. It is suggested that only gains in productive capital should be considered eligible for distribution as dividend, bonus or taxation, and that speculative gains should instead, when realised, be invested in productive activity. Productive activity is directly associated with the production of currently consumable product or service. This conservative approach to distribution is in response to the lessons provided by the 2008 financial crisis and the difficulties experienced in rebalancing the economy. It is an approach of particular significance for banking and other financial sector activities. Performance measurement too can take a conservative approach with a focus upon the growth in productive capital, whilst speculative capital growth suggests an opportunity for future investment in productive capital. Such performance measures when embedded in executive compensation schemes serve to align the interests of management with the interests of long-term shareholders and the rebalancing of the economy toward productive capital.
