Joanna
Julian Gollop wrote:
>I just finished reading Stiglitz's 'The Roaring Nineties'. It's a nice
>little book - nothing terribly deep - but a good economic survery of the 90s
>boom and bust. One thing that struck me as quite horrifyingly inefficient in
>the current corporate system is the use of share options for CEOs. Stiglitz
>goes on about the importance of effective incentives, and this is one
>example of something so egregiously inefficient that any apologist for
>capitlism would surely be quite worried? I didn't realise the extent to
>which this system was used to deceive shareholders, due to the fact that the
>share options were not reported as an expense in corporate accounts. Plus,
>many CEOs and other senior execs did everything possible to push the share
>price up, to the extent of deceiving the shareholders, then exercised their
>share options and sold their shares when they realised the whole house of
>cards was about to fall. Maybe the 90s bubble, with many so-called 'new
>economy' corporations was an exceptional situation, where in the absence of
>any foreseeable profits in the near future, the mythologizing about new
>technology and the rush for 'first mover advantage' meant that the share
>price was king? Or maybe various methods of share price manipulation are
>very widespread for a whole variety of reasons and in different situations?
>And what has actually been done about it since the bubble burst? Stiglitz
>says he has great faith in markets, as long as they are properly regulated,
>but his book is such and effective horror story that his prescriptions seem
>a little vague and under whelming.
>
>
>Julian Gollop
>
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