To his credit, Michael Jensen also recognized the error of his ways. His original idea was to create a structure that would both reward and punish managers for producing profits. His self-critique centered on the dishonest information that management provided. He recognized that profits could be fictitious; that companies, such as Enron, WorldCom, or Tyco could report bountiful profits amidst real losses; that the shareholders who were supposed to guide the economy had no way to evaluate deceptive information. Even before the Enron bubble exploded, he began writing papers with titles that evoked the mood of a deceived lover: "How Stock Options Reward Managers for Destroying Value" (Jensen 2001), "Just Say No To Wall Street" (Fuller and Jensen 2002), and "Paying People to Lie" (Jensen 2003; see also a fuller discussion in Lowenstein 2005, pp. 69 and 198).
-- Michael Perelman Economics Department California State University Chico, CA 95929
Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu michaelperelman.wordpress.com