Evil Geniuses: The Unmaking of America

by Kurt Andersen

For instance, in a survey in the 2000s of four hundred financial officers of public companies, as many as 78 percent of them actually admitted they would cancel projects and forgo investment that they knew would have important long-term economic benefits for their companies rather than risk disappointing Wall Street’s every-ninety-days earnings expectations. Another giant irony: precisely that kind of perverse, enterprise-damaging management behavior was what the professor-godfathers of shareholder supremacy in 1976 had warned that purely salaried managers were doing. According to “Theory of the Firm,” when an executive’s pay isn’t a function of the stock price, “his incentive to devote significant effort to creative activities such as searching out new profitable ventures falls. He may in fact avoid such ventures simply because it requires too much trouble or effort” to understand new technologies and use them to innovate. Forty years later, the research provides no consensus that paying executives in stock solves the problems of executive inattention or laziness.