Joseph Stiglitz on Capitalist Fools

Cropped picture of Joseph Stiglitz, U.S. econo...

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As long as we are putting corporate American under the microscope (with a view toward fixing it, not tearing it down), we may as well take a look at some of the other viruses plaguing the institution of the joint-stock company. One such institution, suggests Nobel Laureate Joseph E. Stiglitz, is the stock option:

Stock options have been defended as providing healthy incentives toward good management, but in fact they are “incentive pay” in name only. If a company does well, the C.E.O. gets great rewards in the form of stock options; if a company does poorly, the compensation is almost as substantial but is bestowed in other ways. This is bad enough. But a collateral problem with stock options is that they provide incentives for bad accounting: top management has every incentive to provide distorted information in order to pump up share prices.

This is not the sort of thing, I would imagine, that is compelling the Occupy Wall Streeters to set up their tents. But as we grope toward a series of polices that will kill the maladies afflicting our institutions, this is one that could use some attention.

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