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We could also decide, as a society, that this is a problem; that the perverse incentives in place are harmful and change how companies are allowed to operate. F
by digitaltrees 9y ago
We could also decide, as a society, that this is a problem; that the perverse incentives in place are harmful and change how companies are allowed to operate. For example, until the 90’s investment banks could only be general partnerships, meaning each banker was personally liable for the debt of the firm. What do you think that meant for how seriously they took underwriting risk? Similarly, law firms cannot sell stock and must only be owned by lawyers because society believes any other ownership structure would have a conflict of interest and harm clients.
- dogruck 9y agoYou're right that we could collectively define new laws and rules. But what would they be? Their are downsides to investment banks being private partnerships. On the other hand, I've talked with execs that wish the banks hadn't gone public. Yet they had strong incentives to go public.