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Not only might there be issues with choosing CEOs based on pedigree and past performance (related to share value), but even the measurement of share value is ar
by blunte 8y ago
Not only might there be issues with choosing CEOs based on pedigree and past performance (related to share value), but even the measurement of share value is arguably a weak indicator of company health and profitability.
Many institutions and media organizations are focused on quarterly or annual share price, but those numbers can be temporarily inflated if the company is willing to take actions that would damage itself longer term. And when I say "would", I actually mean "usually do". Also, global and industry factors can push a whole sector up or down for months or years.
- pembrook 8y agoI would argue the efficiency of the market produces an excellent correlation between company health and stock valuation over long periods. But even if you disagree, isn't that just another way of arriving to the authors same conclusion? If share price is a terrible proxy for company health, then why are we paying CEOs based on it? And if it is a good proxy for company performance, then it's proving that CEOs are being grossly overpaid for what are essentially random outcomes. Under both scenarios, something is terribly wrong.