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> Regular quarterly targets are an important part of management discipline. This boils down to "having goals is important", which is certainly true, but most o
by nitwit005 7y ago
> Regular quarterly targets are an important part of management discipline.
This boils down to "having goals is important", which is certainly true, but most of us have seen managers try to improve quarterly numbers at the expense of company health. The effect is pronounced enough that people time purchases to be near other companies end of quarter, knowing they'll get a better deal.
- jshaqaw 7y agoI accept that but ANY measured goals will be games as a fairly universal principle of human organization. If you shift accountability to annual the incentives to game increase because you have a whole year before you need to fess up.
- roguecoder 7y agoThis seems like it would be a good reason not to link CEO pay to outcomes at all: game theory says that as long as metrics have no impact on you personally, you don't have any incentive to game them.
- jshaqaw 7y agoManagement incentives will always have agent-principal issues. These things can’t be set by autopilot. That’s why corporate governance and a fiduciary voice for shareholders is so important. Of course the same CEOs who want annual reporting also want to neuter the capability of shareholders to enforce accountability.
- mikeash 7y agoIt also says you don’t have any incentive to improve them legitimately. The whole problem with metrics is that they can’t distinguish between gaming them and real improvement.
- RhodesianHunter 7y agoI disagree. If you want good long term performance, link CEO pay to long term outcomes such as making a large portion of their compensation stock that vests over 10 years.
- robbrit 7y ago> most of us have seen managers try to improve quarterly numbers at the expense of company health Yep, this does happen. The point though, is to let shareholders rather than managers decide if this is a good choice. If managers are sacrificing the long-term health of the company, shareholders can vote them out or choose to sell their stake. This is one of the downsides of the rise of passive investing and ETFs based on market cap - less votes are going into the system and holding people accountable.
- sigstoat 7y ago> This is one of the downsides of the rise of passive investing and ETFs based on market cap - less votes are going into the system and holding people accountable. uh. the fund managers vote their shares. and they've got way more time and subject matter expertise to do it than the mom & pop investors.