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Tyler Cowen made an interesting point on a recent Econtalk episode that no passenger wants the airlines' stockholders wiped out. If you wipe out the stockholder
by nickff 7y ago
Tyler Cowen made an interesting point on a recent Econtalk episode that no passenger wants the airlines' stockholders wiped out. If you wipe out the stockholders, it skews the incentives of the executives against safety, and in favor of profits. The reason is that the primary (financial) incentive to run safe airline is to maintain reputation/goodwill (which is a form of equity), and if you wipe out all the equity, they have nothing to lose.
- Klinky 7y agoWait, this is the industry that produced the 737 MAX, which skirted regulations and design flaws to avoid costly retrofits, redesigns and training, in order to maximize profits for shareholders. This is the industry actively sending out planes for repair and refurb to sketchy offshore repair centers, in order to maximize profits for shareholders. This is the industry that lobbies against more strict pilot fatigue rules, in order to maximize profits for shareholders. This is the industry that spent the last decade investing heavily in stock buybacks instead of improving passenger experience, maintenance of their planes and employee well being, in order to maximize profits for their shareholders. Seems maintaining shareholder profitability is its own safety issue.