Maybe this is just nitpicking, but I found this passage confusing:
On the level of corporations doing this direct from the top, often these actions are a response to the incentives the corporation faces. In those cases, there is no reason to expect such actions to be out-competed.
In other cases, the incentives of the CEO and top management are twisted but the corporation’s incentives are not. One would certainly expect those corporations that avoid this to do better. But these mismatches are the natural consequence of putting someone in charge who does not permanently own the company. Thus, dual class share structures becoming popular to restore skin in the correct game.
Is that last sentence in the wrong paragraph?
Before I get to my reading that suggests that change, a couple things that I found confusing that could have caused me to misread it: What does “in charge” mean? The CEO or the owners? How do corporations face incentives, rather than individuals?
I read the first paragraph about Wall Street and quarterly reports giving bad incentives to the CEO. Dual class shares exist to protect founders from outside investors. So doesn’t that sentence belong in the first paragraph, not the second...? (It’s a little weird to say that outside investors don’t have skin in the game. Maybe you mean that money managers investing other people’s money don’t have skin in the game. Also, it’s more that super shares remove control, rather than add skin. I think that it may be more important that the founders have demonstrated ability to make long-term plans than their incentives. Consider Steve Jobs returning to Apple as a hired-gun CEO.)
What is the other case, the case of the second paragraph? When Wall Street or other owners understands the company, but has to install a hired manager? Then, yes, the misalignment of incentives makes it difficult for the board to hire a CEO. But super shares don’t seem relevant to that problem.
Maybe this is just nitpicking, but I found this passage confusing:
Is that last sentence in the wrong paragraph?
Before I get to my reading that suggests that change, a couple things that I found confusing that could have caused me to misread it: What does “in charge” mean? The CEO or the owners? How do corporations face incentives, rather than individuals?
I read the first paragraph about Wall Street and quarterly reports giving bad incentives to the CEO. Dual class shares exist to protect founders from outside investors. So doesn’t that sentence belong in the first paragraph, not the second...? (It’s a little weird to say that outside investors don’t have skin in the game. Maybe you mean that money managers investing other people’s money don’t have skin in the game. Also, it’s more that super shares remove control, rather than add skin. I think that it may be more important that the founders have demonstrated ability to make long-term plans than their incentives. Consider Steve Jobs returning to Apple as a hired-gun CEO.)
What is the other case, the case of the second paragraph? When Wall Street or other owners understands the company, but has to install a hired manager? Then, yes, the misalignment of incentives makes it difficult for the board to hire a CEO. But super shares don’t seem relevant to that problem.