[ExI] Restructuring executive compensation

Max More max at maxmore.com
Tue Jun 2 05:16:58 UTC 2009

Dan Ust wrote:
>I'm not sure those swings are endogenous to the market economy.  In 
>fact, there's reason to suspect on a totally free market, there 
>would be few if any total economy swings, but only localized or at 
>best secoral ones.

I'm not sure either, Dan. However, I'm certainly not sure that they 
are *not* endemic either. The problem is the currently-human tendency 
to imitate one another without adequate rational thought. (Just the 
kind of thing that worries Shiller.) I definitely agree that 
government intervention has typically made the swings worse.

>I'm not as well versed in this area as I'd like to be, but from my 
>studies the question to ask is why are certain "compensation 
>schemes" selected?  This has not been an area of zero intervention 
>and seems related not merely to direct interventions in compensation 
>(e.g., caps on payouts, including the 1993 one you mention*) but 
>also to the threat of interventions...

Here's an example of how government involvement in compensation has 
led to unintended consequences (did I already mention this?): When 
the Clinton administration imposed a cap of $1 million on cash 
payouts to be eligible for corporate tax deductions, many firms 
shifted compensation to guaranteed bonuses, such as the controversial 
AIG payouts. Yet, you can be certain that most commentators will 
reflexively blame market-based decisions for this.

>I would only want to see this plan [Dynamic Incentive Accounts] 
>voluntarily adopted -- and not adopted merely because of either a 
>legal mandate or the threat of such a mandate.

Me too, in case that wasn't clear.


Max More, Ph.D.
Strategic Philosopher
Extropy Institute Founder
max at maxmore.com

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