THOUGHT LEADERS
The Rules Of The Game
Lucian Bebchuk
Are over-compensated and unaccountable corporate bosses to blame for today’s Great Recession? How should “toxic assets” be removed from banks’ balance sheets, and who should bear the cost of reviving credit markets? Which reforms must be adopted to save capitalism – above all from its practitioners?
If there is one lesson to be learned (or re-learned) from the current global economic crisis, it is that bad incentives produce bad outcomes. Indeed, at almost every turn in the financial meltdown, one finds a tableau of perverse incentives: entrenched managers compensated for short-term gains rather than long-term performance; rampant moral hazard driving down lending standards; investment banks paying ratings agencies to assess their securities.
Lucian Bebchuk, Professor of Law, Economics, and Finance at Harvard Law School and Director of Harvard’s Program on Corporate Governance, is one of the world’s top thinkers on corporate governance and finance. Trained as both a financial economist and a lawyer, Bebchuk has done pioneering work at the intersection of economics, finance, and law, and is a leading advocate of reforms to strengthen investor protection.
In Project Syndicate’s exclusive monthly series The Rules of the Game, Lucian Bebchuk, a leading advocate of reform, takes readers into the nitty-gritty but high-stakes world of market regulation, bailouts, corporate control, executive compensation, financial distress, and shareholder rights. It is in these trenches of capitalism that the Great Recession took shape, and where measures to prevent its recurrence will succeed or fail.
