Intertemporal Choice, Hostile Takeovers and the Principal-Agent Problem: Corporate Managers Versus Political Agents
Journal of Social, Political and Economic Studies, Vol. 17, No. 2, Summer 1992
11 Pages Posted: 4 Aug 2011
Date Written: 1992
It is a commonly held belief that corporations, in pursuit of short-term profit, typically ignore the interests of the future [see Reich (1983), and Carnoy and Shearer (1980)]. According to this argument, the emphasis on the short-run explains a whole host of problems such as: an eroding industrial base, a lack of competitiveness in the world market, the energy crisis of the seventies, and the environmental "mess." The solution advocated by Reich (1983) and others is to substitute political action for private action. However, in this paper we argue that this would be a misguided policy prescription, especially since it is the presence of transferable property rights that makes corporate leaders more conscious of future decisions than their counterpart - political agents.
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