Too many corporations wait too long before firing the boss, Robin Hanson says:
Consider Michael Eisner at Disney, Carly Fiorina at HP, Jack Stahl at Revlon and Scott McNealy at Sun. All of these chief executive officers were kept on long past the point when a rational owner of the companies in question would have told them to leave.Why are boards so slow to fire the chief? One reason is that they don’t have enough skin in the game. They own few shares and therefore don’t feel obligated to protect their investment from an out-of-touch boss. Besides, most of them owe their cushy jobs to the chief executive.
Hanson suggests a solution though:
Set up two new stock markets where investors would be making not outright bets on the future of a company but conditional bets. In one market the trades are consummated only if the current chief executive remains in place at the end of the current quarter. In the other market the trades are consummated only if the incumbent is bounced out by the end of the quarter. The price spread between these two markets would send a signal about whether the boss should stay or go.
The directors’ job then would be to listen to the markets, and, if a wide enough spread opens up in favor of a departure, get out the pink slip.
Hanson believes that such fire-the-CEO markets could evolve into a political tool superior to one-vote-per-person democracy — something he calls futarchy. Mencius Moldbug, no fan of democracy, is no fan of futarchy either and dismisses it out of hand as too easy to manipulate. Hanson retorts:
In the debate, I suggested we start by trying fire-the-CEO markets, and only gradually rely more on them in CEO decisions as such markets collect good track records. Moldbug seems to accept wide trading in ordinary stock markets because he doesn’t think any decisions depend on them, but strongly advises against allowing non-employees to trade in fire-the-CEO markets, due to manipulation concerns. But even a track record showing that firms which followed market advice do better on average than firms that do not would not persuade him.In fact, Moldbug the “engineer” says no data anyone could collect in the lab or in any organization smaller than a nation would be relevant, and even with nations he doubts we’d see hidden manipulation. Nor does any data collected in the last century test his belief that the best governments are single rulers running city-sized polities with iron fists and complete discretion. It is not even clear what prior data makes his case — apparently it can’t be summarized in any concise form; you have to just read dozens of books and have a feel for it.
Not only does Moldbug know such iron fists would rule best, allow emigration, not cheat their investors, and never ever accept manipulator payola, he apparently knows this deductively, as a noble philosopher, not like we data-addicted pansy social scientists. And he has no interest in improvements in the status quo below his philosopher-deduced-best pinacle.
What more can one say to such a person?