[marketcorrection] Don Boudreaux: Apologies to Henry Manne....

[Email subscription to blog articles]

Posted by Don Boudreaux:
Apologies to Henry Manne....
http://marketcorrection.powerblogs.com/posts/1213619227.shtml


   22 January 2008
   Editor, The Region
   Federal Reserve Bank of Minneapolis
   Dear Editor:
   I very much enjoyed your interview with Eugene Fama (December 2007).
   But I wonder if Fama was somewhat inconsistent. When asked about
   principal-agent problems in corporations, he correctly pointed out
   that state statutes protecting corporations from hostile takeovers
   (and, hence, protecting incumbent managers from losing their jobs)
   strip away some market discipline that corporations would otherwise -
   and healthily - be subjected to.
   But when asked about CEO compensation, Fama says that it would be
   excessive only if the compensation process gets "corrupted." But he
   adds that he doesn't "know of any solid evidence that the process was
   corrupted."
   Does not anti-takeover legislation corrupt the process?
   Sincerely,
   Donald J. Boudreaux
   Chairman, Department of Economics
   George Mason University