Summary of Robert J. Shiller's Finance and the Good Society

By IRB Media

Please note: This is a companion version & not the original book. Book Preview:

#1 The financial sector is the science of goal architecture, and those who work in it are the architects who structure these goals and manage the risks of small businesses, families, school systems, cities, and corporations.

#2 The CEO of a company is in a very special position, because he or she stands for an idea that defines the work of all company employees. The CEO embodies the company’s purpose, and this responsibility must be put into the hands of an individual.

#3 The corporation has a problem: it has to deal with a succession of CEOs. CEOs, subject to human mortality, cannot be relaxing in the lives of kings. The company must find ways to keep its leaders focused on their jobs, attending to the boring and often unappreciated tasks that take up much of their time.

#4 The financial arrangement for the typical CEO is carefully human engineered, designed to incentivize that person to stay in the position long enough and prominently enough that his or her relationship to others as their leader becomes firmly established.

• Language: English
• Publisher: IRB Media
• Release date: Jun 2, 2022
• ISBN: 9798822526983

IRB Media

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Insights on Robert J. Shiller's Finance and the Good Society

Contents

Insights from Chapter 1

Insights from Chapter 2

Insights from Chapter 1

#1

The financial sector is the science of goal architecture, and those who work in it are the architects who structure these goals and manage the risks of small businesses, families, school systems, cities, and corporations.

#2

The CEO of a company is in a very special position, because he or she stands for an idea that defines the work of all company employees. The CEO embodies the company’s purpose, and this responsibility must be put into the hands of an individual.

#3

The corporation has a problem: it has to deal with a succession of CEOs. CEOs, subject to human mortality, cannot be relaxing in the lives of kings. The company must find ways to keep its leaders focused on their jobs, attending to the boring and often unappreciated tasks that take up much of their time.

#4

The financial arrangement for the typical CEO is carefully human engineered, designed to incentivize that person to stay in the position long enough and prominently enough that his or her relationship to others as their leader becomes firmly established.

#5

The salaries and bonuses of CEOs are often subject to news articles, as they are extremely high. However, this does not mean that companies can always cheaply hire the CEOs they want. CEOs are not usually particularly loved or famous, with only a few exceptions.

#6

The growth in high salaries that we have seen in recent decades might in part be explained as the result of improvements in our capitalist system. However, the system should not be bound by arbitrary pay conventions.

#7

The government should intervene in the process of determining executive salaries to mitigate a specific moral hazard that seems to have played a significant role in causing the financial crisis of 2007. CEOs and other top officers have incentives to take extraordinary risks, and they believe the government will not allow their companies to fail.

#8

The problem of cronyism in the boardroom is not with financial capitalism, but with the details of its implementation. To reduce the problem, Bebchuk and Fried propose reform of the election of board members, measures to make it easier to replace a board, and procedures to give shareholders the power to initiate changes in corporate charters.

#9

The general public, at least in the United States, cannot appreciate all the issues surrounding the extremely high salaries paid to some executives, and thus has been excessively willing to acquiesce in those salaries.

#10

The problem of CEO compensation can be seen in the fact that the same issues arose even in communist countries. The roles of