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Individual - Risk Article: Difference between revisions
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*'''The crabs can pole-vault''': Individuals can move from firm to firm; {{risk|gene}}s cannot leave one host and join another (except via reproduction) <br> | *'''The crabs can pole-vault''': Individuals can move from firm to firm; {{risk|gene}}s cannot leave one host and join another (except via reproduction) <br> | ||
*'''Firms don’t “[[evolve]]”''': However transfixed their executives might be with evolutionary {{tag|metaphor}}s, [[Corporation|corporations]] do ''not'' evolve like organisms. Just as well; that would involve dying. Firms ''adapt'' during life. If there is any heritability it is by way of heretical [[Lamarckian evolution]]<ref>Being a great biological heresy.</ref> at best. But, since the crabs can pole-vault, a Lamarckian approach might make sense: The firm is a vessel for replicating {{risk|individual}}s. It is not a replicator itself. | *'''Firms don’t “[[evolve]]”''': However transfixed their executives might be with evolutionary {{tag|metaphor}}s, [[Corporation|corporations]] do ''not'' evolve like organisms. Just as well; that would involve dying. Firms ''adapt'' during life. If there is any heritability it is by way of heretical [[Lamarckian evolution]]<ref>Being a great biological heresy.</ref> at best. But, since the crabs can pole-vault, a Lamarckian approach might make sense: The firm is a vessel for replicating {{risk|individual}}s. It is not a replicator itself. | ||
*'''The {{risk|firm}} has NO conscience''': No matter how often we tell ourselves it has a corporate [[legal personality|personality]], responsibility and “conscience”, ''these are '''fictions'''''. A {{risk|firm}} has no personality other than the one that emerges from the individuals comprising it, Ouija board style.<br> | *'''The {{risk|firm}} has NO conscience''': No matter how often we tell ourselves it has a corporate [[legal personality|personality]], responsibility and “conscience”, ''these are '''fictions'''''. A {{risk|firm}} has no personality other than the one that emerges from the individuals comprising it, Ouija board style. Indeed this is one of the great sources of the [[agency problem]]: at the end of the day no-one speaks, without conflict, for the corporate entity itself,<br> | ||
''Just as the evolutionary fitness of an organism can only be explained by the reproductive capacity of its genes, so the fitness of an {{risk|firm}} is a function of the survival instincts of its employees.''<br> | ''Just as the evolutionary fitness of an organism can only be explained by the reproductive capacity of its genes, so the fitness of an {{risk|firm}} is a function of the survival instincts of its employees.''<br> | ||
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::::::(ii) The stock reply: turning a control function into a profit and loss centre has bee tried before. It didn’t work out so well. <br> | ::::::(ii) The stock reply: turning a control function into a profit and loss centre has bee tried before. It didn’t work out so well. <br> | ||
:::::(e) The bonus culture. No doubt to redress the fear / reward balance, investment banks shifted towards a bonus culture throughout the eighties. <br> | :::::(e) The bonus culture. No doubt to redress the fear / reward balance, investment banks shifted towards a bonus culture throughout the eighties. <br> | ||
::::::(i) Many of these firms started out life as partnerships, where those bringing in the profits were personally liable for losses, and the compensation they shared was specifically the equity. These firms took advantage of regulatory change to incorporate. The partners changed their formal status (if not their titles) from partner to employee, but the compensation structure remained. While these firms encouraged equity participation (to the point of paying compensation in shares) employees main source of income was celery and not share performance. Indeed the manual dilution of equity capital in the bonus round had the typical effect of depressing share performance. In this way and in many others comma employees in these Incorporated partnerships were and continue to be systematically preferred over equity holders. The same pay structure has been adopted by competing banks which have always had a corporate structure full stop the lesson of the last 30 years has been only a mug is long banking stock .<br> | ::::::(i) Many of these firms started out life as partnerships, where those bringing in the profits were personally liable for losses, and the compensation they shared was specifically the equity. These firms took advantage of regulatory change to incorporate. The partners changed their formal status (if not their titles) from partner to employee, but the compensation structure remained. While these firms encouraged equity participation (to the point of paying compensation in shares) employees main source of income was celery and not share performance. Indeed the manual dilution of equity capital in the bonus round had the typical effect of depressing share performance. In this way and in many others comma employees in these Incorporated partnerships were and continue to be systematically preferred over equity holders. The same pay structure has been adopted by competing banks which have always had a corporate structure full stop the lesson of the last 30 years has been only a mug is long banking stock.<br> | ||
{{ref}} | {{ref}} | ||