Question A:
Having companies run to maximize shareholder value creates significant negative externalities for workers and communities.
Responses
Responses weighted by each expert's confidence
Question B:
Appropriately managed corporations could create significantly greater value than they currently do for a range of stakeholders – including workers, suppliers, customers and community members – with negligible impacts on shareholder value.
Responses
Responses weighted by each expert's confidence
Question C:
Effective mechanisms for boards of directors to ensure that CEOs act in ways that balance the interests of all stakeholders would be straightforward to introduce.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
 Daron Acemoglu |
MIT | Bio/Vote History | ||
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Cutting wages or polluting increase shareholder value with considerable social cost. Competition will not necessarily drive them out
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 Alberto Alesina |
Harvard | Bio/Vote History | ||
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it depends on too many factors to give a general answer
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 Joseph Altonji |
Yale | Bio/Vote History | ||
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 Alan Auerbach |
Berkeley | Bio/Vote History | ||
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Negative effects, quite possibly. But not sure why these would be externalities as commonly defined.
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 David Autor |
MIT | Bio/Vote History | ||
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Data show huge monetary + psychic costs to workers of mass layoffs that are almost surely not internalized by employers
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 Katherine Baicker |
University of Chicago | Did Not Answer | Bio/Vote History | |
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 Abhijit Banerjee |
MIT | Bio/Vote History | ||
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 Marianne Bertrand |
Chicago | Bio/Vote History | ||
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 Markus Brunnermeier |
Princeton | Bio/Vote History | ||
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 Raj Chetty |
Harvard | Bio/Vote History | ||
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 Judith Chevalier |
Yale | Bio/Vote History | ||
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Companies are transacting w workers so externality wrong word. Community externalities can be pos or neg in diff cases.
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 David Cutler |
Harvard | Bio/Vote History | ||
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 Angus Deaton |
Princeton | Bio/Vote History | ||
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 Darrell Duffie |
Stanford | Bio/Vote History | ||
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This is the point of regulation. For examples, pollution and labor regulations are intended to mitigate such effects.
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 Aaron Edlin |
Berkeley | Bio/Vote History | ||
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Greenhouse gases are but one example.
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 Barry Eichengreen |
Berkeley | Bio/Vote History | ||
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Too vague to answer with certainty.
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 Liran Einav |
Stanford | Bio/Vote History | ||
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 Ray Fair |
Yale | Bio/Vote History | ||
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Not clear how one should interpret "significant"
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 Amy Finkelstein |
MIT | Did Not Answer | Bio/Vote History | |
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 Austan Goolsbee |
Chicago | Bio/Vote History | ||
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 Michael Greenstone |
University of Chicago | Bio/Vote History | ||
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Externalities seem small between workers and firms so poor ?
Externalities for communities could be + (eg agglomeration) or - (eg pollution)
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 Robert Hall |
Stanford | Bio/Vote History | ||
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This depends on the effectiveness of laws and regulations limiting harmful conduct by corporations.
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 Oliver Hart |
Harvard | Bio/Vote History | ||
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It depends. Worker and community externalities can arise if companies have monopoly/monopsony power but not under competition.
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 Bengt Holmström |
MIT | Bio/Vote History | ||
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Probably significant externalities, but not sure there are significantly better alternative governance structures
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 Caroline Hoxby |
Stanford | Bio/Vote History | ||
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It depends on the degree to which shareholder values are aligned with worker/community values. This differs among firms & industries.
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 Hilary Hoynes |
Berkeley | Bio/Vote History | ||
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 Kenneth Judd |
Stanford | Bio/Vote History | ||
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This depends on the regulatory environment. IF laws impose the proper constraints THEN maximizing value will not create externalities.
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 Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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 Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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sometimes, but doubtful that this is pervasive
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 Pete Klenow |
Stanford | Bio/Vote History | ||
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Pollution externalities, for one.
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 Jonathan Levin |
Stanford | Bio/Vote History | ||
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Would prefer "sometimes" to "uncertain" here.
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 Eric Maskin |
Harvard | Bio/Vote History | ||
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But shareholders themselves may have other objectives besides the share price.
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 William Nordhaus |
Yale | Bio/Vote History | ||
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 Maurice Obstfeld |
Berkeley | Bio/Vote History | ||
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 Emmanuel Saez |
Berkeley | Bio/Vote History | ||
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 Larry Samuelson |
Yale | Bio/Vote History | ||
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Companies can clearly create externalities, but a general characterization of their sign and magnitude is less clear.
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 José Scheinkman |
Columbia University | Did Not Answer | Bio/Vote History | |
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 Richard Schmalensee |
MIT | Bio/Vote History | ||
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Long-run value maximization requires avoiding the negative consequences of harming workers or communities.
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 Carl Shapiro |
Berkeley | Bio/Vote History | ||
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 Robert Shimer |
University of Chicago | Bio/Vote History | ||
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Enforcing regulation can handle negative externalities. Companies should maximize value subject to these constraints
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 James Stock |
Harvard | Did Not Answer | Bio/Vote History | |
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 Richard Thaler |
Chicago Booth | Bio/Vote History | ||
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I am assuming this means "can create". Should not be controversial. See Theranos. Mortgage lenders in early 2000s. Etc.
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 Christopher Udry |
Northwestern | Bio/Vote History | ||
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Second best. Profit max in context of other externalities, imperfect markets, incomplete info generates bad outcomes.
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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Daron Acemoglu |
MIT | Bio/Vote History | ||
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Some of the steps will be costly for shareholders.
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Alberto Alesina |
Harvard | Bio/Vote History | ||
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Joseph Altonji |
Yale | Bio/Vote History | ||
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Alan Auerbach |
Berkeley | Bio/Vote History | ||
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David Autor |
MIT | Bio/Vote History | ||
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I don’t know why this would be a free lunch
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Katherine Baicker |
University of Chicago | Did Not Answer | Bio/Vote History | |
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Abhijit Banerjee |
MIT | Bio/Vote History | ||
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Marianne Bertrand |
Chicago | Bio/Vote History | ||
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Markus Brunnermeier |
Princeton | Bio/Vote History | ||
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Raj Chetty |
Harvard | Bio/Vote History | ||
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Judith Chevalier |
Yale | Bio/Vote History | ||
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David Cutler |
Harvard | Bio/Vote History | ||
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Angus Deaton |
Princeton | Bio/Vote History | ||
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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Hard to know. But if true, this would imply almost no mis-alignment of incentives between shareholders and the others. That seems unlikely.
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Aaron Edlin |
Berkeley | Bio/Vote History | ||
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Barry Eichengreen |
Berkeley | Bio/Vote History | ||
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Liran Einav |
Stanford | Bio/Vote History | ||
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Ray Fair |
Yale | Bio/Vote History | ||
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Amy Finkelstein |
MIT | Did Not Answer | Bio/Vote History | |
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Austan Goolsbee |
Chicago | Bio/Vote History | ||
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Michael Greenstone |
University of Chicago | Bio/Vote History | ||
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empirical evidence is weak/nonexistent
theory would say to disagree though
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Robert Hall |
Stanford | Bio/Vote History | ||
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See previous
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Oliver Hart |
Harvard | Bio/Vote History | ||
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Companies are not usually managed inefficiently. They may be maximizing the wrong thing but I don't think there's money "left on the table."
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Bengt Holmström |
MIT | Bio/Vote History | ||
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No obvious win-win alternatives, but better for workers/stakeholders at the cost of shareholders, yes.
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Caroline Hoxby |
Stanford | Bio/Vote History | ||
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There is NO answer that is generally true. It depends on the firm & industry. But, I would not say that it is true on average.
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Hilary Hoynes |
Berkeley | Bio/Vote History | ||
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Kenneth Judd |
Stanford | Bio/Vote History | ||
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In light of the current litigation regarding opioids, it is clear that things could be improved.
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Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Shareholder value maximization often coincides with the community, employees, suppliers. When they conflict, shareholders should decide.
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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Pete Klenow |
Stanford | Bio/Vote History | ||
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Jonathan Levin |
Stanford | Bio/Vote History | ||
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I think these cases exist, especially over longer time periods; less clear they are generic and easy to identify.
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Eric Maskin |
Harvard | Bio/Vote History | ||
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William Nordhaus |
Yale | Bio/Vote History | ||
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Maurice Obstfeld |
Berkeley | Bio/Vote History | ||
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Emmanuel Saez |
Berkeley | Bio/Vote History | ||
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Larry Samuelson |
Yale | Bio/Vote History | ||
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Appropriate actions could impose second-order losses on shareholders while attaining first-order gains for others.
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José Scheinkman |
Columbia University | Did Not Answer | Bio/Vote History | |
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Richard Schmalensee |
MIT | Bio/Vote History | ||
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There is no reason to think that firms are as inefficient as an affirmative answer would imply.
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Carl Shapiro |
Berkeley | Bio/Vote History | ||
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Robert Shimer |
University of Chicago | Bio/Vote History | ||
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James Stock |
Harvard | Did Not Answer | Bio/Vote History | |
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Richard Thaler |
Chicago Booth | Bio/Vote History | ||
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Should adding solar panels need the same ROI as buying new computers? Employees, customers, and shareholders all live on the same planet.
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Christopher Udry |
Northwestern | Bio/Vote History | ||
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"negligible" is the word that makes me unsure.
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Question C Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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Daron Acemoglu |
MIT | Bio/Vote History | ||
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Moving away from extreme shareholder values needs simultaneous changes in laws & norms. Imposing topdown regulations wouldn’t be sufficient
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Alberto Alesina |
Harvard | Bio/Vote History | ||
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Joseph Altonji |
Yale | Bio/Vote History | ||
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Alan Auerbach |
Berkeley | Bio/Vote History | ||
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David Autor |
MIT | Bio/Vote History | ||
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Never straightforward. But still potentially worth it. Other country examples — Germany, Denmark— prove it’s feasible.
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Katherine Baicker |
University of Chicago | Did Not Answer | Bio/Vote History | |
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Abhijit Banerjee |
MIT | Bio/Vote History | ||
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Marianne Bertrand |
Chicago | Bio/Vote History | ||
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Markus Brunnermeier |
Princeton | Bio/Vote History | ||
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Raj Chetty |
Harvard | Bio/Vote History | ||
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Judith Chevalier |
Yale | Bio/Vote History | ||
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David Cutler |
Harvard | Bio/Vote History | ||
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Angus Deaton |
Princeton | Bio/Vote History | ||
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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This doesn't seem "straightforward." It would be complicated to balance the potential conflicts of interests among all stakeholders.
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Aaron Edlin |
Berkeley | Bio/Vote History | ||
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Few major changes are straightforward but that does not mean they are impossible.
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Barry Eichengreen |
Berkeley | Bio/Vote History | ||
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Liran Einav |
Stanford | Bio/Vote History | ||
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Ray Fair |
Yale | Bio/Vote History | ||
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Amy Finkelstein |
MIT | Did Not Answer | Bio/Vote History | |
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Austan Goolsbee |
Chicago | Bio/Vote History | ||
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Michael Greenstone |
University of Chicago | Bio/Vote History | ||
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v difficult to maximize multiple goals w/o objective function
questions missing the big picture by ignoring central role for govt policy
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Robert Hall |
Stanford | Bio/Vote History | ||
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Corporate governance is a hard subject and no reform is easy.
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Oliver Hart |
Harvard | Bio/Vote History | ||
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I don't see why this would be good unless the company is set up for this purpose, in which case it would be difficult but possible.
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Bengt Holmström |
MIT | Bio/Vote History | ||
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Definitely not straightforward.
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Caroline Hoxby |
Stanford | Bio/Vote History | ||
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Hilary Hoynes |
Berkeley | Bio/Vote History | ||
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Kenneth Judd |
Stanford | Bio/Vote History | ||
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There is nothing "straightforward" about creating such mechanisms.
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Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Milton Friedman was and is absolutely right on this one.
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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it is a hornet's nest
-see background information here |
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Pete Klenow |
Stanford | Bio/Vote History | ||
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Jonathan Levin |
Stanford | Bio/Vote History | ||
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Designing effective mechanisms to balance interests is incredibly important but rarely "straightforward"
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Eric Maskin |
Harvard | Bio/Vote History | ||
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Different stakeholders could have representation on the Board, but making quantitative tradeoffs across interests is a challenge.
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William Nordhaus |
Yale | Bio/Vote History | ||
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Maurice Obstfeld |
Berkeley | Bio/Vote History | ||
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Emmanuel Saez |
Berkeley | Bio/Vote History | ||
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Larry Samuelson |
Yale | Bio/Vote History | ||
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Anticipating the unintended consequences of incentives is always difficult.
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José Scheinkman |
Columbia University | Did Not Answer | Bio/Vote History | |
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Richard Schmalensee |
MIT | Bio/Vote History | ||
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Carl Shapiro |
Berkeley | Bio/Vote History | ||
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Robert Shimer |
University of Chicago | Bio/Vote History | ||
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James Stock |
Harvard | Did Not Answer | Bio/Vote History | |
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Richard Thaler |
Chicago Booth | Bio/Vote History | ||
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There is always one word too many. Here it is straightforward. But here is one rule: don't do it if you would not want it on the front page.
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Christopher Udry |
Northwestern | Bio/Vote History | ||
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I don't think that this is easy. But it is important to work to figure it out.
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