Why Greed Is Still Good
By Thomas Mucha; Steven Kaplan

(Business 2.0) – Scandal. Malfeasance. Disgrace. Does American capitalism rest on shaky foundations? Not at all, argues University of Chicago B-school professor Steven Kaplan. In a provocative paper, "The State of U.S. Corporate Governance: What's Right and What's Wrong," he asserts that too much has been made of too little. - THOMAS MUCHA

How can you argue that corporate governance isn't broken? The glass is two-thirds full. Sure, Enron, Adelphia, and WorldCom were bad-but if you look at the U.S. stock market over the last 5, 10, or 20 years, we've outperformed everyone else. Then look at productivity. Of all the big, developed countries, it's the U.S. that's seeing the big gains.

Clearly, there's room for improvement. The biggest problem is liquidity. To reduce incentives to play short-run games, we should severely restrict executives' ability to sell stock.

Is equity-based compensation out of control? There's not a CEO in America today who doesn't care passionately about his stock price. That's much better than not caring, because the push to maximize the value of a company generally leads to higher productivity and better outcomes for consumers.