Incentives that goose short term profits at the expense of longer term viability are misguided and counter-productive. Policy changes are needed to shift the focus from short term financial gimmicks to longer term investment and innovation.
Oliver Hart is a professor of economics at Harvard University. Hart won the Nobel Prize in economics in 2016 for his work in contract theory and is the author of “Firms, Contracts, and Financial Structure.” Hart sat down with Business Insider’s Sara Silverstein at UBS’s Nobel Perspectives Live event in Brooklyn. In this interview, Hart discusses his most recent paper “Companies Should Maximize Shareholder Welfare Not Market Value.” He says that profit maximization is important to shareholders, but it’s not the only thing they care about. Here is a direct video link.
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