Are executive bonuses justified?
It’s a lovely sunny day on the Harvard campus, and Oliver Hart, as is appropriate for a British gentleman, has chosen a dark suit for the occasion. There’s another very British custom to enjoy, and that’s a nice cup of Earl Grey tea. During an enlightening conversation, he shows himself to be a composed and sincere academic, even when discussing more controversial topics such as the question of whether excessive executive bonuses are ever justified.
Why employees need to have a long-term perspective
The Nobel Laureate notes that there are many examples of what can go wrong with an incentive scheme. It may be that employees don’t have a long-term perspective. "You manage to make a lot of money for a time by doing things that aren’t really good, but it’s only going to become apparent later,” he explains. "Then you get out of the company, you made your fortune, and other people suffer later on when the damage is revealed." Hart knows that sometimes people are encouraged to focus on short-term advantages only, "making money on the bottom line and not worrying about the bigger picture". And that’s why it may be important to think about reducing bonuses and giving people a more long-term perspective in their everyday work.
Public or private ownership?
A rich life
Hart knows that the march of innovation can’t be stopped, and shouldn’t be. At the same time he feels that there are other solutions to the question of how to deal with it, solutions that far exceed the political solutions of today. Perhaps, with the help of the world’s leading economists, change is possible.
One of the things about winning the Nobel Prize is that I may have an opportunity to do some good, one’s impact could be greater than before. I don’t want to just think about what I did for myself, my family. I would like to think, at the end of it all, there was some small way in which I improved the world. This is part of a rich life.
See how UBS can help
Whether it's about investments, your business, or anything to do with your financial future
The value of investments can go down as well as up. Your capital and income is at risk.