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Predatory Value Extraction: How the Looting of the Business Corporation Became the US Norm and How Sustainable Prosperity Can Be Restored Illustrated Edition
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Balancing the contributions of economic actors to value creation with their power to extract value provides the foundation for stable and equitable economic growth. When certain economic actors are able to assert their power to extract far more value than they contribute to the value-creation process, an imbalance occurs which, when extreme, leads to dire economic, political, and social consequences. This book not only explores these consequences, but also sets out an agenda for restoring sustainable prosperity.
- ISBN-100198846770
- ISBN-13978-0198846772
- EditionIllustrated
- PublisherOxford University Press
- Publication dateJanuary 28, 2020
- LanguageEnglish
- Dimensions9.3 x 0.9 x 6.3 inches
- Print length256 pages
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Editorial Reviews
Review
About the Author
William Lazonick is President of the Academic-Industry Research Network and Emeritus Professor of Economics at the University of Massachusetts. He has professorial affiliations with SOAS, University of London, and Institut Mines-Telecom in Paris. His research focuses on the social conditions of innovation, socioeconomic mobility, employment opportunity, income distribution, and economic development in advanced and emerging economies.
Jang-Sup Shin is an economics professor at the National University of Singapore. His research interests include East Asian economic growth, financial crises and restructuring, technology and innovation, competitive strategies, and organizations of firms. He has previously served as a part-time economic advisor to the Finance Minister of Korea, as well as an editorial writer for Maeil Business Newspaper, a leading economic newspaper in Korea.
Product details
- Publisher : Oxford University Press; Illustrated edition (January 28, 2020)
- Language : English
- Hardcover : 256 pages
- ISBN-10 : 0198846770
- ISBN-13 : 978-0198846772
- Item Weight : 1.13 pounds
- Dimensions : 9.3 x 0.9 x 6.3 inches
- Best Sellers Rank: #1,370,115 in Books (See Top 100 in Books)
- #308 in Corporate Governance
- #1,356 in Economic Policy & Development (Books)
- #1,986 in Communism & Socialism (Books)
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Efficient markets, they argue, are the result, not the cause of a highly productive economy. “The foundation of economic development is the ‘investment triad’: household families, government agencies and business enterprises.” There are no free markets. Rules, set by citizens and our representatives, are necessary for the trust and trade necessary for a dynamic economy. This is a “must read” book for anyone asking fundamental questions about how to build a future we can all feel proud to live in.
Maximizing shareholder value (MSV) is rooted in the false notion that shareholders invest in productive assets when they buy on secondary markets (not at IPO). That error is compounded by the assumption that shareholders take the primary risk and, therefore, have an incentive to monitor. Taxpayers also take a risk, as do employees, neither of which are so easily disposed of through liquid securities.
At the conclusion of their book, Lazonick and Shin boil down their most substantive recommendations to the following five:
1. Rescind and Rewrite SEC Rule 10b-18, which facilitates the use of share buybacks for predatory value extraction, primarly by company executives, Wall Street bankers and hedge funds
2. Redesign Executive Pay. We should get rid of US-style stock-based pay, which rewards speculation and manipulation more than innovation. Senior executives should, instead, be incentivized around metrics related to innovation. (love this idea)
3. Reconstitute Corporate Boards. Workers and taxpayers take more fundamental risks than shareholders, so would have board seats. (I can see laws facilitating workers on boards; much tougher to get taxpayers... since companies do business in multiple jurisdictions)
4. Reform the Corporate Tax System.
5. Redeploy Corporate Profits and Productive Capabilities.
I would add that we also need to focus on mobilizing the masses, increasing their education and participation in corporate governance. Such a mobilization will be required to win the reforms the authors seek.
We all know people that this has happened too. This books explains how this came about and explains what changes are needed to stop it. This book should be required reading for managers as well as policy makers. It should also be on every MBA syllabus and required reading for faculty in the disciplines of strategy, finance and political science.


