- 10 Nov 2014
- Working Paper
In essence, crony capitalism conveys a shared point of view-sometimes stretching to collusion-among industries, their regulators, and Congress. The result is business-friendly policies and investments that serve private interests at the expense of the public interest. In this research paper, the author's goal is to add precision and nuance to our understanding of this form of corruption. He does so first by exploring definitions of crony capitalism. He then outlines the toolkit of crony capitalism including 1) campaign contributions to elected officials, 2) heavy lobbying of Congress and rule-writing agencies, and 3) a revolving door between government service and the private sector. The paper next describes the costs of cronyism and concludes with innovative ideas for curbing the excesses of crony capitalism. As the author notes, thorny problems remain: for example, the fact that "the public interest" in matters involving subsidies, tax preferences, and legislative loopholes is often difficult to discern and agree on.
- 07 Jun 2012
- Working Paper
A long-term time horizon is most sensible where a business or investor has some edge and when short-term risks associated with a longer-term strategy are hedged and opportunity costs minimized. However, when perverse, short-term incentives artificially encourage executives to ignore high-yielding, long-term opportunities, then the costs of short-termism set in. The recent financial crisis suggests that the rise of short-termism has been especially troublesome in the finance industry. In this paper, Malcom Salter starts by analyzing a case involving the mortgage-banking desk at Citigroup because it can help us think about how short-termism-the collapsed time horizon of both business decision makers and investors-not only sabotages an enterprise's reputation and value, but also invites individual and institutional corruption. He then examines the key drivers of short-termism in contemporary business, and their potential effects on the behavior of both executives and their organizations. He concludes by proposing mechanisms to deter the corrupting effects of short-termism, including changes in both business and public policy.
- 02 Feb 2011
- Working Paper
In the business world, "gaming" refers to the act of subverting the intent of rules or laws without technically breaking them--a skillful if unsavory way to achieve private gain. Harvard Business School professor emeritus Malcolm S. Salter explores how gaming the system can lead to institutional corruption, citing examples from Enron and early efforts by some banks to game the implementation of the Dodd-Frank financial reform act.
- 15 Jun 2009
For decades, General Motors reigned as the king of automakers. What went wrong? We asked HBS faculty to reflect on the wrong turns and missed opportunities of the former industry leader, and to suggest ideas for recovery. Key concepts include: Formed in 1908, General Motors was the world's largest carmaker between 1931 and 2008. GM filed for bankruptcy protection on June 1, 2009. In the bankruptcy petition, GM claimed slightly over $82 billion in assets and nearly $173 billion in debts. GM's failure of leadership is astounding and ironic given its early history as an innovator, says HBS professor Nancy Koehn. GM faces a unique opportunity to retool itself for the 21st century, says visiting scholar Daniel Heller. Meanwhile, the U.S. government administration is embarking on an interesting experiment in political economy, according to professor Joseph Bower. Closed for comment; 0 Comment(s) posted.