Chapter 13. Create Good Incentives for Long- Term Solutions
Many of the new laws will make it easier to prosecute the future offenders and punish them more harshly. This is good. However, they may not be effective in deterring behavior. When talking about the recent scandals, prosecution and punishment are very important. We think that prevention is a better strategy for the future. However, not the kind of prevention that more regulators bring. To prevent market-wide problems in the future, long-term solutions need to be implemented. We want to see solutions that set up the right relationships among shareholders, executives, and monitors . Various solutions could create incentives for these participants to work hard in the right activities, not the wrong ones.