Okay rather than continuing to gripe into the wind, I'm going to lay my cards on the table. As some of you know I'm interested in the discussion around corporate purpose and its connection to corporate governance. But I find the discussion to be so frequently besides the point.

So let's start with my grand theory of what is going on here. Gonna rip some of these slides from my dissertation defense. I *really* like this paper from Greenwald, Lettau, Ludvigson.

What are the aggregate trends in the market - essentially the economy has been decelerating while at the same time payouts to capital have been increasing. Similarly there is the famous EPI graph showing the disparity bw productivity and worker pay.

Yes I know people gripe with some of the measures in the graph, but still there is inarguably something there. The question is what is driving these trends - it's the most important Q in econ and every field thinks they have the answer.

My argument is kind of simple. What we think has changed (see the excellent paper from @annastansbury and Larry Summers) is that there has been some change in bargaining power in the relationship between shareholders, managers, and stakeholders (workers, the community, etc.)

I think that ignoring corporate governance here is a problem. Corporate governance is fundamentally about these power relationships, and a lot has changed since the 1980s and Michael Jensen and co convincing everyone that all that matters is the agency problem.

First, not only has CEO compensation increased considerably, but the *composition* is much closer to what Big Harvard says is the ideal. A lot less salary and bonus, more stock.

And increased market for corporate control through both private equity and hedge fund firms. All of this is supposed to make managers more accountable to shareholders by aligning their pay incentives and by threatening them with removal if they shirk.

We've seen these large changes in managerial oversight at pretty much the precise time that we've seen large flows of corporate profits to shareholders. This is both the point of the whole thing, but yet somehow people refuse to believe that 'good governance' could be to blame.

It's hard to causally connect these two phenomenon but it makes as much intuitive sense to me as anything else. I'm working on one lense of this right now - looking at the effects of hedge fund activism on stakeholders.

It's hard. There is a whole HF activism literature that suffers from the same Ashenfelter dip problem as with job trainings program but doesn't really address it. I'm trying to use modern AIPW stuff with ML to try and get at the selection problem, but we'll see, it's tuff.

What I (a nobody) think we need to do is 1) embed this stuff in some theory/structural work, 2) identify some outcomes we can measure well, and try and find, if they exist, some potentially exogeneous shifts in governance standards.

What I don't think is useful is continued unstructured debates about whether this is all a way for managers to shirk duties. Sure, the agency problem is real but it is but one problem in a messy world. Thinking that if you solve that everything will turn out just fine is odd.

Also don't use bad IVs, and aggregate ESG measures are all crap. END.