Article Review: - The Greed Cycle, by John Cassidy

The article by Thomas Cassidy, points out the instrumental role that greed plays in the modern corporation. Modern Economists have always seen greed as not only a necessary element in the corporate environment, but as also a vital part of the successful evolution of a public company. As the article points out, “Economists from Adam Smith to Milton Friedman have seen greed as an inevitable and, in some ways, desirable feature of capitalism. In a well regulated and well balanced economy, greed helps to keep the system expanding”.
In the early public companies, greed was not seen as a danger, as the implicit trust that managers would not slack off, and would run the company in the interest of the stockholders and stakeholders was not undermined. Economist was the first to identify the issue of managers not acting in the interest of the shareholders, and instead being motivated by greed, and “self-enrichment”. Public Companies, evolved as a way to create financing for large industry, where in the owners agreed to relinquish day to day control and operation of a company to mangers, who in turn would act in their interest, and maximize revenues.
As the article points out, in the beginning, “most of the professional managers were content to collect generous salaries and pensions rather than habitually attempt to rob the stockholders and bondholders. It is a strong proof of the marvelous growth in recent times of a spirit of honesty and uprightness in commercial matters, that the leading officers of great public companies yield as little as they do to the vast temptations to fraud which lie in their way”
Initially, as the article states, “As long as the firm made a decent profit every year and raised the dividend it paid its stockholders, this was considered good enough”. However, as Economists Jensen and