Feudal Values Are Ruining Corporate Profitability

If you want your company to make a profit, don't offer any of its executives a shot at knighthood. No, this isn't a Game of Thrones joke. In countries where governments can grant knighthoods, executives are willing to do almost anything to get the coveted titles — including letting their companies fail.

Over at Foreign Policy's Passport, Alicia Wittmeyer writes:

In a new paper, researchers Konrad Raff and Linus Siming found that CEOs were willing to let their firm's performance suffer for the sake of...a knighthood (or a damehood, if she happened to be a woman). Chief executives, it seems, actually forsake cutting costs or firing employees when presented with the possibility of the archaic honor — the award of which might be hurt by, say, a round of ugly layoffs.

Governments, in turn, may be using such awards as a low-cost means of boosting employment in companies run by CEOs that are suckers for status symbols, according to Raff and Siming, who are professors at VU University Amsterdam and Bocconi University, respectively.

So basically, the specter of feudalism is haunting capitalism. Makes perfect sense.