Short-Term CEO vs. Hereditary Ownership

There is a small game company. A new CEO, “A,” has been appointed to this company. He loudly declares “innovation.”
The company originally had PhD-level economists who analyzed the balance of the in-game economy. However, CEO A decides to fire them, claiming that they are “not producing results.”
“This isn’t a place to write academic papers. This is a place to make money!”

Then he decides to adopt an aggressive marketing strategy.
He begins sending users frequent notifications promoting new items and starts selling packages designed to maximize short-term revenue.
As a result, the value of in-game currency experiences extreme volatility, and a large number of users leave the game.

But A is not worried. During all of this, he carefully organizes his personal portfolio—filled with eye-catching achievements such as “short-term performance improvement.”
With this portfolio in hand, he is already searching for his next job, a bigger stage.
What remains is nothing but a devastated game, discouraged employees, and users who feel betrayed.

Now let’s look at the story of an owner-family’s “prince.”
There is a large corporation that has maintained its scale for three generations.
The only son of the third generation, “B,” was raised from birth to become a “business leader.”
The expectations placed on him were taken for granted. And that weight gradually twisted him.
Rebellion against expectations, and the compulsion to prove his own worth.

After numerous conflicts with his father, B is eventually assigned to run a small affiliate company because he is deemed “not yet prepared” for central management.
B then replaces the entire executive team with his own people: college friends, golf club acquaintances, long-time buddies.
Now the executives have learned how to survive meetings—by choosing only the statements that will please B.

The first story is a typical example of the principal-agent problem.
CEO A is merely someone who has come to work for a short period, and he has no absolute obligation to ensure the company’s long-term prosperity.
In many cases, long-term effectiveness and short-term performance exist in a zero-sum relationship, and the CEO may be forced to choose between the two.
Furthermore, from a long-term perspective, A can rearrange information to manipulate how much harm was actually done.
After all, the CEO holds strong authority to access and control internal information within the company.

The second story is a classic case of owner risk.
This type of risk can cause stock price decline, damage to corporate reputation, and lowered employee morale, and is considered one of the major factors that hinder sustainable growth.
An owner is an undeniable member of the firm, which theoretically gives him a strong advantage in forming long-term strategy.
But that, of course, only applies if he has the competence and the will to do so.
And even if he has both competence and will, the rigidity that accumulates over long periods can hold him back.

All of these issues were, in fact, things humans did not have to consider when we were hunting or cutting down trees.
Hunting depended on personal skill; logging depended on personal strength; failure was borne by the individual.
However, after the agricultural revolution, human activity became based on “communities, groups, and organizations.”
In other words, human “sociality” began to blur the boundaries between subjects.

In modern society, companies are called corporations, and a company itself can even be regarded as a kind of person.
But CEO A does not feel any necessity to fully align the company’s prosperity with himself.
Meanwhile, B feels negatively toward such expectations, and his sense of self becomes constrained.

The solution humans have come up with is this: “Let’s make the system more sophisticated!”
In other words, negative feedback mechanisms.
CEO A can sacrifice the company’s long-term health for his own personal advancement because he is a subject separate from the company.
Of course, this only happens when the negative consequences of such actions are small enough for him.
If his actions were thoroughly analyzed and pressured by the shareholders’ meeting, he would not have been able to adopt the “burn the company as fuel” strategy.

In B’s case, if there had been a system that could properly check his overly large authority, the situation might have been different.
But even a disappointing son is still the heir of a giant corporation, and he did not receive adequate checks and balances.

Both cases are situations where the negative feedback system either failed to operate or was destroyed.
But then, in every case, how—and by whom—can a negative feedback system that is fair, impartial, and universally valid be created?