Tuesday, March 29, 2011

Education versus corporate governance

There's been some talk in the blogosphere today about Campbell's Law, which, as Wikipedia helpfully explains, holds that, "the more any quantitative social indicator is used for social decision-making, the more subject it will be to corruption pressures and the more apt it will be to distort and corrupt the social processes it is intended to monitor.

"The social science principle of Campbell's law is sometimes used to point out the negative consequences of high-stakes testing in U.S. classrooms.... [Thus,] achievement tests may well be valuable indicators of general school achievement under conditions of normal teaching aimed at general competence. But when test scores become the goal of the teaching process, they both lose their value as indicators of educational status and distort the educational process in undesirable ways."

This clearly applies as well to corporate governance and indicators of good managerial performance, be they elements in executive compensation formulas or markers that pervasively affect stock prices (e.g., meeting quarterly earnings targets).

It's also related to the argument (originally from Henry Hansmann) for why, in some settings (e.g., education), donors or consumers may prefer dealing with nonprofit to for-profit entities.

1 comment:

yahadame said...

Very intereresting reading. thx