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Return without Risk: Not Bad if You Can Get It

Managers, executives, and entrepreneurs who deliver strong performance should collect compensation and rewards commensurate with their work. Investors providing capital to risky ventures should be entitled to high, risk-adjusted returns if the venture proves successful. Employees and investors who provide above-average performance or take above-average risk are entitled to above average compensation. Financial rewards flow to those who have earned them. Risk and return are the cornerstones of our capital markets. The presumptions of rational capital markets depend on motivated individuals attempting to maximize their investment return.

However, during the 1980s and to a greater extent during the 1990s, those in a position of influence could easily manipulate the organization to personal advantage without taking large, personal risk in the short term. If management desired organizational growth they certainly had the option to grow slowly through internal expansion (organic manner). Or, they could raise capital and acquire growth through the purchase of other companies. Whereas the first path was slow and tedious, the latter could be accomplished very fast. Moreover, for many it may have been glamorous.7 The 1990s clearly demonstrated a go-go era.

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