There will always be instances of executives rising to positions of power and high income who do not deserve it, “deserve” meaning that they have risen beyond their level of competence. This is called the Peter Principle. But that isn’t an injustice–that’s a mistake. If those in a position to correct the mistake fail to do so, and there are enough of these mistakes being made in key departments, performance of the company at the customer level will become evident. Profits and future prospects will dim. Astute stockholders will recognize this and unload their shares. Over time, share value will decline, and this will serve as a feedback signal to top executives that something is wrong within the company. If they, in turn, fail to recognize and correct their management problems, the company’s stock will drop so much that it will eventually be bought by a competitor or will go bankrupt.
There is no perfect system, but any system that is used must have a self correcting mechanism such as this. When government interferes with this “creative destruction”, they are subsidizing failure and hurting everyone involved in the capitalist system–stockholders, employees and the public.
Government involvment in the capitalist system must be limited to producing legislation and regulations that have only one purpose–to prevent fraud and injury–and not to dictate economic outcomes.
