More Skin in the Game in 2013
In an opaque system, operators have an incentive to hide risk, taking upside without downside. And there is no possible risk management method that can replace having skin in the game – particularly when informational opacity is compounded by informational asymmetry.
https://prosyn.org/CtUT6Ja
NEW YORK – Those who have the upside are not necessarily those who incur the downside. For example, bankers and corporate managers get bonuses for “performance,” but not reverse bonuses for negative performance, and they have an incentive to bury risks in the tails of the distribution – in other words, to delay blowups.