The trouble with markets

Roger Martin argues (see title link) that linking managers rewards to share prices (eg with options) gives them an incentive to manage the 'expectations' market rather than the real market for production of goods and services. He fingers efficient markets theory, shareholder value and agency theory as the intellectual culprits and advocates reward based on 'real' performance.

He has a convincing case and a corollary of his argument would be a return to historical cost accounting rather than the use of fair values, which are based on the expectations market.