Academic journal article
By Field, Heather M.
Journal of Corporation Law , Vol. 38, No. 2
The lovely double entendre in the title of Dean Roger L. Martin's book, Fixing the Game: Bubbles, Crashes, and What Capitalism Can Learn from the NFL,1 encapsulates Martin's argument that the American system of business and capitalism is rigged, but can still be repaired.2 Drawing on an unlikely source-an analogy to the National Football League (NFL)-Martin argues that business should shiftits focus away from the "expectations market" (i.e., in football, the betting world, and in business, the stock market, where stock prices reflect investor expectations of future performance) and back to the "real market" (i.e., in football, the game on the field, and in business, the creation of products and services).3
Martin contends that the business world's overemphasis on the expectations market leads to the sacrifice of long-term business growth in favor of higher short-term stock prices;4 incentivizes inauthentic and amoral behavior by executives and other market players who withhold or manipulate information through earnings management, pumping of the stock price, and accounting fraud or otherwise;5 entices market players to create economic volatility, which enables them to "tak[e] advantage of less-sophisticated investors while creating no net value for society;"6 and creates a "downward spiral" in which market players try to increase their piece of a "finite pie" at the expense of other market players rather than trying to expand the size of the pie by creating societal goods.7 That is, American capitalism's expectation-market orientation destroys shareholder value rather than increasing it. In contrast, Martin argues that reorienting business toward the real market could provide an "opportunity to build for the long run . . . and produce sustainability"; restore authenticity in our executives; reduce volatility and the influence of parasitic market players; and create more value for customers and society, making everyone (including shareholders) better off.8 To accomplish this reorientation, Martin makes several specific recommendations,9 the unstated upshot of which is to recommend that businesses remain private to the extent at all possible.
Fixing the Game makes powerful and persuasive arguments. Martin's analogy between business and the NFL is quite useful, and not solely for the substantive lessons Martin distills. In addition, the analogy makes the debate about corporate governance accessible to a wider audience,10 gives this audience a more familiar lens through which it can understand the sometimes arcane aspects of business law and practice, and enables each member of this audience to draw on her sense of good sportsmanship in order to develop her own intuitions about what constitutes fair business practices. Moreover, the analogy can help even sophisticated businesspeople better appreciate some of the flaws of the system in which they operate.
However, the analogy between business and the NFL is far from perfect. Martin clearly acknowledges this,11 but a more thorough exploration of the flaws of the analogy will help to refine the analysis. Thus, this Article challenges three12 aspects of the analogy and discusses how these challenges ought to alter Martin's recommendations. First, imperfection in the analogy between shareholders and sports bettors suggests a stronger condemnation of hedge funds and the derivatives market than of the traditional stock market. Second, the limitations of the analogy between business executives and NFL players weaken Martin's case against the use of stock compensation for executives. Third, the flaw in the analogy between business customers and NFL fans suggests that a reorientation of business toward the maximization of "customer delight" is unrealistic and perhaps unwise, particularly if the business needs capital. Ultimately, the intent of this Article is not to reject Martin's recommendations; rather, the goal of this Article is to help refine and further Martin's work as we face the daunting tasks of reforming corporate governance and growing the economy. …