In the incentive literature, myopia is almost sure a bad word. For example, myopic CEOs may focus on the earnings of current period instead of other long-run interests of a firm, such as a persistent development. The reason of CEOs' "myopic behaviors" is usually given as the linkage between CEOs' bonus and current earning. Although it seems to be a reasonable story and perfectly justifies the public resentment of CEO rent extraction, I still feel skeptical of it. If everyone knows this possibility, shouldn't an efficient CEO compensation package take care of it?
I tend to believe an alternative explanation: some CEOs may sometimes behave as if they are myopic because that is the best strategy for the firm at that time. For example, a distressed firm may not even survive before the year-end, how can we expect the CEO to think about the future, like in five years? This may not be an accurate metaphor, but you can think of a very sick person who has cancer. He may not even be able to see the sun rise tomorrow, how could you blame him for not working hard for his future?
In other words, the "myopic behaviors" that we observed may not always be a bad thing. Rather, it could be the best the firm could do at a certain point of time. To sell everything one has and to travel all over the world may seem to be a strange thing to do for a healthy person with a stable job, but for a dying person, that may be the best thing (giving him highest utility) because that is his last dream. Similarly, I would imagine that a firm that is about to bankrupt focuses on meeting the earning forecast because otherwise its suppliers will be panic and run away.
Nevertheless, the above argument has an embedded assumption: the cancer is not curable. If all of a sudden, the doctor calls and tells him that a new medicine will significantly increase his surviver rate, what would he do? He may change his mind and gets back to work again. What could be a cancer curer for bankruptcy? Chapter 11? Reorganization? Maybe.
