We hear a lot about cognitive bias these days (and confirmation bias – a type of cognitive bias), an extraordinarily important concept in life, business and marketing, most recently made famous by Scott Adams’ book Win Bigly: Persuasion in a World Where Facts Don’t Matter
The duty of directors is always to direct the affairs of the corporation so as to maximize its value for the benefit of its stakeholders. When a corporation is solvent, those stakeholders are the corporation’s shareholders. When the corporation is insolvent, its creditors take the place of the shareholders as the residual beneficiaries of any increase in its value.
Ongoing discounting becomes a vicious spiral that absorbs all stakeholders. While customers wait for a sale announcement to even visit a store or its website, employees expect discounts to compensate for poor internal choices and weak efforts. The strategy is simply not sustainable.
Managers with expertise who are willing to put their reputation on the line for a struggling company are few and far between – especially if the last guy quit. It is difficult to head hunt someone willing to step in at the helm of the Titanic, inches away from the iceberg.