Capitalism is evil because it stresses long-run profit (TFP) maximization.
TFP=value of outputs – value of inputs
Capitalism is good because it stresses long-run waste minimization.
Waste=value of inputs – value of outputs
Good corporate governance is about how to have maximized outputs with minimized inputs

Theoretically, firms should be run in shareholder’s interests. Shareholders are residual claimants. They should get whatever profit is left over. But, the reality is that shareholders are being used. Traditional western values were actually not very friendly to capitalism.
Virtue = citizenship + magnanimity.
The question is why capitalism / industrial revolution developed in the west? In fact, the west looked unpromising in terms of religion extremism, wars of religion, disgust with prince and powers, and enlightenment western style.
One of the roots of capitalism was in 16th century Holland, where ships were going to the east, and brought back goods to sell. Gradually, people started to own the ships, and these shareholders became wealthy. Wealth was power.

The west grew rich by accident?
The social purpose of the financial system.
The financing institutions emerged between entrepreneurs and capitalists. A state with a developed financial system has a competitive advantage in geopolitics. It has more private wealth to tax and it can borrow in bond markets. Westerns countries competed to maximize their wealth.

How the west grew rich?
Instability: open entry to government and business; insecure elite; insubordinate middle class; Stabilized: rules of law, i.e. protect weak from strong.

Corporate governance fundamentals.
Institutions to make firms trustworthy: rationalizing investors; people’s savings at work for economy; innovation start-ups can get funds and grow.
It takes a system to get the right stabilities and stabilize the instability.
Frontier mentality: to catch up, we need to move outwards towards the frontier, and watch closely; to overtake, we need to move the frontier.
The key is where the tipping point is. How good is good enough.
Professor Morck said that modern west got rich by accident. Why only part of western world got rich? – is about stabilizing the instability.