In this case the ''values'' part is pretty easy: the board typically has a fiduciary responsibility to hire the candidate who will maximize the value of the corporation's shares.

The question is, which of the available candidates will best accomplish this goal? Mr. Hanson proposes using financial markets to answer this question.

The key is to create a derivative security whose value depends on who becomes chief executive.

Suppose there are two candidates, Mr. Smith and Ms. Jones. The board creates two stock options, one that will deliver one share of company stock if Ms. Jones becomes chief executive, and one that will deliver one share if Mr. Smith gets the job. They also create two ''money options''; one delivers one dollar if Mr. Smith becomes chief executive, while the other delivers one dollar if Ms. Jones does.

In a well-functioning speculative market, the Jones money option should sell for a price that is roughly equal to the probability that Ms. Jones will be chosen. The Jones stock option, on the other hand, should sell for the value of one share of stock if Ms. Jones becomes chief executive, times the probability that Ms. Jones will be chosen. The ratio of the stock option to the money option should therefore give the value of the company's stock if Ms. Jones is picked.

Every M.B.A. student is told to ''make choices that maximize shareholder value.'' What could be a better way to do this than to let shareholders determine the value of each alternative directly?

The argument above is the simplest account, but one can develop more sophisticated arguments that give essentially the same outcome.

Once you get the idea, the possibilities are endless. Suppose a company is trying to choose between ad agencies. The board can simply create an option that pays off in shares conditional on which one is chosen, along with the appropriate money options.