The institution of the Best Paper award at STOC and FOCS is relatively recent (2002?) and it came with some controversy. Indeed, most people acknowledged that such an award (as opposed to the best student paper award, which has nearly universal support) has a series of shortcomings, such has the element of randomness in recognizing one (or a few) of the top papers in each year, and the difficulty of recognizing excellence without the benefit of hindsight. But, more fundamentally, our community likes to see itself as engaged in a group effort to advance knowledge, and it is often from unglamorous and unfashionable investigations that the next great advance comes from. A best paper award, like any award, however, inevitably rewards the individual over the group and the fashionable over the unfashionable.
All this is true, the proponents of the award (successfully) argued, but awards are useful as a medium of communication between us and other research communities. They tell people in department-wide or university-wide (or NSF-wide) committees “listen to what the theoretician guy is saying; the awards we have given him mean he is not a random guy off the street,” and they tell people in ad-hoc committees “give tenure to this theory candidate, the awards we have given her mean the theory community thinks highly of her,” and so on.
Oded Goldreich explains these points rather eloquently.
This month, the Notices of the AMS (the American Mathematical Society), has a discussion on a proposal to name some mathematicians Fellows of the AMS, the way other learned societies do, including the ACM. The piece includes an article in favor and an article against the proposal.
The same arguments I outlined above for/against best paper awards are given in these articles. There is, however, a noticeable addition. In arguing against the proposal, David Eisenbud says, almost in so many words, that many of those who are in favor of the proposal must be intellectually dishonest: surely they can see the many downsides of the proposal, and so their support must be motivated by their expectation of becoming fellows. This is really a new one, I don’t think I ever heard such an argument when discussing awards in TCS.
It should be noted, however, that the AMS proposal involves the making of a lot of fellows. About a thousand people will be shooed in to get things started (to give you a sense, I would be eligible to be a founding fellow) and then more than a hundred fellows would be added each year. To give some proportion, ACM has about 80,000 members, and it named 34 fellows in 2005. AMS has about 30,000 members.