Unfortunately, according to corporate executives themselves, the pressure on companies to generate short-term financial performance shows no sign of letting up
WHITE PAPER - Rising to the challenge of short-termism
by Dominic Barton, Jonathan Bailey and Joshua Zoffer
Together with the launch of FCLT Global, this new non-for profit company published the white paper 'Rising to the challenge of short-termism'. This paper, written by SHIFT TO's Dominic Barton amongst others, describes the view of FCLT Global on corporate short-termism.
"The problem of corporate short-termism is a complex one. Its causes are multifaceted, ranging from
activist investor pressure to the way management teams are incentivized and compensated. However, the
answers executives and board members give when asked directly about short-termism offer an opportunity
to get to the heart of the matter. What emerges from these responses is a keen understanding that
short-termism manifests through a negative feedback loop: while executives may feel that investor
pressure forces their hand, the short-term objectives and metrics they set also push investors to shorten
their horizons to match the data available to them. Indeed, when executives and directors are asked
where they feel short-term pressure on them comes from, nearly 40% point to executive teams and boards
of directors themselves! These business leaders know that they are affected by short-termism and freely
admit that they would prefer to use longer strategic planning horizons. The problem is how to enable them
to break the vicious cycle."
You can download the white paper here or visit the website of FCLT Global.
FCLT Global is dedicated to developing practical tools and approaches that encourage long-term behaviors in business and investment decision-making. It takes an active and market-based approach to achieve its goals. By conducting research and convening business leaders, FCLT Global develops tools and generates awareness of ways in which a longer-term focus can increase innovation, economic growth and future savings.
FCLT Global’s membership encompasses asset owners, asset managers and corporations from around the world. Two of the SHIFT TO board members play an active part within this organisation: Dominic Barton of McKinsey and Company, and Lars Dijkstra of Kempen Capital Management.
More information is available at FCLT Global.