Institutional Investor (June 16)
“Short-termism, often driven by activists, can have grave implications for corporations, for our economy and sometimes for society overall. Innovation, discovery and hiring are curtailed when R&D projects are put on hold or cancelled because of short-term pressures…. Short-termism also leads to mispricing, misallocation of assets and a lack of reliable information about long-term prospects.”
Tags: Activists, Assets, Corporations, Discovery, Economy, Hiring, Innovation, Misallocation, Mispricing, Prospects, R&D, Short-termism, Society
Financial Times (July 27)
“Ending the tyranny of quarterly earnings is an idea that is on the march. The case for reforming shareholder capitalism is strong.” An “investment drought” is resulting from the focus on short-termism. “With healthy profits and a near zero cost of capital, now ought to be the time to lay down plans for the future. Today’s investments yield tomorrow’s dividends. But listed companies are almost uniformly opting for dividends today.” In the U.S., leading listed companies are, on average, investing only one dollar for every $8-$9 they return to shareholders.
Tags: Cost of capital, Drought, Future. Dividends, Investment, Profits, Quarterly earnings, Shareholder capitalism, Shareholders, Short-termism, U.S.
The Economist (November 22)
It has become fashionable to praise long-termism and deplore the corrosive influences of short-termism, but this is simplistic. “Long-termism and short-termism both have their virtues and vices—and these depend on context. Long-termism works well in stable industries that reward incremental innovation.” In other businesses, however, long-termism “is a recipe for failure” and success goes to those who can constantly “abandon their plans and ‘pivot’ to a new strategy, in markets that can change in the blink of an eye.”
Tags: Failure, Incremental innovation, Long-termism, Markets, Pivot, Short-termism, Stable industries, Strategy, Success
