“The future whispers while the present shouts.”
Al Gore, former U.S. Vice President
One of the great scourges of our age is “short-termism.”
A staggering 78 percent of the managers surveyed in a large-scale study of CFOs and CEOs admit to sacrificing long-term value to achieve smoother earnings.
In July 2011, former Federal Deposit Insurance Corporation (FDIC) chair Sheila Bair wrote:
“The common thread running through all the causes of our economic tumult is a pervasive and persistent insistence on favoring the short term over the long term, impulse over patience.”
Our 2012 blog, “Suicide By Quarter—Leading for the Short-Term,” indicated the investor base in corporations is not homogeneous. We have day traders who live by daily stock fluctuations, but there is a growing body of investors—notably including “impact investors”—who want excellent, ethical, and enduring results. These impact investors aren’t the Carl Icahn’s green-mailing for some short-term cash distribution or breakup of a firm. They have a longer-term horizon.
Some experts insist the key to stopping short-termism is to educate large asset owners (pension and mutual funds, insurance companies, etc.) to adopt investment strategies aimed at maximizing long-term results. Such education may take time.
So, what can the senior corporate leaders do to scuttle the scourge of short-termism? Here’s our checklist:
There are no easy answers to the scourge of short-termism. Taking the high road can be costly and painful in the short run. But we can no longer afford short-termism. In time, it comes back to haunt us.
Core Concept: Corporate leaders can take clear and decisive action to eliminate the scourge of short-termism. It takes courage, but great leadership requires courage.
Practical Applications: How many of these checklist items will you champion? What are you waiting for?
Bob and Gregg Vanourek, father and son, are co-authors of Triple Crown Leadership: Building Excellent, Ethical, and Enduring Organizations, winner of the 2013 International Book Awards (Business: General). Twitter: @TripleCrownLead, @BobVanourek, @GVanourek
Tags: Bob Vanourek, Checklist, Choices, Enduring, Excellent Ethical Enduring, Gregg Vanourek, Investment Strategy, Lead, Leader, Leaders, Leadership, Long-term value, Short-termism, stakeholder value, Triple Crown Leadership