One of the great scourges of our age is “short-termism.” A staggering 78 percent of CFOs and CEOs admit to sacrificing long-term value to achieve smoother earnings.
Many decry this “suicide by quarter” mentality, but few CEO’s will be able to withstand the pressure to make the quarterly numbers unless he or she has the full, vocal support of the board.
When the CEO and CFO conduct the conference call and get hammered by day traders or short sellers, and when the stock dips because the company didn’t make the whisper number the Street expected, what will the board do? Hide? Talk among themselves about whether or not the CEO will “make it”? If so, your CEO won’t trust your board. Without this trust, the CEO’s job is too lonely.
Or will the board reinforce to the management team that we stay together to stay the course. Our goal is long-term value creation, not short-term financial manipulations that hurt the long-term.
The board must ensure that the board, CEO, CFO, and the leadership team are all on the same page of focusing on the long term. That explicit commitment between a board and a CEO will build deep trust and strengthen the management team to “do the right thing,” especially when the pressure is on.
Boards can scuttle the scourge of short-termism by making sure you have your CEO’s back.
Bob Vanourek is the former CEO of five firms from a start-up to a billion dollar NY stock exchange turnaround. He is the co-author of the award-winning book Triple Crown Leadership: Building Excellent, Ethical, and Enduring Organizations. He is one of Trust Across America’s Top 100 Thought Leaders in Trustworthy Business Behavior. This article is one of several Bob Vanourek wrote for Trust Inc., A Guide for Boards and C-Suites, published by Next Decade, Inc. 2014 and edited by Barbara Brooks Kimmel, Executive Director, Trust Across America – Trust Around the World.