Resources
We conduct original research on the causes of short-term business decisions and work to find practical solutions.
Governance | Article
21 April 2017 - Impact of Reporting Frequency on UK Public Companies: Profs. Robert Pozen, Suresh Nallareddy, and Shivaram Rajgopal Weigh In The CFA Institute Research Foundation published a study examining the UK’s implementation of quarterly reporting requirements for public companies in 2007 – designed to foster increased transparency – and subsequent scrapping of these requirements seven years later in hopes of combatting perceived short-termism in UK equity markets and the misalignment of incentives throughout the investment chain. At FCLT Global, we are examining alternatives to quarterly or short-term guidance in an effort to...
Article
19 April 2017 - FCLTGlobal Director Matthew Leatherman recently joined the team from the North Carolina Department of State Treasurer where he served as Policy Director. Matthew discusses his reasons for joining FCLTGlobal and his mission to put top-down economic logic to the test… Q: Why did you decide to join FCLTGlobal, and what will you be working on? Working with FCLT Global was an easy decision for me. I had the opportunity, as part of the asset owner community, to watch the initiative gather momentum and then form into an organization. Throughout that...
Article
17 April 2017 - A new addition to the team, Ariel Babcock is an equity investment professional with over a decade of experience in the financial industry. We spoke to Ariel about her motivations for joining FCLT Global, and the goals she hopes to accomplish during her tenure. Q: Why did you decide to join FCLT Global, and what will you be working on? Over the course of my career in the investment industry I’ve frustratingly witnessed the swing toward shorter term capital allocation decisions (by both companies and investors) and the value...
Article
14 April 2017 - Matthew Brady is an exciting new addition to the FCLT Global team, passionate about driving practical change in the financial investments industry for increased efficiencies. We spoke to him about his background, motivations for joining FCLT, and what he determines as success for the organization. Q: Why did you decide to join FCLTGlobal, and what will you be working on? I joined FCLT because I have seen the detriments of short-termism and how it can perpetuate sub-optimal results. I wanted to be a part of a company that...
Article
10 April 2017 - Jonathan Bailey, Director of Research at FCLT Global, speaks to Else Bos about the practical steps asset owners should take to support sustainable long-term value creation. Else Bos is CEO of PGGM, a cooperative that provides services in the field of pension administration, communications, fiduciary advice and asset management to a range of Dutch clients. PGGM is perhaps best known for managing over € 180 billion in assets for PFZW, the second largest pension fund in the Netherlands. JB: Else, can you tell me a little about your path to becoming...
Article
17 March 2017 - Earlier this year, together with the McKinsey Global Institute, we co-authored an article in the Harvard Business Review, “Finally, Proof That Managing for the Long Term Pays Off.” Based on an analysis of 615 large and mid-cap U.S. publicly listed companies from 2001 to 2015, it highlighted the benefits to long-termism, including higher corporate earnings growth and overall financial performance, and a greater growth in job creation and GDP (a longer summary is available here). This generated much thoughtful discussion on the role of long-termism and economic growth from...
Article
10 March 2017 - We recently spoke to FCLT Global CEO Sarah Williamson following her attendance at the Asia Business Council 2017 Spring Forum in Vietnam, which focused on the need for patient capital and long-term stewardship at a time where there growing recognition among governments and businesses that traditional models are broken, as well as extraordinary pressure from stakeholders calling for the adoption of a longer-term view. Sarah shared her reflections on the Forum, the current state of long-termism in emerging markets, lessons learned from family companies in Asia, and the...
In the News
2 March 2017 - Schumpeter’s recent column on corporate short-termism suggests that “the solution is to prod incumbent firms to invest vast amounts and insulate their managers from investors” (February 18th). On the contrary, the solutions should be much more targeted to how capital markets really work. We are exploring two such solutions. One is rethinking the quarterly guidance process to engage managers with, rather than insulate them from, investors in their long-term strategic thinking. The second solution is to change the relationships and incentives between asset owners and fund...
In the News
16 February 2017 - AS AMERICA’S economy has misfired over the past decade, several grand theories have emerged about what went wrong. Economists fret about secular stagnation, debt hangovers and whether demography explains sluggish growth. In American boardrooms, meanwhile, a widely held view is that a dangerous short-termism has taken hold. This theory contends that investors and executives have become myopic, leading firms to invest too little. Like many business ideas, short-termism fits the experience of some individual business people. But as a theory about how the economy works...
In the News
16 February 2017 - If they do, as many CEOs believe, this is a serious indictment of current corporate governance arrangements and has important policy implications. To take one close to my heart, if short-termism causes underinvestment, it will be a cause of secular stagnation. I am not sure what to believe in this area. On the one hand, there are many anecdotes suggesting that pressures to manage earnings hold back investment. And the short-termism view is very widely believed.
Report
8 February 2017 - Corporate short-termism has been the subject of ongoing debate among leaders in business, government, and academia for decades, but hard evidence on the impact of short-termism on company performance and economic growth has remained scarce. To fill this gap, MGI created a systematic measurement of long- and short-termism at the company level. Its findings show that companies classified as “long term” outperform their shorter-term peers on a range of key economic and financial metrics. Based on an analysis of 615 large and mid-cap U.S. publicly listed companies...