Elgar Financial Law and Practice series
Chapter 4: THE ROLE OF INSTITUTIONAL SHAREHOLDERS: STEWARDSHIP AND THE LONG-/SHORT-TERM DEBATE
With the financial crisis came a renewed interest in short-termism and its negative implications for growth and development in general, and on equity markets in particular. The responses ranged from independent reviews and public policy recommendations to private sector-led initiatives. These provide solid evidence for a growing consensus on the need to strike an appropriate balance between short-termism and long-termism. One of the first things Marissa Mayer did as CEO of Yahoo was remove the stock ticker from the homepage of Backyard, the company’s internal website. The reason, according to those who have interacted with her, is that she believes employees should be more focused on creating better products and services than on corporate finances. Whether this is a sign that companies are shifting from the prevailing sentiment (i.e. that a company’s primary goal is to maximise shareholder value), to a more stakeholder approach, is still open to question. ‘Why,’ askes Unilever’s Paul Polman in an interview with Guardian Sustainable Business, ‘would you invest in a company which is out of synch with the needs of society, that does not take its social compliance in its supply chain seriously, that does not think about the costs of externalities, or of its negative impacts on society?’ The answer, most likely, lies in the priorities of the businesses of today: bottom line returns and an allegiance to the interests of shareholders. In the 1960s the American psychologist,Walter Mischel, conducted a series of experiments on the drivers of delayed gratification.
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