THE ERROR AT THE HEART OF CORPORATE LEADERSHIPmore jobs on average than their peers from 2001 to 2015. We calcu-
late that U.S. GDP over the past decade might well have grown by
an additional $1 trillion if the whole economy had performed at the
level our long- term stalwarts delivered— and generated more than
fi ve million additional jobs over this period.
Who are these overachievers and how did we identify them? We’ll
dive into those answers shortly. But fi rst, it’s worth pausing to con-
sider why fi nding conclusive data that establishes the rewards from
long- term management has been so hard— and just how tangled the
debate over this issue has been as a result.
In recent years we have learned a lot about the causes of short-
termism and its intensifying power. We know from FCLT surveys, for
example, that 61% of executives and directors say that they would
cut discretionary spending to avoid risking an earnings miss, and a
further 47% would delay starting a new project in such a situation,
even if doing so led to a potential sacrifi ce in value. We also know
that most executives feel the balance between short- term account-
ability and long- term success has fallen out of whack; 65% say the
short- term pressure they face has increased in the past fi ve years. We
can all see what appear to be the results of excessive short- termism
in the form of record levels of stock buybacks in the U.S. and historic
lows in new capital investment.
But while measuring the increase in short- term pressures and iden-
tifying perverse incentives is fairly straightforward, assessing the ulti-
mate impact of corporate short- termism on company performance and
macroeconomic growth is highly complex. After all, “ short- termism”
does not correspond to any single quantifi able metric. It is a confl uence
of so many complex factors it can be nearly impossible to pin down. As
a result, despite persistent calls for more long- term behavior from us
and from CEOs who share our views, such as Larry Fink of BlackRock
and Mark Wiseman, the former head of the Canada Pension Plan Invest-
ment Board, a genuine debate has continued to rage among economists
and analysts over whether short- termism really destroys value.
Academic studies have linked the possible effects of short-
termism to lower investment rates among publicly traded fi rms and
decreased returns over a multiyear time horizon. Ambitious work