Monday, 11 May 2009

Short snippet on short-termism

From John Kay:
Both the citizen and the investor should be concerned about the difficulty modern management finds in taking a long-term view of the growth and development of the business. The public company encounters the blight of quarterly earnings reporting; the private equity owned business must accommodate the timescale of the investors seeking a quick profit. This short termism is reinforced by the incentive schemes offered to managers - even, or perhaps especially, the so-called long-term incentive schemes that now constitute a large part of executive remuneration. Even if you are concerned with the fundamental value in which you hold shares, the managers may not be.

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