Who Can Really Take on Short-Termism?

It’s almost an article of faith: The world would be a better place if businesses stopped thinking so much about short-term results and focused more on the long term. Yet it has proved nearly impossible to shift their behavior. The ideal is clear, but the incentive systems in place at many firms deter efforts to attain it. Dominic Barton, the global managing director of McKinsey & Company, made the case in a 2011 HBR article that called on business leaders to reform the capitalist system by fighting “the tyranny of short-termism.” He praised companies such as Unilever and Ford, which now pay less attention to their short-term shareholders. Barton’s ideas weren’t new, but coming from the head of McKinsey, they added impressive pro-business heft to the debate. Despite the proliferation of such thinking, however, the situation may actually be getting worse. So Barton revisits the topic with new urgency this month, in an article cowritten with Mark Wiseman, the head of the Canada Pension Plan Investment Board (“Focusing Capital on the Long Term”). The authors concede that it’s unrealistic to expect most CEOs of publicly listed companies to ignore short-term pressure from the financial markets. The only way to foster meaningful change, they argue, is to enlist pension funds, mutual funds, and other large investors in the cause: If those investors adopt strategies aimed at maximizing long-term results, other key players—asset managers, corporate boards, and company executives—are likely to follow suit. “The best place to start moving this debate from ideas to action,” Barton and Wiseman write, “is with the people who provide the essential fuel for capitalism—the world’s major asset owners.” Adi Ignatius, Editor in Chief

Who Can Really Take on Short-Termism?

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