Another January has come and gone, and another week of discussions at Davos has drawn to a close. The discussions perennially grab headlines, whether because of the high-profile names spotted around town or the major market events that are up for discussion. Regardless, when Davos speaks, the world is all ears. This year, President Trump’s attendance and “Larry’s Letter” were the talk of the town, but the underlying conversation on long-termism is what stood out to many in attendance.
FCLTGlobal was on the ground in Davos for the week and built upon the long-term trend by hosting its annual Member CEO Roundtable, with a specific focus on improving the strategic dialogue between investors and corporations.
What emerged from this meeting, and the week in general, was an atmosphere of strongly held beliefs and a consensus on the need for immediate action. When the conversation turned to how to be more long-term, here’s what we heard from some of our Members and other business leaders who joined us in Davos:
Look beyond the next quarter: The corporate representatives we heard from generally do not issue quarterly EPS guidance and place a greater emphasis on long-term results and objectives on investor calls.
Be more transparent about long-term strategy: We picked up on a need for greater transparency from corporations on their long-term goals, even if market conditions may require adjusting them over time. Many thought they need to have long-term strategic roadmaps to help investors better understand whether strategy changes are consistent with long-term goals or reactive to short-term pressures.
“Corporations have been too opaque in the digital age.”
Target the shareholders you want: Many CEOs tend to focus on the investment community broadly, but some are now targeting the right shareholders for their companies. Finding shareholders who were large and long-term versus short-term and disruptive has proven beneficial for many.
Be consistent as an investor and an investee: Many have begun to work to ensure that companies’ pension plans invest in ways that are consistent with the ethos and principles of the parent company. To this end, decisions to invest with short-term or activist funds are considered inconsistent with their overall goals.
Articulate a purpose: A stronger, clearer sense of direction emerged as a focal point in discussions we held. When corporations articulate a purpose, it can make the investor/corporation dialogue more strategic and long-term in nature.
Narrow the focus of engagement: Strategic dialogue with corporations has been greatly improved with a more concentrated, intentional focus. We heard from a North American asset owner that deeper dialogue with fewer companies was more effective for them than a more diluted engagement across a wide range of firms and issues.
“We vote on 50,000 issues but concentrate on four.”
Communicate deeply with investee corporations: One EU-based asset owner noted that when they started communicating directly with the Board, as opposed to just with the CEO, the conversations became longer-term and more strategic than they had ever been. An US counterpart has started meeting one-on-one with CEOs to provide direct feedback to the corporation and their investment thesis for owning company stock.
This list is by no means exhaustive; it’s just a snippet of the talk around long-termism that we came across in our week in Davos. We expect more of the same at our upcoming Focusing Capital on the Long-term Summit later this month in New York. Were you there? Did you hear a new voice or a compelling argument on long-term behavior in business and investment? Contact us at @FCLTGlobal and let us know.