Download Report

We invited over 25 of the world’s foremost economic actors, including CEOs, board members, investors, and regulators, to present their views about what it will take to change the current system.

The short-term thinking that pervades our boardrooms, our executive suites, and our financial markets has been spreading for years, slowly impeding the ability of companies to make the kinds of bold investments in the future that sustainable growth and a vibrant economy require. The financial crisis of 2008 and the global recession that followed, however, brought the issue to the fore and galvanized our two organizations to found Focusing Capital on the Long Term (FCLT), an initiative dedicated to uncovering practical solutions to reverse short-term thinking. Our goal is to reorient individuals and institutions across the investment value chain toward a longer-term and more expansive mind-set that takes into account both immediate goals and the longer-term interests of corporations and society.

The FCLT initiative has already helped advance our understanding of the roots of short-termism and how it plays out across the economy. The causes are many, from the “tyranny” of quarterly earnings targets to ill-conceived incentive systems to certain regulations that inhibit the ability to make long-term investments. But our research also shows that business leaders would like to break free of such constraints.We see this both in broad-based surveys and in the conversations we’ve had with more than 100 CEOs, all of whom tell us that the constant demand to meet 90-day earnings targets has become a straitjacket inhibiting the execution of sustainable, long-term strategies. Board members also feel the pressure. Indeed, a number of public-corporation business leaders we have spoken to are contemplating taking their companies private to escape the yoke of quarterly capitalism. Now is the time to formulate practical solutions that can help put our economic system on a more stable foundation and allocate resources in ways that provide the greatest value for the broadest range of stakeholders. The essays in this book are part of that effort.By providing a platform for views from a wide range of economic actors, including CEOs, board members, investors, and regulators, our aim was to foster a lively conversation about what it will take to change the current system. These are the opinions of the individual authors and not McKinsey & Company, the Canada Pension Plan Investment Board, or the FCLT initiative. But as the essays came together, we’ve been intrigued by how often themes and insights recur.