How to improve the investor-corporate dialogue to make strategic and operating decisions that build value for the long term.

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Short-term behavior is becoming the norm in modern capital markets. Rather than pursuing and communicating long-term strategies, many public companies dedicate significant resources to meeting quarterly earnings guidance and communicating their performance relative to this guidance. This focus on short-term actions and communications seems counterproductive, considering that more than 50% of a typical company’s value is created by activities that will take place three or more years in the future.

Research shows that the current emphasis on achieving short-term earnings targets leads to value destroying behaviours:

The investor-corporate dialogue can help counteract this short-term bias. We define “investor-corporate dialogue” as the flow of information and ideas between corporations and their current and future investors and have three primary recommendations for compa­nies that seek to strike a better balance between short-term performance and long-term value creation:

Read the paper “Straight talk for the long term” for a brief look at these ideas, and for an extended discussion read Straight talk for the long term: an in-depth look at improving the investor-corporate dialogue