This issue of Harvard Business Review includes, as many prior issues did, an article decrying the perils of short-termism and supporting measures for insulating corporate leaders from the outside pressures that allegedly make them myopic. But such arguments are long on alarming rhetoric and short on empirical evidence or economic logic. Furthermore, their supporters overlook substantial benefits that outside-investor oversight produces and that such measures would sacrifice.
Don’t Let the Short-Termism Bogeyman Scare You
Active investor oversight is a plus, not a minus.
From the Magazine (January–February 2021)
· Long read
Summary.
The author, a professor at Harvard Law School, argues that concerns about the perils of short-termism—and support for measures that would insulate corporate leaders from the outside pressures that allegedly make them myopic—are long on alarming rhetoric and short on empirical evidence or economic logic. Furthermore, he writes, the threat of hedge fund activism should be expected to discourage managerial slack and underperformance, thus playing an important disciplinary role and incentivizing leaders to enhance shareholder value.
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A version of this article appeared in the January–February 2021 issue of Harvard Business Review.
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