Everyone knows the focus on short-term profits isn’t healthy. It’s certainly not good for investors, or the wider economy. Yet, all around the world, the trend towards what Hilary Clinton has termed “quarterly capitalism” continues to accelerate.
The common wisdom is that short-termism stems from the way company directors are incentivised financially. Those incentives in turn reflect the pressures shareholders put on them to deliver quick returns.
But in fact the problem is much bigger than that. The whole investment industry, from fund managers to consultants, brokers and advisers, contribute to it. Financial PR and journalism must also share the blame.
This New York Times infographic brilliantly illustrates all the different players that discourage firms from taking a long-term view. If you have time, I can also recommend the article by Andrew Ross Sorkin that accompanies the graphic.
Infographic: New York Times