CEOs Still Don’t Like Short-Termism

Short-termism.

On first principles, shareholders of public companies should want those companies to maximize long-term value. This is true of long-term institutional shareholders, retail shareholders, activist hedge funds, high-frequency traders, and anyone else who owns shares in the company. A share of stock is worth the present value of its expected future cash flows, and every shareholder—even the ones who don’t plan to stick around for more than an instant—should want the company to maximize those cash flows. That will maximize the current price of the stock, so that when they do sell their stock—in a century or in a second—they can get a good price for it. In a sense, this is the point of stock: Because it represents a perpetual claim on a company’s business, it encourages shareholders (and managers working on their behalf) to take the very long view.