Seymour Burchman and Blair Jones Published by New York Stock Exchange

Seymour Burchman and Blair Jones Published by New York Stock ExchangeZoom inDownload PDF

The New York Stock Exchange (NYSE) published the article “When Did Long-term Incentives Become So Short-term?” by Seymour Burchman and Blair Jones on July 5, 2016.

From the article:

Many leaders in the business, academic, and investment communities have been lamenting corporations’ increasingly short-term focus. Many factors are cited as causes of this short-termism: the market’s obsession with quarterly earnings; activists pushing companies to return cash to investors through share buybacks and dividend increases at the expense of long-term investment; and management’s fear of investments that may not pay back, or pay back quickly enough, especially in an uncertain, slow-growth economic environment.

However, we see another driver. Business heads, daunted by the prospect of setting long-term goals, have largely acquiesced to a surprising notion: when it comes to their pay, long-term is defined as no more than three years. That notion has come about since the Dodd-Frank reforms and Say on Pay voting, which prompted most compensation committees to use three-year goals in their long-term plans. But three years—that’s simply not long term.

Read the rest of the article here, or download the PDF.