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August 10, 2015

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'Corporate Long-Termism'

Posted: 10 Aug 2015 12:15 AM PDT

Larry Summers:

Taking a long view on corporate reform: ..Matters are not as clear as is often suggested regarding short-term-driven "quarterly capitalism," and I believe skepticism is appropriate toward arguments that horizons should be lengthened in all cases. A generation ago, Japan's keiretsu system, which insulated corporate management from share price pressure by tying large companies together, was widely seen as a great Japanese strength; yet even apart from Japan's manifest macroeconomic difficulties, Japanese companies lacking market discipline have squandered leads in sectors ranging from electronics to automobiles to information technology. Managements of companies that are dissipating the most value, such as General Motors before it needed to be bailed out, have often been the most enthusiastic champions of long-termism. Market participants who willingly place huge valuations on many Silicon Valley companies that lack any profits and have little revenue may be placing too much, not too little, weight on the distant future. That, at least, is the implication of the technology bubbles we have seen. ...

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Posted: 10 Aug 2015 12:06 AM PDT

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