COMPETITIVE ADVANTAGE. ISM’s business owners consider the environment over generations not each quarter, managing risk and their reputation. This gives them a clear upper hand over public companies stressed on quarterly forecasts.
Companies focused only on the next quarter may not see the environment as relevant to their success, because of the stress and pressure from those with daily or quarterly profit-taking investors.
However, for those companies that think of success over decades and generations, consideration of their environmental impact is both necessary to manage risk and reputation, and a potential source of opportunity and competitive advantage.
Industry organizations and investor groups have argued for the elimination of short-term earnings guidance. For example, The Committee for Economic Development wrote a policy brief titled, “Built to Last: Focusing Corporations on Long-Term Performance.” The CFA Centre for Financial Market Integrity and Business Roundtable for Corporate Ethics wrote, “Breaking the Short-Term Cycle.”
The SEC has raised the same concern. https://www.sec.gov/rules/other/2018/33-10588.pdf
These arguments are also echoed by industry leaders such as Warren Buffet, Jamie Dimon, and Larry Fink, among others. The core argument is that short-term plans and communications can lead to myopic behavior that distorts investment and encourages earnings management. Instead, these actors have urged companies to “take a long-term strategic view” and disclose specific and measurable long-term goals consistent with that view.
ISM’s Long-term Strategy is designed to help move the narrative of a company’s success from a quarterly cadence to a long-term focus with appropriate accountability metrics that are not quarterly. Many organizations, market participants, and industry experts have championed the concept of greater company focus and disclosure of long-term strategy.
Similar studies find investors value information on strategy as demonstrated by positive boosts to share price. A recent study by CECP also found preliminary positive economic impacts related specifically to long-term strategic plans. CECP’s Strategic Investor Initiative (SII) is a coalition of leading companies and investors committed to re-orienting capital markets toward the long-term.
I can list another dozen articles from industry experts. The proof is there. Long-Term strategies are better than “Short-Termism,” which is defined as an undue focus on meeting quarterly forecasts and a lesser emphasis on long-term planning. ISM is: THE FUTURE OF FUNDING!™
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