Focusing on corporate short-termism

Much concern has been expressed over the problem of 'short-termism' as evidenced in the numerous discussion papers made public by industry and investor associations and regulatory bodies in the US and the UK. While concerns over short-termism and its effects are not new, the short-termism being experienced now is the result of structural changes brought about by agency theory based managerial compensation and its four legged strategy of short term managerial employment contracts, stock based compensation, high stock price, and the pursuit of high-risk high-return investment strategies to achieve the latter. This article investigates the changes to corporate governance structure that have produced short-termism, short-termism's present form and continuing hold, how it has impacted on corporate governance, and what, if anything, should be done about it.