TORONTO, May 28, 2014 /CNW/ - An international network of directors'
institutes has called on corporate decision makers to abandon
short-term perspectives and objectives in favour of longer-term
considerations that will produce more sustainable outcomes.
The Global Network of Director Institutes (GNDI) argues in a new paper
released today that excessive short-termism may lead to reduced
shareholder value and returns over the longer-term as a result of the
Missed opportunities to create enduring value for a company and
therefore its shareholders;
Under-investment in value-creating opportunities such as research and
Rejection of long-term projects, or projects with high build or sunk
costs, including infrastructure and high-tech projects.
"Boards need to think about strategic decisions in the context of the
long-term financial health of their companies. There are occasions
where it is best to reject actions that will produce short-term gains
at the expense of longer-term interests of a company and its
shareholders," said John Colvin, chair of GNDI.
"Directors in Canada have witnessed first-hand the effect of
short-termism on eroding confidence in capital markets and company
value. To achieve long-term corporate success, the board should be
committed to working with and influencing management to focus on
long-term value creation, and providing support when faced with
short-term pressures," said Stan Magidson, president and CEO of the
Institute of Corporate Directors, and deputy chair of GNDI.
The new GNDI paper sets out some suggested practices, which extend
beyond minimum regulatory requirements, that boards of listed companies
could adopt to help foster longer-term value creation. These include:
Setting forward-looking strategic goals and implementation plans that
are properly monitored.
Reporting practices that disclose short-term performance in the context
of medium and long-term goals and strategies.
Executive remuneration that is based on long-term performance measures
to avoid excessive weighting of short-term remuneration.
"Many member countries of GNDI have taken steps to foster better
long-term decision making in the corporate world. GNDI supports these
efforts to curb excessive short-termism and encourages business leaders
to remain committed to producing sustainable outcomes to the benefits
of all stakeholders," Mr. Colvin said.
The full text of the GNDI perspectives paper, "Curbing Excessive
Short-Termism," can be found at www.gndi.org/papers.
GNDI was founded in 2012 and brings together 10 member-based director
associations from around the world with the aim of furthering good
corporate governance. Together, the member institutes comprising the
GNDI represent more than 100,000 directors from a wide range of
organisations. For more information, please visit www.gndi.org.
About Institute of Corporate Directors
The Institute of Corporate Directors (ICD) is a not-for-profit,
member-based association representing Canadian directors and boards
across the for-profit, not-for-profit, and Crown sectors. The ICD has
more than 8,500 members and 11 local chapters across Canada. The ICD
fosters the sharing of knowledge and wisdom through education,
professional development programs and services, and thought leadership
and advocacy to achieve the highest standard of directorship. For more
information, please visit: www.icd.ca.
SOURCE: Institute of Corporate Directors (ICD)
For further information:
For more information or to arrange an interview, please contact:
Institute of Corporate Directors
Tel: (416) 593-7741 ext. 229