Is Your Responsible Career Suffering From Short-Termism?

When working with clients dedicated to build a responsible career that successfully blends financial return with social impact and environmental responsibility, I often get the following question: "How can I make the case for our long-term social and environmental impact when all my manager wants to know is whether we will meet and exceed our quarterly numbers?" This is the most common symptom for a condition the Aspen Institute has so elegantly named 'short-termism'.

Of course, 'short-termism' is not new, and has largely driven the 'business as usual' approach that led to the 2008 financial meltdown, the global great recession, and the current jobless recovery. These practices are still taking place today, in the form of High Frequency Trading for example. The good news is that accumulating evidence demonstrates that being socially and environmentally responsible leads to higher employee retention, higher consumer loyalty, and to sizable cost savings. These strategies can serve as a road map to enable professionals building responsible careers to get business done better. See our previous posts on best practices and previous successes of responsible professionals who have driven socio-eco innovation through theirtraditional functional roles.

In addition, since 2008, the Aspen Institute's Business and Society Program (BSP) has been facilitating conversations with business and nonprofit leaders on how to overcome 'short-termism' and "create public policies that reward long-term value creation for investors and the public good". In a manifesto released on 9/9/2009, the BSP outlined a three point strategy designed to reward long-term value creation as a way to get past 'short-termism'. Some of these strategies can be very helpful to professionals dedicated to build a responsible career to get business done better:

• Strategy #1: Incentivizing investors that provide patient capital - Measures proposed included creating a descending scale on capital gains tax rates based on the number of years a security is held, uncap capital loss deductibility for long-term holdings, and setting time-based vesting or minimum holding periods. These measures have not been implemented. However, new tax breaks and incentives for social enterprises such as L3Cs and B Corporations are good steps in this direction.

• Strategy #2: Required disclosures and policies from financial intermediaries - The 2008 financial meltdown and further shown that the US (and global) financial system is in dire need of clarifying, and enforcing the rules related to the fiduciary duties of financial intermediaries. The most important point here is to set rules that will strike an optimal balance between maximizing the financial intermediaries' and the long-term investors' interests. In this area, required disclosures from financial intermediaries on incentives, compensation, as well as required disclosures and policies on proxy voting and other matters related to any incompatibility with the fund's objectives, and the beneficiaries' goals. These measures have not been implemented or signed into law. Therefore, if you are involved in asset management or in treasury, it is your responsibility to make sure that you understand and disclose how your interests and those of other shareholders align (or not).

• Strategy #3: Transparent investors' disclosure to corporations - In 2008, over a third of corporate equity was managed by mutual funds and hedge funds, which makes it very difficult for the companies' decision makers to get an accurate sense of the short- or long-term focus of the corporation's shareholders. For corporations to successfully pursuea long-term orientation, corporate decision makers need to know their investors' motivations so that they can best encourage investment behavior consistent with the corporation's longer term value creation. As a responsible professional, do you know how your current projects align with the Corporate Social Responsibility strategies of the company you work for? Knowing how to leverage like-minded professionals in and beyond your company can help you engage your supervisor and your colleagues into a dialogue that can help move the needle to get business done better from within.