Firms should resist short-termism, create long-term value

OVER the past several years, I have written to the CEOs of leading US companies urging resistance to the powerful forces of short-termism afflicting corporate behaviour. Reducing these pressures and working instead to invest in long-term growth remains an issue of paramount importance for BlackRock's clients, most of whom are saving for long-term goals, as well as for the entire global economy.

While I've heard strong support from corporate leaders for taking such a long-term view, many companies continue to engage in practices that may undermine their ability to invest for the future. Dividends paid out by S&P 500 companies in 2015 amounted to the highest proportion of their earnings since 2009. As of the end of the third quarter of 2015, buybacks were up 27 per cent over 12 months. We certainly support returning excess cash to shareholders, but not at the expense of value-creating investment.

LONG-TERM VALUE CREATION FRAMEWORK