Investor recommendations for managing market short-termism

Below is an overview of recommendations, which are not comprehensive solutions, but aim to mitigate some of the most serious consequences of short-termism through changes in strategy and practice.

They are framed around the belief that companies, with support from investors, can advance strategies that support long-term business growth and improve their impact on society and the environment.

Corporate strategies	Investor strategies
Cope with short-termism in the existing investor base	Help companies cope with market short-termism
Companies need to understand the diverse needs and interests of their current investor base and target investors.	Investors should craft and publish their investment strategy.
Companies should analyse how investor short-termism has affected their business strategy, capital investments and financing of the business.	Investors should publish an explanation of how drivers of long-term performance, including ESG factors, are taken into account in their investment processes.
Companies need to define the outcomes they wish to achieve from their efforts to alleviate the effects of investor short-termism on their business. They should use these outcomes to develop measures of success and monitor the effectiveness of their efforts.	Investors should encourage companies to articulate how their business strategies and capital expenditure plans will create long-term value.
Companies should communicate any short-term benefits of their sustainability-related strategies and clearly articulate how this positively affects their net present value.

Corporate strategies	Investor strategies
Shift to a more long-term investor base	Shift to support long-term decision-making
Companies should confidently demonstrate how their business strategy, including their approach to sustainability, will create long-term value for their investors.	Investors should ensure that their investment strategy and commitments to long-term responsible investment are covered and effectively implemented in their investment policies.
Senior management remuneration should depend on the long-term performance of the business across a range of metrics that include relevant ESG indicators.	Investors should encourage companies to align remuneration with long-term value creation, end quarterly earnings guidance and publish a board-level commitment to long-term decision-making.
Companies should consider ending the practice of issuing quarterly earnings guidance, and instead focus on communicating issues and metrics that are relevant to the long-term success of the business.	Investors should meet with companies to discuss their approach to creating and protecting value.
Boards of directors should produce formal statements that outline their duties as stewards of the company and commit to long-term decision-making. They should explain how they define long term, and how this relates to their business and investment cycles.
Companies should meet with current and potential investors to discuss their approach to creating and protecting value. These meetings should cover issues such as sustainability, long-term strategy, performance, governance, culture, risk and reputation, and should occur outside of results season.

Corporate strategies	Investor strategies
Support wider systemic change in capital markets	Support wider systemic market change in capital markets
Companies should publicise evidence of how market short-termism has affected their business strategy, capital investment decisions, approach to sustainability and ability to create long-term business value.	Investors should support efforts to create evidence that demonstrates how a focus on long-term value creation delivers financial benefits
Companies should encourage policy makers to address the negative consequences of short-termism, and to adopt measures that enable companies to take a longterm approach to sustainability-related activities and investments.	Investors should support efforts to create evidence that demonstrates how a focus on long-term value creation delivers financial benefits.
Companies should take a long-term approach in their own investment practices and in the investment practices of their pension funds.	Investors should support public policy efforts that incentivise and reward companies that take proactive actions to build long-term, successful and sustainable businesses.