Joe Bower and Lynn Paine “had me at hello” (to quote Jerry Maguire) with their new HBR article, “The Error at the Heart of Corporate Leadership.” Laying out their data, they find that long-term oriented companies create more financial value and more jobs. In fact, if more American companies were focused on the long term, they estimate, investors would have an additional $1 trillion, workers would have an additional 5 million jobs, and the country would have more than an additional $1 trillion in GDP.
What If Investors Who Held Their Shares Longer Got More Voting Power?
Long term-oriented companies create more financial value and more jobs. But too many firms cave to the short-term pressures of shareholders, especially activist hedge funds. Holding-period based voting rights could change that. Each common share should give its holder one vote per day that holder has owned the share – up to 3,650 days or ten years. So if you hold 100 shares for ten years, you get to vote 365,000 shares. If you sell your shares to an activist hedge fund (or anybody else), they get 100 votes the day they buy the shares. The adoption of holding-period-based voting rights would provide long-term shareholders with the reward they deserve for providing the most valuable kind of capital: long-term capital. And it would smother the destructive forces of short-termism that are holding firms, and economies, back.