Leading Sustainably: Sustainable Business and How the Sdgs Have Changed Everything by Trista Bridges & Donald Eubank

Author:Trista Bridges & Donald Eubank
Language: eng
Format: mobi
ISBN: 9780367428365
Publisher: Taylor and Francis
Published: 2020-07-29T18:30:00+00:00

A recent survey has shown that the average holding period on the New York Stock Exchange has declined continually over the decades, descending from a high of eight years in 1959 to just eight months in 2016.1

Although there’s a wide diversity of investing motivations, many investors still hold wildly unrealistic expectations in regard to returns. A recent study found that investors expect an average of 10.2 percent annual returns over the next five years.2

Even the mere definition of what a “long-term stock holding” is can pose a big challenge. From the US Internal Revenue Service’s perspective, any investment held for one year or more is considered a long-term investment.3 This, however, is just one view. The definition of “long-term” can vary greatly—it’s primarily a function of the investor’s perspective on how long (or short) that period should be.

Analysis by McKinsey and the non-profit organization (NPO) FCLT Global, whose mission is “focusing capital on the long-term”, found that 87 percent of CEOs feel pressure to demonstrate strong financial performance within two years, while 65 percent state that short-term pressure has increased “over the last five years” (as of 2016). On the other hand, their analysis also revealed that the long-term approach delivered $7 billion more in market capitalization per firm between 2001 and 2014 than short-term peers.4

Finally, a study by Taekjin Shin and Jihae You of San Diego State and Louisiana State University (respectively) that appeared in the Journal of Management Studies found that CEOs are more strongly rewarded for stressing the importance of “shareholder value” in shareholder letters. This reward translated on average to approximately $116,000 in additional compensation.5

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