Attracting Long‐Term Shareholders

Sarah Keohane Williamson and Ariel Babcock

Journal of Applied Corporate Finance, 2020, vol. 32, issue 2, 78-84

Abstract: Corporate CEOs often say they don't hear enough from shareholders about strategic issues related to long‐term value creation. At the same time, they claim to hear with predictable regularity from short‐term investors about their success (or failure) in hitting consensus earnings targets. But as the authors of this article begin by noting, there is mounting evidence that companies get the shareholders they deserve—that companies that provide quarterly earnings guidance and otherwise focus investor attention on near‐term earnings targets tend to attract more transient investors. The authors go on to argue that companies with a compelling long‐term vision can expect to benefit not only from more farsighted managerial decision‐making, but also from building a base of longer‐term investors who share management's view of success, and how it can and ought to be achieved. Such a shift in strategic focus and disclosure toward longer‐run performance creates a virtuous cycle—one in which companies that gain the interest and backing of investors with longer horizons end up reinforcing management's confidence to undertake value‐adding investments in their company's future. Even if most companies can't pick their shareholders, they can develop an investor engagement strategy designed to attract long‐term investors. In this article, the chairman and president of FCLTGlobal outline the underlying strategy behind long‐term investor relations and the four key components of such an approach.

Date: 2020
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Journal of Applied Corporate Finance is currently edited by Donald H. Chew Jr.

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