Sarah Williamson, CEO of FCLT Global, discusses corporate short-termism and the prevalence of quarterly earnings guidance in the US.
What-if
Williamson: Long-term behavior from US firms would have added $1T, 5M jobs
“In the United States over the decade leading up to 20 16, if the short-term companies in this country, and I know this is a big if the short-term companies in this country had been able to behave like the long-term countries, They would have created a trillion…”
Insight
Williamson: Boards mathematically cannot optimize for both short and long-term investors
“And so that is where the problem is, that there is, is mathematically impossible to optimize for both a high discount rate, shorter term investor, and a lower discount rate, longer term investor.”
Assertion Not checkable as stated
Williamson: Sovereign wealth CIOs value illiquidity to prevent committees from panic-selling
“There was a CIO of a big sovereign fund I know well who, during the crisis, was forced by his oversight committee to sell his public equities because people got scared, but couldn't sell his private equities, and told me later, he said, I don't need an illiqui…”
Insight
Williamson: Investors can have an analytical edge but not an information edge
“It's just much, much harder to have an information edge. You can have an analytical edge, but not an information edge.”
Assertion Supported
Williamson: Long-term companies outperform generally but suffer steeper crisis drawdowns
“If you look at how long-term companies have behaved, long-term companies on a number of financial metrics, versus how short-term companies have behaved, what you see is that long-term companies outperform in terms of revenue, profitability, share appreciation,…”
Assertion Supported
Williamson: Quarterly guidance does not reduce volatility or boost valuation
“A lot of people believe it lowers volatility of the stock. That's not true. Or increases valuation, the credibility premium, yet that doesn't exist.”