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More Builders and Fewer Traders
Report

More Builders and Fewer Traders

A Growth Strategy for the American Economy

William A. Galston and Elaine C. Kamarck
Brookings Institution, 2015
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Editorial Rating

9

Qualities

  • Analytical
  • Scientific
  • Eye Opening

Recommendation

The short-term mentality that drives American businesses and investors has negative long-term implications for the US economy. CEOs, focused on meeting this-quarter’s goals, engage in shareholder friendly activities such as buying back shares and boosting dividends while neglecting long-term value creation and growth. This noteworthy study from governance experts William A. Galston and Elaine C. Kamarck puts a magnifying glass to the potentially disastrous consequences of America’s “corporate short-termism.” getAbstract recommends this eye-opening report to corporate decision makers, board directors and policy makers.

Take-Aways

  • America’s “corporate short-termism” is one reason for the nation’s sluggish economic growth, stagnant wages, increasing income inequality and contracting middle class.
  • Share buybacks and dividends, more equity remuneration, “a fixation on quarterly earnings,” and “activist investors” promote short-term thinking at the expense of long-term investment.
  • Between 2004 and 2013, almost half of the S&P 500 allocated 47% of their net income to stock repurchases. In 2011, CEOs received 70% of their compensation in share grants and options, compared to almost all cash in 1961.

About the Authors

William A. Galston and Elaine C. Kamarck work on the Brookings Institution’s Governance Studies Program.

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