Boards need to be “protected” from shareholders with a short-term investment horizon if they are to succeed in the pursuit of long-term value creation, according to the association representing directors across Europe.
“If sustainability is the goal, then companies and their boards need to be protected from shareholders whose short-term objectives hamper the respect of long-term perspectives,” said Prijovic.
Lutgart Van den Berghe, chair of the policy committee at ecoDa, said that the short-term business models of stock exchanges were contributing to a lack of focus on long-term goals for companies because of the need for a high turnover in trading.
“More attention should be given to the necessary diversity and tailored mix of shareholders listed companies need, to foster long-term value creation,” said Van den Berghe.
“Moreover, to function properly stock markets need sustainable long-term oriented shareholders as well as short(er)-term-oriented investors. Further reflection on the paradox between the actual business models of stock exchanges and the need for long-term stable shareholders deserves the full attention of the European Commission.”