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This chapter shows that herding can help to explain many empirical phenomena in finance, like stock market crashes. In a setting with widely dispersed information, even relatively unimportant news can lead to large price swings and crashes. Stock market crashes can also occur because of liquidity problems, bursting bubbles, and sunspots. Traders might also herd in information acquisition if they care about the short‐term price path as well as about the long‐run fundamental value. Under these circumstances all traders will try to gather the same piece of information. These models also provide a deeper understanding of Keynes’ comparison of the stock market with a beauty contest. Limits to arbitrage are discussed and it is shown that if investors focus on the short‐run, corporate decision‐making also becomes shortsighted. The chapter concludes with a brief summary of bank runs and its connection to financial crises.

This chapter introduces the key themes that will be looked at in this book. In particular, it looks at the problem of long-term investing, illustrating why institutional investors are not acting in a long-term manner and the repercussions that this has for wider society. It provides a clear distinction between asset owner investors who have monopolies over their capital source and financial intermediaries, who are essentially acting on the former’s behalf but have come under much scrutiny for their shorter-term, opportunistic, and at times unethical behavior. The collaborative model of long-term investing and re-intermediation thesis is introduced as an innovative way for institutional investors to overcome some of the challenges of short-termism. The chapter outlines how social network theory and economic sociology are used to validate the collaborative model. This paves the way for detailed explanations and case study examples starting in Chapter 2.

This chapter summarises the main points raised in the UK chapters and identifies the overall strengths and weaknesses of the social exclusion and accessibility planning approach. The UK case studies (Chapters Four to Seven) demonstrate that there is already a lot of good practice happening ‘on the ground’ and, for transport authorities such as Merseytravel, which has been championing a social-equity agenda in transport for more than ten years, the SEU policies will simply help to reinforce the good work that is already going on. There is also an important role for the community-transport sector aimed at improving transport for socially excluded groups and communities. However, there are still some significant barriers and risks, such as short termism and over-simplification of the problem; under-resourcing and competing funding priorities; legislative and institutional barriers; and reconciling social concerns about transport.

This chapter examines the challenges of temporal uncertainty and how the state and bio-industry stakeholders have been forced to assume a new kind of political economic leadership role to stem people's growing impatience regarding the slow pace and unpredictability of commercial biotech development. It shows that biotech stakeholders in Korea, Taiwan, and Singapore have had to shift expectations about progress in the biotech industry away from “short-termism” to a more realistic “long-termism.” Due to the challenges of managing commercial biotech's temporal uncertainty, commercial biotech stakeholders in Korea, Taiwan, and Singapore have attempted to manufacture progress in the near term in order to sustain an appetite for biotech over the long term.

This chapter presents the book’s goals and structure as well as key notions that should be kept in mind while going through the book’s seventeen proposals. Short-termism and the diversity of its types are introduced. Proposals of specialized, future-focused institutions are distinguished from those aimed at rendering non-specialist institutions more future-beneficial. Then endogenous strategies are distinguished from exogenous ones aimed at aligning the actions of institutional actors with the interests of future generations. The various types of mandate of such institutions are also explored. Moreover, three types of determinants of short-termism are separated out: epistemic, motivational and institutional ones. Finally, we consider the extent to which various types of institutional proposals are able to respond to inter- and intra-generational legitimacy concerns.

The authors define space and time as universal but culturally variable constraints on social action. Two classical studies on these constraints are summarized. Among the areas emphasized are the symbolic elaboration of space and time in systems of social ranking and status; the seasonal scheduling of social life; the power of the political calendar; time in the organization of economic life; spacial and temporal dimensions of economic development; spatial and temporal dimensions of virtual technology and the information revolution; and spatial and temporal dimensions of globalization processes.

With special attention to the effects of scarcity, this chapter investigates the causes and consequences of a preoccupation with the present in the lives of both workers and the indebted poor, and of the short-termism typical of finance-dominated capitalism. It lays out the different reasons for Christian attention to an urgent present, along with the different effects of the Christian understanding of the present.

This chapter addresses the question of whether the progress of the UK biotech sector has been held back by lack of support from the financial system. It looks in particular at whether UK investor short-termism is to blame for the dearth of large and consistently profitable British biotech firms. It is certainly true that, after allowing for the size of the two countries, the flow of capital into biotech has been far greater in the US than in the UK but the chapter suggests that this difference is due more to the different histories of the two biotech sectors—America’s early start in biotechnology, and the presence of well-established institutions that support high-tech firms in the US, such as NASDAQ, contrasting with the slower development of the UK financial institutions for the emerging sector.

This chapter develops the professionalization framework that is central to The Quest for Professionalism. First, the historical context of this quest is explored, and then several examples serve to point out that management currently is anything but a profession. The unresolved dispute on shareholder value maximization and multi-stakeholder management illustrates the lack of a shared sense of purpose and understanding. Subsequently, a set of definitions as well as a multi-level framework of science-based professionalization are developed. This framework identifies and connects four generative mechanisms of professionalization: purpose, knowledge, behavior, and expectations. Accordingly, professionalization involves the development and alignment of professional purpose, knowledge, behavior, and expectation of management. If one or more of these four dimensions remain underdeveloped, so will the nature and level of professionalism of management and its scholarship.

Something is wrong with the modern corporation, especially the US/UK version. The problem is what the firm is organized to achieve and for whom, and the ways in which it is exposed to the market where firms are bought and sold by forces more interested in making money on the transaction than ensuring the long-term profitability of the firm. This chapter rehearses the argument about the weaknesses of the prevailing conception of the firm and explores the manifestations of these weaknesses in a number of core issues: the emphasis on shareholder value, the emphasis on the market as a key dynamic, the conception of leadership underpinning the prevalent view of the firm, and the increasing role of management in the firm. This is the disturbing context within which the JLP assumes great significance, as, potentially an alternative model.

chapter argues that “maximizing shareholder value” is unnecessary and unworkable as a business objective. Each element—maximize, shareholder, and value—is problematic. First, while maximizing a single objective is supposedly necessary to hold managers accountable, systems analysis provides a proven alternative methodology for assessing and improving managerial performance, and demonstrates why satisficing multiple objectives is often preferable to maximizing one. Second, because shareholders are individuals with differing investment concerns, there is no uniform shareholder interest. Third, unless “value” is measured by short-term metrics like profits or share price, the concept is too abstract and unobservable to provide an objective measure of performance.

Financial and capital markets create externalities, positively when serving the needs of an inclusive, sustainable economy, and negatively when holding back economic development, and increasing inequality and the deterioration of natural capital. This chapter explores the latter effects and roles for central banks, regulators, and standard setters. It draws on work undertaken under the United Nations Environment Programme Inquiry into Design Options for a Sustainable Economy, which found an emerging “quiet revolution” of innovations in this respect, particularly although not exclusively from developing countries. The chapter proposes an empirical framework for the further exploration of the nexus between the evolution of the financial system and sustainable development.

This chapter presents a response to the challenges facing capitalism today, including the erosion in public trust and a growing focus on short-term performance. After briefly highlighting the varieties of capitalism—historically and geographically—it points to ways capitalism could be re-imagined going forward. At the macro level, the model should move beyond a narrowly defined shareholder capitalism to focus on long-term value creation and prioritization of a broader set of stakeholders. Similarly at the micro level, asset managers, executives, and board members must move away from “quarterly capitalism” and act like owners, using longer time horizons to invest and create sustained value. To go from imagination to reality requires efforts from many, with business in particular called upon to catalyze the necessary changes.

The mandatory disclosure regime makes fraud harder and plays other economic, social, and political roles, many of them highly contested. The content is interesting partly because of what doesn’t have to be disclosed—much that is forward-looking and competitively dangerous to disclose—as well as the large amount that does even though most investors might not find it economically material in the short term. The latter reflects the incursion of publicness, migrating in the direction of transparency in the name of social responsibility. The process is equally interesting in the way various gatekeepers and whistle-blowers—supposedly with more investor or public-oriented points of view—have been conscripted to improve disclosure quality. Yet they are all conflicted to some extent or another—economically, cognitively, or both—even though they do make important contributions.

This chapter explores UK corporate governance and puts forward the case for greater worker representation (voice) on UK corporate boards. The chapter explores the prevailing features of UK corporate governance and the high volatility in ownership, with transient short-term shareholder interests often prevailing at the expense of long-term business success. This results in relatively lower investments in R&D, training, and other long-term investment strategies compared to other European-based companies. The chapter argues that greater worker representation on corporate boards is thus an important adjunct for industrial policy, since it may act as a constraint upon corporate power (and ‘short-termist’ strategies). This is substantiated by evidence from other countries where worker representation and labour–management partnerships have enhanced long-term company productivity and performance, with firms pursuing a broader (and long-term) company strategy with a greater focus upon innovation-led, higher value-added activities.

Future-oriented institutions aim to correct short-term biases in political systems and produce policies that achieve a better balance between the legitimate concerns of the present and the potential interests of the future. This chapter provides an overview of some of the challenges associated with designing future-oriented political institutions. The first part identifies four potential sources of short-termism in democratic systems: 1) short-sighted voters; 2) politicians with short-term incentives; 3) special interests groups with short-term objectives; and 4) the fact that future generations cannot be included in decision-making processes today. The second part identifies different types of long-term issues, and explores how features of the issues themselves may be relevant to decisions about institutional design. I argue that we need a multifaceted approach to designing future-oriented institutions because of the multidimensional nature of the long-term issues that we face.

Governments often adopt short-term policies that unnecessarily reduce the standard of living of the current generation and also violate their responsibilities to future generations. It is therefore important to consider morally legitimate ways of reducing such harmful short-termism. This chapter addresses this problem by identifying the drivers of harmful short-termism. It then proposes five reforms to the policy-making process that respond to these drivers. More specifically, it argues in favour of (i) requiring incoming governments to issue a Manifesto for the Future that outlines their policies for addressing long-term trends; (ii) creating a Committee for the Future, whose role is to scrutinize policies for their long-term impacts; (iii) building into the parliamentary process a regular Visions for the Future day in which the Government’s Manifesto for the Future and its record is scrutinized by the Opposition; (iv) creating an Independent Council for the Future; and (v) employing long-term performance indicators.

This chapter explores what the reasons for deviating from modified universalism in practice may be. To do so, it draws on behavioural international law and economics. The chapter argues that certain decision-making biases may play a role in cross-border insolvency and can explain both negative inclinations and instances of lack of cooperation, as well as the relative success of modified universalism. The key argument here is that instead of yielding to territorial inclinations, cross-border insolvency law has a debiasing role to play. It should attempt to align choices with optimal solutions, overcoming biases, and should also close gaps in the cross-border insolvency system in line with modified universalism.