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Will the Long-Term Stock Exchange Make a Difference?

corpgov.law.harvard.edu

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Re: Will the Long-Term Stock Exchange Make a Difference?

#31

Post by roguecoder »

kolbe wrote: post #10
whatshisface wrote: post #8

Earlier quoted context omitted.

The organizers are talking about tenure voting, "not proposing" means they have not formally filed with the SEC for permission.

i.e. there is no exchange that offers tenure voting, and it's not clear that there ever will be one.

Tenured voting is already legal on NYSE and NASDAQ (https://corpgov.law.harvard.edu/2016/03/07/tenure-voting-and...): it simply requires the company to choose to adopt it and figure out how they would administer it. Right now, tech companies are going with dual-class instead, which only entrenches the founders rather than all long-term investors and is trivial to implement.

Re: Will the Long-Term Stock Exchange Make a Difference?

#32

Post by walshemj »

dragontamer wrote: post #25
dcolkitt wrote: post #9

The prevailing narrative on this topic is "greedy investors only care about short-term profits". The spin is that visionary CEOs try to build long-term growth and innovation, but they're continuously stymied by Wall Street vultures. However the empirical evidence tells a very different story. Corporate managers have a demonstrated tendency towards wasteful ego-stroking empire building when not properly monitored. Thi…

> towards wasteful ego-stroking empire building when not properly monitored What is "ego-stroking empire building" exactly? I think I can imagine cartoon-characters who do this, but I'm having difficulty thinking of real world examples.

HP has a track record of buying companies and destroying them, 20 years ago the Concert JV between several big Telcos is another example.

Re: Will the Long-Term Stock Exchange Make a Difference?

#33

Post by oilman »

Perhaps the solution is more reporting instead of less reporting. Some sort of real time (or hourly, daily, whatever) metrics about a company instead of quarterly reports. I feel like a certain frequency makes it harder to game, and much more routine, so people aren't as likely to make decisions that are detrimental to the long term. I think faster reporting and quicker feedback loops are the way the world is going, why not for public markets?

Re: Will the Long-Term Stock Exchange Make a Difference?

#34

Post by dcolkitt »

roguecoder wrote: post #26
dcolkitt wrote: post #9

The prevailing narrative on this topic is "greedy investors only care about short-term profits". The spin is that visionary CEOs try to build long-term growth and innovation, but they're continuously stymied by Wall Street vultures. However the empirical evidence tells a very different story. Corporate managers have a demonstrated tendency towards wasteful ego-stroking empire building when not properly monitored. Thi…

Managing to metrics because they are easy to measure instead of because they actually reflect the outcome you want is a very common mistake, but it seems like a particularly destructive problem to design our economy around that. It's probably why so many companies treat their employees like disposable punching bags: they can't easily measure the payoff from investing in employees so it must not be worth doing, right?

> It's probably why so many companies treat their employees like disposable punching bags

Contrary to what you posit, the empirical evidence shows the opposite. The firms with the best management practices tend to have the highest rates of employee satisfaction [1]. And the surest way for a firm to wind up poorly managed, is for shareholders not to hold management accountable with tangible targets and transparent monitoring.

[1] https://www.nber.org/papers/w17850.pdf

Re: Will the Long-Term Stock Exchange Make a Difference?

#35

Post by curiouscats »

tempsy wrote: post #22

What I don't necessarily get is that from interviews with the founders they are suggesting that they think companies will list on multiple exchanges, including LTSE. How would that work? If you list on a traditional exchange, then the problem is not solved since they still are going to be reporting quarterly and the speed of price discovery will stay the same as it is today. Wouldn't the price on that exchange inform…

Different classes of stock with different voting privileges could at least prevent some abuses by speculators that buy up shares and seek to force through actions that benefit speculators but harm all the other stakeholders (long term investors, customers, employees...).

There are certainly questions about if a long term exchange can make a difference. But it seems to me possible that it could. It does seem to me the voting rights on the shares would have to be different for it to have much of an affect. It seems to me it makes sense to have voting rights largely vest with those interested in the long term success of the company.

Re: Will the Long-Term Stock Exchange Make a Difference?

#36

Post by tempsy »

curiouscats wrote: post #35
tempsy wrote: post #22

What I don't necessarily get is that from interviews with the founders they are suggesting that they think companies will list on multiple exchanges, including LTSE. How would that work? If you list on a traditional exchange, then the problem is not solved since they still are going to be reporting quarterly and the speed of price discovery will stay the same as it is today. Wouldn't the price on that exchange inform…

Different classes of stock with different voting privileges could at least prevent some abuses by speculators that buy up shares and seek to force through actions that benefit speculators but harm all the other stakeholders (long term investors, customers, employees...). There are certainly questions about if a long term exchange can make a difference. But it seems to me possible that it could. It does seem to me the…

That doesn’t really address the main thesis behind LTSE - the idea that public companies are too focused on the short term due to quarterly reporting requirements.

It just seems like if you list on multiple exchanges then you’re still beholden to short term thinking created by quarterly reporting unless you choose to list exclusively on LTSE.

Re: Will the Long-Term Stock Exchange Make a Difference?

#37

Post by jshaqaw »

roguecoder wrote: post #28
jshaqaw wrote: post #17

Whenever a CEO complains about quarterly accountability I ask them “would you like your direct reports to check in with you once a year?” It is ironic as management move towards real-time 24/7 dashboards to track key metrics, every 3 months is viewed as an inappropriate timeframe to judge progress or lack thereof. The fact is public market investors are desperate to find high return places to invest capital. There is…

Going the other direction would be interesting: if companies produced ongoing metrics, there might be fewer rewards for gaming them and less impact from missing one hour's target. I doubt either the SEC or the accountants are interested in going that direction, but it seems like it is the periodic nature that is the problem, rather than the specific length of time. Perhaps there should be a Continuous Reporting movem…

That’s an interesting concept long term. Some investors are (perfectly legally to be clear) mining big data sources to try and replicate real time monitoring of many companies. Maybe to level the playing field companies will have to provide much more frequent disclosures. For now, as an investor, I find quarterly results a decently optimal balance of factors.

Re: Will the Long-Term Stock Exchange Make a Difference?

#38

Post by jshaqaw »

roguecoder wrote: post #27
jshaqaw wrote: post #18

Earlier quoted context omitted.

I accept that but ANY measured goals will be games as a fairly universal principle of human organization. If you shift accountability to annual the incentives to game increase because you have a whole year before you need to fess up.

This seems like it would be a good reason not to link CEO pay to outcomes at all: game theory says that as long as metrics have no impact on you personally, you don't have any incentive to game them.

Management incentives will always have agent-principal issues. These things can’t be set by autopilot. That’s why corporate governance and a fiduciary voice for shareholders is so important. Of course the same CEOs who want annual reporting also want to neuter the capability of shareholders to enforce accountability.

Re: Will the Long-Term Stock Exchange Make a Difference?

#39

Post by mikeash »

roguecoder wrote: post #27
jshaqaw wrote: post #18

Earlier quoted context omitted.

I accept that but ANY measured goals will be games as a fairly universal principle of human organization. If you shift accountability to annual the incentives to game increase because you have a whole year before you need to fess up.

This seems like it would be a good reason not to link CEO pay to outcomes at all: game theory says that as long as metrics have no impact on you personally, you don't have any incentive to game them.

It also says you don’t have any incentive to improve them legitimately. The whole problem with metrics is that they can’t distinguish between gaming them and real improvement.

Re: Will the Long-Term Stock Exchange Make a Difference?

#40

Post by polishTar »

owens99 wrote: post #30
dcolkitt wrote: post #9

The prevailing narrative on this topic is "greedy investors only care about short-term profits". The spin is that visionary CEOs try to build long-term growth and innovation, but they're continuously stymied by Wall Street vultures. However the empirical evidence tells a very different story. Corporate managers have a demonstrated tendency towards wasteful ego-stroking empire building when not properly monitored. Thi…

> When management does demonstrate credibility, Wall Street's usually more than happy to let them focus on long-term initiatives. Just look at Amazon, which is a darling of the investment community, trusted to steer nearly a trillion dollars in shareholder capital. Bezos has continuously poured huge resources into long-term speculative initiatives at the expense of quarterly earnings. And he's loved by shareholders f…

If you object to the Amazon example because the CEO was also the founder, there are many other examples of extremely long-term focused companies where that isn't true. A really good example is Uber. Honestly, Uber is probably far too long-term focused and it'd be better if Wall St punished them more. It's pretty hard to accuse Wall St of being short-term focused on that one.

That said, I totally agree with you that experimentation is good, and the LTSE is a valuable experiment. Maybe we can learn something from it, even if it's worse than what we already have.

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