Article at a glance:

How to escape the short-term trap

Claims that investors focus on quarterly earnings at the expense of long-term value creation have distorted thinking at the top of business. Meeting short-term-performance targets is important but the health of a company (its ability to deliver strong performance year after year) is equally crucial. An examination of what drives share prices demonstrates that financial markets understand this.

The take-away

Companies should think in different 'time horizons' when setting strategy, establish proper organizational processes that monitor their health and change the nature of their dialogue with stakeholders.