Short-termism

• What is short-termism?

  Where a business prioritises short term performance rather than long term performance
• What performance measures does short-termism prioritise?

  • Share price
  • Revenue growth
  • Gross and operating profit
  • Unit costs and productivity
  • Return on capital employed
• What long-term performance measures does short-termism neglect?

  • Market share
  • Quality
  • Innovation
  • Brand reputation
  • Social responsibility and sustainability
• What are possible indicators of short-termism?

  • Bonuses based on short term objectives
  • Low investment in Research and Development
  • High dividend payments rather than reinvesting profits
  • Overuse of takeovers rather than internal growth
• Why might businesses want short-term performance?

  • Stock market focuses on latest financial performance
  • Reliance on bonuses based on short term performance
  • Frequent changes in leadership and strategy