I heard an interview of Roger Martin the other day on Business Daily and he pointed out that the idea that companies are in business in maximize the shareholders short-term profit is just because someone said so. There is no reason that this should be the driving goal of capitalistic businesses.

I suppose that over the years the idea of short-term profits has become the loudest voice in the room.What if we changed that to reward 10-year growth? A company’s executives and board put together long-term goals and drive the company in that direction  and they are rewarded for reaching those goals – in 10 years. Bonuses will be paid to you or your estate whether you are still with the company. And if the 10-years goals are set every year, potential investors can see how well the management is doing and decide if they want to invest or invest more. There are no extraordinary bonuses based on past year’s performance or non-performance.  Profits/dividends can still be distributed annually, but the focus on performance is long-term.

It will require a paradigm shift to get away from immediate gratification ( I hate using that term but I think it actually works here.) I can’t imagine the current crop of business managers will move willingly in this direction. So much easier to game the system in the short-term. I don’t know how we could go about introducing this as a common business practice. Possibly use the SEC to reward the long-term planners? Disincorporate companies that don’t line up? Talk to the states that  incorporate companies and get them to change their rules?

Whatever, let’s put it on the table. I’m sure there are a lot of considerations to include. Maybe 7-year planning rather than ten (let’s not go to 5-year planning).