Posted by Brian Tomlinson, CECP, and Mike Krzus, BrownFlynn, on Saturday, February 16, 2019
Editor's Note: Brian Tomlinson is Research Director at CECP and Mike Krzus is a Senior Advisor at BrownFlynn. This post is based on their CECP memorandum. Related research from the Program on Corporate Governance includes The Myth that Insulating Boards Serves Long-Term Value by Lucian Bebchuk (discussed on the Forum here); The Uneasy Case for Favoring Long-Term Shareholders by Jesse Fried (discussed on the Forum here); and Socially Responsible Firms by Alan Ferrell, Hao Liang, and Luc Renneboog (discussed on the Forum here).
Method of Production of Long-Term Plans: Key Learning Points
| CEO Motivation for Delivering a Long-Term Plan: | Context for Preparing a Long-Term Plan: | Organizational Process Themes from Long-Term Plan Development: |
|---|---|---|
| Frustration with short-term-focused market infrastructure: corporations interested in rebalancing communications towards the long term and setting out their sustainable value story. | Investor voice, guidance, and pressure: mutual fund manager letters to CEOs, bilateral engagements, and the shareholder resolution process had elevated focus on sustainability and corporate governance themes. |
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| Extension of existing initiatives: amplification of efforts to expand the range and quality of disclosures and respond to investor demand. | Strategic Investor Initiative (SII) briefings to CEO teams: the pre-event consulting and post-event feedback SII provides had facilitated long-term plan development. | |
| CEO leadership: CEOs want to demonstrate leadership on an issue of importance to investors and corporate stakeholders. | Board involvement: reflecting expanded governance plan process and governance expectations, boards had often been involved in the long-term arrangements were adjusting to account for long-term and sustainability priorities. | Long-Term Plan—Potential Frequency:
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Project Rationale: Understanding How Corporations Think about the Long-Term
Our work on this project seeks to understand and compare the different methods by which corporations have developed the long-term plans delivered at CEO Investor Forums.
Through this project we have developed insights into how organizational process, cross-team collaborations, available data, disclosure practice, and investor guidance influence the content of a long-term plan. This work forms the basis of decision-making guidance for corporations seeking to deliver a long-term strategic plan to investors.