A systems thinking review for solving short‐termism

Abstract

PurposeThe purpose of this paper is to review proposed methods to reduce corporate short‐termism – a private sector obsession with short‐term profit and a neglect of true long‐term value creation – via a systems thinking analytical framework.Design/methodology/approachThis paper identifies five often cited causes of corporate short‐termism directly affecting managers, including: pressure from Wall Street; ill‐aligned executive compensation; arrested executive capabilities; weak corporate governance; and ill‐aligned regulatory policy. It then compares those issues to generic system archetypes, and evaluates proposed solutions by contrasting them with typical solutions relating to specific archetypes.FindingsThis study suggests a majority of the solutions are well proposed and identifies strong leverage points where managers may intervene. It also finds that several proposed solutions are susceptible to complications, especially those relating to executive compensation, board empowerment, and regulatory structures. It also notes several additional points of leverage not yet fully explored, especially relating to deterring shareholder pressure and executive compensation structures. Finally, it suggests too little attention is being given toward a culture supportive of short‐termism, and argues that emphasizing solutions that engage stakeholders is important for sustained success.Practical implicationsFor managers seeking to reduce corporate short‐termism, this paper suggests several key levers that may be used to intervene within their environment.Originality/valueFew works have tested system‐wide solutions to corporate short‐termism using a system thinking foundation. This original work fills that unmet need.