CHAPTER 9

Thinking Long-Term in a Short-Term Economy

by Ron Ashkenas

Do you find it odd that when a company announces a profit of $8.4 billion in a single quarter, the performance is reported as “disappointing”? Or $5.7 billion as “dreadful”? Fact is, these were the terms used by analysts to describe the results produced by Exxon Mobil and Royal Dutch Shell after their second-quarter earnings release in 2012.1

Almost all publicly traded firms are given “qualitative assessments” by analysts during earning announcement season, which influence investors. But too often the weight of Wall Street opinion causes executives to focus on hitting short-term earnings targets rather than creating long-term value. And even if executives’ strategies are not ...

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