SHORT-TERMISM AS A MILITATING FACTOR AGAINST CORPORATE PLURALIST APPROACH

Abstract

The need for big public companies to do away with over-indulgence in shareholder value approach and embrace stakeholder approach in its corporate approach can never be over-emphasised. Consequently, a lot of writers are focusing their attention on enlightening the public that, a company is not just an economic entity formed with the sole objective of making maximum wealth for its shareholders but also a social being which should as such, be concerned with and integrative of the interests and well-being of the broader society who, in one way or the other affect or are affected by its corporate decisions and corporate activities, otherwise popularly referred to as its stakeholders. To this end, some writers have been criticising anything which cause or has the effect of causing the directors to be unduly focused on maximising solely, the interests of the shareholders. One of those factors is the directors and investors placing unnecessary attention to the position of the company’s share value in the stock market, and the amount of dividends paid to the company shareholders which ended up encouraging the directors to attach unnecessary attention to the short-term goals of the company, which are primarily beneficial to the investors/shareholders and the directors but in neglect to the long-term corporate objectives of the company; which will ensure its sustainability in the long run and promote the integration of the broader stakeholders’ interests with its resultant benefits to the company and its shareholders in the long run. The writer thus, decided to look into the negative impacts of short-termism to the adoption of a wider stakeholder or pluralist corporate approach. He did this by adopting a doctrinal research methodology. It was observed that short-termism is actually discouraging corporate broader approach as directors are focused on having or achieving immediate result of their corporate policies, and decisions commonly evidenced by the rapid appreciation in the value of the company’s shares and higher dividends declared at the end of the corporate year, which causes them to sacrifice building a lasting relationship with non-shareholding stakeholders. Of course, building such a desired relationship is a long-term project which may not yield immediate returns for or have immediate positive effects on the company, yet appears to have serious immediate in-roads on the resources of the company. The work, however, concluded that long-term corporate approach is beneficial to the company as a whole and its shareholders in particular as it helps to ensure the sustainability of the company and in the promotion or maintenance of long lasting cordial relationship with the company’s stakeholders which is ultimately beneficial to the shareholders, especially in the long run.