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Buffett and Bogle join call for long-term, responsible investment

Group of “28 strange bedfellows” joins chorus against financial short-termism.

Some of the most senior figures in the US pension fund and financial services sector, including legendary investor Warren Buffett and Vanguard founder, John Bogle, have thrown their weight behind a call for a more responsible, long-term approach to investment management – potentially involving new regulation. They include California State Teachers’ Retirement System chief executive Jack Ehnes and Florida State Board of Administration investment chief Ash Williams. The self-styled group of 28 “strange bedfellows” have issued a set of proposals railing against what they call “system-wide short-termism”. Other signatories include former TIAACREF corporate governance head John Wilcox – now at consulting firm Sodali, as well as top lawyers and academics. The proposals were put together by the Aspen Institute, an international think-tank founded by Walter Isaacson, the former chief executive of CNN, the television news organisation. In a seven-page document, titled: “Overcoming Short-termism: A Call for a More Responsible Approach to Investment and Business Management”, the group said: “We believe a healthy society requires healthy and responsible companies that effectively pursue long-term goals. Yet in recent years, boards, managers, shareholders with varying agendas, and regulators, all, to one degree or another, have allowed short-term considerations to overwhelm the desirable long-termgrowth and sustainable profit objectives of the corporation.”
It added: “We believe that short-term objectives have eroded faith in corporations continuing to be the foundation of the American free enterprise system, which has been, in turn, the foundation of our economy. Restoring that faith critically requires restoring a long-term focus for boards, managers, and most particularly, shareholders—if not voluntarily, then by appropriate regulation.”
The group said it was vital that institutional investors and related intermediaries be properly incentivized to focus on the interest of promoting sustainable, long-term growth. The paper is also critical of what it calls: “the high rate of portfolio churn and the focus on short-term trading gains.”
Among its proposals are revisions to capital gains tax provisions, the removal of limitations of capital loss deductibility on very long-term holdings and the adoption of minimum holding periods or time-based vesting. They also call for “regulation or policy to base the compensation of long-term oriented fund managers on the fund’s long-term performance and extend to such funds the compensation disclosure requirements that are currently applicable to operating companies”.
Link to Aspen Institute